UNITED STATES
                       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

                     For the fiscal year ended June 30, 2000

                                       OR

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

For the transition period from  _______________ to  _______________.  Commission
file Number: 000-17637

                      Leisure Time Casinos & Resorts, Inc.
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

             Colorado                               34-1763271
-------------------------------         --------------------------------------
(State or other jurisdiction of         (I.R.S. Employer Identification Number)
 incorporation or organization)

                            1258 Communications Drive
                            Norcross, Georgia 30093
                    ----------------------------------------
                    (Address of Principal Executive Offices)

Registrant's telephone number, including area code:  (770) 923-9900
                                                     --------------

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

                                  common stock

                                (Title of Class)

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

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

     As of October 17, 2000,  the  aggregate  market  value of the  Registrant's
voting stock held by non-affiliates was $1,321,178 based on the closing price of
$0.438  per share as of that  date.  As of  October  17,  2000,  Registrant  had
5,918,301 shares of its $0.001 par value common stock issued and outstanding.


<PAGE>




                                TABLE OF CONTENTS

                                     PART I

Item                                                                     Page

1.   Business..............................................................3

2.   Properties...........................................................15

3.   Legal Proceedings....................................................15

4.   Submission of Matters to a Vote of Security Holders..................20

                                     PART II

5.   Market for Registrant's Common Equity and Related
        Stockholder Matters...............................................20

6.   Selected Financial Data..............................................21

7.   Management's Discussion and Analysis of Financial Condition
        and Results of Operation..........................................20

7A. Quantitative and Qualitative Disclosures About Market Risk............25

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

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

                                    PART III

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

11.  Executive Compensation...............................................32

12.  Security Ownership of Certain Beneficial Owners and Management.......36

13.  Certain Relationships and Related Transactions.......................38

                                     PART IV

14.  Exhibits, Financial Schedules, and Reports on Form 8-K...............41


<PAGE>


                                     PART I

ITEM 1.  BUSINESS

     Leisure Time Casinos & Resorts,  Inc.  ("Leisure Time") was incorporated on
February 4, 1993, and was a development stage enterprise until September 1996.

     Leisure Time Technology,  Inc. (f/k/a U.S. Games,  Inc.)  ("Technology") is
incorporated  in Georgia  and  develops,  manufactures  and sells  video  gaming
machines.  Technology  is  licensed  to sell  video  gaming  machines  to Native
American tribes, or distributors,  in California,  Kansas, Michigan,  Minnesota,
Montana,  New  Mexico,  New  York,  North  Carolina,   Wisconsin.  In  addition,
Technology  is  licensed  by the  states  for the  sale  of  gaming  devices  in
Minnesota, Montana and Wisconsin.

     In September  2000, the State of Arizona as well as the Viejas Indian Tribe
in  California  denied  gaming  licenses to Leisure  Time  citing the  financial
condition of Leisure  Time.  Leisure Time has also been denied  gaming  licenses
with the Pueblo of Isleta Gaming  Commission  and Pueblo of Sandia Tribal Gaming
Commission, both in New Mexico.

         Leisure Time Cruise Corporation ("Cruises") was incorporated on October
17, 1997, in the state of Colorado and conducted  offshore gaming cruises on the
"Vegas Express" gaming vessel from July, 1998 until October 31, 1999 when it was
placed in dry-dock. In May 1999, Leisure Express Cruise, LLC, a Colorado limited
liability company,  acquired Florida Casino Cruises,  Inc., the corporation that
owns the Vegas  Express.  Cruises also owns the "Leisure  Lady",  another gaming
vessel that has not been placed in operation.  Leisure  Belle  Cruise,  LLC is a
Colorado limited  liability  company that owned a dry-docked  gaming vessel that
was sold in a  foreclosure  proceeding  by the  holder of a loan on the  vessel.
Leisure Lady Cruise,  LLC is a Colorado limited  liability company and currently
has no operations. Effective April 19, 2000, Leisure Time decided to discontinue
this business  segment and is  investigating  alternatives for disposing the net
assets of this segment.  Leisure Time has guaranteed the outstanding debt from a
financial  institution  related to vessels that operated in the offshore  gaming
cruise segment.

     Leisure Time  Hospitality,  Inc. is  incorporated  in Ohio and owns a hotel
property  that  was  being  redeveloped  in  the  Cleveland  metropolitan  area.
Effective  April 19, 2000,  Leisure Time decided to  discontinue  this  business
segment and has a proposal to dispose of Leisure  Time  Hospitality,  Inc. to an
entity affiliated with the president of Leisure Time.

     Leisure Time Gaming,  Inc. is incorporated in South Carolina and operated a
gaming route in South  Carolina  from March 1999 to June 30, 2000.  Leisure Time
Gaming,  Inc. is attempting to revive its route operation using redemption games
in the State of Georgia.

     Leisure Time International,  Ltd. is incorporated in Barbados and currently
operates as a Foreign International Sales Corp. (FISC).

     Leisure Time  acquired  Leisure  Time  Financial  Corp.  (f/k/a RP Capital,
Corporation) ("Financial") in April 1999. Financial is incorporated in the state
of Minnesota and finances various types of equipment  acquisitions  under direct
financing  leases and loans  secured by existing  equipment and sells leases and
loans to financial  institutions.  Effective April 19, 2000, Leisure Time agreed
to sell stock of this business back to the previous owner.

     Solutia Gaming Systems, Inc. is incorporated in Oklahoma and was developing
new gaming  machines.  The  Oklahoma  office has been  closed and  relocated  to
Norcross,  Georgia.  Solutia Gaming Systems,  Inc.  markets other than Class III
gaming devices in markets where other than Class III devices are not prohibited.


                                       1
<PAGE>

            Leisure Time  manufactures  and  distributes  video gaming and video
pulltab machines,  related software and replacement cartridges for video pulltab
machines and owns and operates video gaming machines.

         On September  20, 1999,  Leisure  Time  completed a public  offering of
700,000 shares of Leisure Time's common stock at $12.00 per share.  Leisure Time
incurred an aggregate of approximately $1,184,000 of expenses in connection with
the offering,  including underwriting discounts ($672,000),  expenses paid to or
for the underwriter  ($232,000),  and other expenses of the offering ($280,000).
After deducting the total expenses,  Leisure Time received net offering proceeds
of approximately $7,216,000. The net offering proceeds have been used for:

          - approximately $4.2 million as working capital, including the payment
     of accounts payable;

          - approximately $1.0 million to develop a new Pot-O-Gold line of video
     game machines and related software

         In March of 1999, a court  decision  discontinued  legalized  gaming in
South Carolina  effective July 1, 2000.  This resulted in the elimination of the
largest market for Leisure Time's video gaming  machines.  From November 1999 to
March  2000,  Leisure  Time's  principal  effort  was  developing  games  to  be
introduced into California that allowed gaming on Indian  reservations  starting
in March 2000. Leisure Time believed that entry into the California market would
produce  a  significant  market  for  Leisure  Time's  machines.  The  market in
California  did not  develop as quickly as Leisure  Time had  anticipated.  As a
result of this and the  discontuance of gaming in South  Carolina,  Leisure Time
has  continued  to lose money  from  operations  and has been  unable to pay its
vendors and debt  holders.  This has  resulted in several  lawsuits  being filed
against  Leisure  Time. In September  2000,  the State of Arizona as well as the
Viejas Indian Tribe in California  denied gaming licenses to Leisure Time citing
the  financial  condition  of Leisure  Time.  Leisure  Time has also been denied
gaming licenses with the Pueblo of Isleta Gaming Commission and Pueblo of Sandia
Tribal  Gaming  Commission,  both in New Mexico.  As a result of these  denials,
Leisure Time expects to have  licenses  denied,  revoked or not renewed in other
jurisdictions.  As a result of this denial  Leisure Time is no longer  confident
that it can  market  certain  lines of  inventory  and its  gaming  machines  in
significant  quantities.  These factors, among others, may indicate that Leisure
Time will be unable to continue as a going  concern for a  reasonable  period of
time.

            Leisure  Time  has  cut  its  costs  significantly  in  2000  and is
continuing  to reduce its costs so that it can  achieve  profitable  operations.
Additionally,   Leisure   Time  is  pursuing   opportunities   in  other  gaming
jurisdictions  and  markets to attempt to expand its  potential  customer  base.
However,  there can be no assurances that the attempted expansions will increase
revenue or that Leisure Time will be able to return to a profitable position

POT O GOLD PRODUCT LINE

            Leisure  Time's  principal  video  gaming  machine is the Pot O Gold
product  line.  The retail  price for a video  gaming  machine in the Pot O Gold
product line varies from approximately  $5,400 to approximately $8,500 depending
on the features included.  This product line offers three video gaming machines,
the Pot O Gold,  Shamrock  Poker and Keno  Gold,  which  share a common  central
processing  unit.  The  common  central  processing  unit  contains  all  of the
components  of  a  single  video  gaming  machine  with  software  and  cosmetic
variations. Leisure Time's common central processing unit strategy allows:

                                       2
<PAGE>

               - a streamlined manufacturing process with lower inventories;

               - the versatility to develop new games through  software  updates
                  and cosmetic changes; and

               - a synergy  between all of the games in the  product  line where
                  the improvement of one game is useable to improve other games.

            Leisure  Time's  principal  video  gaming  machine,  the Pot O Gold,
features a multi-game video package, including poker, blackjack, keno, slots and
bingo,  that can be chosen by the operator  from a library of  approximately  50
games. The Pot O Gold is designed to enable the player to have a desirable level
of interactivity  without  excessively  slowing play. Leisure Time believes that
the Pot O Gold provides a balance of player interactivity and game sequence that
results in desired  entertainment  quality  and  continuing  player  interest to
maximize revenue for the operator. The Shamrock Poker and Keno Gold video gaming
machines that are a part of the Pot O Gold product line are similar to the Pot O
Gold with different games and cosmetics.

            The current technology in the Pot O Gold product line is designed to
offer the operator  game play  configurations  that  Leisure  Time  believes are
unmatched by other  current video gaming  machines.  The Pot O Gold product line
has the  ability  to display  up to 12 games  represented  by icons on the video
monitor.  The player may choose any one game for individual play from this menu.
Each game program may be set by the operator for up to six different percentages
of the  total  amount  bet that will be paid to the  player.  This  enables  the
operator to select the desired  percentage  payout of each game for the targeted
market.

            A standard feature of the Pot O Gold product line, usually an option
offered at extra cost by other manufacturers,  is a built-in LED display located
above the video monitor,  which offers a "progressive jackpot." The "progressive
jackpot" is a prize that a player may win by striking a  combination  of symbols
or  cards.  The  "progressive  jackpot"  is  set at a base  amount  that  varies
according to the value of the coin or token  denomination  for which the machine
is set.  The base  amount  and the  progressive  rate of each  game  are  easily
configured by the operator.

            Leisure Time believes that the Pot O Gold product line is attractive
to operators because of its:

            -     large library of approximately 50 games from which the
                    operator may choose;

            -     ability to utilize different percentage payouts set by the
                   operator;

            -     ability to display 12 games from which the player may choose;

            -     multi-colored LED display and progressive jackpot feature; and

            -     ability to provide an interactive experience for the player.

                                       3
<PAGE>

            Leisure  Time  believes the  negative  attributes  of the Pot O Gold
product line as compared with other video gaming machine products are:

            - the Pot O Gold has a slightly larger cabinet than most other video
gaming  machines which limits the number of Pot O Gold machines that an operator
is able to place in a given location;

            - the bill  acceptor on the Pot O Gold is  currently  located on the
left side of the  machine  whereas  the  industry  standard  is to have the bill
acceptor  located on the right  side and the  difference  may limit the  earning
potential of the machine; and

            -  the  Pot  O  Gold  has  one  basic  cabinet  style  whereas  most
manufacturers  offer a variety of cabinet  styles and the one cabinet  style may
limit the operator in the placement of the machines.

            Leisure Time  believes  that it has  developed a successful  formula
that  creates  a higher  level of  entertainment  and  video  game  appeal  that
generates  player  loyalty and revenue for  operators.  Leisure  Time  carefully
evolves its  product  designs to take  advantage  of the latest  technology  and
materials  with a modern look and play that still retains the critical  elements
of the Pot O Gold product line identity.

            The Pot O Gold product  line library of games has been  developed to
meet various  market and  jurisdictional  requirements  in the United States and
internationally.  Leisure Time is designing and developing new game software for
its video gaming  machines.  The new games will be sold  separately to owners of
Leisure Time's video gaming machines.

            Leisure Time  believes  that the  experience  it has gained from its
current markets will assist it in marketing the Pot O Gold product line in other
jurisdictions.

PULLTAB GOLD PRODUCT LINE AND PLANNED VIDEO BINGO PRODUCT LINE

            Pulltab Gold Product Line. Leisure Time has developed a product line
of video  machines  that offer the popular  game of  pulltabs.  The Pulltab Gold
video  machine is Leisure  Time's first pulltab  product.  The retail price of a
Pulltab Gold video machine is approximately  $3,995.  It was designed to address
what Leisure Time  believes are the growing  concerns of pulltab  operators  and
regulators.  Frequently,  paper pulltabs are used in  environments  that require
integrity  and  accountability  levels that cannot easily be achieved with paper
pulltabs.  Pulltabs are often sold by attendants or sales  representatives  that
receive  gratuities.  Leisure Time believes that this invites corruption because
the  attendants  or sales  representatives  coach  patrons  to  purchase  from a
particular  box or to avoid a box that has no large winners  left.  Some pulltab
boxes  purchased for resale can be  manipulated to pay out less by removing some
of the winners.  The winners are often shipped from the factory  bound  separate
from the losers.  Ensuring  that the proper funds are received for pulltabs sold
is often  another  labor-intensive  activity,  increasing  the  overhead  of the
operation.

            Leisure   Time's  Pulltab  Gold  video  machine   provides   pulltab
cartridges that cannot be manipulated and automates many of the tasks associated
with paper pulltab operations. Leisure Time believes that the Pulltab Gold video
machine  increases  not only the  integrity  of the  game,  but also the  profit
potential for the operator.  Leisure Time believes that regulators and operators
alike are realizing that there are no solid arguments against the application of
technology,  such as that  contained in the Pulltab  Gold,  to bring  heightened
security and play appeal to the game.

            Leisure Time's estimates of the completion dates for the above items
are based upon the various stages of development of each of the above items.

                                       4
<PAGE>

SOFTWARE SALES AND DEVELOPMENT

     Because the South Carolina  Supreme Court ruled gaming to be illegal in the
state after June 30, 2000,  Leisure Time no longer believes that it will realize
material  revenue  through  the  sale  of a data  communication  device  that it
developed for use on video gaming machines in South Carolina or through the sale
of software  upgrades for its installed video gaming  machines.  Based upon this
belief,  Leisure Time impaired 100% of its capitalized software costs during the
fourth quarter of 2000.

RESEARCH AND DEVELOPMENT EXPENSES

            During the fiscal years ended June 30, 1998, 1999 and 2000,  Leisure
Time spent, $642,000, $1,445,000 and $3,276,000 on research and development, all
of which was conducted and paid for by Leisure Time.

MANUFACTURING AND SERVICING

            Leisure Time's manufacturing facility is approximately 40,000 square
feet.  Other than  management and supervisory  staff,  Leisure Time operates its
manufacturing  facility  with  temporary  employees  and  produces  video gaming
machines as needed to complete orders.  Leisure Time conducts both  sub-assembly
and final assembly operations. Leisure Time's manufacturing operation builds the
components at the sub-assembly stage and, in turn, the sub-assemblies are placed
in stations where they are incorporated into a final assembly or cabinet. As the
cabinet moves along the production  line from station to station,  sub-assembled
components,  complete  components  or parts  are  built  into the  cabinet.  The
completed  video  gaming  machine  is then  tested to  ensure  the  software  is
functioning  properly and all operating  standards are met. After  testing,  the
video gaming machine is packaged for shipment to the customer.

            As of June  30,  2000,  Leisure  Time had a  backlog  of  orders  of
approximately $500,000 that Leisure Time believes is firm. Substantially all
of the backlog at June 30, 2000,  was filled by the end of August 2000.  Leisure
Time believes that backlog may not be a meaningful indicator of revenue expected
in future periods.  As of June 30, 1999, Leisure Time had a backlog of orders of
approximately $8.4 million.

     As of June 30, 2000,  Leisure Time had an inventory value of  approximately
$9.0 million.  Leisure Time's inventory value decreased dramatically as a result
of the denial of licenses in Arizona,  California and New Mexico and as a result
of the South  Carolina  Supreme  Court's ruling that gaming was illegal in South
Carolina after June 30, 2000. Based upon these conditions, Leisure Time recorded
a reserve on inventory of $5,727.  Approximately  $1.3 million of the  inventory
consists of inventory related to a data communications device that was developed
for use in South Carolina.

SALES AND MARKETING OF VIDEO MACHINES

            Leisure Time  believes  that the  experience  it has gained from the
markets where its video gaming  machines are  currently  located will assist its
marketing  personnel in developing new markets. In order to achieve these goals,
Leisure Time believes in utilizing experienced gaming industry personnel for its
sales and marketing efforts. These gaming personnel are able to interface, guide
and advise the operator on methods that will contribute to profitability for the
operator.

            Leisure  Time has  developed  a customer  base for its video  gaming
machines in several states, Brazil and Norway. Leisure Time plans to continue to
expand its customer base in those areas and is  evaluating  the marketing of its
video gaming machines in other states and countries.

                                       5
<PAGE>

            Leisure Time  believes  that in order to be  successful in expanding
the market for its video gaming  machines into new states and  jurisdictions,  a
good  customer  relationship  needs  to be  established  by a  professional  and
experienced sales and service organization. Leisure Time is continuing to create
such a sales and service  organization  to support market  opportunities  in the
various geographical areas of the United States and in the international market.
The sales  organization  utilizes a central  reporting  system linked to Leisure
Time's  headquarters  that is complemented by sales policies,  training,  market
analysis and operations meetings held on a regular basis.

            As of June 30,  2000,  Leisure  Time had four  employees  engaged in
sales and  marketing.  Of the four  employees,  at least two have at least  five
years of experience in the gaming industry. Leisure Time plans to add additional
sales and marketing people in the near future.

            Leisure Time has  appointed Sao Paulo Games  Commercial  LTDA as the
exclusive  distributor  of the Pot O Gold  product  line in  Brazil.  Sao  Paulo
purchases the Pot O Gold machines at a fixed price for resale or for Sao Paulo's
use. The agreement is in effect until December 31, 2000, if Sao Paulo  purchases
a minimum number of Pot O Gold machines each calendar  quarter.  If not, Leisure
Time  has  the  right  to  terminate  the  agreement.   The  agreement  will  be
automatically  renewed for two one-year terms unless either party determines not
to renew the  agreement.  Leisure Time also has orally agreed that Sao Paulo can
test market the Pot O Gold  product  line in  Argentina.  If the test  marketing
proves successful,  it is contemplated that Sao Paulo would become a distributor
for the Pot O Gold product line in Argentina.

            Leisure Time received total revenue of  approximately  $3.6 million,
$5.7  million and $3.2 million from sales in foreign  countries  during  Leisure
Time's  fiscal  years  ended June 30,  2000,  1999 and 1998,  respectively.  The
following  chart  provides  information  pertaining to the revenue  Leisure Time
received from sales in foreign countries:

Year Ended June 30          Argentina            Brazil             Norway
                            ---------           ------             ------
2000                           $   --        $3,190,249           $431,326
1999                          141,875         5,232,652            202,330
1998                               --         3,210,691                 --

            Leisure Time did not commence  sales in Norway until Leisure  Time's
fiscal year ended June 30, 1999. Leisure Time anticipates that Leisure Time will
derive additional  revenue from Norway in the future.  Leisure Time's Pot O Gold
product line is being test  marketed in Argentina.  Leisure Time cannot  predict
whether or not  Leisure  Time will ever  derive  any  significant  revenue  from
Argentina in the future.

            Leisure  Time has no  significant  long-lived  assets in any foreign
country.

GAMING MACHINE ROUTE OPERATIONS

            In February  1999,  Leisure  Time  acquired a gaming  machine  route
operation in South  Carolina.  A gaming  machine  route  operation  involves the
installation,  operation  and servicing of video gaming  machines  under revenue
participation  agreements  with local  retail  establishments,  such as taverns,
restaurants,  supermarkets, drug stores and convenience stores. Leisure Time has
discontinued  its  gaming  route  operation  due to the  decision  of the  South
Carolina  Supreme Court that gaming was illegal in South Carolina after June 30,
2000.  Leisure Time is attempting to revive its route operation using redemption
games in the State of Georgia.

                                       6
<PAGE>

SALE OF BUSINESSES

     On May 7, 2000, Leisure Time sold all of the outstanding stock of Financial
to the  previous  owner.  Consideration  for the  purchase of the shares was the
delivery by the previous owner of 100,000 shares of Leisure Time's stock and the
unvested  portion (60,000 shares) of an option to purchase  additional  stock of
Leisure Time. The previous owner in return  accepted the financial  condition of
Financial  as it  existed  on the date of sale,  subject  to the  following:  a)
transfer  to Leisure  Time of a lease  from a related  party  receivable  in the
approximate amount of $114,391,  including interest,  together with all right to
the  equipment  or   residuals;   and  b)  Financial   assuming/retraining   tax
obligations,  including penalty and interest,  to the state of Minnesota for the
period April - June, 1999.  Leisure Time retained  responsibility  for any taxes
due for the period July 1999 through the date of closing.

     During April 2000, the Comapny agreed to sell all of the outstanding  stock
of Leisure Time Hospitality, Inc. to the president of the Company. The president
purchased Hospitality for $1,300 which is the estimated fair market value of the
hotel and property located in Cleveland.

CUSTOMERS

         For the fiscal year ended June 30, 1998,  two  customers  accounted for
approximately  23% and 47% of Leisure  Time's total sales.  As of June 30, 1998,
Leisure Time had  approximately  $39, or 2%, of total trade accounts  receivable
due from these two customers.

         For the fiscal year ended June 30, 1999,  two  customers  accounted for
approximately  29% and 11% of Leisure  Time's total sales.  As of June 30, 1999,
Leisure Time had  approximately  17% and 13% of total trade receivables due from
two customers.

         For the  year  ended  June  30,  2000,  four  customers  accounted  for
approximately  13%, 14%, 14% and 10% of Leisure  Time's total sales.  As of June
30, 2000,  Leisure Time had approximately  $191, or 42%, of total trade accounts
receivable due from these four customers.

         The majority of Leisure  Time's sales of video gaming  machines for the
years ending June 30, 1998, 1999 and 2000 were in South Carolina.  For the years
ending June 30, 1998, 1999 and 2000, 67%, 75%, and 35%, respectively, of Leisure
Time's  sales were  derived  from South  Carolina,  however  gaming was declared
illegal in South Carolina after June 30, 2000.

COMPETITION

            Video   Machines.   The  video  gaming   machine  market  is  highly
competitive  and is dominated by a small number of  manufacturers.  Leisure Time
believes  that its lack of  licenses  to sell  gaming  machines  in states  that
require licenses places it at an extreme competitive disadvantage.  In addition,
Leisure  Time  believes  that the other  principal  competitive  factors in this
market  are  the  appeal  of the  machine  to  players,  knowledge  of  customer
requirements   and  player   preferences,   service,   support   and   training,
distribution,  name and product recognition and price. The principal competitors
in the video gaming machine market are IGT and WMS  Industries,  Inc. IGT may be
viewed as a dominant  competitor.  Leisure Time  estimates that IGT had a market
share in video game machines of 70% and that WMS  Industries  had a market share
of 15% in 1998.  Additional  competitors or potential  competitors include Acres
Gaming, Inc., Atronic Casino Technology, Inc. , Anchor Games, Aristocrat Leisure
Limited, Bally Gaming, a subsidiary of Alliance Gaming Corporation,  Casino Data
Systems,  Innovative Gaming Corporation of America,  Sigma Games, Inc. and Video
Lottery Consultants,  Inc. Companies in historically unrelated industries,  such
as Sega,  have  technological  resources  that  could  give  them a  competitive
advantage in developing  multimedia-based video gaming machines. There can be no
assurance that other companies in the video gaming or multimedia market will not
successfully  enter the market for video gaming  machines,  nor can there be any
assurance that the  manufacturers  of traditional slot machines will not develop
products that are superior to, or that achieve greater market  acceptance  than,
Leisure Time's video gaming machines.

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<PAGE>

            Oasis  Gaming,  Infinity and Diamond  Games are Leisure  Time's most
significant competitors in the pulltab video machine industry.

            Worldlink Gaming  Corporation and Multimedia Games, Inc. are Leisure
Time's significant  competitors in the wide area networked,  progressive jackpot
bingo  industry  and  GameTech  and Bingo King are  Leisure  Time's  significant
competitors in the video bingo industry.

            In general,  Leisure Time's  existing  competitors,  as well as many
potential new competitors,  have  significantly  greater financial and technical
resources  than Leisure Time,  as well as more  established  customer  bases and
distribution channels,  which may afford them competitive advantages.  Increased
competition is likely to result in price  reductions,  reduced operating margins
and loss of market share,  any of which could  materially  and adversely  affect
Leisure Time's business, operating results and financial condition.

REGULATION

            General. The manufacture and distribution of gaming machines and the
operation of gaming facilities are subject to extensive  federal,  state,  local
and foreign regulation. The laws and regulations of the various jurisdictions in
which  Leisure Time or its  subsidiaries  operate and into which Leisure Time or
its subsidiaries  may expand their gaming and gaming related  operations vary in
their  technical  requirements.  These  laws  and  regulations  are  subject  to
amendment from time to time and virtually all of these jurisdictions require:

            -     licenses;

            -     permits;

           -      documentation of qualification (including evidence of
                    financial stability); and

           - other forms of approval for  companies  engaged in the  manufacture
and  distribution of gaming devices and the operation of gaming  facilities,  as
well as for the officers,  directors,  major  shareholders  and key personnel of
such operations.  Any person who acquires a controlling interest in Leisure Time
would have to meet the  requirements  of all  governmental  bodies that regulate
Leisure  Time's  gaming  business  and any  lender,  holder  of an  evidence  of
indebtedness or other person who would be in a position to exercise  significant
influence  over the gaming  activities of Leisure Time may be required to submit
to the  jurisdiction  of any  gaming  authority  which has  issued a license  or
approval to Leisure Time.

            Leisure  Time  or  its   subsidiaries   are  subject  to  government
regulation in a number of different  jurisdictions related to their operation as
a  manufacturer  and  distributor  of  gaming  devices.   Leisure  Time  or  its
subsidiaries are licensed in the following  jurisdictions to manufacture  gaming
devices for sale to Native Americans or distributors:

                                       8
<PAGE>

            -     Kansas;

            -     California;

            -     Michigan;

            -     Minnesota;

            -     Montana;

            -     New Mexico;

            -     New York; and

            -     Wisconsin.

            Leisure Time was denied  gaming  licenses in Arizona,  by the Viejas
Indian Tribe in California  and by the Pueblo of Isleta and the Pueblo of Sandia
in New  Mexico in  August  and  September  2000.  As a result of these  denials,
Leisure  Time  anticipates  that its  licenses  will be  denied,  revoked or not
renewed in other jurisdictions.

            Generally  gaming  devices may not be  manufactured,  distributed or
operated unless appropriate licenses are obtained from regulatory authorities in
each  jurisdiction.  Ordinarily,  licenses  may only be  obtained  by  filing an
application.  A regulatory  agency  within a  jurisdiction  usually may deny the
application  if it  believes  the  applicant  did  not  satisfy  the  particular
requirements  for  licensing  in  that  jurisdiction.   Furthermore,  each  such
regulatory agency usually retains jurisdiction with respect to licensees and may
take disciplinary action. These actions may include the suspension or revocation
of the  license  or the  imposition  of a monetary  fine.  Changes in such laws,
regulations  and  procedures,  the  initiation of  disciplinary  action  against
Leisure Time or its  subsidiaries,  or adverse court  decisions  having  general
applicability could have an adverse effect on Leisure Time's operations.

            As indicated above,  most of the jurisdictions in which Leisure Time
or its subsidiaries conduct business or intend to conduct business in the future
require various approvals in connection with the manufacture and distribution of
gaming devices.  However, some jurisdictions allow manufacturers or distributors
to operate under a temporary  government  approval or on a  transactional  basis
during the pendency of a comprehensive background investigation. There can be no
assurances that any government  approval currently applied for or intended to be
applied for will be given or renewed.

            It should be noted that most  jurisdictions in which Leisure Time or
its subsidiaries conduct business, or intends to conduct business in the future,
require gaming devices to meet standards and specifications  established by each
jurisdiction. Moreover, most jurisdictions require gaming devices to be reviewed
and  approved  either  by  the  regulatory  agency  or  an  independent  testing
laboratory  prior to the gaming device being sold or offered for public play. In
evaluating the suitability of any applicant,  the regulatory agency will examine
the prior  compliance  with laws and  regulations in other  jurisdictions  where
Leisure Time or its subsidiaries have been operating.  There can be no assurance
that any approval applied for or required of Leisure Time or its subsidiaries in
this regard will be received.  Nor can there be any assurances that any approval
already received by Leisure Time or its subsidiaries will be maintained, or that
additional approvals will not be required.

                                       9
<PAGE>

            Federal Registration. The Federal Gambling Devices Act of 1962 makes
it unlawful for any person to manufacture,  deliver or receive gaming  machines,
gaming machine devices and components across  interstate  boundaries unless that
person has first  registered  with the  Attorney  General of the United  States.
Leisure  Time or its  subsidiaries  that are involved in gaming  activities  are
required to register  annually with the Attorney General of the United States in
connection  with the sale,  distribution  or  operation of gaming  machines.  In
addition,  various record keeping and equipment identification  requirements are
imposed by the Federal  Act.  Violation of the Federal Act may result in seizure
or forfeiture of equipment, as well as other penalties.

            Native American Gaming. Leisure Time or its subsidiaries  distribute
gaming  devices to gaming  operations  located on some  Native  American  lands.
Gaming on Native American lands,  including the terms and conditions under which
gaming equipment can be sold or leased to Native American  tribes,  is or may be
subject to regulation under the:

               - laws of the tribes;

               -  laws  of  the  United  States   including  the  Indian  Gaming
          Regulatory Act of 1988,  which is  administered by the National Indian
          Gaming Commission, and the Johnson Act which is administered by the U.
          S. Department of Justice;

               - Secretary of the U. S. Department of Interior; and

               - provisions of compacts with Native American  tribes,  which are
                   administered by the Secretary.

            As a precondition to gaming  involving  gaming  devices,  the Indian
Gaming  Regulatory Act requires that the tribe and the state have entered into a
written tribal-state compact that specifically  authorizes such gaming, and that
has been approved by the  Secretary,  with notice of such approval  published in
the  Federal  Register.  Tribal-state  compacts  vary from state to state.  Many
require  that  equipment  suppliers  meet  ongoing  registration  and  licensing
requirements of the state or tribe. Some impose background check requirements on
the officers, directors, key personnel, and shareholders of the gaming equipment
suppliers.  Some also require that either  tribal  regulatory  agencies or state
regulatory agencies license the manufacturer or distributor. Leisure Time or its
subsidiaries  have  received  approvals  from  a  number  of  tribal  regulatory
agencies.  There can be no assurances  that such approvals  will be renewed,  or
that any additional approvals required, will be obtained. Failure to obtain such
renewals or approvals may have a material  adverse  impact on the  operations of
Leisure Time.

            Bingo. Bingo is legal in 46 states and the District of Columbia (the
exceptions  are  Arkansas,  Hawaii,  Tennessee  and Utah).  Nonprofit or charity
organizations  sponsor  bingo  games for fund  raising  purposes,  while  Native
American tribes, casinos and  government-sponsored  entities operate bingo games
for  profit.   Video  bingo   systems  are   permitted  for  use  by  charitable
organizations in 26 states.  Under the Indian Gaming Regulatory Act, video bingo
may be played on Native  American  reservations  in the 46 states where bingo is
legal.  Leisure Time believes video bingo is currently played on Native American
reservations in 28 states.

            Pulltabs. Leisure Time currently sells the Pulltab Gold machine only
in Ohio.  In Ohio,  video  pulltab  machines may only be sold to and operated by
charitable  organizations.  Leisure Time  believes  that the law relating to the
legality of the sale and use of video pulltabs in many jurisdictions is unclear.
Before Leisure Time sells its Pulltab Gold machines in additional jurisdictions,
Leisure Time will review the  applicable  law to determine  whether or not video
pulltabs may be legally sold in the jurisdictions.

                                       10
<PAGE>

            Ohio.  Leisure  Time is not  required to obtain a gaming  license to
sell the Pulltab Gold  machines in Ohio.  The Pulltab Gold machines in Ohio must
be operated by a charity.  The Attorney  General of Ohio takes the position that
the charity must be a religious,  educational,  veteran's,  fraternal,  service,
nonprofit medical,  volunteer rescue service,  volunteer fire fighter's,  senior
citizen's,   youth   athletic,   amateur   athletic,   or  youth  athletic  park
organization.  Further, the charity must receive all proceeds, except for prizes
paid out, from the operation of the machines.

            Argentina.  Leisure Time has orally  agreed to allow Sao Paulo Games
Commercial  LTDA to test market the Pot O Gold  product line in  Argentina.  The
discussions on this agreement are  preliminary in nature.  Leisure Time believes
that the operation of such games in Argentina is lawful  because  Argentina does
not have laws or  regulations  related to the operation or  distribution  of the
games. There can be no assurances that any future laws and regulations would not
adversely affect Leisure Time.

            Brazil.   Manufacturers   and   distributors   do  not  have  to  be
specifically licensed to sell gaming devices in Brazil.  Leisure Time Technology
is required to have its hardware and software approved by Brazilian  regulators.
The only  video  gaming  machines  that are  legal in Brazil  are  video  gaming
machines  that only offer  bingo or keno.  Brazilian  regulators  have  approved
Leisure  Time's Pot O Gold Super Pick Keno. Sao Paulo Games  Commercial  LTDA is
the exclusive distributor of the game in Brazil. Sao Paulo Games must submit all
modifications or alterations to the approved game for approval.

            Norway.   Manufacturers   and   distributors   do  not  have  to  be
specifically licensed to sell gaming devices in Norway.  Leisure Time Technology
is  required  to have  its  hardware  and  software  approved  by the  Norwegian
Department of Justice before Leisure Time Technology's video gaming machines can
be sold in Norway.  To date, the hardware and software for three of Leisure Time
Technology's video gaming machines have been approved for sale in Norway.

            A new lottery act, recently proposed in Norway's  Parliament,  would
require  manufacturers  and  distributors  to be  licensed.  The act would  also
establish a regulatory agency to administer all licensing  matters.  This act is
expected to be enacted,  and be effective January 1, 2000. It is not anticipated
that any  manufacturer  or  distributor  will be required  to be licensed  until
January 1, 2001.  There can be no  assurances  that the act will be favorable to
Leisure Time.

            Application of Future or Additional Regulatory Requirements.  In the
future,  Leisure Time  Technology  intends to seek the necessary  registrations,
licenses,  approvals  and  findings of  suitability  in other states and foreign
jurisdictions  in which Leisure Time  Technology  identifies  significant  sales
potential  for its  products.  However,  there  can be no  assurance  that  such
necessary  approvals will be obtained and will not be revoked. If an approval is
required by a regulatory  authority and Leisure Time Technology fails to seek or
does  not  receive  the  necessary  license,  Leisure  Time  Technology  may  be
prohibited  from selling its products in the respective  jurisdiction  or may be
required  to sell its  products  through  other  licensed  entities at a reduced
profit to Leisure Time Technology.

PROPRIETARY RIGHTS

            Leisure   Time's  success   depends  in  part  on  its   proprietary
technology. Leisure Time relies on a combination of:

            -     copyrights;

            -     trade secret and trademark law;

            -     nondisclosure agreements; and

               - technical safeguards to protect its software, documentation and
          other written materials.

                                       11
<PAGE>

            As a part of its confidentiality  procedure,  Leisure Time generally
enters into  nondisclosure  agreements  with its employees and  consultants  and
limits access to its software, documentation and other written materials.

            Despite  Leisure Time's efforts to protect its  proprietary  rights,
unauthorized  third  parties  may be able to copy  its  products  or to  reverse
engineer or obtain and use information that Leisure Time regards as proprietary.
Leisure Time cannot provide  assurances that competitors will not  independently
develop  technology  that is  substantially  equivalent  or  superior to Leisure
Time's  technology.  Policing  unauthorized  use of Leisure  Time's  products is
difficult.  Leisure  Time is unable to  determine  the extent to which  software
piracy  of  its  products  exists.  Software  piracy  may  be a  continuing  and
persistent problem.

            Leisure Time has no patents and has two patent applications  pending
for a type of keno game that is not currently  being offered by Leisure Time and
for a progressive feature on a video blackjack game in the near future.  Leisure
Time may not be issued  any  patents  and any  patents  issued  may not  provide
Leisure Time with coverage  that will be useful to protect  Leisure Time against
infringement by others.

            Leisure Time has  obtained  trademark  registration  from the United
States  Patent and  Trademark  Office for the names of a few of its video gaming
machine games.  The  registrations  terminate at various times in 2008.  Leisure
Time has also  applied  to the United  States  Patent  and  Trademark  Office to
register the names Leisure Time Casinos & Resorts,  Leisure  Time,  Leisure Time
Gaming, Inc. , Leisure Time Technology and Leisure Casino Cruises.

            Leisure  Time  believes  that,  due to the rapid pace of  innovation
within its industry,  factors such as the  technological  and creative skills of
its personnel are more important to establishing and maintaining a technological
leadership position within the industry than are the various legal protections.

Employees

            As of October 17,  2000,  Leisure Time  employed 49 persons,  all of
whom were employed on a full time basis. The approximate  number of employees in
each operation follows:

            -     6 in manufacturing;

            -     16 in engineering and research and development; and

            -     4 in sales and marketing.

            The balance of Leisure Time's employees are management employees and
staff that are involved in executive  management and  administration  of Leisure
Time.  There are no union or collective  bargaining  agreements  between Leisure
Time and its employees and employee  relations are considered by Leisure Time to
be excellent.

                                       12
<PAGE>

ITEM 2.   PROPERTIES


<TABLE>
<CAPTION>


Location                Use                        Approximate         Monthly Rental         Lease Expiration
--------                ---                        Square Footage      --------------         ----------------
                                               --------------
<S>                     <C>                        <C>                 <C>                    <C>

Norcross, GA           Executive offices and          57,000                 $20,663                1/2005
                        manufacturing facility
Avon, OH                Office                         1,250                  $1,500                6/2000
New Orleans, LA         Condominium/office             4,200                  $2,500                10/2002


</TABLE>

ITEM 3.   LEGAL PROCEEDINGS

         On December 27, 1999 American  International  Specialty Lines Insurance
Co. and A. I. Credit Corp. filed a complaint  against Leisure Time in the United
States District Court for the Southern  District of New York,  (Civil Action No.
99 CV12369)  alleging  that Leisure Time  defaulted on the payment of a note and
breach of  contract  by  failing  to pay in  accordance  with a premium  finance
agreement.  The plaintiffs request that they be granted damages in the amount of
$2,688,088.54  plus interest at a rate of 7.6% per annum on the note and, in the
alternative,   $2,773,377.00   plus  interest,   together  with  the  costs  and
disbursements  of the  action,  including  attorneys'  fees,  for  breach of the
finance agreement. The trial scheduled for September 12, 2000, was continued. On
February  15,  2000,  Leisure  Time filed an answer.  On August  24,  2000,  the
plaintiff filed for summary judgment.  On September 25, 2000, Leisure Time filed
a response  to the  plaintiff's  motion for  summary  judgment.  The parties are
awaiting the Court's ruling.

         On January 26, 2000, Ceronix, Inc. filed a complaint against Technology
in the State  Court of Gwinnett  County,  State of  Georgia,  (Civil  Action No.
00-C-06277-4), alleging that Technology had failed to pay on an account. Ceronix
requested  that it be granted  damages in the amount of $135,937 plus  interest,
attorneys'  fees and costs of the action.  Technology's  answer to the complaint
was filed on May 9, 2000. Ceronix was awarded a judgment in the principal amount
of $135,819 on May 9, 2000.  On July 7, 2000 the parties  negotiated a payoff of
the judgment. The judgment was totally satisfied on September 10, 2000.

         On March 8, 2000,  Hammond  Electronics Inc. filed a complaint  against
Technology in the State Court of Gwinnett  County,  State of Georgia,  (Case No:
00-C-1602-2).  Plaintiff  requested that it be granted  damages in the amount of
$116,640 and judgment for $155,427 principal,  $4,828  pre-judgment  interest to
date, plus continuing pre-judgment interest and post-judgment interest at a rate
of 18% per annum. On August 9, 2000, the Court granted summary judgment in favor
of plaintiff in the amount of $155,427.77,  $5,175.50  pre-judgment interest and
post-judgment  interest  at  the  lawful  rate  and  court  costs.  The  parties
negotiated a payment plan to satisfy the judgment whereby  Technology  agreed to
pay $20,000.00 on August 31, 2000 and $10,000.00  monthly  thereafter until paid
in full.

         On  April  28,  2000,  General  Electric  Capital  Corporation  filed a
complaint  against the Biloxi  Belle,  her engines,  tackle,  etc.,  in rem, and
Leisure Belle Cruise,  L.L.C. in personam in the U.S.  District  Court,  Eastern
District of  Louisiana  (Civil  Action No.  00-1287)  alleging  that  defendants
breached their obligation  under a loan with a principal  balance of $1,382,825.
The plaintiff  requested  that the Biloxi  Belle's,  rigging,  tackle,  apparel,
furniture,   engines  and  all  other  necessaries  thereunto  appertaining  and
belonging  be  condemned  and sold to pay the demands and claims.  On August 14,
2000,  the Court  ordered the sale of the Biloxi  Belle to be held on August 30,
2000. On August 30, 2000, the Biloxi Belle was sold to the only bidder,  General
Electric Capital Corporation, for $100,000.00.

                                       13
<PAGE>

         On June 18, 1998, Collins  Entertainment  Corporation filed a complaint
against Technology in the United States District Court for the District of South
Carolina, Anderson Division, (Civil Action No. 3:98-1887 13), alleging breach of
contract  and  violation  of the South  Carolina  Unfair  Trade  Practices  Act.
Plaintiff requested damages in the amount of $1.3 million. The trial was held on
June 20 through  June 22, 2000,  resulting in an award for the  plaintiff in the
amount of $190,000.00,  interest at 6.375%, plus costs. Plaintiff filed a motion
for new  trial  and  additur  on July  3,  2000.  Defendant  filed a  motion  in
opposition  on July 14, 2000.  On August 28, 2000,  the  plaintiff's  motion was
denied. On September 26, 2000,  plaintiff filed a notice of appeal in the United
States District Court for the District of South Carolina, Columbia Division.

         On March 25, 1999, Drews  Distributing,  Inc. filed a complaint against
Technology and Phillip C. Caldwell, in the Court of Common Pleas, Fifth Judicial
Circuit,  State  of  South  Carolina,  City  of  Richland,   (Civil  Action  No.
99CP401068),  alleging  breach of a distribution  agreement,  illegal raising of
prices,  breach of contract by  fraudulent  act,  fraudulent  non-disclosure  of
material fact, and tortuous interference of contract. The plaintiff requested an
award of  $2,000.00  for every game resold by Collins.  The exact number has not
yet been determined.  The case is in the discovery/pre-trial  process. The Court
has indicated that if the case is not settled by October 25, 2000, the case will
be removed to the Federal District Court.

         On  December  14,  1998,  Technology  filed a complaint  against  Drews
Distributing,  Inc., a South  Carolina  corporation,  in the  Superior  Court of
Gwinnett County, State of Georgia (Civil Action No. 98-A-9761-4), alleged breach
of a distribution agreement and misappropriation of trade secrets.  Leisure Time
seeks specific performance and damages.  The case is in the  discovery/pre-trial
process.

         On October 19, 1998, James J. Oden,  filed a complaint  against Leisure
Time and Technology in the U.S.  District Court,  Northern  District of Georgia,
Atlanta  Division,  (Civil  Action No.  1:98-CV-3033),  alleging  breach of oral
employment agreement.  The plaintiff requested damages for failure of defendants
to issue plaintiff an option for 200,000 shares  exercisable at $1.00 per share.
On July 10, 2000,  the Court granted  summary  judgment in favor of Leisure Time
and  Technology.  Plaintiff filed a notice of appeal on July 24, 2000. This case
has been set for mediation on October 26, 2000.

         On July  31,  2000,  Duke-Weeks  Realty,  Limited  Partnership  filed a
complaint against  Technology in the Magistrate Court of Gwinnett County,  State
of Georgia (Civil Action No. 00M11868),  alleging non-payment of rent. Plaintiff
sought  judgment for  $119,367.33  rent,  $2,356.95  interest,  plus  $12,197.43
attorney's  fees. On August 29, 2000, the parties entered into an agreement by a
consent order with schedule of re-payment plan,  reinstatement of the lease, and
a limited personal guarantee by Alan N. Johnson,  the president of Leisure Time.
Leisure Time paid  $44,979.68 on August 29, 2000 and agreed to pay $33,521.50 on
October 1, November 1, and December 1, in order to satisfy the consent order.

         On August 2, 2000,  KSM  Electronics,  Inc.  filed a complaint  against
Technology in the Magistrate Court of Gwinnett  County,  State of Georgia (Civil
Action No.  00-A07048  1),  alleging  non-payment  on account.  Plaintiff  seeks
judgment for $46,759.60  principal,  plus pre-judgment  interest accruing on the
principal  indebtedness  at the per diem rate of $23.06 from July 31, 2000 until
the date of judgment.  Defendant's  answer and defenses were filed on August 31,
2000. The case is in the discovery/pre-trial process.

                                       14
<PAGE>

         On August 4, 2000,  Arrow/Bell  Components Group of Arrow  Electronics,
Inc., filed a complaint  against  Technology in the United States District Court
for the Northern  District of Georgia,  Atlanta  Division,  (Civil  Action No. 1
00-CV-2011),  alleging  non-payment  on account.  Plaintiff  seeks  judgment for
$936,809.30 plus inventory  carrying charges,  costs,  attorneys' fees, costs of
action, and such other and further relief.  Defendant's answer and defenses were
filed on August 31, 2000. The case is in the discovery/pre-trial process.

         On August 25, 2000,  Spectral Response,  Inc. filed a complaint against
Leisure  Time and  Technology  in the State Court of Gwinnett  County,  State of
Georgia,  (Civil  Action No.  00_C_5242-4),  alleging  non-payment  on  account.
Plaintiff requests damages in the amount of $958,501.13, prejudgment interest at
the rate of 18% per annum,  plus  $7,987.51 in interest which accrued at 10% per
annum prior to July 15, 2000, plus attorneys' fees; plus post-judgment  interest
at the rate of 18% per annum;  all court costs and such other and further relief
as the Court considers just, fair and appropriate.  Defendant filed an answer on
September 28, 2000. The case is in the discovery/pre-trial process.

     On September 11, 2000,  Merrill Lynch  Business  Financial  Services,  Inc.
filed a complaint  against  Leisure  Time;  Technology;  Cruises;  Leisure  Time
International,  Ltd.; Leisure Time Gaming,  Inc.; Solutia Gaming Systems,  Inc.;
Leisure Belle Cruise,  LLC;  Leisure Time  Hospitality,  Inc.;  Leisure  Express
Cruise, LLC; Financial;  Florida Casino Cruises, Inc. d/b/a FCC Advertising; and
Alan N. Johnson, an individual,  Michael R. Pace, an individual, in the Superior
Court of Gwinnett  County,  State of Georgia,  (Civil  Action No.  00-A-8358 7),
alleging  Breach of Contract  and default  under an  Agreement  and  Guaranties.
Plaintiff  requests  damages  in the  amount  of  $1,026,590.55  plus  interest,
including reasonable attorneys' fees and expenses, and other costs of collection
in the amount provided for in such statute,  as determined at trial.  Defendants
were granted an extension of time to file their  answer  and/or  defenses  until
November 13, 2000.

         On September 12, 2000,  Phillip C. Caldwell  filed a complaint  against
Leisure Time,  Technology and Leisure Time Gaming,  Inc., in the Court of Common
Pleas,  State of South  Carolina,  County  of  Spartanburg,  (Civil  Action  No.
2000-CP-42-2524),  alleging that he was denied the  opportunity  to exercise his
options,  that he is owed expenses and that Leisure Time was unjustly  enriched.
Plaintiff  seeks judgment of  $1,900,875.00  regarding the options and $4,746.16
for expenses. Defendant's answer is due on October 25, 2000.

         On August 17,  2000,  Atlantic Dry Dock  Corporation  filed a complaint
against Florida Casino Cruises,  Inc., Leisure Express Cruise,  LLC, Cruises and
Leisure Time in the United States  District  Court for the Northern  District of
Georgia, Atlanta Division,  (Civil Action No. 1 00-CV-2128),  alleging breach of
maritime  contract.  Plaintiff requests a constructive trust for repair funds in
the amount of $299,863.00 plus additional  interest,  costs and attorneys' fees.
Plaintiff  filed  for  attachment  and  garnishment  to any  and  all  freights,
accounts, monies, hires, disbursements, fees, advances, cash, or otherwise, etc.
being held by First  Union  National  Bank  and/or  its  agents and  affiliates.
Defendants' response to the complaint is due on October 25, 2000.

     On September 28, 2000, Wynn & Wynn, P.C. filed a complaint against Cruises,
in  the  Commonwealth  of  Massachusetts,  District  Court  Department,  Taunton
Division,  (Civil  Action No.  0031CV0669)  requesting  damages in the amount of
$39,683.18 plus interest,  costs and attorneys' fees.  Defendant's answer is due
October 23, 2000.

                                       15
<PAGE>

         On June 27,  2000,  Bowne of Dallas,  Inc.  filed a  complaint  against
Leisure  Time in the District  Court  Dallas  County,  Texas,  I-162nd  Judicial
District, (Civil Action No. 00-04789). Plaintiff seeks judgment for $260,364.26,
attorneys'  fees, plus  pre-judgment and  post-judgment  interest at the highest
rates allowed by law, costs of suit and other and further  relief,  both special
and  general,  legal and  equitable.  On August 25,  2000,  Leisure Time filed a
notice of special  appearance  objecting to jurisdiction.  A hearing was held on
September  19, 2000.  The Court  requested  briefs after the hearing.  The Court
ruled that Leisure Time should be given the opportunity to correct an affidavit.
A hearing is set for October 24, 2000.

         On  August  23,  2000,  Prime  Technological  Services,  Inc.  filed  a
complaint  against  Leisure Time and Alan Johnson in the United States  District
Court for the Northern District of Georgia, Atlanta Division,  (Civil Action No.
00-CV-2186)  alleging that the defendants  violated Section 10(b) and Rule 10b-5
of the  Securities  Exchange Act of 1934 by making  material  misrepresentations
involving  the  issuance of  preferred  stock and  alleging  breach of contract.
Plaintiff requested damages in the amount of $2,690,555,  the exact amount to be
determined by jury as compensatory  damages;  costs of litigation and attorneys'
fees, and other relief the Court deems just and proper.  Defendants'  answer was
filed on October 12, 2000.

         On February 9, 2000,  Tripp  Enterprises,  Inc., a Nevada  corporation,
filed a  complaint  against  Leisure  Time,  Technology  and DOES 1 through  10,
inclusive,  in the Second  Judicial  District  Court,  State of  Nevada,  Washoe
County,  (Civil  Action  No.  CV00-00628),  requesting  damages in the amount of
$29,404.00 plus interest at a rate of 1 1/2% per month since March 31, 1999. The
case was settled by payments of  $2,500.00  per month.  $3,567.00  remains as an
outstanding balance.

         On August 28, 2000,  Atlanta  Marriott  Gwinnett  Place,  Inc.  filed a
complaint  against  Technology in the State Court of Gwinnett  County,  State of
Georgia,  (Civil  Action No.  00-C-5273-1),  alleging  non-payment  on  account.
Plaintiff requests damages in the amount of $5,342.01, plus $287.14 pre-judgment
interest,  plus continuing  pre-judgment interest, and post-judgment interest at
the rate of 18% per annum on the principal amount,  plus court costs.  Defendant
filed an answer on September 28, 2000.  The case is in the  discovery/  pretrial
process.

         On August 7, 2000, Alliant Foodservice,  Inc. filed a complaint against
Cruises in the Commonwealth of  Massachusetts,  District Court of Massachusetts,
Peabody District Court, (Civil Action No. 0086 CV 0348), alleging damages in the
amount of $14,131.68  plus interest in the amount of $162.26 and attorney's fees
of $2,119.75 for a total of $16,413.69.  An entry of default against Cruises was
filed on September 14, 2000.

         On July 24,  2000,  Reliable  Construction  Heaters  filed a  complaint
against Leisure Time Hospitality, Inc. in the Cleveland Municipal Court Cuyahoga
County,  Ohio,  (Civil  Action  No.  00CVF  15927),  alleging  defendant  rented
equipment on three different months and failed to pay.  Plaintiff seeks judgment
in the amount of $6,710.47 plus interest at a rate of 10% plus costs.  On August
28, 2000,  defendant  entered into a stipulated order granting leave of court to
move or plead on or before  September  25,  2000.  Defendant  filed an answer on
September 25, 2000. The case is in the discovery/ pretrial process.

Defaults

     Leisure Time Hospitality,  Inc. has been served with a notice of default of
a promissory note dated September 15, 1998 in the amount of $545,000.00  that it
gave in  connection  with the  purchase  of the  hotel  property.  Leisure  Time
Hospitality,  Inc. has also  received  notice of  demolition of the hotel by the
City  of  Cleveland,  Ohio.  The  hearing  has  been  continued  to a date to be
determined.

                                       16
<PAGE>

         Leisure  Time  has  defaulted  on  a  payment  of  $730,000  under  the
non-competition  agreement with Michael Pace that was due on September 15, 2000.
By  certified  letter dated  October 6, 2000,  Leisure Time has been served with
notice of default regarding the nonpayment of the non-competition agreement with
Michael Pace in the amount of $730,000 that was due on September 13, 2000.

Unpaid Invoices

         Leisure Time has unpaid invoices to suppliers that are over 90 days old
in the approximate amount of $1,900,000.

The  following  lawsuits and legal  claims have had no material  change in their
status since December 31, 1999:

          -  Civil  Action  No.:   98-A-9761-4   between  Technology  and  Drews
     Distributing, Inc.

          - Civil Action No.: 99-CP-401068 between Drews Distributing,  Inc. and
     Technology.

Administrative Hearings

     On June 10, 1999, Maria Luberto,  filed a complaint against Leisure Time in
the Commonwealth of Massachusetts,  Commission Against Discrimination, (Case No:
M.C.A.D.  C.A.#:  99-BEM-1619).  The complaint  alleges  sex/gender  harassment,
sex/gender  discrimination,   age  discrimination,   hostile  work  environment,
retaliation and constructive termination. The case is the discovery stage.

         On April 26, 2000, Sandra Gibson filed a workers compensation complaint
(WC Case No.  9926617)  against  Leisure  Time.  The matter is in the  discovery
stage.

         It is Leisure Time's policy to vigorously defend  litigation,  however,
Leisure Time has entered into  settlements  of claims in the past, and may do so
in the future,  whenever  management deems the  circumstances  appropriate.  Any
unfavorable outcome related to any outstanding  litigation could have a material
adverse effect on the financial condition of Leisure Time.

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

         No matter was submitted to a vote of Leisure Time's shareholders during
Leisure Time's fiscal quarter ended June 30, 2000.

                                       17
<PAGE>

                                     PART II

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

Market Information

         Leisure Time's common stock is currently  traded on the Nasdaq National
Market under the symbol LTCR.  The  following  table shows the range of high and
low closing bid quotations for the common stock, for each quarterly period since
the common stock became publicly traded on September 15, 2000.  These quotations
represent  prices between dealers and do not include retail markups,  markdowns,
or commissions and may not necessarily represent actual transactions.

                 Fiscal Quarter Ended:                 High           Low
                 ---------------------                 ----           ---
                     June 30, 2000                 $   5.25      $    2.00
                     March 31, 2000                    8.625          3.50
                     December 31, 1999                11.00           5.75

         The Nasdaq National Market requires companies with securities traded on
the Nasdaq National Market to maintain  certain  continuing  listing  standards.
Leisure  Time  currently  does not meet  certain  of  these  continuing  listing
standards  and,  therefore,  faces the  possibility  of being delisted from such
market.  By letter dated September 26, 2000, the Nasdaq National Market notified
Leisure Time that Leisure Time had failed to maintain a minimum  market value of
public float of $5,000,000 over a certain 30 day period as required.  The letter
also stated that Leisure Time has until  December 26, 2000 to regain  compliance
with the marketplace  rules of the Nasdaq National Market. If Leisure Time fails
to do this and is delisted,  the market price of Leisure Time's common stock may
be materially adversely affected.

Holders

         As of October 17, 2000,  Leisure Time had  approximately 150 holders of
record of Leisure Time's common stock.

Dividends

         Leisure Time has not declared cash  dividends on its common stock since
its inception and does not  anticipate  paying any dividends in the  foreseeable
future.

Recent Sales of Unregistered Securities

            Leisure  Time has not sold any  unregistered  securities  during its
last  fiscal  year ended June 30,  2000 that were not  previously  reported in a
Quarterly  Report on Form 10-Q.  Leisure  Time does not  consider  issuances  of
options to employees and directors to purchase Leisure Time's common stock to be
sales.

                                       18

<PAGE>

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

     The  following  selected  consolidated  financial  data  should  be read in
conjunction with  "Management's  Discussion and Analysis of Financial  Condition
and Results of  Operations"  and are  qualified by  reference  to the  financial
statements and notes beginning on page F-1.
<TABLE>
<CAPTION>

                     CONSOLIDATED STATEMENTS OF OPERATIONS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

                                         Leisure Time Technology
                                         (f/k/a U.S. Games, Inc.)(1)
                                          --------------------------
                                            For the                       Leisure Time Casinos & Resorts, Inc. and Subsidiaries (2)
                                           Year Ended    uly 1, 1996 to   ---------------------------------------------------------
                                            June 30,     September 13,                For the Year Ended June 30,
                                              1996            1996            1997        1998          1999        2000
                                          -----------    -------------    ----------   ----------   ----------   ----------
Revenue                                   $    28,291    $        2,671   $   29,838   $   28,643   $   56,869   $   15,566
<S>                                       <C>            <C>              <C>          <C>          <C>          <C>

Cost of goods sold                             15,677            1,300        16,616       16,517       30,107       10,761
                                          -----------    --------------   ----------   ----------   ----------   ----------
Gross profit                                   12,614            1,371        13,222       12,126       26,789        4,805
                                          -----------    --------------   ----------   ----------   ----------   ----------
Selling, general and administrative
expenses                                        8,284            2,856         5,615        8,727       10,395       11,214
Inventory impairment                               -                 -             -            -            -        7,355
Research and development costs                    800              132           469          642        1,445        3,276
Stock based compensation                           -                 -             -            -         1,500           -
Interest, net                                      74                9           712          840          622        1,249
Litigation                                         -                 -             -        3,043          318        1,739
                                          -----------    --------------   ----------   ----------   ----------   ----------
   Total operating expenses                     9,158            2,997         6,796       13,252       14,280       24,833

Net (loss)_ income before income tax
benefit (expense)                               3,456           (1,626)        6,426       (1,126)      12,509      (20,028)
Income tax benefit (expense)                   (1,293)             554        (1,738)         197       (4,628)       1,310
                                          -----------    --------------   ----------   ----------   ----------   ----------

Net income from continuing operations
(loss)                                          2,163            (1,072)       4,688         (929)       7,881      (18,718)
                                          -----------    --------------   ----------   ----------   ----------   ----------
Loss from operations of discontinued operations     -                 -            -            -       (3,449)      (1,760)
Loss on disposal of discontinued
operations including provision of
$1,903 for operating losses during
phases out period                                   -                 -            -            -            -       (7,066)
                                          -----------    --------------   ----------   ----------   ----------   ----------
Loss from discontinued operations                   -                 -            -            -       (3,449)      (8,826)
Net income (loss) before dividends paid         2,163            (1,072)       4,688         (929)       4,432      (27,544)
                                          -----------    --------------   ----------   ----------   ----------   ----------
Dividends declared                                  -                 -            -            -            -          157
                                          -----------    --------------   ----------   ----------   ----------   ----------
Net income (loss) available to common
shareholders                                    2,163            (1,072)       4,688         (929)       4,432      (27,701)
                                          ===========    ==============   ==========   ==========   ==========   ==========
Earnings (loss) per common share -
continuing operations                            3.14            (1.56)         1.08         (.21)        1.66        (3.25)
                                          ===========    ==============   ==========   ==========   ==========   ==========
Earnings (loss) per common share -
discontinued operations                             -                 -            -            -         (.73)       (1.53)
                                          ===========    ==============   ==========   ==========   ==========   ==========
Earnings (loss) per common share -
basic                                            3.14             (1.56)        1.08         (.21)         .93   $    (4.81)
                                          ===========    ==============   ==========   ==========   ==========   ==========
Earnings (loss) per common share -
diluted                                          3.14             (1.56)         .65         (.21)         .56   $    (4.81)
                                          ===========    ==============   ==========   ==========   ==========   ==========
Weighted average number of common
shares outstanding - basic                    688,850           688,850    4,343,397    4,516,528    4,755,771    5,753,815
                                          ===========    ==============   ==========   ==========   ==========   ==========
Weighted average number of common
shares outstanding - diluted                  688,850           688,850    7,664,903    4,516,528    7,898,220    5,753,815
                                          ===========    ==============   ==========   ==========   ==========   ==========

</TABLE>
(1) Represents the financial  results of Leisure Time Technology,  a predecessor
    to Leisure Time acquired by Leisure Time on September 13, 1996.
<PAGE>

(2) The  following  information  is  presented  for  Leisure  Time (prior to the
    acquisition of Leisure Time Technology) for the years ended June 30, 1996



                                                         For the Year ended
                                                           June 30, 1996
Revenue                                                  $            -
Cost of goods sold                                                    -
Gross profit                                                          -
Selling, general and administrative expenses                      1,342
Interest                                                             55
Net loss                                                         (1,397)
                                                         ==============
Earnings (loss) per common share - basic                 $        (0.35)
                                                         ==============
Weighted average number of common shares
outstanding - basic                                           4,010,650
                                                         ==============




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

The following  discussion contains certain forward looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which
are intended to be covered by the safe harbors created thereby. These statements
include the plans and objectives of management for future operations,  including
plans and  objectives  relating to expansion and the general  development of our
business.  These  forward-looking  statements are based on current  expectations
that involve  numerous  risks and  uncertainties.  Related  assumptions  involve
judgments with respect to, among other things, future economic,  competitive and
market conditions and future business  decisions,  all of which are difficult or
impossible  to predict  accurately  and many of which are  beyond  our  control.
Although we believe that the  assumptions  could be inaccurate  and,  therefore,
there can be no assurance that the  forward-looking  statements included in this
Annual  Report  on  Form  10-K  will  prove  to be  accurate.  In  light  of the
significant  uncertainties  inherent  in the  forward  looking  statements,  the
inclusion of such information  should not be regarded as a representation  by us
or any other person that our objectives and plans will be achieved.

OVERVIEW

Leisure Time's largest  business  segment is the  manufacture  and sale of video
gaming and pulltab  machines.  The  Pot-O-Gold  product line  comprises  Leisure
Time's principal  product line.  Leisure Time also sells a video pulltab machine
called the Pulltab  Gold.  A major  component of the Pulltab Gold machine is the
replaceable   cartridge  that  contains  encrypted  electronic  pulltabs.   Each
cartridge  has a finite  number of pulltabs  and,  when they are  depleted,  the
cartridge must be returned to Leisure Time to be refilled.

Leisure  Time's  second  largest  revenue  generating  segment has been offshore
gaming  cruises.  Leisure Time currently has two offshore  gaming  vessels.  The
first  vessel,  the  Vegas  Express,   operated  offshore  gaming  cruises  from
Gloucester,  Massachusetts  until October 31, 1999. Leisure Time's second vessel
is the Leisure Lady, which was purchased in January 1997 but was never placed in
operation.  Effective  March 31, 2000,  Leisure Time has decided to  discontinue
this business segment and is investigating alternatives for disposing of the net
assets of this  segment.  Leisure Time also owned the Biloxi  Belle,  a dockside
gaming  vessel that was  located on the  Mississippi  River.  Because of Leisure
Time's  default on the note payable this vessel was seized and sold at sheriff's
auction on August 30, 2000.

Leisure  Time's  third  segment of business is gaming route  operations.  Gaming
route  operations  involve the  installation,  operation  and servicing of video
gaming machines under various types of revenue participation agreements. Leisure
Time's only gaming route  operations were in South Carolina and these operations
were  discontinued on June 30, 2000.  Because of a South Carolina  Supreme Court
ruling, these routes became illegal on July 1, 2000.

The  following  discussion  should  be read in  conjunction  with the  financial
statements  and notes  thereto  and the  other  financial  information  included
elsewhere  in  this  prospectus.   This  discussion   contains   forward-looking
statements that involve risks and  uncertainties.  Leisure Time's actual results
could  differ  materially  from  those  anticipated  in  these   forward-looking
statements as a result of any number of factors, including those set forth under
"risk factors" and elsewhere in this document.



<PAGE>
RESULTS OF OPERATIONS

The  following  table sets forth for the periods  indicated the  percentages  of
total revenue of those items included in Leisure Time's  consolidate  statements
of operations.
<TABLE>
<CAPTION>

                                                                         Year Ended June 30,
                                                                1998       1999      2000
                                                              -------    -------    -------
<S>                                                           <C>        <C>        <C>

Total revenue                                                     100%       100%       100%
Cost of goods sold                                                 58         53         69
                                                              -------    -------    -------
Gross profit                                                       42         47         31
Selling, general and administrative expenses                       30         18         72
Inventory impairment                                               -          -          47
Research and development costs                                      2          2         21
Stock based compensation                                           -           2         -
Interest expense, net                                               3          1          8
Litigation                                                         11          1         11
                                                              -------    -------    -------
         Total operating expenses                                  46         24        159
Income (loss) before income taxes                                  (4)        22       (128)
Income tax benefit (expense)                                        1         (8)         8
Income (loss) from continuing operations                           (3)        14       (120)
Loss from operations of discontinued operations                    -          (6)       (11)
Loss   on   disposal   of   discontinued   operations
including  provision of $1,903 for  operating  losses
during phase out period                                           -          -         (45)
Loss from discontinued operations                                  -          (6)       (56)
Income (loss) before dividends paid                                (3)         8       (176)
Dividends paid                                                     -          -           1
         Net income (loss)                                         (3)%        8%      (177)%
</TABLE>

The  following  chart  provides  information  as to material  changes in Leisure
Time's  statements of operations for the year ended June 30, 1999 as compared to
the same period ended June 30, 2000:

<TABLE>
<CAPTION>

                                           Increase
Statements of                             (Decrease)       Percentage
Operations Item                            Millions         Change           Reason for Change
-----------------                         -----------    --------------   -----------------------
<S>                                       <C>            <C>              <C>

Revenues                                  $    (41.33)        -72.6%      Decreased sales in South Carolina
                                                                          Supreme Court ruling that determined
                                                                          that gaming was illegal in South
                                                                          Carolina.

Cost of goods sold                        $    (19.35)        -64.3%     Decreased sales in South Carolina.
Selling, general and
administrative expenses                   $      0.82           7.9%     Increased due to increased litigation expenses.
Inventory adjustment                      $      7.36         100.0%     Increased due to the write down of
                                                                          inventory associated with the South
                                                                          Carolina Supreme Court ruling that
                                                                          determined that gaming was illegal in South
                                                                          Carolina.
Research and development costs
                                          $      1.83         126.7%     Increased to the design and development of new
                                                                          products for release in 2000.
Interest expense, net                     $      0.63         100.8%
Total operating expenses                  $     10.55          73.9%
Income taxes
                                          $     (5.94)       -128.3%     Decrease in income resulting in a decrease in tax
                                                                          expense.
Net loss from continuing
operations

                                       $         26.60         337.5%     Increase due to a write down of obsolete inventory
                                                                          of $7.4 million, guarantee of debt of .4 million, and
                                                                          decreased sales due to South Carolina ruling.
Net loss from discontinued
operations                             $          5.38        -155.9%     Decreased due to loss estimates.
Net loss                               $         31.98         721.5%

</TABLE>

<PAGE>

The  following  chart  provides  information  as to material  changes in Leisure
Time's  historical  statements of operations  for the fiscal year ended June 30,
1999 as compared to the fiscal year ended June 30, 1998.


<TABLE>
<CAPTION>
                                           Increase
Statements of                             (Decrease)       Percentage
Operations Item                            Millions          Change       Reason for Change
                                          -----------    --------------   -----------------
<S>                                       <C>            <C>              <C>

Manufacturing                             $      28.2            98%      Increased sales in South Carolina due to a
                                                                          favorable resolution of uncertainties regarding
                                                                          the continued legality of gaming in Novmeber
                                                                          1998.
Cost of manufacturing revenue
                                          $      13.6            82%      Increased sales in South Carolina.
Selling, general and
administrative expenses                   $       1.7            19%      Increase in expense related to manufacturing overhead.
Research and development costs

                                          $        .8           125%      Increased research and development related to development
                                                                          of location controller for South Carolina.
Stock based compensation                  $       1.5           N/A       No comparable amount in prior period.
Interest expense, net
                                          $        .2            26%      Increased borrowings principally related to increased
                                                                          inventory levels.
Litigation
                                          $      (2.7)           90%      Judgement recorded in fiscal 1998 with cost of litigation
                                                                          appeal recorded in fiscal 1999.
Total operating expenses                  $       1.0             7%
Income taxes
                                          $       4.8         2,449%      Increase in income in fiscal year correlates to increase
                                                                          in tax expense.
Net income from continuing
operations                                $       8.8           948%
Net loss from discontinued
operations                                $       3.5            N/A      No comparable amount in prior period.
Net income                                $       5.4           577%

</TABLE>

Below is a detailed  description  of the events,  which may affect the  year-end
results.


RECENT DEVELOPMENTS THAT WILL AFFECT RESULTS FOR THE FORESEEABLE FUTURE

The South Carolina  Supreme Court has ruled that the gaming  referendum that was
to be held on November 2, 1999,  in South  Carolina  is  unconstitutional.  As a
result of the ruling,  video gaming became  illegal in South Carolina after June
30, 2000.  The ruling has  eliminated  Leisure Time's future video poker machine
sales in South  Carolina and has adversely  impacted  Leisure Time's revenue and
earnings for fiscal 2000 and will for the foreseeable  future. The sale of video
poker  machines in South  Carolina  accounted for  approximately  75% and 35% of
Leisure  Time's revenue for the year ended June 30, 1999 and the year ended June
30, 2000, respectively. The discontinuance of video poker machine sales in South
Carolina also will affect Leisure Time's ability to sell other related  products
in South Carolina.


<PAGE>

Leisure  Time  believes  that the  majority of the  machines  that were in South
Carolina will  ultimately  be converted to  redemption  games or end up in other
gaming jurisdictions. As a result, Leisure Time will attempt to continue to sell
software to convert or upgrade games. Solutia has signed exclusive  distribution
agreements with BestCo for Georgia and West Virginia and a distributor agreement
for North  Carolina.  Under  the  terms of the  agreements,  BestCo.  Inc.  will
distribute Leisure Time's redemption gaming machines, boards and software. These
products,  which range from conversion  kits and software  upgrades to machines,
will focus almost exclusively on the redemption market, where coupons for prizes
are  distributed  to  players,  upon  completion  of play.  The  agreements  are
three-year  agreements,  which  call for  minimum  purchases  by Bestco of 3,000
units, 5,000 units and 5,000 units, respectively, for the next three years ended
June 30. The Company did not receive orders for 3,000 units.

Leisure Time  continues to assess the impact of the ruling in South  Carolina on
its  operations  and is committed to replacing  potential lost sales by pursuing
new markets.

In November 1999,  Technology received a manufacturers license from the State of
Montana's  Department of Justice Gambling Control  Division.  In April 20, 2000,
Technology  received  approvals  from the State of Montana to begin  selling its
Pot-O-Gold  multi-game  machines in  Montana.  The  approvals  from the State of
Montana  Department of Justice Gambling  Control  Division enable  Technology to
move forward with its two-year distribution agreement with Summit Amusements and
Distribution LTD. Under the agreement, Summit has been appointed a non-exclusive
distributor  for the sale of  Technology's  products in Montana,  including  the
Pot-O-Gold  machine that includes the Touch Easy Keno,  Super Ball Keno and four
Poker games.

On  September  25,  2000 the State of Montana  Gambling  Control  Division  gave
Technology a Notice of Proposed  Department  Action and Opportunity for Hearing,
based on suitability  for license.  Technology has requested a hearing to resist
the Proposed Departmental Action.

In  September  2000,   Leisure  Time  and  Technology  entered  into  Settlement
Agreements  with the Arizona  Department of Gaming  whereby the  companies  were
denied state certification based solely on Section 5(f)(6) of Pascua Yaqui Tribe
of Arizona Gaming Compact,  dated June 24, 1993. Also, Alan N. Johnson, Elden W.
Rance and Gerald J. Boyle,  were denied  licenses by the Arizona  Department  of
Gaming. Leisure Time and the stated officers agreed to not reapply for licensing
for a period of three years from the date of the settlement.

In August 2000,  Technology entered into a Settlement  Agreement with the Viejas
Tribal  Government  Gaming  Commission  whereby the license was denied  based on
Technology's  distressed financial condition and based on Section 4.04(i) of the
Gaming  Ordinance  (having  a gaming  license  denied by  another  jurisdiction,
Arizona.) Technology may reapply for a gaming license after three years from the
date of this  settlement.  However,  Technology  has been orally  advised by the
Viejas Tribal Government that Leisure Time would not be licensed as long as Alan
N. Johnson was associated  with Leisure Time. In a letter dated  September 2000,
the Commissioner,  Norman H. DesRosiers,  waived the order prohibiting the sales
or service agreement or business  transactions between Viejas and Technology for
the  purposes  of  completing  the  compliance  upgrade/conversion  of  the  200
Technology  gaming  devices in  question.  Viejas and  Technology  may engage in
whatever business transactions are necessary until November 4, 2000.

In September 2000,  Leisure Time received a Notice of Provisional  Revocation of
Vendor Gaming License from the Pueblo of Isleta Gaming  Commission  stating that
Technology's license has been revoked immediately,  halting any and all business
transactions.  In October 2000,  Technology filed a request for  reconsideration
review.

In August 2000,  Technology  received  notice from the  Minnesota  Department of
Public Safety of its intent to revoke the temporary  manufacturer's  license, by
Consent Order based on a Minnesota  statute which requires the  Commissioner  of
the  Department  of Public Safety to revoke a license if the licensee has "had a
license or permit revoked or denied by another jurisdiction for a violation of a
law or rule  related to gaming."  Technology  did not agree nor sign the Consent
Order.  The  Commissioner  may  choose to  initiate  a  contested  case  against
Technology for the purpose of taking disciplinary action against the license.

In addition,  Leisure Time is experiencing  difficulty in obtaining new licenses
due  to  the  financial  condition  of  Leisure  Time  and  the  denials  in the
jurisdictions mentioned above. Leisure Time's denial of gaming licenses in these
jurisdictions  may affect its  ability to renew and receive  gaming  licenses in
other jurisdictions.

Leisure  Time  had  hoped  to  market  its  Pot-O-Gold  product  line  to  newly
established  casinos  and  route  operators  both to Native  American  tribes in
California,  where a number of California-based Native American tribes currently
conduct gaming. The voters in California  adopted a constitutional  amendment in
March 2000. In May 2000, the constitutional  amendment,  in conjunction with the
compacts, legalized Native American gaming in California when a list of compacts
with Native American tribes was published in the Federal Register.  Leisure Time
had  anticipated  that sales to the various Native American tribes in California
would have a material  positive  effect on Leisure Time's revenue in fiscal year
2001,  however  with the  denial of the  gaming  license  by the  Veijas  Indian
Reservation and the fact that Leisure Time is experiencing  difficulty obtaining
licenses  in other  jurisdictions  these  sales  will  more than  likely  not be
realized.

In addition,  Leisure Time has suspended offshore gaming operations of the Vegas
Express,   the   cruise-to-nowhere   gaming   vessel   located  in   Gloucester,
Massachusetts, effective October 31, 1999. As a result, losses have been reduced
dramatically  for  this  business  segment  as the  vessel's  related  operating
expenses have virtually  disappeared.  Leisure Time intends to sell this segment
and has been seeking to do so.

The loss of the South  Carolina  market  has had a  material  adverse  effect on
Leisure  Time's  revenue and earnings in fiscal 2000 and Leisure Time expects to
feel the  impact  of the loss of this key  market  for the  foreseeable  future.
Fiscal 2001  results are  dependent  upon  Leisure  Time moving into new markets
outside the United  States,  beginning the  introduction  of new  products,  and
fulfilling orders to existing customers.  Leisure Time's fiscal 2001 results are
dependent  on Leisure Time  increasing  revenues  through  increased  sales.  If
Leisure Time is unable to increase  revenues,  Leisure  Time's  fiscal 2001 will
result in  significant  loses and Leisure  Time's  ability to be a going concern
will be in doubt.


LIQUIDITY AND CAPITAL RESOURCES

Historically,  Leisure Time has funded its operations  primarily through revenue
generated  by the sale of video gaming  machines.  Leisure Time has acquired its
assets,  such as the Vegas Express and the Leisure Lady offshore  gaming vessels
through long term debt and cash available from operations.  As of June 30, 2000,
Leisure Time had  negative  working  capital of  approximately  $16,200,000.  In
addition, Leisure Time is in default on all of its long-term debt.

Leisure  Time will need to raise  capital to satisfy  its debt and  continue  in
existence.

The following  information  relates to Leisure  Time's  sources and uses of cash
during the twelve months ended June 30, 2000.

Leisure Time utilized $2.4 million of cash in operations related primarily to:

         - a net loss of $27.7 million; effect of non-cash change of:

         - a $7.4 million decrease due to the inventory write down;

        - $12 million in discontinued assets

         - $1.7 million of depreciation and amortization;

         - a $1 million impairment of software and cash-generating items of:

         - a $2.8 million decrease in prepaids and other assets;

         - a $ .5 million decrease in accounts payable

         - a $ .4 million net decrease in accrued expenses and other; and debt
           guarantee

         - a $.33 million increase in income taxes receivable


Leisure Time used $.4 million in cash in investing  activities related primarily
to the purchase of equipment for the manufacturing and gaming segment.

Leisure  Time  received  approximately  $ .4  million  in  cash  from  financing
activities related primarily to:

     - the receipt of net proceeds of approximately $5 million from the issuance
of common  and  preferred  stock;  and

     - the net  payout of  approximately  $4.5
million of short term and long term debt.


Leisure  Time is in  default  on  sixteen  items  of  long-term  debt,  totaling
approximately $12,800,000.

Cash  generated from  operations  may not be sufficient to meet working  capital
requirements for fiscal 2001. Therefore, additional debt or equity financing may
be required for Leisure Time to satisfy its short term capital needs. If Leisure
Time does not generate sufficient cash from operations and if additional debt or
equity financing cannot be obtained, Leisure Time may not be able to continue as
a going concern.  Leisure Time's long-term  liquidity needs consist primarily of
working capital to finance receivables and inventory and to pay off debt. Future
profits,  if any,  retained in the  business as well as bank debt or  additional
equity financing will be necessary to pay for these needs. To date, Leisure Time
is in default of debt financing from various financial institutions.  Thus it is
doubtful  that Leisure Time will obtain  long-term  liquidity in the future from
these or any other sources.  If unable to obtain its long-term  liquidity,  then
Leisure  Time will have to scale back its  long-term  growth  strategy or may be
unable to continue in existence.

In addition, Leisure Time is reviewing its non-core businesses and is attempting
to sell off some assets in an attempt to reduce bank debt and improve  operating
cash flow. Some of the initiatives Leisure Time has currently undertaken include
the following:

         - Leisure Time has suspended  offshore gaming  operations for the Vegas
         Express,  a  cruise-to-nowhere   gaming  vessel  that  was  located  in
         Gloucester,  Massachusetts.  Effective April 19, 2000, Leisure Time has
         decided to discontinue  offshore gaming operations and is investigating
         alternatives  for  disposing of the net assets of the  offshore  gaming
         operations.
         - Leisure Time has reorganized  its Atlanta  operations to focus on its
         core businesses.  - Leisure Time has decided to suspend payments on the
         financing  for its offshore  gaming  vessels until a buyer can be found
         for the  vessels.  Leisure  Time is  currently  working with one of the
         financing  companies to restructure  one of the loans and is attempting
         to dispose of the vessels. - Leisure Time has sold its hotel division.

Management  of Leisure  Time is  currently  assessing  its current  situation to
determine what cause of action is appropriate and what direction to focus sales.
Leisure Time will need to raise  capital,  satisfy debt and generate sales if it
is to continue in existence.

Leverage  Growth in  Installed  Products  to  Increase  Recurring  Revenue  From
Software Sales

To date,  most of Leisure Time's revenue has been derived from the sale of video
gaming  machines.  As Leisure Time's installed  product base has grown,  Leisure
Time has experienced an increase in customers' demand for sales of:

                 - newly developed game software;

                 - software enhancements for existing games; and

                 - cartridge replacements for video pulltab

With this in mind,  Leisure Time is focusing in the near future on foreign sales
and sales of redemption machines. It has not yet been determined if the sales in
these markets are of a sufficient size to support Leisure Time.

YEAR 2000 COMPLIANCE

Leisure Time has not experienced  any year 2000 system  failures  resulting from
internal or external  sources.  Leisure Time will continue to monitor its system
for any year 2000  failures.  However,  Leisure  Time does not  expect  any such
failures.

<PAGE>


ITEM 7A.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Leisure Time has no market risk sensitive instruments.

ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The  Consolidated  Financial  Statements  that  constitute  Item  8 are
attached  at the end of this  Annual  Report  on Form  10-K.  An  Index to these
Consolidated Financial Statements is also included in Item 14 (a) of this Annual
Report on Form 10-K.

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

         Leisure Time did not change its independent  accountants during Leisure
Time's last two fiscal years or any subsequent interim period.

                                    PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

            The directors and executive officers of Leisure Time are as follows:

NAME                  AGE                 POSITION
----                  ---                 --------

Alan N. Johnson       59                  Chairman of the Board, President,
                                          Chief Executive Officer and Director
Gerald J. Boyle       69                  Vice President, Secretary and
                                          Director
Joseph C. Grunda      48                  Vice President of Licensing and
                                          General Counsel and Assistant
                                          Secretary
Kelly L. Macke        35                  Vice President of U. S.  Sales and
                                          Marketing

John J. Pasierb       53                  Vice President of Engineering and
                                          Research and Development and
                                          President and Chief Executive
                                          Officer of Technology
Richard D. Sly        65                  Assistant Secretary and Director
Lester E. Bullock     47                  Director
Per-Arne Skogstad     48                  Director
Carl A. Williams      60                  Director

            Alan N. Johnson and Kelly L. Macke are father and daughter.

                                       20
<PAGE>

            Directors  are elected for a  three-year  term,  with  approximately
one-third  of the board of  directors  standing  for  election  each year.  Each
director  holds office until the expiration of the  director's  term,  until the
director's successor has been duly elected and qualified or until the earlier of
their  resignation,  removal or death.  All of Leisure Time's  officers,  except
Richard D. Sly, spend substantially all of their time on Leisure Time's business
and affairs

            Alan N. Johnson has been the Chairman of the Board and  President of
Leisure  Time since 1993 and the Chief  Executive  Officer of Leisure Time since
1997.  Alan N. Johnson also serves in the following  capacity with the following
wholly-owned operating subsidiaries of Leisure Time:

            -     Leisure Time Technology - Director and Chairman;

            -     Leisure Time Cruise -- Director and President;

            -     Leisure Express Cruise -- President and Chief Executive
                        Officer;

            -     Florida Casino Cruises -- Director and President;

            -     Leisure Time International -- Director and President.

Mr.  Johnson  studied  transportation  law at Fenn College,  Engineering at Case
Western Reserve and hazardous materials removal and control at Georgia Institute
of Technology.

           Gerald J.  Boyle has been the Vice  President  and the  Secretary  of
Leisure Time since 1997 and a director of Leisure Time since 1994.  From 1987 to
the present,  Mr. Boyle has been an independent  accountant with a concentration
in consulting for small emerging companies.  Mr. Boyle graduated with a bachelor
of commerce degree in accounting form Sir George William University.

           Joseph C. Grunda has been the Vice President of Licensing and General
Counsel or Vice  President of Licensing  and  Compliance/General  Counsel and an
Assistant  Secretary of Leisure Time since 1999.  Mr.  Grunda has resigned as an
officer of Leisure Time effective  November 2000.  From 1981 to 1999, Mr. Grunda
was a partner in the law firm of Grunda & Grunda.  Mr. Grunda graduated from the
College  of  Wooster  with a  bachelor  of arts  degree  and from Ohio  Northern
University with a doctor of jurisprudence degree.

     Kelly J. Macke has been the Vice  President of U. S. Sales and Marketing of
Leisure Time since May 1999.  Mrs.  Macke was an Account  Executive with Leisure
Time Technology from January 1997 to May 1999. From 1994 to 1997, Mrs. Macke was
a licensed  insurance  agent with Sedgwick,  an insurance  broker.  From 1991 to
1994,  Mrs.  Macke was an Account  Executive  with Hogg  Robinson,  an insurance
broker.  Mrs. Macke attended Lorain County Community College.  Kelly J. Macke is
the daughter of Alan N. Johnson.

           John J.  Pasierb  has been  the Vice  President  of  Engineering  and
Research and  Development of Leisure Time since 1999 and the President and Chief
Executive  officer of  Technology  since January  2000.  From 1998 to 1999,  Mr.
Pasierb was the Vice  President of Engineering  and Research and  Development of
Leisure Time  Technology.  From 1994 to 1998,  Mr.  Pasierb was the President of
Acclaim   Coin-Operated   Amusement,   a  wholly-owned   subsidiary  of  Acclaim
Entertainment.  From 1992 to 1994, Mr. Pasierb was Vice President of Engineering
of American Laser Games. Mr. Pasierb graduated from Western Michigan  University
with a Master of Science degree in engineering.

                                       21
<PAGE>

     Richard D. Sly has been an  Assistant  Secretary of Leisure Time since 1997
and a director  of Leisure  Time since  1993.  Mr. Sly was a Vice  President  of
Leisure  Time from 1993 to 1997 and the  Secretary  of Leisure Time from 1993 to
1997. Mr. Sly has been employed by Richard Sly Architect, Inc., an architectural
firm owned by him, since 1970. Mr. Sly graduated from Ohio State University with
a bachelor  of  architecture  degree.  In addition  to  providing  architectural
services  for the hotel for which Mr.  Sly is  compensated  separately,  Mr. Sly
provides services as a part time employee of Leisure Time.

           Lester E.  Bullock has been a director of Leisure Time since 1998 and
has  been  the  Director  of  Acquisitions  or a Vice  President  and the  Chief
Operating  Officer of Leisure Time Cruise  Corporation  since 1998. From 1994 to
1998, Mr. Bullock was the President and Chief  Executive  Officer and a director
of Europa Cruise  Corporation,  a day cruise  operator.  From 1992 to 1994,  Mr.
Bullock was the General  Manager and then the Vice  President of  Operations  of
Europa Cruise  Corporation.  Mr. Bullock graduated from Arizona State University
with a bachelor of science degree in business administration.

           Per-Arne  Skogstad has been a director of Leisure Time since December
1999. Mr. Skogstad has been the Director General of the Civil Aviation Authority
in Norway since March 1999.  From 1995 to 1999,  he was Director  General of the
Department of Civil Affairs of the Ministry of Justice and Police of Norway.  He
has also served as the Assistant  Director General of the Department of Research
at the  University  of Oslo and was the Head of the  Housing  Department  of the
Student's  Welfare  Organization  of  Rogaland.  Mr.  Skogstad  has a Master  of
Political Science from the Institute of Public  Administration and Organization,
at  the  University  of  Bergen,  Norway  and  is  a  graduate  in  Economy  and
Administration  from the  State  University  College  of  Rogaland,  Stravanger,
Norway.

     Carl  Williams  has been a director of Leisure  Time since April 2000.  Mr.
Williams is retired.  Previous to his  retirement he was the owner of a business
in Cleveland, Ohio.

Committees of the Board of Directors

            The board of directors  has a  compensation  committee  and an audit
committee.  The  compensation  committee and the audit committee are composed of
Per-Arne  Skogstad and Carl A. Williams,  the two  non-employee  directors.  The
primary  functions  of  the  compensation  committee  are  to  review  and  make
recommendations  to the board of  directors  with  respect to the  compensation,
including bonuses, of Leisure Time's officers and to administer the grants under
Leisure  Time's stock option plan.  The functions of the audit  committee are to
review the scope of the audit procedures  employed by Leisure Time's independent
auditors,  to review with the  independent  auditors  Leisure Time's  accounting
practices and policies and recommend to whom reports should be submitted  within
Leisure Time, to review with the independent auditors their final audit reports,
to review with Leisure Time's internal and independent  auditors  Leisure Time's
overall  accounting and financial  controls,  to be available to the independent
auditors during the year for  consultation,  to approve the audit fee charged by
the  independent  auditors,  to report to the board of directors with respect to
such matters and to recommend the selection of the independent auditors.

Compensation of Directors

            Leisure  Time   currently  pays  it   non-employee   directors  cash
compensation  of $3,500 per directors'  meeting  attended and committee  meeting
attended that is held separately from a directors' meeting for their services as
directors  and each  receives  an option to  purchase  15,000  shares of Leisure
Time's  common  stock  at  market  value on the date of  grants.  Directors  are
reimbursed  for expenses  incurred in  connection  with meetings of the board of
directors or committees thereof.

                                       22
<PAGE>

Compensation Committee Interlocks and Insider Participation

     Leisure Time's  compensation  committee  consists of Per-Arne  Skogstad and
Carl A. Williams.

Section 16(a) Beneficial Ownership Reporting Compliance

     To Leisure Time's  knowledge,  during Leisure Time's fiscal year ended June
30, 2000,  there were no directors or officers or more than 10% shareholders who
failed to timely  file a Form 3, Form 4 or Form 5, other than  Gerald J.  Boyle,
Lester E.  Bullock,  Eric R. Dey,  Anne M.  Ellison,  Joseph C. Grunda,  Alan N.
Johnson, R. Thomas Klingel, Kelley L. Macke, Keko Mottes, John J. Pasierb, Elden
W. Rance,  Per-Arne  Skogstad,  Richard D. Sly and Carl A. Williams who were all
late in filing their Forms 3.

ITEM 11.   EXECUTIVE COMPENSATION

Summary Compensation Table

     The  following  table  provides  certain  information   pertaining  to  the
compensation paid by us and our subsidiaries  during our last three fiscal years
for services  rendered by Alan N. Johnson,  Elden W. Rance,  R. Thomas  Klingel,
Gerald J. Boyle and John J. Pasierb.

                               ANNUAL COMPENSATION
<TABLE>
<CAPTION>
                                                                               Long-Term
                                                                               Compensation Awards
                                                                               -------------------
                                                                               Securities
Name and                           Period Ended                                Underlying
Principal Position                 September 30,   Salary ($)   Bonus ($)      Options (#)
------------------                 -------------   ----------   ---------      -----------
<S>                                <C>             <C>          <C>            <C>
Alan N. Johnson                         2000         588,463      60,000                --
Chairman of the                         1999         452,797     102,356             6,111
Board of Directors                      1998         357,544       3,847                --
President and
CEO

Elden W. Rance                          2000         342,131      30,000             2,038
Executive Vice President,               1999         219,247      54,847                --
Chief Financial Officer and             1998          26,539          --                --
Treasurer until July 13, 2000

R. Thomas Klingel                       2000         196,960      15,000             1,360
Executive Vice President of             1999         212,217      27,185                --
Marketing, Sales, Compliance            1998         177,024       2,597                --
and Licensing or President
and Chief Executive Officer
of Solutia Gaming Systems,
Inc. until April 2000

Gerald J. Boyle                         2000         172,933      16,250             1,020
Vice President and Secretary            1999         155,481      32,873                --
                                        1998         157,500                            --

</TABLE>

                                       24
<PAGE>

<TABLE>
<CAPTION>

                                                                               Long-Term
                                                                               Compensation Awards
                                                                               -------------------
                                                                               Securities
Name and                           Period Ended                                Underlying
Principal Position                 September 30,   Salary ($)   Bonus ($)      Options (#)
------------------                 -------------   ----------   ---------      -----------
<S>                                <C>             <C>          <C>            <C>



John J. Pasierb                         2000         174,757      12,500             1,782
Vice President of                       1999         120,679       2,404           100,000
Engineering and Research and            1998              --          --                --
Development until January
1999, President and Chief
Executive Officer of
Technology since January 1999

Eric R. Dey                             2000         148,442      34,276            51,020
Chief Financial Officer                 1999              --          --                --
until May 2000, Vice                    1998              --          --                --
President of Finance until
October 1999

Joseph C. Grunda                        2000         126,725       8,250               680
Vice President of Licensing             1999          27,652          --                --
and Compliance/General                  1998              --          --                --
Counsel and Assistant
Secretary

Kelly L. Macke                          2000         105,311          --               680
Vice President of U.S. Sales            1999          83,995       3,150                --
and Marketing                           1998          75,650          --                --


</TABLE>

         Leisure Time provides  Alan N. Johnson and provided  Elden W. Rance and
R. Thomas Klingel with  automobiles  and pays or paid the related  insurance and
maintenance.  The total amounts paid by Leisure Time for automobiles,  insurance
and maintenance for the fiscal years ended June 30, 2000, 1999 and 1998 for each
individual  did not exceed  the  lesser of  $50,000  or 10% of the total  annual
salary and bonus paid to each individual.

                                       25
<PAGE>

Option Grants in Last Fiscal Year

     The following  table provides  information  with respect to options granted
during Leisure Time's fiscal year ended June 30, 2000, to Alan N. Johnson, Elden
W. Rance,  R. Thomas  Klingel,  Gerald J. Boyle,  Eric R. Dey,  John J. Pasierb,
Joseph C. Grunda and Kelly L. Macke:

<TABLE>
<CAPTION>
                               Number of              Percent of Total
                              Securities             Options Granted to
                          Underlying Options        Employees in Fiscal        Exercise
        Name                    Granted                     Year                 Price            Expiration Date
---------------------     --------------------     -----------------------    ------------     -----------------------
<S>                       <C>                      <C>                        <C>              <C>

  Alan N. Johnson                6,111                      3.4%                 $2.13             11/04 - 12/04

   Elden W. Rance                2,038                      1.1%                 $2.13             11/04 - 12/04*

 R. Thomas Klingel               1,360                      0.8%                 $2.13             11/04 - 12/04*

  Gerald J. Boyle                 166                       0.1%                 $2.13             11/04 - 12/04*

  John J. Pasierb                1,782                      1.0%                 $2.13             11/04 - 12/04*

    Eric R. Dey                  1,020                      0.6%                 $2.13             11/04 - 12/04*
                                50,000                     28.2%                $12.00       7   7/05/04 - 7/05/07

  Joseph C. Grunda                680                       0.4%                 $2.13             11/04 - 12/04*

   Kelly L. Macke                 680                       0.4%                 $2.13       `     11/04 - 12/04*
</TABLE>

*Cancelled and exchanged for cash effective June 22, 2000.

Aggregate Option exercised in Last Fiscal Year and Fiscal Year End Option Values

     No options were  exercised by Alan N.  Johnson,  Elden W. Rance,  R. Thomas
Klingel,  Gerald J. Boyle,  John J.  Pasierb,  Eric R. Dey,  Joseph C. Grunda or
Kelly L. Macke  during  Leisure  Time's  fiscal  year ended June 30,  2000.  The
following table provides information with respect to them concerning unexercised
options to  purchase  our common  stock held by them as of the end of the fiscal
year ended June 30, 2000:

                                       26
<PAGE>

                          Fiscal Year End Option Values

                         Number of Securities          Value of Unexercised
                        Underlying Unexercised         In-the-Money Options
                      Options at Fiscal Year End        at Fiscal Year End
        Name           Exercisable/Unexercisable   Exercisable/Unexercisable(1)

 Alan N. Johnson             1,018,900/-0-                $1,015,625/-0-
 Elden W. Rance               562,500/-0-                    -0-/-0-
 R. Thomas Klingel          164,300/40,000                   -0-/-0-
 Gerald J. Boyle             50,292/50,292                   -0-/-0-
 John J. Pasierb             60,000/40,000                   -0-/-0-
 Eric R. Dey                  12,500/-0-                     -0-/-0-
 Joseph C. Grunda            20,000/20,000                   -0-/-0-
 Kelly L. Macke              126,250/1,250                 $156,250/-0-

(1) Calculated by multiplying the difference  between the exercise price and the
closing bid price of $2.25 per share on June 30, 2000 by the applicable  shares.
Does not give consideration to commissions or other market conditions.

Employment Agreements

            Alan N. Johnson has an employment  agreement  with Leisure Time that
terminates on June 30, 2003.  Gerald J. Boyle and Richard D. Sly have employment
agreements  with  Leisure  Time  that  terminate  on June 30,  2001.  Under  the
employment  agreements,  the current  annual base  salaries of Alan N.  Johnson,
Gerald  J.  Boyle  and  Richard  D.  Sly are  $600,000,  $165,000  and  $41,250,
respectively.  Each of the employment  agreements is renewed automatically after
its termination  date for succeeding one year periods unless Leisure Time or the
employee  gives  written  notice of  nonrenewal  at least 180 days  prior to the
expiration of any such renewal date. Each of the employment  agreements contains
provisions that the employee will not disclose confidential information and will
not  compete  with  Leisure  Time  for  various  periods  after  termination  or
expiration of their employment agreements.

           Each of the employment  agreements  contains a provision that, at any
time after a "change in control" of Leisure Time, the employee has the option to
cause  Leisure  Time to  repurchase  all or any  portion of the common  stock of
Leisure  Time then  owned by the  employee  at the  higher of (i) the book value
thereof as of the last day of the month prior to the date of notice, or (ii) the
last sale price of a share of Leisure  Time's  common stock or the last price at
which the common stock was sold by Leisure Time or by a  stockholder  of Leisure
Time to any person (other than the employee).  Also, upon a change of control of
Leisure Time,  each employee is  automatically  granted  options to purchase the
same  number of shares of  Leisure  Time's  common  stock as are  issuable  upon
exercise of options to purchase  Leisure  Time's  common stock then owned by the
employee.  Such new options will have a ten year exercise period and an exercise
price of $0.01 per share.

                                       27
<PAGE>

           A "change in control" is deemed to have occurred if:

- at any  time  any one  person,  or more  than one  person  acting  as a group,
acquires  beneficial  ownership  of the voting  securities  of Leisure Time that
together with the voting securities  beneficially owned by such person or group,
constitute more than 20% of the total voting power of Leisure Time's outstanding
voting securities; - the appointment or election of a majority of the members of
Leisure  Time's board of directors  who are  appointed or elected  during any 24
month period but are not  endorsed in writing by a majority of those  members of
Leisure  Time's board of directors who were  directors  prior to the date of the
appointment or election of the first such new directors comprising a majority of
the board of  directors;  or - one  person or more than one  person  acting as a
group,  acquires (or has acquired  during the 12 month period ending on the date
of the most recent  acquisition  by such person or persons)  assets from Leisure
Time that have a total fair market value equal to or greater  than  one-third of
the total fair market value of all of Leisure Time's assets  immediately  before
the acquisition or acquisitions.

           Bernard C.  Johnson,  an employee of Leisure  Time and the brother of
Alan N. Johnson,  has an employment  agreement with Leisure Time that terminates
on June 30, 2001, and has the same confidentiality, noncompetition and change in
control provisions as the employment agreements discussed above.

           Joseph C. Grunda has an employment  agreement  with Leisure Time that
terminates  on February 28, 2002.  John J. Pasierb has an  employment  agreement
with Leisure Time that terminates on January 31, 2002. Each of these  employment
agreements contains provisions that the employee will not disclose  confidential
information  and will not compete with Leisure  Time for various  periods  after
termination or expiration of their employment agreements.

Consulting Agreement

           Effective  March 31,  1998,  Leisure  Time  entered into a consulting
agreement with Anthony J. Siciliano,  the former  Executive Vice President and a
former  director of Leisure  Time.  Pursuant to the  consulting  agreement,  Mr.
Siciliano is required to provide a maximum of ten hours of management consulting
per week for Leisure Time and its subsidiaries.  Mr. Siciliano is paid an amount
of $5,000 per month,  together  with the amount he pays to maintain  his current
health insurance,  and any out-of-pocket  expenses incurred by him in performing
his consulting  duties.  The consulting  agreement  automatically  terminates on
December 31, 2008.

Stock Option Plan

           Leisure Time has an incentive and nonstatutory stock option plan that
authorizes  Leisure Time to grant  incentive stock options within the meaning of
Section 422A of the  Internal  Revenue  Code of 1986,  as amended,  and to grant
nonstatutory  stock options.  The stock option plan currently relates to a total
of  4,500,000  shares  of  common  stock.  Leisure  Time  has  agreed  with  the
representative  of the  underwriters  of Leisure Time's public offering that all
options granted under the plan after the date of this  prospectus  until options
to purchase a total of 3,000,000  shares have been granted will be granted at no
less than fair market  value.  Thereafter  and until the next meeting of Leisure
Time's  stockholders,  any options granted relating to the next 1,500,000 shares
only may be granted at no less than the greater of the fair market  value of the
common  stock on the date of grant or 120% of the public  offering  price of the
common stock.

                                       28
<PAGE>

           Options to purchase  764,900 shares of common stock have been granted
under the plan that are  outstanding.  The  options are  exercisable  at between
$2.50 and $12.00  per share,  vest over  various  periods of time and  terminate
between 2003 and 2008. Of the outstanding options granted under the stock option
plan,  executive  officers of Leisure Time have been granted options to purchase
246,400 shares of common stock and other  employees have been granted options to
purchase 518,500 shares of common stock. The outstanding options have an average
exercise price of approximately $7.03 per share.

           The stock  option plan is  administered  by Leisure  Time's  board of
directors or a committee  thereof which determines the terms of options granted,
including  the exercise  price,  the number of shares of common stock subject to
the option,  and the terms and  conditions of exercise.  No option granted under
the stock option plan is  transferable by the optionee other than by will or the
laws of descent  and  distribution  and each  option is  exercisable  during the
lifetime of the optionee only by such optionee. The board of directors currently
administers the stock option plan.

           Leisure  Time has  also  granted  nonqualified  options  to  purchase
2,477,348  shares of Leisure  Time's  common  stock  outside of the stock option
plan.  Of these  options,  executive  officers of Leisure Time have been granted
options to purchase  1,147,348  shares of common stock that are  exercisable  at
between $1.00 to $2.50 per share,  are fully vested and  terminate  between 2005
and 2013.  These options have a weighted average exercise price of approximately
$1.44 per share.

Limitation of Liability and Indemnification

           Pursuant to the provisions of the Colorado Business  Corporation Act,
Leisure  Time has adopted  provisions  in its  articles of  incorporation  which
provide that its directors will not be personally  liable to Leisure Time or its
stockholders  for monetary damages for a breach of fiduciary duty as a director,
except that the provisions will not eliminate or limit the directors'  liability
as a result of:

                    - a breach of the director's duty of loyalty to Leisure Time
               or its stockholders;

                    - acts or  omissions  not in good  faith  or  which  involve
               intentional misconduct or a knowing violation of law;

                    - voting for or assenting to a  distribution,  which,  after
               giving  effect to the  distribution,  would result in (a) Leisure
               Time not being  able to pay its debts as they  become  due in the
               usual  course of  business,  or (b) Leisure  Time's  total assets
               being  less than the sum of its total  liabilities  plus  amounts
               needed to satisfy preferential rights upon dissolution of Leisure
               Time; or

                    - any  transaction  from  which  the  director  directly  or
               indirectly derives any improper personal benefit.

           Leisure  Time's  articles of  incorporation  state that  Leisure Time
shall  indemnify,  to the maximum extent  permitted by law, any person who is or
was a director,  officer,  agent,  fiduciary or employee of Leisure Time against
any claim,  liability or expense arising against or incurred by such person made
party to a proceeding  because such person  served in any of such  capacities or
because the person is or was  serving  another  entity as a  director,  officer,
partner,  trustee,  employee,  fiduciary or agent at Leisure Time's request. The
articles of  incorporation  also permit  Leisure  Time to purchase  and maintain
insurance providing such indemnification. Leisure Time's bylaws also provide for
indemnification  of such  persons  and for the  advancement  of expenses to such
persons.

           Insofar  as  indemnification   for  liabilities   arising  under  the
Securities  Act of 1933 may be  permitted  to  directors,  officers  and control
persons of Leisure Time  pursuant to the  foregoing  provisions,  or  otherwise,
Leisure  Time  has  been   advised  that  in  the  opinion  of  the  SEC,   such
indemnification  is against  public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable.

                                       29
<PAGE>

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

              MANAGEMENT

            The  following  table sets forth  information  regarding  beneficial
ownership of Leisure Time's common stock, as of October 17, 2000, by:

                    -  each  person  who  is  known  by  Leisure   Time  to  own
               beneficially more than 5% of Leisure Time's outstanding shares of
               common stock;

                    - each of Leisure Time's executive officers named in Item 11
               and Leisure Time's directors;

                    - all current  executive  officers and  directors of Leisure
               Time as a group; and

                    - each  other  person  listed  in the  Summary  Compensation
               Table.

            Shares of common stock not outstanding but deemed beneficially owned
by virtue of the right of an  individual  to acquire the shares of common  stock
within 60 days are treated as outstanding  only when  determining the amount and
percentage  of common  stock  owned by such  individual.  Except as noted,  each
person has sole voting and investment power with respect to the shares of common
stock shown.

                                                  Share of Common Stock
  Name and Address,                                 Beneficially Owned
  If Over 5%, of Beneficial Owner                 Prior to the Offering

                                               Number          Percent of Class

  Alan N. Johnson                           3,202,456(1)            45.8%
     1284 Miller Road
     Avon, OH  44011

  Gerald J. Boyle                             350,292(2)             5.9
     4258 Communications Drive
     Norcross, GA  30093

  Richard D. Sly                              325,920(3)             5.5
     13920 West Lake Road
     Vermillion, OH  44089

  Lester E. Bullock                            20,850(4)              *

  John S. Pasteno                              41,782(5)              *

  Per-Arne Skogstad                                                   *
                                               15,000(6)

  Carl A. Williams                                  -0-               *

                                       30
<PAGE>

  Directors and Current Executive
   officers as a   group (6 persons)         4,113,700(8)           56.3%

  R. Thomas Klingel                                 -0-               -0-

  Elden W. Rance                                    -0-               -0-

  Anthony J. Siciliano                        301,000(9)             5.1%
     18 Neil Drive
     Smithtown, NY  11787

  David K. Vanco                              917,643(10)
     1 South Piermont Drive
     North Barrington, IL  60010

  * Less than 1%.

          (1) The shares owned by Alan N. Johnson  include  1,066,567  shares of
     common stock underlying presently exercisable options.

          (2) The  shares  owned by Gerald J.  Boyle  include  50,292  shares of
     common stock underlying presently exercisable options.

          (3) The shares owned by Richard D. Sly include 43,420 shares of common
     stock underlying presently exercisable options.

          (4) The shares owned by Lester E. Bullock  represent  40,000 shares of
     common stock underlying the exercisable portion of an option.

          (5) The shares owned by John J.  Pasierb  represent  41,782  shares of
     common stock underlying the exercisable portion of options.

          (6) The shares owned by Per-Arne  Skogstad  represent  5,000 shares of
     common stock underlying the presently  exercisable portion of an option for
     15,000 shares.

          (7) Carl A. Williams owns an option to purchase  15,000 shares none of
     which will be exercisable until April 19, 2001.

          (8) The shares owned by the directors and executive  officers  include
     the  shares set forth  above and 2,000  shares  owned by Joseph C.  Grunda,
     20,000 shares  underlying the presently  exercisable  portions of an option
     owned  by  Joseph  C.  Grunda  and  126,250  shares  underlying   presently
     exercisable portions of options owned by Kelly L. Macke.

          (9) The shares owned by Anthony J. Siciliano  include 75,000 shares of
     common stock underlying a presently  exercisable option and include 141,250
     shares owned by Mr. Siciliano's wife, Mary E. Siciliano.

          (10) The shares  owned by David K.  Vanco  include  661,643  shares of
     common  stock  underlying  a presently  exercisable  option and a presently
     exercisable  warrant and a warrant that will be  exercisable at 120% of the
     offering price of a share of common stock in this offering.

                                       31
<PAGE>

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     In  October  1998,  Cruises  borrowed   $3,000,000  from  Foothill  Capital
Corporation. The loan is secured by the assets of Cruises, including the Leisure
Lady,  and is guaranteed by  Technology  and Leisure Time. In May 1999,  Leisure
Express  Cruise,  LLC and  Florida  Casino  Cruises,  Inc.  borrowed  a total of
approximately  $5.4 million from  Foothill  Capital  Corporation.  The loans are
secured by the assets of Leisure Express Cruise, LLC and Florida Casino Cruises,
Inc.,  including  the  Vegas  Express,  and  are  guaranteed  by  Leisure  Time,
Technology and Cruises. Alan N. Johnson also guaranteed $1,000,000 of all of the
loans from Foothill  Capital  Corporation.  Mr. Johnson received no compensation
for guaranteeing the loans.

     Mr.  Johnson has also  guaranteed a $1,000,000  line of credit that Leisure
Time has with Merrill Lynch Business Financial Services, Inc. The line of credit
is secured by substantially  all of the assets of Leisure Time and is guaranteed
by Technology, Cruises and Mr. Johnson. Mr. Johnson received no compensation for
guaranteeing the line of credit.

     Mr.  Johnson  owns 51% of Leisure  Time  Europe  Ltd. , which was formed in
February  1998  and acts as the  distributor  of  Leisure  Time's  video  gaming
machines to charities in Norway. Leisure Time sells the video gaming machines to
Leisure  Time  Europe,  which adds a markup to the price and  resells  the video
gaming  machines  to the  charities.  The markup  ranges from $400 to $1,200 per
video gaming  machine  depending on the number of video gaming  machines sold to
the  particular  charity.  Leisure  Time Europe also  services  the video gaming
machines.  From its  inception  through June 30,  1999,  Leisure Time Europe has
realized  a gross  amount of  approximately  $40,000  from  markups on the video
gaming  machines sold in Norway.  Leisure Time has reserved  $33,000  associated
with sales to Leisure Time Europe.  The  remaining 49% of Leisure Time Europe is
owned by unaffiliated parties.

     Leisure  Time  leases a  condominium/office  from Mr.  Johnson.  The  lease
expires on October 31,  2002 and  requires  rental  payments of $3,000 per month
net/net/net  plus all association fees related to the  condominium/office.  Rent
expense  for the years ended June 30,  1999 and 2000 were  $30,000 and  $13,000,
respectively.

     Leisure  Time  leases  office  space in Ohio from Mr.  Johnson at a rate of
$2,000 per month. The term of the lease extends through June 2000. Rent expenses
for  the  years  ended  June  30,  1999  and  2000,  were  $18,000  and  $18,000
respectively.  Accrued rent related to this lease was $18,000 and $9,000 at June
30, 1999 and 2000, respectively.

     Leisure  Time leases 12  automobiles  from J-Way  Leasing,  Ltd., a company
owned by Mr. Johnson. The leases are for 36 months to 48 months and have various
dates of  expiration  through  December  2002.  Leisure  Time  reimburses  J-Way
Leasing,  Ltd. for the down  payments  J-Way  Leasing,  Ltd. pays on each of the
automobiles  and pays J-Way Leasing,  Ltd. a monthly  payment  equivalent to the
monthly payments (plus 5%) that J-Way Leasing, Ltd. pays for each automobile. No
amounts were paid by Leisure Time to J-Way Leasing, Ltd. for the year ended June
30, 1998,  but for the years ended June 30, 1999 and June 30, 2000,  $61,000 and
$63,000, respectively, was paid.

                                       32
<PAGE>

     In  October  1998,  Cruises  borrowed   $3,000,000  from  Foothill  Capital
Corporation. The loan is secured by the assets of Cruises, including the Leisure
Lady, and is guaranteed by Technology,  Casinos and Mr.  Johnson,  none of which
received any  compensation  for guaranteeing the loan. This loan is currently in
default.

     Mr. Johnson has also guaranteed  $1,000,000 of $8,400,000 of notes payable.
The notes  payable  are secured by  substantially  all the assets of Cruises and
Florida  Casino  Cruises and are  guaranteed  by  Technology  and  Cruises.  Mr.
Johnson,  Technology and Cruises  received no compensation  for guaranteeing the
notes payable.

     Mr. Johnson has also  guaranteed a $1,000,000  line-of-credit  that Leisure
Time has with a finance company.  The line-of-credit is secured by substantially
all of the assets of Leisure Time and is guaranteed by  Technology,  Cruises and
Mr.  Johnson,  none of which  received any  compensation  for  guaranteeing  the
line-of-credit.

     Mr. Johnson has advanced  approximately  $362,000 to Leisure Time.  Leisure
Time issued Mr.  Johnson a demand  promissory  note in the amount of $295,381.37
for a portion of the advances.  The amount of the promissory  note was offset by
$116,956 due from Mr.  Johnson to Leisure  Time.  The balance of the  promissory
note  bears  interest  at 6% per annum.  The note is  secured by certain  gaming
machines.

     Leisure Time uses the architectural  services of Richard D. Sly who is also
the assistant secretary and a director of Leisure Time. These services are being
performed in connection  with Leisure Time's  renovation of the hotel  property.
For the year ended June 30, 2000,  approximately  $27,000 was paid in connection
with these services.

     The brother of Mr.  Johnson is the owner of a consulting  business that was
paid $140,000  during the year ended June 30, 2000.  The same person was also an
employee  of Leisure  Time and was paid  $60,000  during the year ended June 30,
2000.

     The brother of the  president of Leisure Time owes Leisure Time $86 through
a lease receivale at June 30, 2000.

     In October 16, 2000, an affiliate of Mr. Johnson offered to purchase all of
the  outstanding  stock  of  Leisure  Time  Hospitality,  Inc.  for  the  sum of
$1,300,000  minus  the  approximately  $360,000  due on the note  for the  hotel
property  owned by Leisure  Time  Hospitality,  Inc. and the $83,900 of accounts
payable of Leisure Time  Hospitality,  Inc. The net purchase price would be paid
by a note that would bear  interest at prime,  plus 2% would be due on April 25,
2000, and would be secured by a second mortgage on the hotel property. The board
of directors of Leisure Time is currently  considering  the  acceptance  of this
offer.

                                       33
<PAGE>


                                     PART IV

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

Financial Statements and Financial Statement Schedules

         INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

                                                                          Page
                                                                          -----

Independent  Auditors'  Reports F-1 Consolidated  Balance Sheets
   as of September 30, 2000 and 1999                                       F-3
Consolidated  Statements of Operations for the three year p
   period ended September 30, 2000                                         F-5
Consolidated Statements of Comprehensive Income (loss) for the
        three year period ended September 30, 2000                         F-7
Consolidated Statements of Stockholders' Equity  (Deficit) for the
   three year period ended September 30, 2000                              F-8
Consolidated Statements of Cash Flows for the three year period ended
   September 30, 2000                                                      F-9
Notes to Consolidated Financial Statements                                 F-12

All schedules  are omitted  because the required  information  is not present in
amounts  sufficient  to  require  submission  of the  schedule  or  because  the
information  required is included in the Consolidated  Financial  Statements and
Notes thereto.

Financial Statement Schedules

     None.

Exhibits

See "EXHIBIT INDEX"

Current Reports on Form 8-K:

None


<PAGE>


                                   SIGNATURES

         Pursuant  to the  requirements  of Section  13 or 15(d) 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, on October 20, 2000.

                      LEISURE TIME CASINOS & RESORTS, INC.

                                            By:/s/Alan N. Johnson
                                               --------------------------
                                                Alan N. Johnson, President and
                                                Chief Executive Officer

                                            By:/s/Gary W. Knox
                                               --------------------------
                                               Gary W. Knox, Chief Financial
                                                Officer and Principal
                                                Accounting Officer

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant in the capacities and on the dates indicated:

Signature                                       Title        Date
----------                                      ------       -----

/s/Gerald J. Boyle
---------------------
Gerald J.  Boyle                              Director     October 20, 2000

/s/Lester E. Bullock
---------------------
Lester E.  Bullock                            Director     October 20, 2000

/s/Alan N. Johnson
---------------------
Alan N.  Johnson                              Director     October 20, 2000

/s/ Richard D. Sly
---------------------
Richard D.  Sly                               Director     October 20, 2000


---------------------
Per-Arne Skogstad                             Director

/s/ Carl A. Williams
---------------------
Carl A. Williams                              Director     October 20, 2000



<PAGE>





                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                     LEISURE TIME CASINOS AND RESORTS, INC.

                                    EXHIBITS

                                       TO

                                ANNUAL REPORT ON

                                    FORM 10-K

                                     FOR THE

                                FISCAL YEAR ENDED

                                  JUNE 30, 2000


<PAGE>






                                  EXHIBIT INDEX

                  EXHIBIT NO. DESCRIPTION AND METHOD OF FILING

2.0  Agreement  and Plan of  Reorganization  dated as of August 30, 1996,  among
     U.S.  Games,   Inc.,   Leisure  Time  Casinos  &  Resorts,   Inc.,  Leisure
     Acquisition,  Inc.  and certain  holders of U.S.  Games,  Inc.  Outstanding
     Stock,  Options and Warrants  together with Exhibits C, D, E, F, G, H and J
     thereto.  The other  schedules  and exhibits to the  Agreement  and Plan of
     Reorganization  are listed  therein and copies  thereof  will be  furnished
     supplementally to the United States Securities and Exchange Commission upon
     request.*

2.1  Amended and Restated Asset Purchase Agreement dated as of January 31, 1997,
     between Leisure Time Casinos & Resorts, Inc. and Star of Cincinnati, Inc.*

2.2  Accord and  Satisfaction  and Release of  Mortgages  Agreement  dated as of
     February  3,  1997,  by  Leisure  Time  Casinos &  Resorts,  Inc.,  Star of
     Cincinnati, Inc. and Henry E. Davis Trustee.*

3.0  Articles of  Incorporation  of Leisure Time Casinos & Resorts,  Inc.  dated
     February 4, 1993.*

3.1  Articles of  Amendment  to the  Articles of  Incorporation  of Leisure Time
     Casinos & Resorts, Inc. filed on April 3, 1997.*

3.2  Articles of  Amendment  to the  Articles of  Incorporation  of Leisure Time
     Casinos & Resorts, Inc. filed on May 12, 1999.*

3.3  Articles of  Amendment  to the  Articles of  Incorporation  of Leisure Time
     Casinos & Resorts, Inc. filed on December 10, 1999.***

3.4  Bylaws of Leisure Time Casinos & Resorts, Inc. adopted May 12, 1999.*

4.0  Form of Representatives Warrant for the Purchase of Common Stock.*

10.0 1997 Incentive and Nonstatutory Stock Option Plan.*

10.1 Amendment No. 1 to 1997 Incentive and Nonstatutory Stock Option Plan.*

10.2 Form of 11% Convertible Promissory Note Due September 1, 1999.*

10.3 11% Convertible Promissory Note Due May 29, 1999.*

10.4 11% Convertible Promissory Note Due May 30, 1999.*

10.5 Employment  Agreement  dated  effective July 1, 1998,  between Leisure Time
     Casinos &  Resorts,  Inc.  and Alan N.  Johnson,  Amendment  to  Employment
     Agreement dated effective September 9, 1998, between Leisure Time Casinos &
     Resorts,  Inc. and Alan N. Johnson and  Amendment to  Employment  Agreement
     dated effective  February 22, 1999, between Leisure Time Casinos & Resorts,
     Inc. and Alan N. Johnson.*

10.6 Employment  Agreement  dated  effective July 1, 1998,  between Leisure Time
     Casinos & Resorts,  Inc. and Gerald J. Boyle and  Amendment  to  Employment
     Agreement dated effective September 9, 1998, between Leisure Time Casinos &
     Resorts, Inc. and Gerald J. Boyle.*

                                       34
<PAGE>

10.7 Employment  Agreement  dated  effective July 1, 1998,  between Leisure Time
     Casinos  &  Resorts,  Inc.  and Elden W.  Rance,  Amendment  to  Employment
     Agreement dated effective September 9, 1998, between Leisure Time Casinos &
     Resorts,  Inc.  and Elden W. Rance and  Amendment to  Employment  Agreement
     dated effective  February 22, 1999, between Leisure Time Casinos & Resorts,
     Inc. and Elden W. Rance.*

10.8 Employment  Agreement  dated  effective July 1, 1998,  between Leisure Time
     Casinos & Resorts,  Inc. and R. Thomas  Klingel and Amendment to Employment
     Agreement dated effective September 9, 1998, between Leisure Time Casinos &
     Resorts, Inc. and R. Thomas Klingel.*


10.9 Employment  Agreement  dated  effective July 1, 1998,  between Leisure Time
     Casinos & Resorts,  Inc.  and Richard D. Sly and  Amendment  to  Employment
     Agreement dated effective September 9, 1998, between Leisure Time Casinos &
     Resorts, Inc. and Richard D. Sly.*

10.10Employment  Agreement dated  effective March 1, 1999,  between Leisure Time
     Casinos & Resorts, Inc. and Keko Mottes.*

10.11Employment  Agreement dated  effective March 1, 1999,  between Leisure Time
     Casinos & Resorts, Inc. and John J. Pasierb.*

10.12Employment  Agreement dated effective April 20, 1999,  between Leisure Time
     Casinos & Resorts, Inc. and Joseph C. Grunda.*

10.13Lease  Agreement dated December 1, 1997,  between Leisure Time  Technology,
     Inc. and Weeks Realty, L.P.*

10.14Lease  Agreement  dated  October  31,  1997,  between  Alan N.  Johnson and
     Leisure Time Casinos & Resorts, Inc.*

10.15Purchase  Agreement dated March 23, 1998,  between Lisa Lemon,  Inc. and Al
     Johnson.*

10.16Amendment to Purchase  Agreement  dated June 26, 1998,  between Lisa Lemon,
     Inc. and Al Johnson.*

10.17Assignment  dated  September  11,  1998,  from Al Johnson  to Leisure  Time
     Hospitality, Inc.*

10.18Promissory Note dated  September 15, 1998,  from Leisure Time  Hospitality,
     Inc. to Lisa Lemon, Inc. and Guaranty of Alan N. Johnson thereof.*

10.19Mortgage  Deed dated  September  15, 1998,  from Leisure Time  Hospitality,
     Inc. to Lisa Lemon, Inc.*

10.20Bareboat  Charter Party dated as of June 22, 1998,  between  Florida Casino
     Cruises, Inc. and Leisure Express Cruise LLC.*

10.21 Addendum to Bareboat Charter Agreement.*

10.22Purchase  Option  Agreement  dated as of June  22,  1998,  between  Florida
     Casino Cruises, Inc. and Leisure Express Cruise, LLC.*

10.23$3,000,000  Secured  Promissory  Note dated  October 9, 1998,  from Leisure
     Time Cruise Corporation to Foothill Capital Corporation.*

10.24Security   Agreement  dated  October  9,  1998,  between  Foothill  Capital
     Corporation and Leisure Time Cruise Corporation.*

10.25First  Preferred Ship Mortgage dated October 9, 1998,  between Leisure Time
     Cruise Corporation and Foothill Capital Corporation.*

10.26Equipment  Security  Agreement  dated  October  9, 1998,  between  Foothill
     Capital Corporation and Leisure Time Technology, Inc.*

10.27Continuing  Guaranty dated October 9, 1998,  from Leisure Time  Technology,
     Inc. to Foothill Capital Corporation.*

                                       35
<PAGE>

10.28Continuing  Guaranty  dated  October 9, 1998,  from  Leisure Time Casinos &
     Resorts, Inc. to Foothill Capital Corporation.*

10.29Continuing  Guaranty  dated  October  9,  1998,  from  Alan N.  Johnson  to
     Foothill Capital Corporation.*

10.30$1,500,000  Promissory  Note dated  December 17, 1998,  from Leisure  Belle
     Cruise LLC to General Electric Capital Corporation.*

10.31$1,500,000  Loan and Security  Agreement  dated December 17, 1998,  between
     Leisure Belle Cruise, LLC and General Electric Capital Corporation.*

10.32Guaranty  Agreement  dated  December 17, 1998,  from Leisure Time Casinos &
     Resorts, Inc. to General Electric Capital Corporation.*

10.33Guaranty   Agreement   dated   December   17,   1998,   from  Leisure  Time
     Technologies, Inc. to General Electric Capital Corporation.*

10.34First  Preferred Ship Mortgage dated December 17, 1998,  from Leisure Belle
     Cruise, LLC in favor of General Electric Capital Corporation.*

10.35Consulting  Agreement  dated March 31, 1998 between  Leisure Time Casinos &
     Resorts, Inc. and A. J. Siciliano.

10.36Bareboat  Charter  Party  dated as of January  22,  1999,  between  Florida
     Casino Cruises, Inc. and Leisure Express, LLC.*

10.37Purchase  Option  Agreement  dated as of January 22, 1999,  between Florida
     Casino Cruises, Inc. and Leisure Express, LLC.*

10.38Consulting  Agreement dated as of February 1, 1999, between and Kent Manley
     and Leisure Time Cruise Corporation.*

10.39Dockage  Agreement and Lease dated as of June 1, 1998,  between Rowe Square
     Corporation and Leisure Express Cruise, LLC.*

10.40Distribution  Agreement  dated  January  23,  1998,  between  Leisure  Time
     Technology, Inc. and Sao Paulo Games Commercial LTDA.*

10.41Amendment  to the Contract for  Distribution  dated  January 22, 1998,
     between Leisure Time  Technology,  Inc. and Sao Paulo Games Commercial
     LTDA.*

10.42Stock Purchase  Agreement dated April 22, 1999, between J. Kent Manley
     and Leisure Express Cruise, LLC.*

10.43$2,100,000  Secured Promissory Note dated April 22, 1999, from Leisure
     Express Cruise, LLC to Foothill Capital Corporation.*

                                       36
<PAGE>

10.44Security  Agreement  dated April 22, 1999,  between  Foothill  Capital
     Corporation and Leisure Express Cruise, LLC.*

10.45$3,225,000  Secured Promissory Note dated April 22, 1999, from Florida
     Casino Cruises, Inc. to Foothill Capital

                             Corporation.*

10.46Security  Agreement  darted April 22, 1999,  between  Foothill Capital
     Corporation and Florida Casino Cruises, LLC.*

10.47Continuing  Guaranty  dated  April  22,  1999,  from  Leisure  Express
     Cruise, LLC to Foothill Capital Corporation.*

10.48First  Preferred Ship Mortgage dated April 22, 1999,  between  Florida
     Casino Cruises, Inc. and Foothill Capital Corporation.*

10.49Amendment  No. 1 to Loan  Documents  dated  April  22,  1999,  between
     Foothill Capital Corporation and Leisure Time Cruise Corporation.*

10.50Amendment to and  Confirmation  of Guaranty  dated April 22, 1999,  by
     Leisure   Time   Technology,   Inc.  in  favor  of  Foothill   Capital
     Corporation.*

10.51Amendment to and  Confirmation  of Guaranty  dated April 22, 1999,  by
     Leisure  Time  Casinos & Resorts,  Inc. in favor of  Foothill  Capital
     Corporation.*

10.52Amendment to and  Confirmation  of Guaranty  dated April 22, 1999,  by
     Alan N. Johnson in favor of Foothill Capital Corporation.*

10.53Second amendment to First Ship Mortgage dated April 22, 1999,  between
     Leisure Time Cruise Corporation and Foothill Capital Corporation.*


10.54Pledge Agreement dated April 22, 1999,  between Leisure Express Cruise
     LLC and Foothill Capital Corporation.*

10.55Continuing  Guaranty  dated April 22,  1999,  from Leisure Time Cruise
     Corporation in favor of Foothill Capital Corporation.*

10.56Continuing   Guaranty  dated  April  22,  1999,  from  Florida  Casino
     Cruises, Inc. in favor of Foothill Capital Corporation.*

10.57Continuing  Guaranty  dated  April 22 1999,  from Alan N.  Johnson  in
     favor of Foothill Capital Corporation.*

10.58Master  Agreement and Lease between Leisure  Express  Cruise,  LLC and
     Shoestring Properties Limited Partnership dated April 29, 1999.*

10.59Marina  Lease  dated  April 29,  1999  between  Shoestring  Properties
     Limited Partnership and Leisure Time Cruise Corporation.*

                                       37
<PAGE>

10.60Dockside Lease dated April 29, 1999 between  Shoestring  Properties Limited
     Partnership and Leisure Time Cruise Corporation.*

10.61First Amendment to Lease Agreement dated April 9, 1999 between Leisure Time
     Technology Inc. and Weeks Realty, LP.*

10.62 Form of Unlimited Guaranty in favor of Firestone Financial Corp.*

10.63WCMA Loan and Security  Agreement No.  701-07H43  dated  November 16, 1998,
     between Merrill Lynch Business  Financial  Services,  Inc. and Leisure Time
     Casinos & Resorts, Inc. and Letter Agreement dated February 18, 1999.*

10.64Lease dated May 10,  1999,  by and between Alan N. Johnson and Leisure Time
     Casinos & Resorts, Inc.*

10.65Employment  Agreement  dated  effective July 1, 1998,  between Leisure Time
     Casinos & Resorts,  Inc. and Bernard C. Johnson and Amendment to Employment
     Agreement dated effective September 9, 1998, between Leisure Time Casinos &
     Resorts, Inc. and Bernard C. Johnson.*

10.66Promissory  Note dated June 18, 1999,  from Leisure Time Casinos & Resorts,
     Inc. to American International Specialty Lines Insurance Company.*

10.67Employment  Agreement  dated  effective July 6, 1999,  between Leisure Time
     Casinos & Resorts, Inc. and Eric R. Dey.*

10.68License  Agreement   effective  July  12,  1999,  between  Radisson  Hotels
     International, Inc. and Leisure Time Hospitality, Inc.*

10.69 Form of Custody Agreement.*

10.70Letter dated July 26, 1999 from Merrill Lynch Business Financial  Services,
     Inc. to Leisure Time Casinos & Resorts, Inc.*

10.71Form of Consulting Agreement between Schneider Securities, Inc. and Leisure
     Time Casinos & Resorts, Inc.*

10.72Solutia Gaming  Systems,  Inc.'s  Exclusive  Distribution  Agreement  dated
     November 9, 1999.**

10.73Solutia  Gaming  Systems,   Inc.'s  Exclusive   Distribution  Agreement  of
     Individual Games dated November 9, 1999.**

10.74Subscription Agreement dated December 10, 1999, between Prime Technological
     Services and Leisure Time Casinos & Resorts, Inc. (without exhibits B, C or
     D).***

10.76Promissory  Note in the amount of $98,880 and dated December 10, 1999, from
     Leisure  Time  Casinos  &  Resorts,   Inc.  to  Mogo  Financial  Management
     Company.***

10.77Consulting  Agreement  dated December 10, 1999, by and between Leisure Time
     Casinos & Resorts,  Inc. and Mogo  Financial  Company d/b/a Mogo  Technical
     Consultants.***

10.78Promissory  Note dated June 1, 2000,  from  Leisure Time Casinos & Resorts,
     Inc. to Alan N. Johnson.****

21   Subsidiaries of the Registrant.****

27.0 Financial Data Schedule.

                                       38
<PAGE>


*    Items  incorporated by reference to Leisure Time Casinos & Resorts,  Inc.'s
     Registration Statement on Form S-1, (File No. 333-77737).

**   Items  incorporated by reference to Leisure Time Casinos & Resorts,  Inc.'s
     Quarterly Report on Form 10-Q from the Quarter Ended September 30, 1999.

***  Items  incorporated by reference to Leisure Time Casinos & Resorts,  Inc.'s
     Current Report on Form 8-K dated December 10, 1999.

**** Filed as an exhibit hereto.

<PAGE>

                      LEISURE TIME CASINOS & RESORTS, INC.
                                AND SUBSIDIARIES

                        Consolidated Financial Statements
                        and Independent Auditors' Report
                             June 30, 1999 and 2000


<PAGE>




                          INDEX TO FINANCIAL STATEMENTS

                                                                           Page
                                                                           -----
Leisure Time Casinos & Resorts, Inc. and Subsidiaries

Independent Auditors' Report...............................................F - 2

Consolidated Financial Statements

        Consolidated Balance Sheets........................................F - 4

        Consolidated Statements of Operations..............................F - 5

        Consolidated Statement of Stockholders' Equity.....................F - 6

        Consolidated Statements of Cash Flows .............................F - 7

Notes to Consolidated Financial Statements.................................F - 9




<PAGE>


                          INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
Leisure Time Casinos &
 Resorts, Inc. and Subsidiaries
Norcross, Georgia

We have audited the  accompanying  consolidated  balance  sheets of Leisure Time
Casinos & Resorts,  Inc. and  Subsidiaries as of June 30, 1999 and 2000, and the
related consolidated  statements of operations,  stockholders'  equity, and cash
flows for each of the three  years in the  period  ended  June 30,  2000.  These
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 Leisure
Time Casinos & Resorts, Inc. and Subsidiaries at June 30, 1999 and 2000, and the
consolidated  results of their  operations  and cash flows for each of the three
years in the period ended June 30, 2000 in conformity  with  generally  accepted
accounting principles.


<PAGE>


Board of Directors and Stockholders
Leisure Time Casinos &

 Resorts, Inc. and Subsidiaries
Page Two

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial  statements,  the  Company  has a deficit in  stockholders'  equity of
$3,978,000  at June 30,  2000  and a net  loss  from  continuing  operations  of
$18,718,000  for the year then  ended.  The Company is in default on most of its
debt and has been sued by several note holders and creditors for collection.  In
addition,  the  Company  has  recently  been  denied  gaming  licenses  by  four
jurisdictions.  These  conditions raise  substantial  doubt about its ability to
continue as a going concern. Management's plans regarding those matters also are
described in Note 2. The  financial  statements  do not include any  adjustments
that might result from the outcome of this uncertainty.



                                             Ehrhardt Keefe Steiner & Hottman PC
October 6, 2000
Denver, Colorado


<PAGE>


                      LEISURE TIME CASINOS & RESORTS, INC.
                                AND SUBSIDIARIES

                           Consolidated Balance Sheets

               (In thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                                                                                   June 30,
                                                                                      --------------------------------
                                                                                          1999                2000
                                                                                      -------------       ------------
<S>                                                                                   <C>                 <C>

                                                             Assets

Current assets

    Cash and cash equivalents                                                         $       2,636       $        275
    Notes receivable - related party - current (Note 8)                                          -                  69
    Trade accounts receivable, less allowance of $191 (1999) and $219 (2000)                  1,689                233
    Receivable - other                                                                           18                 12
    Current portion of net investment in direct financing leases                                  1                 -
    Inventories, net (Note 4)                                                                10,643              3,363
    Prepaid expenses and other                                                                  905                305
    Deferred tax asset - current (Note 11)                                                      180                 -
    Income tax receivable                                                                        -                 325
    Net assets of discontinued operations (Note 6)                                            9,249                 -
                                                                                      -------------       ------------
             Total current assets                                                            25,321              4,582
                                                                                      -------------       ------------

Property and equipment, net (Note 5)                                                          1,359                875
Note receivable - related party - long-term (Note 8)                                             -                  12
Financial interest in collateral (Note 6)                                                             7,423              7,807
Goodwill, net of accumulated amortization of $1,786 (1999) and $2,280 (2000)                  4,344              3,531
Non-compete agreement, net of accumulated amortization of $1,456 (1999) and
  $1,977 (2000) (Note 19)                                                                     3,758              3,237
Other assets, net (Note 5)                                                                    1,084                 78
Deposits                                                                                        124                166
                                                                                      -------------       ------------

Total assets                                                                          $      43,413       $     20,288
                                                                                      =============       ============

                                         Liabilities and Stockholders' Equity (Deficit)

Current liabilities

    Line-of-credit (Note 9)                                                           $         960     $        1,034
    Current portion of long-term notes payable (Note 9)                                       6,660             11,738
    Current portion of capital leases                                                            63                 -
    Current portion of other long-term liabilities (Note 10)                                    466                466
    Accounts payable                                                                          7,157              2,538
    Accrued expenses (Note 7)                                                                 1,915              1,829
    Income taxes payable                                                                      1,723                 -
    Net liabilities of discontinued operations (Note 6)                                          -               3,143
                                                                                      -------------       ------------
             Total current liabilities                                                       18,944             20,748
                                                                                      -------------       ------------

Long-term liabilities

    Long-term portion of notes payable (Note 9)                                               7,299                 -
    Long-term portion of capital leases                                                          93                 -
    Deferred income taxes payable (Note 11)                                                     386                 -
    Other long-term liabilities (Note 10)                                                     4,156              3,518
                                                                                      -------------       ------------
             Total long-term liabilities                                                     11,934              3,518
                                                                                      -------------       ------------

Total liabilities                                                                            30,878             24,266
                                                                                      -------------       ------------

Commitments and contingencies (Notes 9, 10, 12, 13 and 15)

Stockholders' equity (deficit)(Notes 15 and 16)
    Preferred stock, no par value;  5,000,000 shares authorized;  523,579 shares
     issued and outstanding at June 30, 2000, liquidation preference of $5,392,790               -               4,964
    Common stock, $.001 par value; 45,000,000 shares authorized; 5,171,829
     (1999) and 5,918,301 (2000) issued and outstanding                                           5                  6
    Additional paid-in capital                                                                8,116             14,339
    Common stock subscription                                                                  (240)              (240)
    Retained earnings (accumulated deficit)                                                   4,654            (23,047)
                                                                                      -------------       ------------
             Total stockholders' equity (deficit)                                            12,535             (3,978)
                                                                                      -------------       ------------

Total liabilities and stockholders' equity (deficit)                                  $      43,413       $     20,288
                                                                                      =============       ============
</TABLE>
                See notes to consolidated financial statements.

                                     F - 4
<PAGE>

                      Consolidated Statements of Operations
               (In thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                                                                          For the Years Ended June 30,
                                                                              ----------------------------------------------------
                                                                                    1998               1999               2000
                                                                              --------------     --------------     --------------
<S>                                                                         <C>                <C>                <C>

Revenue                                                                       $       28,643     $       56,896     $       15,566
Cost of goods sold                                                                    16,517             30,107             10,761
                                                                              --------------     --------------     --------------

Gross profit                                                                          12,126             26,789              4,805
                                                                              --------------     --------------     --------------

Selling, general and administrative expenses                                           8,727             10,395             11,214
Inventory impairment (Note 3)                                                           -                  -               7,355
Research and development costs                                                           642              1,445              3,276
Stock based compensation (Note 15)                                                        -               1,500                 -
Interest expense, net                                                                    840                622              1,249
Litigation (Note 13)                                                                   3,043                318              1,739
                                                                              --------------     --------------     --------------
          Total operating expenses                                                    13,252             14,280             24,833
                                                                              --------------     --------------     --------------

Net income (loss) before income tax benefit (expense)                                 (1,126)            12,509            (20,028)
Income tax (expense) benefit (Note 11)                                                   197             (4,628)             1,310
                                                                              --------------     --------------     --------------

Net income (loss) from continuing operations                                            (929)             7,881            (18,718)
                                                                              --------------     --------------     --------------

Loss from operations of discontinued operations (Note 6)                                  -              (3,449)            (1,760)

Loss on disposal of        discontinued operations including provision of
  $1,903 for operating losses during phase out period (Note 6)                            -                  -              (7,066)
                                                                              --------------     --------------     --------------

Loss from discontinued operations                                                         -              (3,449)            (8,826)
                                                                              --------------     --------------     --------------

Net income (loss) before preferred stock dividends                                      (929)             4,432            (27,544)
                                                                              --------------     --------------     --------------

Dividends declared                                                                        -                  -                 157
                                                                              --------------     --------------     --------------

Net income (loss) available to common shareholders                            $         (929)    $        4,432     $      (27,701)
                                                                              ==============     ==============     ==============

Earnings (loss) per common share - continuing operations (Note 17)            $         (.21)    $         1.66     $        (3.25)
                                                                              ==============     ==============     ==============

Earnings (loss) per common share - discontinued operations (Note 17)          $           -      $         (.73)    $        (1.53)
                                                                              ==============     ==============     ==============

Earnings (loss) available to common shareholders per common share - basic
  (Note 17)                                                                   $         (.21)    $          .93     $        (4.81)
                                                                              ==============     ==============     ==============

Earnings (loss) available to common shareholders per common share -
  diluted (Note 17)                                                           $         (.21)    $          .56     $        (4.81)
                                                                              ==============     ==============     ==============

Weighted average number of common shares outstanding - basic (Note 17)             4,516,528          4,755,771          5,753,815
                                                                              ==============     ==============     ==============

Weighted average number of common shares outstanding - diluted (Note 17)           4,516,528          7,898,220          5,753,815
                                                                              ==============     ==============     ==============
</TABLE>


<PAGE>



                 Consolidated Statement of Stockholders' Equity

<TABLE>
<CAPTION>



                              Preferred Stock                Common Stock        Additional    Common       Accumulated
                           ------------------------     ---------------------     Paid-in      Stock         Deficit/
                            Shares         Amount        Shares        Amount     Capital      Subscrip-     Retained
                                                                                                 tion        Earnings        Total
                           ---------      ---------     ---------      ------     -------      ---------     --------      --------
<S>                        <C>            <C>           <C>            <C>        <C>          <C>           <C>           <C>

Balance - June 30, 1997            -      $       -     4,505,380      $    4     $ 3,118      $       -     $  1,151      $  4,273

Common stock issued for
 cash at $2.80 a share             -              -        33,900           1          94              -            -            95

Conversion of debt at
 rates ranging from
 $2.50 to $2.80 a share            -              -        99,874           -         267              -            -           267

Net loss for the year
 ended June 30, 1998               -              -             -           -           -              -         (929)         (929)
                           ---------      ---------     ---------      ------     -------      ---------     --------      --------

Balance - June 30, 1998            -              -     4,639,154           5       3,479              -          222         3,706

Conversion of debt at
 $2.50 a share                     -              -        38,489           -          96              -            -            96

Issuance of options
 with imputed values of
 $1.46 to $4.00 a share            -              -             -           -       2,017              -            -         2,017

Common  stock  issued
 upon  exercise  of
 options, warrants and
 debt conversion
 features                          -              -       310,186           -         684              -            -           684

Common stock issued for
 cash at $10.00 a share            -              -         4,000           -          40              -            -            40

Common stock issued for
 acquisition                       -              -       180,000           -       1,800              -            -         1,800

Common stock
 subscription                      -              -             -           -           -           (240)           -          (240)

Net income for the year
 ended June 30, 1999               -              -             -           -           -              -        4,432         4,432
                           ---------      ---------     ---------      ------     -------      ---------     --------      --------

Balance - June 30, 1999            -              -     5,171,829           5       8,116           (240)       4,654        12,535

Common stock issued in
 public offering, net
 of costs of $1,926 for
 cash at $12.00 a share
 (Note 16)                         -              -       700,000           1       6,473              -            -         6,474

Common stock issued
 upon exercise of
 options, warrants and
 debt conversion
 features (Note 15)                -              -        31,472           -           -              -            -             -

Convertible preferred
 stock issued at $10.00
 a share for
 satisfaction of debt
 (Note 16)                   523,759          4,964             -           -           -              -            -         4,964

Common stock reacquired
 through the disposal
 of RP Capital
 (Note 20)
                                   -              -      (100,000)          -      (1,400)             -            -        (1,400)

Issuance of common
 stock in satisfaction
 of lawsuit (Note 13)              -              -       115,000           -       1,150              -            -         1,150

Net loss for the year
 ended June 30, 2000               -              -             -           -           -              -      (27,701)      (27,701)
                           ---------      ---------     ---------      ------     -------      ---------     --------      --------

Balance - June 30, 2000      523,759      $   4,964     5,918,301      $    6     $14,339      $    (240)    $(23,047)     $ (3,978)
                           =========      =========     =========      ======     =======      =========     ========      ========

</TABLE>


                 See notes to consolidated financial statements.

                                      F-6
<PAGE>


                      Consolidated Statements of Cash Flows

               (In thousands, except share and per share amounts)
<TABLE>
<CAPTION>

                                                                                     For the Years Ended June 30,
                                                                          -------------------------------------------------
                                                                               1998              1999              2000
                                                                          ---------------    ---------------    -----------
                                                                          <C>                <C>                <C>

Cash flows from operating activities
<S>  Net (loss) income                                                    $          (929)   $         4,432    $   (27,701)
                                                                          ---------------    ---------------    -----------
   Adjustments to reconcile net (loss) income to cash
    provided by (used by) operating activities
      Allowance for doubtful accounts                                                  -                 161             -
      Net loss on disposal of assets                                                   96                 13            397
      Stock based compensation                                                         -               1,500             -
      Deferred taxes                                                               (1,057)               844           (206)
      Common stock issued for settlement agreement                                     -                  -           1,150
      Inventory impairment                                                             -                  -           7,355
      Assumption of guaranteed customer debt                                           -                  -             400
      Impairment of other assets                                                       -                  -           1,006
      Depreciation and amortization                                                 1,864              1,923          1,676
      Changes in certain assets and liabilities
         Receivables                                                                 (879)             2,630          1,381
         Net investment in direct financing leases                                     -                  -               1
         Income taxes receivable                                                       -                  -            (325)
         Inventories                                                                  389             (8,198)         2,542
         Prepaids and other assets                                                   (823)              (647)           600
         Employee advances                                                             (4)                -              -
         Officer advances                                                              55                 -              -
         Accounts payable                                                             549              5,644           (448)
         Accrued expenses                                                           3,452             (3,725)           (23)
         Income taxes payable                                                         (42)             1,261         (1,723)
         Notes receivable                                                             (79)                79             -
         Net assets (liabilities) of discontinued operations                           -              (9,249)        10,608
                                                                          ---------------    ---------------    -----------
             Total adjustments                                                      3,521             (7,764)        24,391
                                                                          ---------------    ---------------    -----------
             Net cash provided by (used by) operating activities                    2,592             (3,332)        (3,310)
                                                                          ---------------    ---------------    -----------

Cash flows from investing activities
   Purchase of property and equipment                                              (1,188)                -            (368)
   Other assets                                                                        -                 558             -
   Deposits                                                                        (1,909)               137            (42)
   Proceeds on the sale of fixed assets                                                -                  -              20
                                                                          ---------------    ---------------    -----------
             Net cash (used by) provided by investing activities                   (3,097)               695           (390)
                                                                          ---------------    ---------------    -----------

Cash flows from financing activities
   Proceeds from issuance of common stock                                              94                484          6,474
   Line-of-credit, net                                                                 -                 960             74
   Proceeds from notes payable                                                      3,000             12,063             -
   Loan fees                                                                           -                (275)            -
   Payment on notes payable                                                        (2,221)            (7,976)        (4,508)
   Payments on capital leases                                                         (29)               (64)           (63)
   Payments on long-term debt                                                        (537)              (807)          (638)
   Payments on note payable - officer                                                  (3)                -              -
                                                                          ---------------    ---------------    ----------
             Net cash provided by financing activities                                304              4,385          1,339
                                                                          ---------------    ---------------    -----------

Net (decrease) increase in cash                                                      (201)             1,748         (2,361)

Cash and cash equivalents- beginning of year or period                              1,089                888          2,636
                                                                          ---------------    ---------------    -----------

Cash and cash equivalents- end of year or period                          $           888    $         2,636    $       275
                                                                          ===============    ===============    ===========
</TABLE>

Continued on next page.

                 See notes to consolidated financial statements.

                                      F-7
<PAGE>


                      Consolidated Statements of Cash Flows
               (In thousands, except share and per share amounts)

Continued from previous page.

Schedule of non-cash investing and financing activities:

      During the years ended June 30, 1998 and 1999, the Company  acquired fixed
       assets by incurring  capital lease  obligations  in the amount of $63 and
       $128, respectively.

      During  the  year  ended  June  30,  1998,  the  Company  recorded  a $250
       receivable  for an insurance  claim on damaged  property  with a net book
       value of $250.

      During the year ended June 30, 1998 and 1999,  the Company  converted $267
       and $96, respectively,  of debt to equity by issuing capital stock to the
       debt holders.

      During the year ended June 30, 1999, the Company incurred various non-cash
       transactions related to the acquisitions  completed in April and May 1999
       (Note 19).

      In 1999,  the Company  issued  stock for a note related to the exercise of
options totaling $240,000.

During the year ended June 30, 2000:

      The Company  converted  $3,613 of accounts payable into a short-term notes
payable.

      The Company issued 523,759 shares of Convertible  Series A Preferred Stock
       to a  vendor  for a total  consideration  of  $5,238,  consisting  of the
       satisfaction  of a $2,000  promissory  note  payable,  a  credit  for the
       payment of interest of $133, $558 of accounts  payable,  and a deposit of
       $2,547  against  future  purchases  of  inventory by the Company from the
       vendor.

      The Company  incurred a transaction fee of $274 related to the issuance of
       the 523,759 shares of Convertible Series A Preferred Stock and offset the
       fee against additional  paid-in capital.  Payment of the fee consisted of
       $175 in cash and the balance in the form of a promissory note for $99.

      The Company offset $434 of  capitalized  initial  public  offering  costs,
       against  additional  paid-in  capital,  which were paid prior to June 30,
       1999.

Supplemental disclosure of cash flow information:

      Cash paid for interest  for the years ended June 30,  1998,  1999 and 2000
       was approximately $1,084, $1,658 and $908, respectively.

      Cash paid for income  taxes for the years  ended June 30,  1998,  1999 and
2000 was $982, $540 and $0, respectively.

                                      F-8
<PAGE>


                      LEISURE TIME CASINOS & RESORTS, INC.

                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

               (In thousands, except share and per share amounts)


Note 1 - Summary of Significant Accounting Policies

Organization

Leisure Time Casinos & Resorts, Inc. ("Casinos") was incorporated in Colorado on
February 4, 1993, and was a development stage enterprise until September 1996.

Leisure  Time  Technology,  Inc.  (f/k/a U.S.  Games,  Inc.)  ("Technology")  is
incorporated  in Georgia  and  develops,  manufactures  and sells  video  gaming
machines  (Note 17).  Technology  is licensed to sell video  gaming  machines to
Native American tribes in California,  Kansas, Michigan, Minnesota, Montana, New
Mexico,  New York,  North  Carolina,  Wisconsin and is in compliance  with South
Carolina  regulations  regarding  the  sale of  gaming  machines.  In  addition,
Technology is licensed by the state for the sale of gaming devices in Minnesota,
Montana and  Wisconsin.  In August and September  2000, the Company was notified
that the Viejas tribe in  California,  the state of Arizona,  the Pueblo  Sandia
Tribe and the Pueblo  Isleta  Tribe in Arizona  had denied its  license  due to,
among other items, the financial condition of the Company.

Leisure Time Cruise  Corporation  ("Cruises")  was  incorporated  on October 17,
1997,  in the state of Colorado and  conducted  offshore  gaming  cruises on the
"Vegas  Express"  gaming  vessel from July,  1998 until October 31, 1999. In May
1999,  Leisure  Express  Cruise,  LLC, a  Colorado  limited  liability  company,
acquired  Florida Casino  Cruises,  Inc., the  corporation  that owned the Vegas
Express.  Cruises also owned the "Leisure Lady",  another gaming vessel that has
not been placed in operation.  Leisure Belle Cruise,  LLC is a Colorado  limited
liability company that owns a dry-docked gaming vessel. Leisure Lady Cruise, LLC
is a  Colorado  limited  liability  company  and  currently  has no  operations.
Effective  April 16, 2000, the Company has decided to discontinue  this business
segment and is  investigating  alternatives for disposing the net assets of this
segment (Note 6).

Leisure Time Hospitality, Inc. is incorporated in Ohio and owns a hotel property
that was being redeveloped in the Cleveland  metropolitan area.  Effective April
26, 2000, the Company has sold the stock of this business to an affiliate of the
President of the Company (Note 20).

Leisure  Time  Gaming,  Inc. is  incorporated  in South  Carolina and operated a
gaming  route from March 1999 to June 30,  2000.  It intends to  revitalize  its
route operations with Redemption Games in the state of Georgia.

Leisure Time  International,  Ltd. is  incorporated  in Barbados  and  currently
operates as a Foreign International Sales Corp. (FISC).

Casinos  acquired Leisure Time Financial Corp.  (f/k/a RP Capital,  Corporation)
("Financial") in April 1999 (Note 19). Financial is incorporated in the state of
Minnesota  and finances  various  types of equipment  acquisitions  under direct
financing  leases and loans  secured by existing  equipment and sells leases and
loans to financial institutions.  Effective April 16, 2000, the Company sold the
stock of this business back to the previous owner (Note 20).


<PAGE>




Note 1 - Summary of Significant Accounting Policies (continued)

Solutia Gaming  Systems,  Inc. is incorporated in Oklahoma and is developing new
gaming  machines.  The Oklahoma office has been closed and relocated to Georgia.
Solutia  markets other than class 3 gaming devices to markets that do not accept
class 3 devices.

Principals of Consolidation

The consolidated  financial  statements  include the accounts of Casinos and its
wholly  owned  subsidiaries,  collectively  referred  to  as  the  Company.  All
significant intercompany transactions and balances have been eliminated.

Cash and Cash Equivalents

The Company considers all highly liquid  investments  purchased with an original
maturity of three months or less to be cash equivalents.

Fair Value of Financial Instruments

The  carrying  amounts of financial  instruments  including  cash,  receivables,
prepaid  expenses,  accounts payable and accrued  expenses  approximate the fair
values as of June 30, 1999 and 2000 because of the relatively  short maturity of
these instruments.

The carrying  amounts of notes  payable and debt  outstanding  also  approximate
their fair values as of June 30, 1999 and 2000 because  interest  rates on these
instruments  approximate  the interest rate on debt with similar terms available
to the Company.

Inventories

Inventories  are stated at the lower of cost or market and consist  primarily of
raw material,  parts manufactured by others, work in process and finished goods.
Work-in-process  and  finished  goods  include raw  materials,  direct labor and
manufacturing overhead. Cost is determined using the first-in,  first-out method
for all inventories.

At June 30, 2000,  the Company had impaired  $8,000 of inventory  based on their
determination that the value of this inventory may not be realized (Note 3).

Property and Equipment

Property and equipment are stated at cost.  Depreciation is calculated using the
straight-line  method over the estimated  useful lives of the assets.  Leasehold
improvements  are  amortized  on a  straight-line  basis over the shorter of the
lease term or estimated useful life of the asset.


<PAGE>




Note 1 - Summary of Significant Accounting Policies (continued)

Product Software Development Costs

During the year ended June 30, 1999, the Company  capitalized  product  software
development  costs when product  technological  feasibility is  established  and
concluding when the product is ready for its intended use. Software  development
costs were amortized on the straight-line method over an expected useful life of
three years.  As of June 30, 2000,  the Company  impaired  $2,486 of capitalized
software as the market for this  software was South  Carolina,  which  effective
July 1, 2000, no longer permits gaming.

Organizational Costs

Organizational  costs and other start-up  related  expenditures  are expensed as
incurred.

Non-Compete Agreement

The  Company  has  a  non-compete  agreement  with  the  former  stockholder  of
Technology.  The amount shown on the balance sheet  represents the present value
of amounts to be paid. This agreement is in default. The cost is being amortized
using the straight-line method over 10 years, the life of the agreement.

Goodwill

Goodwill, resulting from the acquisition of Technology, is being amortized using
the straight-line method over 10 years.

Income Taxes

The Company uses the asset and liability  method of accounting for income taxes.
Under the asset and liability  method,  deferred tax assets and  liabilities are
recognized for the future tax consequences  attributable to differences  between
the financial  statement carrying amounts of existing assets and liabilities and
their  respective tax basis.  Deferred tax assets and  liabilities  are measured
using  enacted tax rates  expected  to be  recovered  or settled.  The effect on
deferred tax assets and  liabilities  of a change in tax rates is  recognized in
income in the period that includes the enactment date.


<PAGE>




Note 1 - Summary of Significant Accounting Policies (continued)

Valuation of Long-Lived Assets

The Company assesses valuation of long-lived assets in accordance with Statement
of Financial  Accounting Standards (SFAS) No. 121, Accounting for the Impairment
of Long-Lived  Assets and for  Long-Lived  Assets to be disposed of. The Company
periodically  evaluates the carrying  value of long-lived  assets to be held and
used,   including  goodwill  and  other  intangible  assets,   when  events  and
circumstances warrant such a review. The carrying value of a long-lived asset is
considered impaired when the anticipated  undiscounted cash flow from such asset
is separately identifiable and is less than its carrying value. In that event, a
loss is recognized  based on the amount by which the carrying  value exceeds the
fair market  value of the  long-lived  asset.  Fair market  value is  determined
primarily using the  anticipated  cash flows  discounted at a rate  commensurate
with the risk involved.

Revenue Recognition

Manufacturing and other revenue is recognized as the product is shipped.

Gaming  revenue is the net win from gaming  activities,  which is the difference
between gaming wins and losses.  Gaming  revenue also includes  ticket sales and
food and beverage  revenue  generated from each cruise.  Gaming revenue does not
include the retail amount of tickets or food and beverages provided gratuitously
to customers, which, if material, reduces revenue as promotional allowances.

Revenue from gaming route operations is recognized at the time the play activity
takes place and is based upon the terms of the individual revenue  participation
agreement.

Leasing  revenue on direct  financing  leases consists of interest earned on the
present value of the lease  payments.  Leasing revenue also includes profit from
the sale to third parties of the Company's interest in direct finance leases.

Deferred revenue,  which represents customer cruise deposits, is included in the
balance sheet when  received and is  recognized  as passenger  fare revenue upon
completion of the voyage.

Research and Development

All research and development costs are expensed as incurred.


<PAGE>




Note 1 - Summary of Significant Accounting Policies (continued)

Earnings (Loss) Per Share

In accordance with the provisions of Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share",  basic earnings per share is computed by
dividing net income by the number of weighted average common shares  outstanding
during the year.  Diluted  earnings per share is computed by dividing net income
by the number of weighted  average  common shares  outstanding  during the year,
including potential common shares, which for the years ended June 30, 1998, 1999
and 2000,  consisted  solely of  convertible  debt,  stock  options and warrants
outstanding.  The Company  uses the treasury  stock method in computing  diluted
earnings per share,  by  recognizing  the use of proceeds that could be obtained
upon the exercise of options and warrants to repurchase  the Company's  stock at
the fair market value (Note 17).

Antidilutive Securities Excluded from Dilutive Earnings Per Share

As of June 30, 1998:

        Security                        Price              Shares
----------------------------     ---------------------   ----------

Stock options                      $  .10  -   $ 6.00    3,370,648
Warrants                           $ 1.00  -   $ 3.00      429,022
Convertible notes payable          $ 1.25  -   $ 2.50    3,214,990

As of June 30, 2000:

        Security                        Price              Shares
----------------------------     ---------------------   ----------

Stock options                      $  .10   - $ 12.00     4,130,498
Warrants                           $ 1.00   - $ 14.40       720,479
Preferred stock                    $ 7.875                1,173,867

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of
credit risk consist primarily of temporary cash investments.  The Company places
its cash investments  with high credit quality  financial  institutions  and, by
policy, limits the amount of credit exposure to any one institution. The Company
does,  however,  on occasion  exceed the Federal Deposit  Insurance  Corporation
federally  insured limits and the Securities  Investors  Protection  Corporation
insured limits.


<PAGE>




Note 1 - Summary of Significant Accounting Policies (continued)

Use of Estimates

The  preparation  of  consolidated   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 consolidated
financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.

Advertising Costs

The Company expenses advertising costs as incurred. Advertising expenses for the
years ended June 30, 1998, 1999 and 2000, were $69, $723 and $116, respectively.

Recently Issued Accounting Pronouncements

SFAS No. 133,  "Accounting for Derivative  Instruments  and Hedging  Activities"
requires  companies  to record  derivatives  on the  balance  sheet as assets or
liabilities,  measured  at fair market  value.  Gains or losses  resulting  from
changes in the values of those  derivatives  are  accounted for depending on the
use of the  derivative  and whether it qualifies for hedge  accounting.  The key
criterion for hedge accounting is that the hedging  relationship  must be highly
effective in achieving  offsetting changes in fair value or cash flows. SFAS No.
133 is effective  for fiscal  years  beginning  after June 15, 2000.  Management
believes  that the adoption of SFAS No. 133 will have no material  effect on its
financial statements.

In March 2000,  the FASB  issued FASB  Interpretation  No. 44,  "Accounting  for
Certain  Transactions  Involving  Stock  Compensation"  ("FIN  44"),  which  was
effective July 1, 2000, except that certain conclusions in this  Interpretation,
which cover specific events that occur after either December 15, 1998 or January
12,  2000  are  recognized  on a  prospective  basis  from  July 1,  2000.  This
Interpretation  clarifies the  application  of APB Opinion 25 for certain issues
related to stock issued to employees.  The Company  believes its existing  stock
based  compensation  policies and procedures  are in compliance  with FIN 44 and
therefore,  the  adoption  of FIN 44 had no  material  impact  on the  Company's
financial condition, results of operations or cash flows.

In December 1999, the  Securities and Exchange  Commission  ("SEC") issued Staff
Accounting  Bulletin ("SAB") 101, which provides guidance on applying  generally
accepted   accounting   principles  to  selected  revenue   recognition  issues.
Management  believes  that the  Company's  revenue  recognition  policies are in
accordance with SAB 101.


<PAGE>




Note 1 - Summary of Significant Accounting Policies (continued)

Reclassifications

Certain  reclassifications  have  been  made  to the  June  30,  1999  financial
statements in order to conform to the June 30, 2000 presentation.

Note 2 - Continued Existence

The  accompanying  financial  statements  have been  prepared on a going concern
basis,  which  contemplates  the  realization of assets and the  satisfaction of
liabilities  in the normal  course of  business.  The  Company  has  sustained a
$27,701 loss in 2000  resulting in a deficit in  stockholders'  equity of $3,978
and a working capital  deficiency of approximately  $16,200 at June 30, 2000. In
March of 1999 a court decision  discontinued  legalized gaming in South Carolina
effective  after June 30, 2000.  This resulted in the elimination of the largest
market for the Company's games.  From November to March the Company's  principle
effort was developing games to be introduced into California that allowed gaming
on Indian  Reservations  starting in March 2000. The Company believed that entry
into the California market would produce a significant  market for the Company's
machines. The market in California did not develop as quickly as the Company had
anticipated  and in April the Company  chose to terminate  its hotel segment and
gaming vessel  segment of the business.  (See Note 6.) The Company has continued
to lose  money  from  operations  and has been  unable to pay  vendors  and debt
holders'  amounts as they become  due.  This has  resulted in several  pieces of
litigation  being filed  against the  Company.  Included in the  litigation  are
several pending  summary  judgments in the amounts of  approximately  $2,700 and
$1,000.  (See Note 13.) In September  2000,  the State of Arizona as well as the
Viejas Indian Tribe in California  denied gaming  licenses to the Company citing
the financial  condition of the Company.  As a result of this denial the Company
is no longer  confident  that it can market  certain  lines of inventory and has
reserved  $8,000  of  inventory  at June  30,  2000.  In  addition,  Company  is
experiencing  difficultly in obtaining new gaming  licenses due to its financial
condition and the denials mentioned above.

The Company has cut its costs  significantly in 2000 and is continuing to reduce
its  costs  so that it can  achieve  profitable  operations.  Additionally,  the
Company is pursuing  opportunities to expand its licensing outside of the United
States and is seeking  interested  buyers for the rights to sell the Pot of Gold
machines in the United  States.  However,  there can be no  assurances  that the
planned  restructuring will increase revenue or that the Company will be able to
return to a profitable position.

These factors,  among others,  raise  substantial  doubt that the Company may be
able to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.


<PAGE>




Note 3 - Significant Fourth Quarter Adjustments

In August and  September  of 2000,  the Company  was denied a gaming  license in
Arizona,  on the Viejas Indian  Reservation in California,  on the Pueblo Sandia
Rservation  and the Pueblo  Isleta  reservation  in Arizona.  This event  caused
management to reassess the  realization  of inventory  and software  development
costs.  In the  first  quarter  of fiscal  2000 the  Company  accumulated  large
quantities of inventory in  anticipation  of sales in South Carolina in December
of 1999.  The Company now believes it cannot realize the value of this inventory
in the near future and has established a reserve of $8,000 in the fourth quarter
of 2000.  Additionally  the Company impaired $2,486 in software costs related to
specific  communication  devises  for gaming  machines  in South  Carolina.  The
Company had felt this software might have had  application  elsewhere but in the
fourth quarter 2000 decided that it could not be realized in the near future.

Note 4 - Inventories

Inventories consist of the following:
                                                        June 30,
                                         --------------------------------------
                                             1999                    2000
                                         --------------          --------------


         Raw materials and parts
          made by others                 $        4,028          $        8,325
         Finished goods                           6,765                     765
                                         --------------          --------------
                  Total                          10,793                   9,090
         Inventory reserve                         (150)                 (5,727)
                                         --------------          --------------

                                         $       10,643          $        3,363
                                         ==============          ==============



<PAGE>




Note 5 - Property and Equipment and Other Assets

Property and equipment consist of the following:

                                                       June 30,
                                         ------------------------------------
                                             1999                 2000
                                         ---------------      ---------------
Property and equipment

    Vehicles                             $           363      $            85
    Furniture and fixtures                           247                  252
    Machinery and equipment                          997                  731
    Leasehold improvements                           277                  341
                                         ---------------      ---------------
                                                   1,884                1,409
    Less accumulated depreciation                   (525)                (534)
                                         ---------------      ---------------

                                         $         1,359      $           875
                                         ===============      ===============
Other assets consist of the following:

    Capitalized software development
     costs, net of impairment of
     $2,486 (2000)                       $           499      $             -

    Capitalized loan fees, net of
     accumulated amortization of
     $11 (1999)
                                                     150                    -
    License fees                                     146                   70
    Other                                            289                    8
                                         ---------------      ---------------

                                         $         1,084      $            78
                                         ===============      ===============


Note 6 - Discontinued Operations

In April 2000, the Company  decided to discontinue  its offshore  gaming cruise,
financial  and  hospitality  business  segments.   All  offshore  gaming  cruise
operations have ceased and related  locations have been closed.  The renovations
on the hotel have ceased.

The Company  intends to sell the net assets of the  subsidiaries  related to the
offshore  gaming cruise  segment and is actively  seeking to do so. The stock of
the financing  segment was sold on May 7, 2000 to a current  stockholder and the
former owner.  The Company has sold the hotel business  segment to the President
of the  Company  for  $1,300,000  payable as  follows:  Assumption  of the first
mortgage of  approximately  $360,000.  The balance of $940,000 will be paid by a
combination  of  forgiveness  of debt the Company owes the  president and a note
receivable from the president.


<PAGE>




Note 6 - Discontinued Operations (continued)

No proceeds have been received related to the discontinued assets as of June 30,
2000.

All personnel associated with the aforementioned divisions have been, or will be
terminated or transferred to another division.

The results of  operations  of the segments are  included in the  statements  of
operations and include the following:
<TABLE>
<CAPTION>

                                                                           June 30,
                                                         --------------------------------------------
                                                               1999                       2000
                                                         -----------------          -----------------
<S>                                                      <C>                        <C>

Revenues                                                 $           5,668          $           2,833
Total costs and expenses                                            (9,117)                    (4,593)
                                                         -----------------          -----------------

Loss from operations of discontinued operations          $          (3,449)         $          (1,760)
                                                         =================          =================
</TABLE>

The loss of the  disposition of the segments
 listed above has been accounted for
 as discontinued operations and includes:

                                                        Loss on Discontinued
                                                            Operations
                                                        -------------------
Estimated loss on disposal and carrying value of net
 assets in excess of anticipated proceeds                $          (4,785)
Estimated loss from operations of the discontinued
 divisions for the period April 20, 2000 through
 April 2001                                                         (2,281)
                                                         -----------------
Total disposal costs                                                (7,066)
                                                         -----------------

Loss on disposal of discontinued business                $          (7,066)
                                                         =================

The components of the loss on disposal of the offshore gaming cruise,  financing
and hospitality segments were based on reasonable estimates and assumptions that
management believes are adequate;  however, actual amounts may differ from these
estimates.

The Company has  guaranteed  the  dollars of  outstanding  debt from a financial
institution  related to vessels  that  operated in the  offshore  gaming  cruise
segment. The Company continues to seek an interested buyer to acquire the assets
an  interested  buyer to acquire  the assets and assume the debt  related to the
offshore  gaming  cruise  segment.  As such,  the  Company  has not  removed the
indebtedness  from the  accompanying  financial  statements  and has recorded an
asset of equal value, which is management's estimate of the value the boats will
be sold  at.  If the  boat  sells  at a value  lower  or if it is  subject  to a
foreclosure  sale  then the  Company  could  experience  a loss in excess of the
current  estimated  amount to the debt titled  financial  interest in collateral
because the lender will not remove Casinos as a maker on the note.


<PAGE>




Note 6 - Discontinued Operations (continued)

The carrying value of net assets of discontinued  operation at June 30, 1999 and
2000 is based on estimated future cash flows associated with the assets.
<TABLE>
<CAPTION>

                                                                                    June 30,
                                                                       ---------------------------------
                                                                           1999                2000
                                                                       --------------      -------------
<S>                                                                    <C>                 <C>

Assets

Cash                                                                   $        1,509      $          17
Receivables                                                                     3,988                  6
Machinery and equipment, net (financial interest in collateral)
                                                                                7,083              7,807
Other assets                                                                    1,682                160
Note receivable - related party                                                    -                 890
                                                                       --------------      -------------

Total assets                                                           $       14,262      $       8,880
                                                                       ==============      =============

Liabilities

Notes payable                                                          $       (3,607)     $      (8,633)
Accrued liabilities and other expenses                                         (1,406)            (1,487)
Provision for losses on disposal of discontinued operations                        -              (1,903)
                                                                       --------------      -------------

Total liabilities                                                      $       (5,013)     $     (12,023)
                                                                       ==============      =============

Net assets (liabilities) of discontinued operations                    $        9,249      $      (3,143)
                                                                       ==============      =============
</TABLE>


Note 7 - Accrued Expenses
<TABLE>
<CAPTION>

                                                                                    June 30,
                                                                       ---------------------------------
                                                                           1999                2000
                                                                       --------------      -------------
<S>                                                                    <C>                 <C>

    Litigation (Note 13)                                               $           -       $          92
    Advanced deposits                                                             588                381
    Accrued interest                                                              244                852
    Accrued wages, benefits and payroll taxes                                     499                233
    Miscellaneous taxes                                                            23                 -

    Dividend Payable                                                               -                 157
    Other accruals                                                                561                114
                                                                       --------------      -------------

                                                                       $        1,915      $       1,829
                                                                       ==============      =============
</TABLE>


Note 8 - Related Party
<TABLE>
<CAPTION>

                                                                                    June 30,
                                                                       ---------------------------------
Notes Receivable                                                           1999                2000
----------------                                                       --------------      -------------
<S>                                                                    <C>                 <C>

Notes receivable

                                                                       $            -      $          81

   Less current portion                                                             -                (12)
                                                                       --------------      ------------

   Long-term portion                                                   $            -      $          69
                                                                       ==============      ============
</TABLE>

Other Transactions

The Company leases a condominium/office from the Company's president.  The lease
expires  on  October  31,  2002 and  requires  rental  payments  of $3 per month
net/net/net  plus all association fees related to the  condominium/office.  Rent
expense  for  the  years  ended  June  30,  1999  and  2000  was  $30  and  $30,
respectively.

The Company  leases office space in Ohio from the Company's  president at a rate
of $2 per month.  The term of the lease extends  through June 2000. Rent expense
for the years  ended  June 30,  1999 and 2000,  were $18 and $18,  respectively.
Accrued  rent  related to this  lease was $18 and $9 at June 30,  1999 and 2000,
respectively.

The Company leases 12 automobiles  from J-Way Leasing,  Ltd., a company owned by
the  Company's  president.  The  leases  are for 36 months to 48 months and have
various dates of expiration  through December 2002. The Company reimburses J-Way
Leasing,  Ltd. for the down  payments  J-Way  Leasing,  Ltd. pays on each of the
automobiles  and pays J-Way Leasing,  Ltd. a monthly  payment  equivalent to the
monthly payments (plus 5%) that J-Way Leasing, Ltd. pays for each automobile. No
amounts were paid by the Company to J-Way Leasing,  Ltd. for the year ended June
30, 1998,  but for the years ended June 30, 1999 and June 30, 2000, $61 and $63,
respectively, was paid.

In October 1998, Cruises borrowed $3,000 from Foothill Capital Corporation.  The
loan is collateralized by the assets of Cruises, including the Leisure Lady, and
is guaranteed by Technology,  Casinos and the Company's president, none of which
received any  compensation  for guaranteeing the loan. This loan is currently in
default.

The Company's  president has also guaranteed  $1,000 of $8,400 of notes payable.
The notes  payable  are secured by  substantially  all the assets of Cruises and
Florida  Casino  Cruises and are  guaranteed  by  Technology  and  Cruises.  The
Company's  president,  Technology  and  Cruises  received  no  compensation  for
guaranteeing the notes payable. The loans are currently in default.


<PAGE>




Note 8 - Related Party (continued)

The Company's  president has also  guaranteed a $1,000  line-of-credit  that the
Company  has  with  a  finance  company.   The   line-of-credit  is  secured  by
substantially all of the assets of Leisure Time and is guaranteed by Technology,
Cruises and the Company's president, none of which received any compensation for
guaranteeing the line-of-credit. The line-of-credit is currently in default.

The Company's  president owns 51% of Leisure Time Europe Ltd.,  which was formed
in  February  1998 and acts as the  distributor  of  Technology's  video  gaming
machines to charities in Norway.  Technology  sells the video gaming machines to
Leisure Time Europe,  which resells the video gaming  machines to the charities.
Leisure Time Europe also services the video gaming machines.  Unaffiliated third
parties own the  remaining  49%. The Company has reserved  $33  associated  with
sales to Leisure Time Europe.

The  Company  uses  the  services  of an  architect  who is also  the  assistant
secretary and a director of the Company.  These services were being performed in
connection  with the Company's  renovation of the hotel  property.  For the year
ended  June 30,  2000,  approximately  $27 was  paid in  connection  with  these
services.

Prior to the acquisition of Financial,  the Company had paid  approximately  $50
and $13 to Financial  and an officer of Financial,  respectively,  in connection
with their  arrangement  of  equipment  and working  capital  financing  for the
Company.

The  brother  of the  president  of the  Company  is the  owner of a  consulting
business that was paid $140 during the year ended June 30, 2000. The same person
was also an  employee of the Company and was paid $60 during the year ended June
30, 2000.

The brother of the  president of the Company has entered into a lease  agreement
with the Company for certain  equipment.  The lease  receivable has a balance of
$69 at June 30, 2000.

Note 9 - Long-Term Debt and Line-of-Credit

All of the following notes are currently in default.

<TABLE>
<CAPTION>
                                                                                                      June 30,
                                                                                      ----------------------------------
                                                                                           1999                  2000
                                                                                      ----------------        ----------
<S>                                                                                   <C>                     <C>

7.80% to 9.99% notes payable - monthly payments  including interest totaling $3,
  due from January 2000 through November 2001, collateralized by automobiles.

                                                                                      $            18         $       -

6.64% promissory notes payable to individuals in connection with the purchase of
  U.S. Games.  The  Company's  obligation  was satisfied in full during the year
  ended June 30, 2000.
                                                                                                   796                -
</TABLE>

<PAGE>

Note 9 - Long-Term Debt and Line-of-Credit (continued)
<TABLE>
<CAPTION>

                                                                                                      June 30,
                                                                                      ----------------------------------
                                                                                           1999                  2000
                                                                                      ----------------        ----------
<S>                                                                                   <C>                     <C>

Note payable to a finance  company,  the first six monthly  installments are for
  accrued and unpaid interest only. The next forty-eight monthly installments of
  $37 include principal and interest at a fixed rate of 8.90%,  unpaid principal
  and interest due June 2003.  Collateralized by a first preferred mortgage on a
  vessel,  a first priority  security  interest in all non-gaming  equipment and
  other  property  used in  connection  with the  operation  of the vessel,  all
  earnings,  insurances and  requisition  compensation  of the vessel and a $125
  compensating balance at June 30, 1999.                                                         1,500                -

Note payable to a finance company with variable  interest at a rate equal to one
  (1.0)  percentage  point above the reference rate (10.5% combined rate at June
  30,  2000).  Payable in sixty  installments  of $50 plus  interest  commencing
  December 1, 1998 and  continuing  until  November  1, 2003 when all  remaining
  principal  and  interest are due.  Collateralized  by certain  equipment.  The
  Company is  currently in default on this note,  as such the entire  balance is
  due and callable at the election of the holder of the note.                                    2,600             2,438

Notes payable to a finance company, payable in 48 and 60 monthly installments of
  $5 and $6  including  interest at fixed rates of 9.80% and 10.25%,  commencing
  August  1998 and July  1999 and due  June  and July  2003.  Collateralized  by
  security interests in certain  equipment.  The Company is currently in default
  on this note,  as such the entire  balance is due and callable at the election
  of the holder of the note.                                                                       458               297


</TABLE>

<PAGE>




Note 9 - Long-Term Debt and Line-of-Credit (continued)

<TABLE>
<CAPTION>

                                                                                                      June 30,
                                                                                      ----------------------------------
                                                                                           1999                  2000
                                                                                      ----------------        ----------
<S>                                                                                   <C>                     <C>

Note payable  to a company  collateralized  by a  mortgage  deed on a hotel with
  interest at the rate of 10% per annum. The interest rate is adjusted quarterly
  beginning  September  15, 1999 to four and 75/100  percentage  points  (4.75%)
  above  the  weekly  average  yield on US  Treasury  securities  adjusted  to a
  constant of one year as made available by the Federal Reserve Board. This note
  is payable in one  payment of $100 plus  interest  on  September  15, 1999 and
  quarterly  payments of principal and interest  beginning December 15, 1999 and
  amortized  over a four (4) year period ending on September 15, 2003.  However,
  the  Company  may pay this note in full by paying  $525 plus  interest  on the
  principal sum due on or before  September 14, 1999.  The Company must also pay
  such additional charges as are set forth in a certain mortgage deed (Note 10).
  The Company is currently in default on this note,  as such the entire  balance
  is due and  callable  at the  election  of the  holder of the  note.  The note
  remained with Leisure Time Hospitality in the sale of that corporation.                          545                -

Notes  payable  to  various  financial  institutions,  interest  at 7.8% to 11%,
  various  monthly   installments.   Substantially   all  assets  of  Financial,
  consisting of capital leases and installment  notes  receivable are pledged as
  collateral for the financing  arrangements.  The notes remained with Financial
  in the sale of that corporation.                                                               3,061                 -

Notes payable to a finance  company for  insurance.  Fixed  interest at 6.92% to
  11.12% payable in nine  installments of $1 to 16,  commencing  January 1999 to
  July 1999 and due  September  1999 to March  2000.  The note is  currently  in
  default.                                                                                         215                26

Notes payable to a finance  company  with  variable  interest at a rate equal to
  2.25% points above the reference rate (10.00% combined rate at June 30, 1999).
  Payable in sixty  installments  of $35 and $54 plus interest,  commencing June
  1999 and due May 2004. Collateralized by a vessel. The Company is currently in
  default on this note,  as such the entire  balance is due and  callable at the
  election of the holder of the note.                                                            4,823             4,534

</TABLE>

<PAGE>




Note 9 - Long-Term Debt and Line-of-Credit (continued)
<TABLE>
<CAPTION>

                                                                                                     June 30,
                                                                                      ----------------------------------
                                                                                           1999                  2000
                                                                                      ----------------        ----------
<S>                                                                                   <C>                     <C>

Note  payable  to an  insurance  company.  Interest  at 7.6%,  payable in twelve
  installments  of $308,  commencing July 1999 and due June 2000. The Company is
  currently  in  default on this  note,  as such the  entire  balance is due and
  callable at the election of the holder of the note.                                            3,550             2,688

Note payable to a finance company,  with a variable  interest rate equal to 2.2%
  points above the  reference  rate  (11.25%  combined  rate at June 30,  2000).
  Payable in fifty-five  installments of $7 plus interest and commencing October
  1, 1999 and  continuing  until May 1, 2004,  when all remaining  principal and
  interest  are due.  The  Company is  currently  in default on this note and as
  such,  the entire  note  balance is  callable  at the  election of the finance
  company.                                                                                          -                392

Note payable to stockholder, non-interest bearing.                                                  -                341

Notes  payable  to  vendors,  interest  rates  at 0% - 10%,  with  various  monthly
  installments, in default.                                                                         -              1,024

Note payable to a finance company for insurance. Fixed rate at 10.9%, payable in
  eight  installments  of $2,  commencing  December  1999  and  due  July  2000,
  currently in default.                                                                             -                  9

Note payable to a finance company,  due in six installments of $5,  commencing July
  1, 2000 and due  December  1, 2000.  Fixed  interest  rate at 12.5%.  The note is
  currently in default.                                                                             -                 28

Capital leases, canceled during the year ended June 30, 2000.                                      156                -
                                                                                      ----------------        ----------

Total debt                                                                                      17,722            11,777
Less current portion                                                                            (6,660)          (11,738)
Less debt attributable to discontinued operations - current                                     (2,024)              (39)
Less debt attributable to discontinued operations - long-term                                   (1,739)               -
                                                                                      ----------------        ----------

Total long-term debt                                                                  $          7,299        $       -
                                                                                      ================        ==========

</TABLE>

<PAGE>




Note 9 - Long-Term Debt and Line-of-Credit (continued)

Line-of-Credit
<TABLE>
<CAPTION>

                                                                                                      June 30,
                                                                                      ------------------------
                                                                                            1999                    2000
                                                                                      ----------------        ----------
<S>                                                                                   <C>                     <C>

$1,000  line-of-credit  with a finance  company  that expired on March 31, 2000.
  Interest  is  variable  at a per annum rate equal to the sum of 3.25% plus the
  30-day Commercial Paper Rate (as published in The Wall Street Journal),  based
  upon  actual  days  elapsed  over a 360  day  year  (6.5%  at June  30,  2000)
  collateralized  by a first lien on certain  accounts  receivable and inventory
  (Note 4). This note is currently in default.                                        $            960        $    1,034
                                                                                      ================        ==========
</TABLE>

The aggregate average interest rate on short-term debt is 9.3% at June 30, 2000.

Note 10 - Long-Term Liabilities

Deferred Compensation Contracts

The Company assumed $1,644  (undiscounted)  of deferred  compensation  contracts
with certain  individuals  related to the acquisition of Technology in September
1996. These contracts provide for the payment of defined amounts,  generally for
up to a period of six years on a monthly  basis.  The  amounts  are  computed by
taking a percentage of the previous  month's  gross sales.  The present value of
the  future  amounts  estimated  to be payable is being  accrued  for  financial
reporting purposes at an imputed interest rate of 6.64%, and originally amounted
to $1,354  (discounted).  As of June 30, 2000,  approximately $2,149 of deferred
compensation  payments  have  been  made.  Of these  payments,  $1,354  has been
recorded as a reduction to the  liability.  The remaining $795 has been recorded
as interest expense. The Company satisfied,  in full, all deferred  compensation
contracts during the year ended June 30, 2000.

Non-Compete Agreement

In connection  with the  acquisition of Technology,  the Company  entered into a
non-compete agreement with the former stockholder of Technology in the amount of
$7,300  (undiscounted).  The agreement is payable  through  September 2006 in 10
annual installments of $730 which include interest imputed at 6.64%. The present
value of the future  amounts to be payable is accrued  for  financial  reporting
purposes  at the  imputed  interest  rate of 6.64% and  originally  amounted  to
$5,214.  The  corresponding  asset  is  being  amortized  over  the  life of the
agreement,  which is 10  years.  The  Company  did not make its  September  2000
payment, and as such, is in default.


<PAGE>




Note 10 - Long-Term Liabilities (continued)

A summary of  long-term  liabilities  at June 30,  1999 and June 30,  2000 is as
follows:
<TABLE>
<CAPTION>

                                                                                  June 30,
                                        -------------------------------------------------------------------------------------------
                                                            1999                                           2000
                                        --------------------------------------------    -------------------------------------------
                                                          Current        Long-term                        Current       Long-term
                                           Total          Portion         Portion           Total         Portion        Portion
                                        ------------    ------------    ------------    ------------    ------------   ---------
<S>                                     <C>             <C>             <C>             <C>             <C>             <C>

Deferred compensation contracts         $        202    $         30    $        172    $          -    $          -   $          -
Non-compete agreement                          4,420             436           3,984           3,984             466          3,518
                                        ------------    ------------    ------------    ------------    ------------   ------------

                                        $      4,622    $        466    $      4,156    $      3,984    $        466   $      3,518
                                        ============    ============    ============    ============    ============   ============
</TABLE>

The annual aggregate  maturities of long-term debt and long-term  liabilities at
June 30, 2000, are as follows:
<TABLE>
<CAPTION>

                                                                       Long-Term               Long-Term
         Year Ending June 30,                                             Debt                Liabilities                Total
         --------------------                                        --------------          --------------          --------------
<S>                                                                  <C>                     <C>                     <C>

                   2001                                              $       11,738          $          466          $       12,204
                   2002                                                          -                      496                     496
                   2003                                                          -                      529                     529
                   2004                                                          -                      564                     564
                   2005                                                          -                      602                     602
                   Thereafter                                                    -                    1,327                   1,327
                                                                     --------------          --------------          --------------

                                                                     $       11,738          $        3,984          $       15,722
                                                                     ==============          ==============          ==============
</TABLE>



<PAGE>




Note 11 - Income Taxes

The Company files a consolidated  tax return that includes the operations of its
subsidiaries.

Income tax expense (benefit) consists of:

                                              Year Ended June 30,
                           ----------------------------------------------------
                               1998                1999               2000
                           --------------     --------------     --------------
   Current

      U.S. Federal         $          780     $        1,672     $       (1,997)
      State and local                  80                127               (127)
                           --------------     --------------     --------------
                                      860              1,799             (2,124)
                           --------------     --------------     --------------
   Deferred

      U.S. Federal                 (1,008)               792                777
      State and local                 (49)                38                 37
                           --------------     --------------     --------------
                                   (1,057)               830                814
                           --------------     --------------     --------------

                           $         (197)    $        2,629     $       (1,310)
                           ==============     ==============     ==============

Rate Reconciliation

The  reconciliation  of income tax expense  (benefit)  by  applying  the Federal
statutory tax rates to the Company's effective income tax rate is as follows:
<TABLE>
<CAPTION>

                                                                                       June 30,
                                                                           ------------------------------------------
                                                                              1998               1999         2000
                                                                           ------------       -----------   ---------
<S>                                                                        <C>                <C>           <C>

Federal statutory rate                                                            (34.0)%            34.0%      (34.0)%
State income taxes, net of federal income tax benefit                               4.7               1.2          -
Nondeductible expenses including nondeductible goodwill
                                                                                   12.9               2.3         1.1
Deferred expenses including litigation and stock based compensation
                                                                                   (1.1)              (.3)        9.9
Net operating loss - reserve                                                         -                 -         18.2
                                                                           ------------       -----------   ---------

                                                                                  (17.5)%            37.2%       (4.8)%
                                                                           ============       ===========   =========
</TABLE>



<PAGE>




Note 11 - Income Taxes (continued)

Rate Reconciliation (continued)

The  net  current  deferred  tax  asset  and  the  net  long-term  deferred  tax
(liability) asset in the accompanying consolidated balance sheets consist of the
following:

                                                               June 30,
                                                      -------------------------
                                                         1999           2000
                                                      ----------     ----------
   Current deferred taxes

     Current deferred tax asset                       $      180     $       -

   Long-term deferred taxes
     Long-term deferred tax asset                            616          3,922
     Long-term deferred tax liability                     (1,002)            -
                                                      ----------     ----------
     Net long-term deferred tax asset (liability)           (386)         3,922
                                                      ----------     ----------

Valuation allowance                                           -          (3,922)

                                                      $     (206)    $       -
                                                      ==========     ==========

The principal temporary differences that result in the above deferred tax assets
and liabilities  are net operating loss  carryforwards.  Discontinued  operation
amounts are not shown net of taxes  because the deferred tax asset will be fully
impaired.

Note 12 - Leases

The  Company  has a  non-cancelable  operating  lease  for its  office  space in
Norcross,  Georgia that expires in January 2005 and requires monthly payments of
$21. Rental expenses for these operating leases were approximately $279 and $287
during the years ended June 30, 1999 and 2000, respectively.

The Company had a Bareboat  Charter  Agreement for the use of the Vegas Express.
The  original  agreement  commenced on April 22, 1998 and was to expire in April
1999, as amended. Charter payments were $100 per month until January 22, 1999 at
which  time they  became $50 per month  through  March 31,  1999.  Additionally,
beginning on January 22, 1999,  the Company paid the owner of the Vegas  Express
$3.00 per passenger per month in excess of 12,000 passengers. Lease expenses for
this  Charter were  approximately  $0, $100 and $750 during the years ended June
30, 1997,  1998 and 1999,  respectively.  The Company  purchased the corporation
that owned the boat in May 1999.


<PAGE>




Note 12 - Leases (continued)

In addition,  the Company has operating  leases that expire through January 2005
for various office equipment,  vehicles,  office  facilities,  dock and parking.
These leases  require  monthly  payments  totaling $63.  Lease expense for these
operating  leases was  approximately  $395 and $600 for the years ended June 30,
1999 and June 30, 2000, respectively.

Future  minimum lease  payments  pursuant to these leases are  approximately  as
follows:

                                                      Related
                                  Non-Related          Party
   Year Ending June 30,              Party            (Note 8)          Total
   --------------------         ---------------   ----------------   -----------

          2001                   $          252     $           95     $     347
          2002                              258                 53           311
          2003                              264                 15           279
          2004                              268                 -            268
          2005                              275                 -            275
          Thereafter                         -                  -             -
                                 --------------     --------------     --------

                                 $        1,317     $          163     $   1,480
                                 ==============     ==============     =========


Note 13 - Commitments and Contingencies

Open Litigation

Creditors:

On July 24, 2000, a complaint was filed against Leisure Time Hospitality, in the
Cleveland Municipal Court Cuyahoga County, Ohio, (Civil Action No. 00CVF 15927),
alleging defendant rented equipment on three different months and failed to pay.
Plaintiff seeks judgment in the amount of $7 plus interest at a rate of 10% plus
costs.  On August 28, 2000,  defendant  entered into  stipulated  order granting
leave of Court to move or plead on or before September 25, 2000. Defendant filed
an  answer  on  September  25,  2000.  The case is in the  discovery/  pre-trial
process. The Company has accrued for this case.

On August 2, 2000, a complaint was filed against  Technology,  in the Magistrate
Court of Gwinnett  County,  State of Georgia  (Civil  Action No.  00-A07048  1),
alleging  non-payment  on account.  Plaintiff  seeks judgment for $47 principal,
plus  pre-judgment  interest  accruing on the principal  indebtedness at the per
diem rate of $.02 from July 31,  2000  until the date of  judgment.  Defendant's
answer and defenses were filed on August 31, 2000. The case is in the discovery/
pre-trial process. The Company has accrued for this case.


<PAGE>




Note 13 - Commitments and Contingencies (continued)

Open Litigation (continued)

On August 4, 2000,  a  complaint  was filed  against  Technology,  in the United
States District Court for the Northern  District of Georgia,  Atlanta  Division,
(Civil Action No. 1  00-CV-2011),  alleging  non-payment  on account.  Plaintiff
seeks judgment for $937 plus inventory carrying charges, costs, attorneys' fees,
costs of  action,  and such other and  further  relief.  Defendant's  answer and
defenses were filed on August 31, 2000. The case is in the discovery/  pre-trial
process. The Company has accrued for this case.

On August 7, 2000,  a  complaint  was filed by a vendor  against  Cruises in the
Commonwealth  of  Massachusetts,   District  Courts  of  Massachusetts,  Peabody
District Court, (Civil Action No. 0086 CV 0348),  alleging damages in the amount
of $14 plus interest and  attorney's  fees of $2 for a total of $16. An entry of
default against Cruises was filed on September 14, 2000. The Company has accrued
for this case.

On August 17, 2000, a complaint was filed against Florida Casino Cruises,  Inc.,
Leisure Express Cruise,  LLC,  Cruises and Casinos in the United States District
Court For the Northern District of Georgia, Atlanta Division,  (Civil Action No.
1  00-CV-2128)  alleging  breach of  maritime  contract.  Plaintiff  requests  a
constructive  trust for  repair  funds in the  amount  of $300  plus  additional
interest,  costs  and  attorneys'  fees.  Plaintiff  filed  for  attachment  and
garnishment to any and all freights,  accounts,  monies,  hires,  disbursements,
fees, advances, cash, or otherwise, etc. being held by First Union National Bank
and/or its agents and affiliates.  Defendant's  response to the complaint is due
on October 25, 2000. The Company has accrued for this case.

On August 23, 2000, a complaint was filed by a vendor  against  Casinos and Alan
N. Johnson,  in the United States District Court,  for the Northern  District of
Georgia, Atlanta Division, alleging violation of 10(b)&10(b)5. (Civil Action No.
00-CV-2186). Plaintiff request damages in the amount of $2,691, the exact amount
to be  determined  by jury as  compensatory  damages;  costs of  litigation  and
attorneys'  fees, and other relief the Court deems just and proper.  Defendants'
answer was filed on October 12, 2000. The Company has accrued for this case.

On August 28, 2000, a complaint was filed against Technology, in the State Court
of Gwinnett County,  State of Georgia,  (Civil Action No. 00-C-5273-1)  alleging
non-payment on account. Plaintiff requests damages plus pre-judgment interest in
the amount of $6,  plus  continuing  pre-judgment  interest,  and  post-judgment
interest at the rate of 18% per annum on the principal amount, plus court costs.
Defendant  filed an answer on September 28, 2000.  The case is in the discovery/
pre-trial process. The Company has accrued for this case.


<PAGE>




Note 13 - Commitments and Contingencies (continued)

Open Litigation (continued)

On September 28, 2000, a complaint was filed by a vendor against Cruises, in the
Commonwealth of  Massachusetts,  District Court  Department,  Taunton  Division,
(Civil  Action  No.  0031CV0669)  requesting  damages  in the amount of $40 plus
interest, costs and attorneys' fees. Defendant's answer is due October 23, 2000.
The Company has accrued for this case.

Note Holders:

On December 27, 1999 a complaint was filed against  Casinos in the United States
District  Court for the  Southern  District  of New York,  (Civil  Action No. 99
CV12369)  alleging that Casinos defaulted on the payment of a note and breach of
contract by failing to pay in  accordance  with the premium  finance  agreement.
Plaintiff  requests  that it be granted  damages  in the  amount of $2,688  plus
interest at a rate of 7.6% per annum on the note and, in the alternative, $2,773
plus  interest,  together  with  the  costs  and  disbursements  of the  action,
including  attorneys'  fees,  for  breach of the  finance  agreement.  The trial
scheduled for September 12, 2000 was  continued.  On February 15, 2000,  Casinos
filed an Answer. On August 24, 2000 the plaintiff filed for summary judgment. On
September  25,  2000,  Casinos  filed a response to the  plaintiff's  motion for
summary  judgment.  Parties are  awaiting  the Court's  ruling.  The Company has
accrued for this case.

On August 25, 2000, a complaint was filed against  Technology and Casinos in the
State Court of Gwinnett County, State of Georgia, (Civil Action No. 00-C-5242-4)
alleging  non-payment on account.  Plaintiff  requests  damages in the amount of
$959,  prejudgment  interest  at the rate of 18% per annum,  plus $8 in interest
which  accrued at 10% per annum prior to July 15, 2000,  plus  attorneys'  fees;
post-judgment  interest  at the rate of 18% per annum;  all court costs and such
other and further  relief as the Court  considers  just,  fair and  appropriate.
Defendants  filed an answer on September 28, 2000. The case is in the discovery/
pre-trial process. The Company has accrued for this case.

On September  11,  2000,  a complaint  was filed  against  Casinos,  Technology,
Cruises,  Leisure Time International,  Ltd., Leisure Time Gaming,  Inc., Solutia
Gaming Systems, Inc., Leisure Belle Cruise, LLC, Leisure Time Hospitality, Inc.,
Leisure Express Cruise, LLC, Financial,  Florida Casino Cruises,  Inc. d/b/a FCC
Advertising, and Alan N. Johnson, an individual, Michael R. Pace, an individual,
in the Superior Court of Gwinnett  County,  State of Georgia,  (Civil Action No.
00-A-8358  7),  alleging  breach of contract and default under the agreement and
guaranties  for a line of  credit.  Plaintiff  request  damages in the amount of
$1,027 plus interest,  including  reasonable  attorneys' fees and expenses,  and
other  costs of  collection  in the  amount  provided  for in such  statute,  as
determined  at trial.  Defendant's  answer was filed on October  11,  2000.  The
Company has accrued for this case.


<PAGE>




Note 13 - Commitments and Contingencies (continued)

Open Litigation (continued)

Other:

On October 19, 1998, a former  employee  filed a complaint  against  Casinos and
Technology in the U.S.  District Court,  Northern  District of Georgia,  Atlanta
Division,  (Civil Action No.  1:98-CV-3033),  alleging breach of oral Employment
Agreement.  The  Plaintiff is  requesting  damages for failure of  defendants to
issue plaintiff an option for 200,000 shares  exercisable at $1.00 per share. On
July 10,  2000 the  Court  granted  summary  judgment  in favor of  Casinos  and
Technology.  Plaintiff filed a notice of appeal on July 24, 2000. As there is no
reasonable estimate of the outcome of this case, no accrual has been made by the
Company.

On December 14, 1998,  Technology filed a complaint against a distributor in the
Superior  Court  of  Gwinnett  County,   State  of  Georgia  (Civil  Action  No.
98-A-9761-4),  alleging breach of a distribution  agreement and misappropriation
of trade secrets. Technology seeks specific performance and damages. The case is
in the discovery/  pre-trial process.  As there is no reasonable estimate of the
outcome of this case, no accrual has been made by the Company.

On March 25,  1999,  a  company  filed a  complaint  against  Technology  and an
individual in the Court of Common Pleas, Fifth Judicial Circuit,  State of South
Carolina,  City of Richland,  (Civil Action No. 99CP401068),  alleging breach of
distribution  agreement,  illegal  raising  of  prices,  breach of  contract  by
fraudulent  act,  fraudulent  non-disclosure  of  material  fact,  and  tortuous
interference of contract.  The plaintiff  requests an award of $2 for every game
resold by the individual. The exact number has not yet been determined. The case
is in the discovery/ pre-trial process. The Court has stated that if the case is
not settled by October  25,  2000,  it will be removed to the  Federal  District
Court.  As there is no  reasonable  estimate  of the  outcome of this  case,  no
accrual has been made by the Company.

On September 12, 2000, a complaint was filed against  Casinos,  Technology,  and
Leisure  Time  Gaming,  Inc.,  in the  Court  of  Common  Pleas,  State of South
Carolina, County of Spartanburg,  (Civil Action No. 2000-CP-42-2524) by a former
employee,  alleging that he was denied the  opportunity to exercise his options,
that he is owed  expenses and that the company is unjustly  enriched.  Plaintiff
seeks judgment of $1,901 regarding the options and $5 for expenses.  Defendants'
answers are due on October 25, 2000. As there is no  reasonable  estimate of the
outcome of this case, no accrual has been made by the Company.


<PAGE>




Note 13 - Commitments and Contingencies (continued)

Pending Litigation (continued)

Creditors:

On June 27, 2000, a complaint  was filed against  Casinos in the District  Court
Dallas County,  Texas,  I-162nd Judicial  District,  (Civil Action No. 00-04789)
alleging  non-payment on account.  Plaintiff  seeks judgment for $260 principal,
attorney fees, plus pre-judgment and post-judgment interest at the highest rates
allowed by law,  costs of suit and other and further  relief,  both  special and
general,  legal and equitable.  On August 25, 2000,  defendant filed a notice of
special  appearance  objecting to jurisdiction.  A hearing was held on September
19, 2000.  The Court  requested  briefs after the hearing.  The Court ruled that
Casinos should be given the  opportunity  to correct an affidavit.  A hearing is
set for October  24,  2000.  Depositions  were taken on October  12,  2000.  The
Company has accrued for this case.

Other:

On June 18, 1998, a complaint was filed against  Technology in the United States
District Court, the District of South Carolina, Anderson Division, (Civil Action
No.  3:98-1887  13),  alleging  breach of contract  and  violation  of the South
Carolina Unfair Trade Practices Act.  Plaintiff  requested damages in the amount
of $1,300. The trial was held on June 20 through June 22, 2000,  resulting in an
award for  plaintiff  in the amount of $190,  interest  at 6.375%,  plus  costs.
Plaintiff  filed a motion for new trial and  additur on July 3, 2000.  Defendant
filed a  motion  in  opposition  on July 14,  2000.  On  August  28,  2000,  the
plaintiff's  motion was denied. On September 26, 2000 plantiff filed a notice of
appeal.  As there is no  reasonable  estimate  of the  outcome of this case,  no
accrual has been made by the Company.

Settled Litigation

Creditors:

On January 26, 2000, a complaint was filed against Technology in the State Court
of Gwinnett County, State of Georgia, (Civil Action No. 00-C-06277-4),  alleging
that Technology had failed to pay on an account.  Plaintiff requested that it be
granted  damages in the amount of $136 plus interest,  attorneys' fees and costs
of the action.  Technology's  answer to the  complaint was filed on May 9, 2000.
The plaintiff  was awarded a judgment in the principal  amount of $136 on May 9,
2000.  On July 7, 2000 the  parties  negotiated  a payoff of the  judgment.  The
judgment was totally satisfied on September 10, 2000.


<PAGE>




Note 13 - Commitments and Contingencies (continued)

Settled Litigation (continued)

On  February  9,  2000,  a  complaint  was  filed by a vendor  against  Casinos,
Technology,  and DOES 1 through 10,  inclusive,  in the Second Judicial District
Court, State of Nevada, Washoe County, (Civil Action No. CV00-00628), requesting
damages in the amount of $29 plus  interest  at a rate of 1 1/2% per month since
March 31, 1999. The case was settled by payments of $3 per month.  $4 remains as
an outstanding balance.

On March 8, 2000, a complaint  was filed by a vendor  against  Technology in the
State  Court of  Gwinnett  County,  State of  Georgia,  (Case No:  00-C-1602-2).
Plaintiff requests that it be granted damages in the amount of $117 and judgment
for  $155  principal,   $5  pre-judgment   interest  to  date,  plus  continuing
pre-judgment interest and post-judgment  interest at a rate of 18% per annum. On
August 9, 2000, the Court granted summary  judgment in favor of plaintiff in the
amount of $155,  $5  pre-judgment  interest  and  post-judgment  interest at the
lawful rate and court  costs.  The parties  negotiated a payment plan to satisfy
the judgment whereby Technology has agreed to pay $20 on August 31, 2000 and $10
monthly thereafter until paid in full.

Note Holders:

On April 28, 2000, a complaint was filed against the Biloxi Belle,  her engines,
tackle,  etc., in rem, and Leisure Belle Cruise,  L.L.C. in personam in the U.S.
District  Court,  Eastern  District  of  Louisiana  (Civil  Action No.  00-1287)
alleging that defendant  breached their obligation under a loan with a principal
balance of $1,383.  The plaintiff  requested that the Biloxi  Belle's,  rigging,
tackle,  apparel,  furniture,   engines  and  all  other  necessaries  thereunto
appertaining  and belonging be condemned and sold to pay the demands and claims.
On August 14, 2000, the Court ordered the sale of the Biloxi Belle to be held on
August 30,  2000.  On August  30,  2000,  the Biloxi  Belle was sold to the only
bidder for $100.

Other:

On  October  15,  1999,  the  former  holders  of  approximately  $1,400  of 11%
convertible  promissory  notes filed a complaint in the United  States  District
Court for the Northern  District of Ohio (Civil  Action No. 1:99CV 2495) against
Casinos.  In January 1999, Casinos paid in full the remaining balance of the 11%
convertible  promissory  notes after the 11% convertible  promissory  notes were
accelerated as a result of a default in payment by Casinos.  The 11% convertible
promissory  notes were  convertible  into units  consisting of 920,000 shares of
Casinos' common stock and warrants to purchase 920,000 shares of Casinos' common
stock at a price of $1.75 and 920,000 shares of Casinos' common stock at a price
equal to 120% of the offering  price of an initial  public  offering by Casinos.
The  complaint  alleged that Casinos  breached the terms of the 11%  convertible
promissory  notes by failing to provide  the  holders  with  Casinos'  financial
statements  denying  them the benefit of their  bargain and  unjustly  enriching
Casinos' rights under the 11% convertible promissory notes.


<PAGE>




Note 13 - Commitments and Contingencies (continued)

Settled Litigation (continued)

The  complaint  requested  judgment  against  Casinos in an  unspecified  amount
including all costs and attorneys'  fees.  Casinos  believed that the conversion
features of the 11% convertible promissory notes had expired and filed an answer
denying  the  claims.  Casinos  settled the lawsuit in March 2000 by agreeing to
issue 5,000 shares of Casino's  unregistered common stock for each $50 loaned by
each former  note-holder for a total of 115,000 shares.  The 115,000 shares were
issued in April 2000.

On February 25, 2000, a complaint  was filed  against  Solutia  Gaming  Systems,
Inc., an Oklahoma corporation,  Casinos, and Elden Rance, an individual,  in the
District  Court of Tulsa  County,  State of  Oklahoma,  (Case No.  CJ-000-0848),
alleging  indebtedness  and  wrongful  possession  of real  property.  Plaintiff
requested  that it be granted  damages  in the  amount of $11 plus late  charges
accruing at $.01 per day from January 10, 2000. On April 13, 2000, the plaintiff
dismissed  Elden Rance with  prejudice.  On August 4, 2000, the case was settled
for the amount of $14. $5 was paid on September  14, 2000,  $4 is due on October
15, 2000 and $4 is due on November 15, 2000.

On June 13, 2000, a complaint was filed against Technology in the State of South
Carolina, County of Greenville,  (Civil Action No. 2000-CP-23-3385),  requesting
damages  for a deposit in the amount of $20.  The case was  settled  whereby the
plaintiff took boards and software for the value of deposit.

On July 31, 2000, a complaint  was filed against  Technology  in the  Magistrate
Court of Gwinnett County, State of Georgia (Civil Action No. 00M11868), alleging
non-payment of rent.  Plaintiff seeks judgment for $119 principal,  $2 interest,
plus $12 attorney's fees. On August 29, 2000,  parties entered into an agreement
by a consent order with schedule of re-payment plan, reinstatement of the lease,
and a limited  personal  guarantee.  Technology  paid $45 on August 29, 2000 and
agreed to pay $34 on October 1,  November 1, and December 1, in order to satisfy
the consent order.

The  following  lawsuits and legal  claims have had no material  change in their
status since December 31, 1999:

-  Civil Action No.: 98-A-9761-4 between Technology and a distributor.


<PAGE>




Note 13 - Commitments and Contingencies (continued)

On June 10,  1999 a former  employee  filed a complaint  against  Casinos in the
Commonwealth of  Massachusetts,  Commission  Against  Discrimination,  (Case No:
M.C.A.D.  C.A.#:  99-BEM-1619).  The complaint  alleges  sex/gender  harassment,
sex/gender  discrimination,   age  discrimination,   hostile  work  environment,
retaliation and constructive termination. The case is in the discovery stage.

On April 26,  2000, a former  employee  filed a workers  compensation  complaint
against Casinos (WC Case No. 9926617). This case is in the discovery stage.

It is the Company's policy to vigorously defend litigation, however, The Company
has entered into settlements of claims in the past, and may do so in the future,
whenever management deems the circumstances appropriate. Any unfavorable outcome
related to any outstanding  litigation  could have a material  adverse effect on
the financial condition of the Company.

Debt Guaranties

During  March  2000,  a customer  defaulted  on $400 of debt  guaranteed  by the
Company.  The lender has  notified the Company of its intent to collect from the
Company.

Employment Agreements

The Company has entered into a five-year employment agreement with the Company's
president.  The agreement contains an anti-dilutive  provision that requires the
issuance  of  additional  options  upon a change in  control,  as defined in the
agreement. Additionally, upon a change in control, the officer has the option to
cause the Company to repurchase  all or any portion of the common stock owned by
the  officer  at a  price  as  defined  in  the  agreement.  This  agreement  is
automatically renewed after the termination date for succeeding one-year periods
unless the Company or the officer gives written notice of non-renewal.

Consulting Agreement

Effective March 1998, the Company  entered into a consulting  agreement with the
former executive vice president  ("Individual") of the Company.  Pursuant to the
consulting  agreement,  the  Individual  is required to provide a maximum of ten
hours of management consulting per week for the Company and its subsidiaries. He
is to be paid $5 per  month,  plus an  amount to  maintain  his  current  health
insurance,  and  out-of-pocket  expenses  incurred  by  him  in  performing  his
consulting  duties.  This  consulting  agreement  automatically   terminates  on
December 31, 2008.


<PAGE>




Note 14 - Business and Credit Concentrations

For the year ended June 30, 1998, two customers  accounted for approximately 23%
and 47% of the  Company's  total  sales.  As of June 30,  1998,  the Company had
approximately $39, or 2%, of total trade accounts  receivable due from these two
customers.

For the year ended June 30, 1999, two customers  accounted for approximately 29%
and 11% of the  Company's  total  sales.  As of June 30,  1999,  the Company had
approximately 17% and 13% of total trade receivables due from two customers.

For the year ended June 30, 2000, four customers accounted for approximately 52%
of the Company's total sales. As of June 30, 2000, the Company had approximately
$191, or 42%, of total trade accounts receivable due from these four customers.

The majority of Leisure  Time's sales of video  gaming  machines  over the years
ending June 30, 1998, 1999 and 2000 have been in South  Carolina.  For the years
ending June 30, 1998,  1999 and 2000,  67%, 75%, and 35%,  respectively,  of the
Company's  sales were derived  from South  Carolina,  however  gaming has become
illegal in South Carolina effective July 1, 2000.

Note 15 - Stock Options and Warrants

Stock Option Plan

The Company has a 1997  Incentive and  Non-statutory  Stock Option Plan ("Plan")
which authorizes the Company to grant incentive stock options within the meaning
of Section 422A of the Internal  Revenue Code of 1986, as amended,  and to grant
non-statutory stock options.  The Plan allows for a total of 4,500,000 shares of
Common Stock to be granted.  The Plan is  administered by the Company's Board of
Directors or a committee  thereof which determines the terms of options granted,
including  the exercise  price,  the number of shares of Common Stock subject to
the option,  and the terms and  conditions  of  exercise.  No  incentive  option
granted under the Plan is transferable by the optionee other than by will or the
laws of descent and distribution and each incentive option is exercisable during
the lifetime of the optionee only by such optionee.

Stock Option Activity

During the year ended June 30, 1997, the Company issued  1,100,648 stock options
exercisable  at prices ranging from $.10 to $2.80 per share,  which  represented
fair market value at the  respective  dates of grant.  These options expire from
April 2002 through June 2007.  No expense has been  recognized  for issuances to
employees. However, for 130,000 options issued to non-employees,  $59 of expense
has been  recognized  at imputed  values  ranging  from $.45 to $.48 per option,
which  approximated  fair  market  value  at the time of  issuance  prior to the
acquisition of U.S. Games.


<PAGE>




Note 15 - Stock Options and Warrants (continued)

Stock Option Activity (continued)

During the year ended June 30, 1998,  the Company  issued  562,500 stock options
exercisable  at $6.00 per  share,  which  represented  fair value at the date of
grant. These options expire June 2008.

In November 1998, the Company issued 500,000 employee stock options  exercisable
at $6.00 per share,  which approximated fair value. These options expire through
December 2007.

From December 1998 through May 1999, the Company  issued 375,000  employee stock
options  exercisable  at $6.00 per share that expire from  December 2003 through
May 2008.  $1,500 of compensation  expense was recorded in connection with these
options using a value of $10.00 per share.

In March and April 1999,  the Company  issued  549,100  employee  stock  options
exercisable at $10.00 per share,  which  approximated fair value.  These options
expire from March 2007 through April 2007.

In May and June 1999,  the Company  issued 85,000 stock options  exercisable  at
$12.00 per share,  which  approximated fair value.  These options expire in June
2009.

In April 1999,  100,000  options to acquire stock at $6.00 per share were issued
in connection with the acquisition of a business. The Company imputed a value of
$10.00 per share related to these options (Note 17).

In August 1999, the Company issued 112,850 stock options  exercisable at $12 per
share,  which  approximated  fair value at the date of the grant.  These options
expire from July 2004 through August 2007.

In December 1999, the Company issued 30,000 stock options  exercisable at $8.625
per share, which approximated fair value at the date of the grant. These options
expire from December 2005 through December 2007.

In May 2000, the Company  issued 45,000 stock options  exercisable at $4.875 per
share,  which  approximated  fair value at the date of the grant.  These options
expire from April 2005 through April 2008.


<PAGE>




Note 15 - Stock Options and Warrants (continued)

Stock Warrant Activity

During the year ended June 30, 1997,  the Company  issued  142,413  common stock
warrants in  conjunction  with various  stock  issuances.  These  warrants  have
exercise  prices ranging from $1.00 to $2.80 per share and expire from June 1999
through May 2005. $26 of expense has been recognized as a result of issuances of
93,321 of common  stock  warrants  to  non-employees  in exchange  for  services
provided.  The  imputed  value of these  warrants  ranged from $.46 to $ .78 per
warrant,  which  approximated  fair value at the time of  issuance  prior to the
acquisition of U.S. Games.

During the year ended June 30,  1998,  the Company  issued  41,988  common stock
warrants in  conjunction  with various  stock  issuances.  These  warrants  have
exercise prices of $2.50 per share,  which  approximated  fair value, and expire
from July 1999 through June 2000.

During the year ended June 30,  1999,  the Company  issued  38,489  common stock
warrants in  conjunction  with various debt  conversions.  These  warrants  have
exercise prices of $2.50 per share and expire from July 2000 through May 2001.

During the year ended June 30, 1999,  4,000 units  containing 4,000 warrants and
4,000  shares of common  stock,  were  sold for cash at $10.00  per unit.  These
warrants  have  exercise  prices of $10.00 per share,  which  approximates  fair
value, and expire March 2002 (Note 13).


<PAGE>




Note 15 - Stock Options and Warrants (continued)

Stock Warrant Activity (continued)

During  the year ended  June 30,  1999,  200,000  units  containing  two sets of
200,000 warrants and 200,000 shares of common stock, were sold for cash at $1.25
per unit in  conjunction  with the  conversion of certain notes  payable.  These
warrants have exercise  prices of $1.75 per share and 120% of the offering price
of an initial public offering by the Company and expire June 2002 and June 2004,
respectively, (Note 13).

The  following  is a summary of options  and  warrants  granted,  exercised  and
expired:

<TABLE>
<CAPTION>
                                                              Weighted      Weighted                                   Average
                                                              Average        Fair                                      Exercise
                                                              Exercise      Average                                      Price
                                                               Price        Value of                                  of Options
                                                                of          Options                                       and
                                                              Options         and         Currently Exercisable       Warrants -
                                                                and         Warrants     -----------------------       Currently
                                  Options       Warrants      Warrants      Granted       Options       Warrants      Exercisable
                                 ---------      --------      --------      -------      ---------      --------      -----------

<S>                              <C>            <C>           <C>           <C>          <C>            <C>           <C>

Outstanding June 30, 1997        2,808,148       515,149          1.80                   2,488,148       515,149             1.74
                                                                                         ---------      --------      -----------
   Granted                         562,500        41,988           .92         2.34
   Expired                              -       (128,115)         (.10)
                                 ---------      --------      --------

Outstanding June 30, 1998        3,370,648       429,022          1.91                   3,110,648       429,022             1.74
                                                                                         ---------      --------      -----------
   Granted                       1,234,100       442,489          1.67         2.12
   Granted at less than fair
    market value                   475,000        80,000           .26         6.13
   Exercised                       (40,100)      (70,086)         (.04)
   Expired                        (370,000)      (64,650)         (.14)
                                 ---------      --------      --------

Outstanding June 30, 1999        4,669,648       816,775          4.36                   3,740,823       816,775             2.10
                                                                                         ---------      --------      -----------
   Granted                         187,850            -           0.38         0.38
   Exercised                            -        (31,472)        (0.02)
   Expired                        (727,000)      (64,824)        (1.17)
                                 ---------      --------      --------

Outstanding June 30, 2000        4,130,498       720,479          4.05                   3,730,523       720,479      $      3.36
                                 =========      ========      ========                   =========      ========      ===========
</TABLE>


<PAGE>


                      LEISURE TIME CASINOS & RESORTS, INC.

                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

               (In thousands, except share and per share amounts)


Note 15 - Stock Options and Warrants (continued)

Stock Warrant Activity (continued)
<TABLE>
<CAPTION>

                                                        June 30, 2000
                                      -------------------------------------------------------
                                                                                                            Options and
                                               Options and Warrants Outstanding                       Warrants Exercisable
                                      -------------------------------------------------------         --------------------
                                                                              Weighted
                                                            Weighted          Average                               Weighted
   Range of Options and Warrants                             Average         Remaining                              Average
                                            Number          Exercise         Contractual         Number             Exercise
     Exercisable Price                   Outstanding          Price             Life           Exercisable           Price
--------------------------------        --------------     -------------     ------------     --------------     --------------
<S>                                     <C>                <C>               <C>              <C>                <C>

$.10 - $2.80                                 3,079,527              1.52        4.6 years          2,568,048               1.56
$6.00 - $14.40                               1,771,450              4.50        7.3 years          1,162,475               7.35
                                        --------------     -------------                      --------------     --------------

                                             4,850,977              4.05        4.0 years          3,730,523               3.36
                                        ==============     =============                      ==============     ==============
</TABLE>

The above table does not include  3,341,000  shares and  warrants  that may have
originally been required to be issued upon the conversion of the 11% convertible
promissory notes payable to individuals as discussed in Note 6. Upon conversion,
1,060,000  shares and 80,500  shares of common  stock would have to be issued at
$1.25 and $2.50 per share,  respectively.  Additionally,  two sets of  1,060,000
common stock  warrants  would have been issued  allowing the holders to purchase
shares of the  Company's  common stock at $1.75 a share and 120% of the offering
price of an initial public offering by the Company.  In addition,  80,500 common
stock warrants  allowing the holder to purchase  shares at $2.50 per share would
have been issued.  In January  1999,  the Company paid off the majority of these
convertible promissory notes payable in full. As such, the Company believed that
the conversion  features that would have entitled the  noteholders  the right to
acquire up to 2,980,000 shares of the Company's common stock expired. Holders of
these  securities sued the Company and in March 2000, the Company issued 115,000
shares  of  stock  to debt  holders  holding  $1,150  of  promissory  notes,  in
satisfaction of the claims associated with these securities.

In June 1999, the Company issued 200,000 shares at a $1.25 per share and 400,000
warrants to the remaining individual who exercised his conversion rights.

In May 1999,  80,000  warrants to acquire common stock were issued in connection
with the  acquisition of a business.  The Company  imputed a value of $10.00 per
share related to these warrants.


<PAGE>




Note 15 - Stock Options and Warrants (continued)

Stock Warrant Activity (continued)

The  Company  has  adopted  the  disclosure-only  provisions  of SFAS  No.  123.
Accordingly,  no  compensation  cost is  recognized  for the  issuances of stock
options to employees when the exercise price  approximates  market.  Pursuant to
the  Accounting  Principles  Board  Opinion No. 25 ("APB 25"),  the Company does
recognize  compensation  expense on issuances of stock options to employees when
the exercise price is less than the fair value,  for the difference  between the
fair value of the stock and the  option  exercise  price.  During the year ended
June 30, 1999 and June 30, 2000,  $1,500 and $0,  respectively,  of compensation
expense was recognized.

Had  compensation  cost for the Company's  issuances of all stock options during
the year ended June 30, 1998,  1999 and 2000 been  determined  based on the fair
value at the date of grant  consistent  with the provisions of SFAS No. 123, the
Company's  net income  (loss) and  earnings  (loss) per share for those  periods
would have been decreased (increased) to the pro forma amounts indicated below:
<TABLE>
<CAPTION>

                                                                                                  June 30,
                                                                           ----------------------------------------------------
                                                                               1998               1999                2000
                                                                           --------------     --------------     --------------
<S>                                                                        <C>                <C>                <C>

       Net income (loss) available to common shareholders - as reported
                                                                           $         (929)    $        4,432     $      (27,701)
       Net income (loss) - pro forma                                       $       (1,431)    $        1,704     $      (28,745)
       Earnings (loss) per share - diluted - as reported                   $         (.21)    $          .56     $        (4.81)
       Earnings (loss) per share - diluted - pro forma                     $         (.32)    $          .22     $        (5.00)
</TABLE>

The Company  utilizes the  Black-Scholes  option-pricing  model to calculate the
fair value of each individual issuance of options or warrants with the following
assumptions used for grants through the year ended June 30, 2000: dividend yield
of 0.0%;  expected average annual volatility of 57.0%;  average annual risk-free
interest rate of 5.44%; and expected terms of 3 to 5 years.

Note 16 - Stockholders' Equity

Preferred Stock

On December 10, 1999, the Company issued 523,759 shares of convertible  Series A
preferred stock in satisfaction of indebtedness totaling $5,237,586. If declared
by the Board of Directors,  The shares accrue  dividends at 6% per annum payable
on a semi-annual  basis  beginning June 10, 2000. The dividends are  cumulative.
Unpaid  dividends  accumulate  at a rate of 12% per  annum  until  paid in full.
Subject to prior  redemption,  the shares are convertible into common stock at a
conversion price of $7.875 per share for a maximum of 1,173,867 shares of common
stock. In the event of liquidation or  dissolution,  the holders of these shares
are  entitled  to  distributions  prior and in  preference  to holders of common
stock.


<PAGE>




Note 16 - Stockholders' Equity (continued)

Common Stock Activity

Initial Public Offering

Effective  September 15, 1999,  Casinos  completed an initial public offering of
700,000 shares of common stock at a price of $12.00 per share.  The net proceeds
of the offering to Casinos, after deducting the underwriters' discount and other
offering expenses of approximately  $1,926,  were $6,554. $434 of these expenses
had been paid prior to June 30, 1999,  and were  reflected  as deferred  initial
public offering costs.

In connection with the offering,  Casinos entered into an underwriting agreement
with the underwriters under which the underwriters received an 8% discount, a 3%
non-accountable  expense allowance and warrants of Casinos.  The warrants are to
purchase  70,000  shares of common  stock of Casinos  at $14.40  per share.  The
warrants expire five years from their issue date.

On May 1, 2000, the Company  reacquired  100,000 shares related to the sale of a
business (Note 20).

During the years ended June 30, 1999 and 2000,  the  Company  issued  70,186 and
31,472 shares of common stock upon the exercise of options and warrants at rates
varying from $2.50 to $2.80 per share.

During the years ended June 30, 1998 and 1999, the Company sold 33,900 and 4,000
shares of common stock,  respectively,  for cash at prices  ranging from $.50 to
$10.00 per share.

Through  May 1, 1999,  the  Company  issued  180,000  shares of common  stock in
connection with various acquisitions valued at $10.00 per share.

During the year ended June 30, 1999, the Company issued 200,000 shares of common
stock at $1.25 per share in connection with certain debt conversion features.

During the year ended June 30, 1999,  the Company  issued 40,000 shares of stock
for a note related to the exercise of options totaling $240,000.


<PAGE>




Note 16 - Stockholders' Equity (continued)

Common Stock Activity (continued)

Initial Public Offering (continued)

During the years ended June 30, 1998 and 1999,  the  Company  issued  99,874 and
38,489 shares of common stock, respectively,  in conjunction with the conversion
of certain notes payable.  During the year ended June 30, 1997,  31,100,  shares
were issued at a value of $1.00 per share in connection with extensions on notes
payable and 54,192  shares,  of which 32,500 related to the exercise of warrants
issued with debt,  were issued at rates ranging from $2.50 to $2.80 per share in
satisfaction of $145 of notes payable and accrued interest.

Note 17 - Earnings (Loss) Per Share

The following table sets forth the  computation  for basic and diluted  earnings
per share:
<TABLE>
<CAPTION>

                                                                                            Year Ended June 30,
                                                                           -----------------------------------------------------
Numerator                                                                       1998                1999               2000
                                                                           ---------------      -------------      -------------
   Numerator for earnings per share - continuing operations
<S>                                                                        <C>                  <C>                <C>
                                                                           $          (929)     $       7,881      $     (18,718)
   Numerator for earnings per share - discontinued operations
                                                                                        -              (3,449)            (8,826)
   Numerator for basic earnings per share - net income (loss)
                                                                                      (929)             4,432            (27,701)
   Effect of interest saved on assumed conversion of convertible debt
                                                                                       (A)                 -                 (A)
                                                                           --------------       -------------      ------------
   Numerator for diluted earnings per share - adjusted net income
    (loss)                                                                 $          (929)     $       4,432      $     (27,701)
                                                                           ===============      =============      =============
</TABLE>


<PAGE>




Note 17 - Earnings (Loss) Per Share (continued)
<TABLE>
<CAPTION>

                                                                                          Year Ended June 30,
                                                                           ----------------------------------------------------
                                                                               1998               1999                2000
                                                                           --------------     --------------     --------------
<S>                                                                        <C>                <C>                <C>

Denominator

   Denominator for basic earnings per share - weighted average shares
                                                                                4,516,528          4,755,771          5,753,815
   Effect of weighted average dilutive securities
     Options and warrants                                                             (A)          3,142,449                (A)
     Convertible debt                                                                 (A)                 -                 (A)
                                                                           -------------      --------------     -------------
   Denominator for diluted earnings per share - adjusted weighted
    average shares                                                              4,516,528          7,898,220          5,753,815
                                                                           ==============     ==============     ==============

   Earnings (loss) per share - continuing operations                       $         (.21)    $         1.66     $        (3.25)
                                                                           ==============     ==============     ==============

   Earnings (loss) per share - discontinued operations                     $           -      $         (.73)    $        (1.53)
                                                                           ==============     ==============-    ==============

   Basic earnings (loss) per share                                         $         (.21)    $          .93     $        (4.81)
                                                                           ==============     ==============     ==============

   Diluted earnings (loss) per share                                       $         (.21)    $          .56     $        (4.81)
                                                                           ==============     ==============     ==============
</TABLE>

(A)      Where the inclusion of potential common shares and other adjustments is
         antidilutive, such shares are excluded from the computation.

Note 18 - Retirement Savings Plan

The Company has a defined contribution retirement savings plan, which covers all
employees  age 21 or older  with  1,000  hours of annual  service.  The  Company
matches  50%  of  each  $1.00  that  the  employee   contributes  up  to  6%  of
compensation. Company contributions vest as follows:

    Years of Service                                Vested

                 1                                    25%
                 2                                    25%
                 3                                    25%
                 4                                    25%

Contributions for the years ending June 30, 1998, 1999 and were $85, $72 and $0,
respectively.


<PAGE>




Note 19 - Business Acquisition

In April 1999,  Casinos acquired all of the outstanding  stock of Financial from
David M. Pote in exchange  for 100,000  shares of Casinos'  common  stock and an
option to  purchase  100,000  shares of common  stock at $6.00 per share with an
imputed  value of $400 based on a fair  value of $10.00  per  share.  The option
vests as to 20,000 shares on each of the first through  fifth  anniversaries  of
the grant date and expires ten years after each  respective  vesting  date.  The
option  terminates as to any unvested  portion if Mr. Pote ceases to be either a
director, officer or employee of Casinos or one of its subsidiaries.

The purchase price was allocated as follows:

Cash advanced to provide funding                                   $        154
Value of stock issued in connection with acquisition                      1,000
Value of options issued in connection with acquisition                      400
                                                                   ------------

Total consideration given in exchange for outstanding stock        $      1,554
                                                                   ============

The purchase price was allocated as follows:

         Current assets                                            $        206
         Net lease receivables                                            2,502
         Other assets                                                        92
         Liabilities assumed                                             (2,517)
                                                                   ------------
         Net assets acquired                                                283
                                                                   ------------

         Goodwill                                                  $      1,271
                                                                   ============

This transaction was rescinded effective May 17, 2000 (Note 20).


<PAGE>




Note 20 - Sale of Business

On May 7, 2000,  the Company sold all of the  outstanding  stock of Financial to
the  previous  owner.  Consideration  for the  purchase  of the  shares  was the
delivery  by the  previous  owner of  100,000  shares of  Casinos  stock and the
unvested  portion (60,000 shares) of an option to purchase  additional  stock of
Casinos.  The  previous  owner in return  accepted  the  financial  condition of
Financial  as it  existed  on the date of sale,  subject  to the  following:  a)
transfer of a lease receivable to Casinos in the approximate amount of $114,391,
including  interest,  together with all right to the equipment or residuals.  b)
Financial will assume/retain tax obligations, including penalty and interest, to
the  state of  Minnesota  for the  period  April - June  1999.  The  Company  is
responsible for any taxes due for the period July 1999 through April 2000.

On April 26, 2000, the Company sold all of the outstanding stock of Leisure Time
Hospitality,  Inc. to the  president of the  Company.  The  president  purchased
Leisure Time Hospitality,  Inc. for $1,300, payable by the assumption of the 1st
mortgage in the approximate amount of $360,000 and the balance of $940,000 to be
paid by a combination of the  forgiveness of debt the Company owes the president
and a note receivable from the president.