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

                                    FORM 10-K

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

(MARK ONE)

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

                     FOR THE FISCAL YEAR ENDED JUNE 30, 1998

                                       OR

[ ]         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

                         FOR THE TRANSITION PERIOD FROM:

                         COMMISSION FILE NUMBER: 0-14050

                                THE SANDS REGENT
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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

              NEVADA                                             88-0201135
  (State or other jurisdiction                                (I.R.S. Employer
of incorporation or organization)                            Identification No.)

      345 NORTH ARLINGTON AVENUE
             RENO, NEVADA                                           89501
(Address of principal executive offices)                          (Zip Code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (702) 348-2200

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

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                          COMMON STOCK, $.05 PAR VALUE

    Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 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

    The aggregate market value of the Registrant's $.05 par value Common Stock
held by non-affiliates of the Registrant on September 23, 1998 was $2,701,764.
The aggregate market value is computed with reference to the average price per
share on such date.

    Registrant's Common Stock outstanding at September 23, 1998 was 4,498,722
shares.

    Portions of Registrant's 1997 Annual Report to the Shareholders are
incorporated into Part II as set forth herein. Portions of Registrant's
definitive Proxy Statement for its November 2, 1998 Annual Meeting of
Shareholders are incorporated into Part III as set forth herein.

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                                     PART I

ITEM 1. BUSINESS

GENERAL
                                   THE COMPANY

    The Company, through a wholly-owned subsidiary, Zante, Inc. ("Zante"), owns
and operates the Sands Regency hotel/casino in downtown Reno, Nevada. The
Company, through three wholly-owned subsidiaries, Patrician, Inc. ("Patrician"),
Gulfside Casino, Inc. ("GCI") and Artemis, Inc., ("Artemis"), owns Gulfside
Casino Partnership (the "Partnership"), which owns the Copa Casino, a dockside
gaming vessel located in Gulfport, Mississippi. GCI, Patrician and Artemis own
 .006%, 98.744% and 1.25%, respectively, of the Partnership. Gaming operations
for the Copa Casino commenced in September 1993.

    Reno, Nevada. The Sands Regency hotel/casino has approximately 27,000 square
feet of gaming space and 938 hotel rooms, including 32 suites of various sizes.
The complex also includes three restaurants, a coffee house/deli-style
restaurant, a "Pizza Hut", and an "Arby's" restaurant, and an "Orange Julius"
operated by third parties. The facilities also include three cocktail lounges, a
gift shop, a beauty/barber shop and a liquor store, each operated by third
parties, a video arcade, a health club, a swimming pool and almost 12,000 square
feet of convention and meeting space which can seat up to 950 people. The
Company maintains six parking areas on its main hotel/casino property and
adjacent to it, including two parking garages, with a total combined capacity
for approximately 1,000 vehicles. Although the Company offers, on a very limited
basis, complimentary hotel accommodations to select customers, no group
arrangements known as "junkets" are conducted.

    The average room occupancy for fiscal 1998 was 83.3% compared to 84.4% for
1997. The hotel's average room rate for the current fiscal year was
approximately $31.00 as compared to $29.00 in the prior fiscal year.

    As of September 21, 1998, the casino offered 20 table games, including 14
blackjack tables, 1 craps table, and 2 roulette tables, 2 let it ride tables and
1 three-card poker table; 2 keno games and approximately 700 slot machines. In
connection with the supervision of its gaming activities, the Company's policies
include stringent controls, cross-checks and recording of all receipts and
disbursements.

    The Company's Reno, Nevada operations are conducted 24 hours a day, every
day of the year. The primary source of revenues and income to the Company is its
gaming activities, although the hotel, bars, shops, restaurants and other
services are an important adjunct to the gaming activities. The Company's
operating and marketing philosophy emphasizes high volume business, offering
large, attractive hotel rooms at reasonable prices to travel group wholesalers,
primarily from Western Canada, the Pacific Northwest and Northern California.
Gaming accounted for approximately 54% of the Company's revenues in fiscal 1998
and approximately 73% of the gaming revenues were generated by slot machines.
The Company generally does not extend credit to its gaming customers.

    The Company has concentrated its resources on renovating and improving
existing Reno facilities and services. Future expansion plans will be considered
based upon future market conditions and the need to add hotel rooms and other
major facilities.


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    Gulfport, Mississippi. The Copa Casino is a permanently moored 500-foot
former cruise ship located in Gulfport, Mississippi. Mississippi, which
legalized casino gaming in September 1991, allows for 24-hour gaming on
riverboats or other floating vessels located on or adjacent to approved
navigable waterways. Such floating facilities need not cruise into the waterways
and, as such, become permanently moored as dockside gaming facilities. Gulfport
is a deep-water port located on U.S. Highway 90 on the Mississippi gulf coast. A
population of approximately 2.5 million resides within a 100-mile radius,
including New Orleans, Louisiana and Mobile, Alabama. Interstate Highway 10,
which is the main thoroughfare between Mobile and New Orleans, lies
approximately 10 miles to the north of the port area. The Gulfport-Biloxi
metropolitan area has almost 9,000 hotel and motel rooms located in the
immediate Gulfport-Biloxi area.

    The Copa Casino consists of approximately 24,000 square feet of casino space
located on two decks. As of September 21, 1998, the Copa offered approximately
785 slot machines and 22 table games, including 1 craps table, 2 roulette
tables, 16 blackjack tables, 1 caribbean stud table, 1 three-card poker table
and 1 Spanish 21 table. In addition, the facility also includes 4 cocktail
lounges/bars, a deli-style restaurant, a gift shop and various other ancillary
services and facilities. The deck below the two casino decks contains a
surveillance area, a vault, count rooms and security and various operations and
administrative offices. An additional three decks on the ship are available for
future expansion of gaming and dining facilities.

    The Copa Casino is permanently moored dockside at a location known as the
"Horseshoe Site." Such site, which is leased from the Mississippi Department of
Economic and Community Development and the Mississippi State Port Authority, is
between the East and West Piers of the Mississippi State Port in Gulfport,
Mississippi. This location, which includes 8.3 acres of land based facilities,
will accommodate surface parking for approximately 840 vehicles. The leased
facilities also include a docking structure which accommodates the Copa Casino
ship and will allow for mooring of additional vessels. The docking structure
also includes a roadway and pedestrian walk which provides access to the Copa
Casino entrance.

    As in Nevada, the Mississippi operations are conducted 24 hours a day every
day of the year. Present operations provide for the offering of complimentary
food and beverage on a limited basis. Group arrangements, known as "junkets,"
are not conducted.


MARKETING

    Reno, Nevada. Traditionally, the central component of the Company's
marketing philosophy has been to utilize travel wholesalers to attract group and
air wholesale business to the hotel/casino. This philosophy is based on offering
attractive, well-furnished, large hotel accommodations and quality food and
beverages at prices slightly lower than those of most major hotel/casinos in
Reno. This strategy has proven to be successful and will continue to be one of
the Company's primary focuses in the future. However, because of the significant
increase in the number of Reno area hotel rooms in the last several years and
increased competition from other gaming venues, competition for wholesale
business has intensified. This has resulted in, by necessity, the Sands Regency
developing other areas for revenue generating opportunities.

    In the past year, the Sands Regency has developed a more comprehensive
casino marketing program with an emphasis on guest retention, data base
marketing and an increase in advertising awareness. In addition, programs are
being developed to attract business segments that had previously been largely
untapped, such as locals and residents of Northern California, particularly the
Sacramento metropolitan area.

    The Company's player tracking system is instrumental in the data base
marketing efforts and in guest recognition. This system allows the casino
marketing efforts to more effectively identify good customers and 


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develop special events, programs and activities that appeal to them. An
aggressive promotion and player events schedule has also been implemented to
allow the Sands Regency to retain guests for longer periods of time and generate
incremental visits.

    The Company will also continue to use a flexible approach to pricing its
rooms which is designed to maximize occupancy levels. Hotel rooms are offered at
discount prices to travel wholesalers, as much as six months in advance of
arrival, for block sales of rooms used in travel packages. This is particularly
important to the Company because of the impact of hotel occupancy on the level
of gaming activity. The Company is particularly dependent upon group business
from November through February because of the seasonal decline in other sources
of business. During these months, a substantial amount of the Sands Regency's
hotel capacity is normally prebooked 30 to 180 days in advance on a cancellable
basis.

    Significant group and air wholesale market areas continue to include Western
Canada, the Pacific Northwest and Northern California. The Company continues to
expand its marketing areas by adding additional air wholesalers and has been
successful in obtaining wholesale business in Central Canada, the Midwest,
Southwest and Southern California.

    The Sands Regency is the lead hotel/casino in the Reno area for several
major travel wholesalers who serve major cities in the West, Midwest and
Southwest United States and in Western and Central Canada. Group and air
wholesale business accounted for approximately 61% of the hotel's occupancy in
fiscal 1998 compared to 62% in fiscal 1997.

    In addition to the group and air wholesale business, the Company
aggressively packages and markets convention and military reunion business which
require 300 rooms or less. Other travel package arrangements are also promoted
which are geared toward individual travelers.

    The Sands Regency will continue to rely on advertising by travel wholesalers
in their markets. However, an increase in advertising efforts, in both the local
market and selected feeder markets, such as Northern California, is important to
the Sands Regency's long-term success. The Sands Regency has recently increased
local and out-of-market advertising expenditures including radio, billboard, and
print advertising. During periods of time when group business operates at
reduced levels, the Company will also continue to utilize print advertising in
its major market areas, with an emphasis on room rates, to attract individual
customers. These efforts will continue into the future as the Sands Regency
strives to strengthen its position in the Reno market.

    Gulfport, Mississippi. The Company has positioned the Copa Casino as a
casino for local residents. Emphasis has been placed on providing a casual and
friendly atmosphere. To maintain this marketing position, the Company's goal is
to provide its products and services at values favored by the Company's guests.
The Company also uses numerous, in-house promotional programs to attract local
residents and other customers. These Company-sponsored promotional and special
event programs include gaming and slot tournaments, football season promotions,
give-a-way programs and seasonal promotions.

    The Company has implemented a variety of outside advertising campaigns in
order to attract "drive-up" gaming customers. This includes billboards within a
100-mile radius of Gulfport and newspaper, radio and television advertising in
the local market and in the New Orleans area on a selective basis. In addition,
the Company has implemented drive-up promotions and programs to generate more
frequent customer visits and to identify valued customers. Direct mail programs,
which have resulted in positive customer responses, will continue to be
undertaken to encourage more frequent visits by customers.



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    In fiscal 1997, the Company acquired a computerized slot player tracking and
marketing system which has improved the Company's ability to offer different and
more diverse promotions. The system also provides player tracking information so
as to allow the Company to reward gaming customers with complimentary and other
promotional goods and services.

    The Company has also pursued marketing efforts toward developing group
business, primarily bus charters and hotel promotional programs to entice visits
from hotel/motel guests staying in the many non-casino hotel/motel rooms in the
local area. The Company has been successful in attracting bus charters from
various areas within a 500-mile radius including Atlanta, Georgia and Florida.

    The Company will continue to utilize various marketing strategies with a
goal of increasing the frequency of casino visits by its customers which
includes implementing programs to identify and retain selected valued customers
and the establishment of promotional programs which cater to senior citizens.
The Company has employed sales representatives to market to tour operators,
travel agents, social groups, corporations and associations.


COMPETITION

    Reno, Nevada. The Company competes in the greater Reno area with
approximately sixteen major casinos and hotel/casinos, some of which are larger
than the Sands Regency. In addition, there are numerous other smaller casinos in
the greater Reno area. The Company competes for its customers based upon gaming
activities, room rates, room size and quality of rooms, food, beverages and
location. Competitors of the Company have received governmental approval to
construct an additional 3,700 hotel rooms, of which approximately 600 are
presently under construction. Such governmental approval does not provide
assurance that all of these rooms will be built. If construction is completed on
all hotel rooms presently under construction or approved for construction, the
hotel room capacity in the greater Reno area will increase by approximately an
additional 22%. In the event all approved hotel rooms are built, and depending
on the time frames during which they are completed, management of the Company
believes that this added capacity may have an adverse effect on operations of
the Company.

    The Company's Reno operations compete, to a lesser extent, with gaming
operations in other parts of the state of Nevada, such as Laughlin, Las Vegas
and Lake Tahoe. California currently sponsors a state lottery and allows other
non-casino style gaming, including parimutuel wagering, card parlors, bingo and
off-track betting. There is also casino style gaming on various Native American
lands in California. The Company believes that such non-casino style gaming does
not have a significant impact on the Company's operations. The Company believes,
however, that Native American gaming in California does have somewhat of an
impact on the Company's gaming operation and that the general legalization of
casino-style gaming in California could have a material impact on the Company's
operations.

    Gulfport, Mississippi. The Company's operations on the Gulf Coast of
Mississippi are in competition with numerous gaming operations currently
established or to be established on vessels or barges moored on the Gulf Coast
of Mississippi, and on boats or barges cruising or moored on the Mississippi
River. Currently there are ten dockside gaming facilities, excluding the
Company, operating along the Gulf Coast of Mississippi, including one in Bay
Saint Louis, one in Gulfport and eight in Biloxi. There is also one gaming
facility presently under construction on the Gulf Coast which is expected to be
completed in the Spring 1999.

    Along the Mississippi River, there are presently eighteen Mississippi
dockside casino facilities; one in Natchez, four in Vicksburg, three in
Greenville, one near Lula and nine in Tunica. There is one additional proposed
casino operation to be located along the Mississippi River in Vicksburg which
has been granted a gaming license and other proposed casinos which are presently
involved in litigation regarding proposed locations. There is also one casino
currently in operation on an Indian reservation near Philadelphia, Mississippi.



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    In addition to the above, there are also several other proposed Mississippi
casino operations along the Mississippi River and the Gulf Coast. Requiring both
site approval and gaming licenses, such proposed operations are at various
stages in the developmental process without assurances that development and
operation will occur.

    In addition to direct competition which the Company faces in the Mississippi
market, the Company faces competition from riverboats and a possibly reopened
land-based casino in the State of Louisiana, which is an important market area
for the Company's Gulfport casino. Current Louisiana legislation permits
unlimited stakes gaming and a total of fifteen riverboat licenses and one
land-based license have been authorized statewide. At present, there are
fourteen riverboats in operation. Besides these State of Louisiana gaming
operations, it is also anticipated that gaming may be implemented on Indian
reservations near Gulfport and New Orleans.

    In the event that all, or a significant number, of these proposed facilities
are licensed, built and operated, management of the Company believes that this
added capacity may have an adverse effect on its Gulfport casino operation.
Management believes that the principal competitive factors will include ease of
access, availability of parking, attractiveness of casino vessels and
surrounding property, proximity to other gaming facilities, and quality of food
and entertainment offered.

    General. To a significantly lesser extent, the Company competes with gaming
facilities in New Jersey, Colorado, South Dakota, Illinois, Iowa and other parts
of the world. The Company also competes with various gaming operations on Native
American land, including those located in California, Arizona, Oregon,
Washington, Connecticut, Michigan, Minnesota and Wisconsin. Indian casino gaming
has become a growing sector of the gaming industry as a result of the Indian
Gaming Regulatory Act of 1988, which generally permits unrestricted gaming on
Indian land in any state that allows similar forms of gaming, whether or not
restricted. Other states may legalize various forms of gaming that may compete
with the Company. In any jurisdiction where the Company may commence operations,
it will face competition for desirable sites and qualified personnel.


EMPLOYEES

    At June 30, 1998, the Company employed 896 people at the Sands Regency in
Reno, Nevada, including 88 salaried employees and 808 hourly employees. The Copa
Casino employed 478 people, including 55 salaried employees and 423 hourly
employees. None of the Company's employees is represented by a union. The
Company has not experienced any work stoppages or other significant labor
problems and management considers its labor relations to be good.


REGULATION AND LICENSING-GAMING

    Nevada. The ownership and operation of casino gaming facilities in Nevada
are subject to (i) The Nevada Gaming Control Act and the regulations promulgated
thereunder (collectively, "Nevada Act"); and (ii) various local regulation. The
Company's gaming operations are subject to the licensing and regulatory control
of the Nevada Gaming Commission ("Nevada Commission"), the Nevada State Gaming
Control Board ("Nevada Board") and the City of Reno, (together, the "Nevada
Gaming Authorities").

    The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) 


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the establishment and maintenance of responsible accounting practices and
procedures; (iii) the maintenance of effective controls over the financial
practices of licensees, including the establishment of minimum procedures for
internal fiscal affairs and the safeguarding of assets and revenues, providing
reliable record keeping and requiring the filing of periodic reports with the
Nevada Gaming Authorities; (iv) the prevention of cheating and fraudulent
practices; and (v) to provide a source of state and local revenues through
taxation and licensing fees. Change in such laws, regulations and procedures
could have an adverse effect on the Company's gaming operations.

    Zante operates the Sands Regency hotel/casino and is required to be licensed
by the Nevada Gaming Authorities. The gaming license requires a periodic payment
of fees and taxes and is not transferable. The Company is registered by the
Nevada Commission as a publicly traded corporation ("Registered Corporation")
and as such, it is required periodically to submit detailed financial and
operating reports to the Nevada Commission and furnish any other information
which the Nevada Commission may require. No person may become a stockholder of,
or receive any percentage of profits from Zante without first obtaining licenses
and approvals from the Nevada Gaming Authorities. The Company and Zante have
obtained from the Nevada Gaming Authorities the various registrations,
approvals, permits and licenses required in order to engage in gaming activities
in Nevada.

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

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

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

    If it were determined that the Nevada Act was violated by Zante, the gaming
licenses it holds could be limited, conditioned, suspended or revoked, subject
to compliance with certain statutory and regulatory procedures. In addition,
Zante, the Company, and the persons involved could be subject to substantial
fines for each separate violation of the Nevada Act at the direction of the
Nevada Commission. Further, a supervisor could be appointed by the Nevada
Commission to operate the Company's gaming properties and, under certain
circumstances, earnings generated during the supervisor's appointment (except
for the reasonable rental value of the Company's gaming properties) could be
forfeited to the State of Nevada. Limitation, conditioning or 


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suspension of any gaming license or the appointment of a supervisor could (and
revocation of any gaming license would) materially adversely affect the
Company's gaming operations.

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

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

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

    The Nevada Commission may, in its discretion, require the holder of any debt
security of a Registered Corporation to file applications, be investigated and
be found suitable to own the debt security of a Registered Corporation. If the
Nevada Commission determines that a person is unsuitable to own such security,
then pursuant to the Nevada Act, the Registered Corporation can be sanctioned,
including the loss of its approvals, if without the prior approval of the Nevada
Commission, it: (i) pays to the unsuitable person any dividend, interest, or any
distribution whatsoever; (ii) recognizes any voting right by such unsuitable
person in connection 



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with such securities; (iii) pays the unsuitable person remuneration in any form;
or (iv) makes any payment to the unsuitable person by way of principal,
redemption, conversion, exchange, liquidation or similar transaction.

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

    The Company may not make a public offering of its securities without the
prior approval of the Nevada Commission if the securities or the proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. Such approval, if given, does not constitute a finding, recommendation
or approval by the Nevada Commission or the Nevada Board as to the accuracy or
adequacy of the prospectus or the investment merits of the securities. Any
representation to the contrary is unlawful.

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

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

    License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Nevada licensee's respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the number of
gaming devices operated; or (iii) the number of table games operated. A casino
entertainment tax is also paid by casino operations where entertainment is
furnished in connection with the selling of food or refreshments. Nevada
licensees that hold a license as an operator of a slot route, or a
manufacturer's or distributor's license, also pay certain fees and taxes to the
State of Nevada.



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

    Mississippi. The ownership and operation of a gaming business in Mississippi
is subject to extensive laws and regulations, including the Mississippi Gaming
Control Act (the "Mississippi Act") and the regulations (the "Mississippi
Regulations") promulgated thereunder by the Mississippi Gaming Commission (the
"Mississippi Commission") and the Mississippi State Tax Commission Regulations
for Gaming Establishments ("Mississippi Tax Regulations") promulgated by the
Mississippi State Tax Commission ("Mississippi Tax Commission"). The Mississippi
Commission and Mississippi Tax Commission (together the "Mississippi Gaming
Authorities") are empowered to oversee and enforce the Mississippi Act. Gaming
in Mississippi can be legally conducted only on floating vessels of a certain
minimum size in navigable waters of the Mississippi River or in waters of the
State of Mississippi (so called dockside gambling) which lie adjacent and to the
south (principally in the Gulf of Mexico) of the counties of Hancock, Harrison
and Jackson, and only in counties in Mississippi in which the registered voters
have not voted to prohibit such activities. The voters in Jackson County, the
southeastern most county of Mississippi, have voted to prohibit gaming in that
county. However, gaming could be approved in Jackson County in any subsequently
held referendum.

    The underlying policy of the Mississippi Act is to ensure that gaming
operations in Mississippi are conducted (i) honestly and competitively, (ii)
free of criminal and corruptive influences, and (iii) in a manner which protects
the rights of the creditors of gaming operations. The laws, regulations and
supervisory procedures of the Mississippi Act seek to (i) establish and maintain
response accounting practices and procedures; (ii) maintain effective control
over the financial practices of licensees, including establishing minimum
procedures for internal fiscal affairs and safeguarding assets and revenues,
providing reliable record keeping, and making periodic reports to the
Mississippi Gaming Authorities; and (iii) provide a source of state and local
revenues through taxation and licensing fees. Changes in such laws, regulations
and procedures could have an adverse effect on the Company.

    The Mississippi Act requires that a person (including any corporation or
other entity) must be licensed to conduct gaming activities in Mississippi. A
license will be issued only for a specified location which has been approved as
a gaming site by the Mississippi Commission prior to issuing such license.
Gaming licenses are issued for an initial two year period and are renewable
every two years thereafter. The Mississippi Act also requires that each officer
or director of a gaming licensee, or other person who exercises a material
degree of control over the licensee, either directly or indirectly, must be
found suitable by the Mississippi Commission. The Mississippi Commission will
not issue a license or make a finding of suitability unless it is satisfied,
only after an extensive investigation paid for by the applicant, that the
persons associated with the gaming licensee or applicant for a license are of
good character, honesty and integrity, with no relevant or material criminal
record. In addition, the Mississippi Commission will not issue a license unless
it is satisfied that the licensee is adequately financed or has a reasonable
plan to finance its proposed operations from acceptable sources, and that
persons associated with the applicant have sufficient business probity,
competence and experience to engage 


                                       9
<PAGE>   11

in the proposed gaming enterprise. Other parties, including the Partnership's or
the Company's lenders, holders of evidences of indebtedness, underwriters and
employees, may be required to be licensed, and such applications for licensing,
if any, may be denied for any cause deemed reasonable by the Mississippi
Commission. The Mississippi Commission may refuse to issue a work permit to a
gaming employee (i) if the employee has committed larceny, embezzlement or any
crime of moral turpitude, or knowingly violated the Mississippi Act or
Mississippi Regulations, or (ii) for any other reasonable cause.

    The Partnership holds the gaming license to the Copa Casino gaming facility
in Gulfport, Mississippi. Patrician, GCI and Artemis, all wholly-owned
subsidiaries of the Company, have been approved as partners of the Partnership.
The license is not transferrable.

    In October 1994, the Mississippi Gaming Commission adopted a regulation
requiring, as a condition of licensure or license renewal, that a gaming
establishment's site development plan include certain infrastructure facilities
in close proximity to the casino complex which will amount to at least 25% of
the cost of the casino facility. Parking facilities, roads, sewage and water
systems or facilities normally provided by governmental entities do not meet the
infrastructure requirement. The Mississippi Gaming Commission found the Copa
Casino to be in compliance with this regulation as a result of its construction
of a general purpose pier facility and other improvements that inure to the
benefit of the Mississippi State Port Authority.

    The Mississippi Commission has the power to deny, limit, condition, revoke
and suspend any license, finding of suitability or registration, or fine any
person, as it deems reasonable and in the public interest, subject to an
opportunity for a hearing. The Mississippi Commission may fine any licensee or
persons who was found suitable up to $100,000 for each violation of the
Mississippi Act or the Mississippi Regulations, which is the subject of an
initial complaint, and up to $250,000 for each such violation which is the
subject of any subsequent complaint. The Mississippi Act provides for judicial
review of any final decision of the Mississippi Commission by petition to a
Mississippi Circuit Court, but the filing of such petition does not necessarily
stay any action taken by the Mississippi Commission pending a decision by the
Circuit Court.

    The Partnership must submit detailed financial and operating reports to the
Mississippi Gaming Authorities. Substantially all loans, leases, sales of
securities and other financing transactions entered into by the Partnership must
be reported to, and, in some cases, approved by, the Mississippi Gaming
Authorities.

    Under the Mississippi Regulations, a gaming license may not be held by a
publicly traded company, although an affiliate corporation, such as the Company,
may be publicly held so long as the Company receives the approval of the
Mississippi Commission. The Company has received such approval of the
Mississippi Commission. In addition, approval of any public offering of the
securities of the Company must be obtained from the Mississippi Commission if
any part of the proceeds from that offering are intended to be used to
construct, acquire or finance the operation of gaming facilities in Mississippi
or to retire or extend obligations incurred for any such purpose.

    Under the Mississippi Regulations, a person is prohibited from acquiring
control of the Company without prior approval of the Mississippi Commission. The
Company is also prohibited from consummating a plan of recapitalization proposed
by management in opposition to an attempted acquisition of control of the
Company and which involves the issuance of a significant dividend to Common
Stockholders, where such dividend is financed by borrowing from financial
institutions or the issuance of debt securities. In addition, the Company is
prohibited from repurchasing any of its voting securities under circumstances
(subject to certain exemptions) where the repurchase involves more than one
percent of the Company's outstanding Common Stock at a price in excess of 110%
of the then market value of the Company's Common Stock from a person who owns
and has for less than one year owned more than three percent of the Company's
outstanding Common Stock, unless the 


                                       10
<PAGE>   12

repurchase has been approved by a majority of the Company's shareholders voting
on the issue (excluding the person from whom the repurchase is being made) or
the offer is made to all other shareholders for the Company.

    Any person who, directly or indirectly, or in associations with others,
acquires beneficial ownership of more than five percent of the Common Stock of
the Company must notify the Mississippi Commission of this acquisition and may
be required to be found suitable by the Mississippi Commission. Any person who
becomes a beneficial owner of more than 10% of the Company's Common Stock must
apply for a finding of suitability by the Mississippi Commission. Furthermore,
regardless of the amount of securities purchased, any person who acquires any
beneficial ownership in the Common Stock of the Company may be required to be
found suitable if the Mississippi Commission has reason to believe that the
acquisition and ownership would be inconsistent with the declared policy of
Mississippi. Any person who is required to be found suitable must apply for a
finding of suitability from the Mississippi Commission within 30 days after
being requested to do so, and must deposit with the State Tax Commission a sum
of money which is adequate to pay the anticipated investigatory costs associated
with such finding. Any person who is found not to be suitable by the Mississippi
Commission shall not be permitted to have any direct or indirect ownership in
the Company's Common Stock. Any person who is required to apply for a finding of
suitability and fails to do so, or who fails to dispose of his or her interest
in the Company's Common Stock if found unsuitable, is guilty of a misdemeanor.
If a finding of suitability with respect to any person is not applied for where
required, or if it is denied or revoked by the Mississippi Commission, the
Company is not permitted to pay such person for services rendered, or to employ
or enter into any contract with such person.

    The Mississippi legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and other corporate
defense tactics that affect corporate gaming licensees in Mississippi, and
corporations whose stock is publicly traded that are affiliated with those
operations, may be injurious to stable and productive corporate gaming. The
Mississippi Commission has established a regulatory scheme to ameliorate the
potentially adverse effects of these business practices upon Mississippi's
gaming industry and to further Mississippi's policy to (i) assure the financial
stability of corporate gaming operators and their affiliates; (ii) preserve the
beneficial aspects of conducting business in the corporate form; and (iii)
promote a neutral environmental for the orderly governance of corporate affairs.
Approvals are, in certain circumstances, required from the Mississippi
Commission before the Company can make exceptional repurchases of voting
securities above the current market price thereof (commonly referred to as
"greenmail") and before a corporate acquisition opposed by management can be
consummated. Mississippi's gaming regulations also requires prior approval by
the Mississippi Commission if the Company were to adopt a plan of
recapitalization proposed by the Company's Board of Directors in opposition to a
tender offer made directly to its stockholders for the purposes of acquiring
control of the Company.

    Neither the Partnership, the Company nor any controlled affiliate may engage
in gaming activities in Mississippi and outside of Mississippi without approval
of the Mississippi Commission. The Mississippi Commission may require, among
other things, that there be adequate governmental regulation of gaming in the
out-of-state location and that there is a means of the Mississippi Commission to
have access to information concerning the out-of-state gaming operations and
persons associated with them.


REGULATION AND LICENSING - ALCOHOLIC BEVERAGES

    Nevada. The sale of alcoholic beverages by the Company is subject to
supervision, control and regulation by the City of Reno, which issues licenses
deemed to be nontransferable, revocable privileges, and which has full power to
limit, condition, suspend or revoke such licenses. The Company is presently
licensed to sell



                                       11
<PAGE>   13

alcoholic beverages. Any adverse regulatory act with respect to this license
could have an adverse effect upon the operations of the Company.

    Mississippi. The sale of alcoholic beverages by the Copa Casino is subject
to regulation by the Mississippi State Tax Commission, which issues licenses
which are both revocable and non-transferable, and which has full power to
limit, condition, suspend or revoke any such license. The Partnership is
currently licensed to sell alcoholic beverages as an "On-Premises Retailer." Any
adverse regulatory act with respect to this license could have an adverse effect
upon the operation of the Partnership. The sale of light wine and beer by Copa
Casino is also subject to regulation by the Mississippi State Tax Commission,
which issues licenses which are both revocable and non-transferable, and which
has the full power to limit, condition, suspend or revoke any such license.
However, the enforcement of laws regulating the acquisition, use, sale and
distribution of light wine and beer is left to local law enforcement agencies.
The Partnership is currently licensed to sell light wine and beer as a
"Retailer" under a beer permit and privilege license. Any adverse regulatory act
with respect to this license could have an adverse effect upon the operation of
the Partnership.



                                       12
<PAGE>   14


ITEM 2.  PROPERTIES

         Reno, Nevada. The Company operates the casino and hotel towers at the
Sands Regency on a Company-owned 6.3 acre site in downtown Reno. The
hotel/casino site also includes the original three-story motor lodge and
four-story hotel tower and other buildings and facilities. Garage and surface
parking is provided at the hotel/casino site and also on a 2.7 acre site located
adjacent to the hotel/casino site. In addition, the Company's personnel office
and certain storage facilities are located one-half block from the hotel/casino
site on a Company-owned .5 acre lot. Management considers the Company's facility
to be in good condition and well-maintained.

         In addition to the main hotel/casino facility, the Company owns a
smaller property in Reno consisting of an area of approximately .2 acres.

         The Company's Reno hotel/casino property is subject to aggregate
encumbrances of approximately $10.8 million as of June 30, 1998.

         Gulfport, Mississippi. The Copa Casino gaming facilities are located on
two decks of a 500 foot cruise ship owned by Gulfside Casino Partnership. These
two decks also include four cocktail lounges/bars, a deli-style restaurant and a
gift shop. The deck below the two casino decks contains a surveillance area, a
vault, count rooms, security and various operations and administrative offices.
An additional three decks on the ship are available for future expansion of
gaming and dining facilities. The engines for such cruise ship are disabled. All
gaming activities are conducted while moored dockside.

         The Copa Casino is permanently moored dockside at a location known as
the "Horseshoe Site." Such site, which is leased from the Mississippi Department
of Economic and Community Development ("MDECD") and the Mississippi State Port
Authority at Gulfport ("Port"), is between the East and West Piers of the
Mississippi State Port in Gulfport, Mississippi. This location, which includes
8.3 acres of land-based facilities, will accommodate surface parking for
approximately 840 vehicles. The leased facilities also include a docking
structure which accommodates the Copa Casino ship and will allow for mooring of
additional vessels. The docking structure also includes a four-lane roadway and
a pedestrian walk which provides access to the Copa Casino entrance.

         The initial term of the lease, as amended, is seven years and ends in
October 1999. The lease provides for three renewal periods of five years each
and one renewal period of ten years if the Partnership, within the first ten
years of the lease agreement, constructs, on the leased premises or within the
city limits of Gulfport, a hotel with a minimum of 350 units. If any of such
renewal options are exercised, the lease term will be extended under the same
terms and provisions of the lease agreement except that the rental amounts will
be adjusted and revised annually, in years six through thirty-two, in accordance
with changes in the Consumer Price Index.

         The lease provides for an annual rental of $511,000 (the "Minimum
Rental") plus five percent (5%) of the gross annual gaming revenues over
$25,000,000 (the "Percentage Rental"). In addition to the Minimum Rental and
Percentage Rental set forth above, the Partnership is also required to pay,
monthly, 3% of the gross monthly revenues on all activities other than gaming
(the "Additional Percentage Rent"). The Minimum Rental is to be paid in advance,
in equal monthly installments of $42,542 on the first day of every month during
the lease year. For each month, the Percentage Rental and the Additional
Percentage Rental must be calculated and the amounts due, if any, are to be paid
on or before the 10th day of the following month.

         The lease also provides that the MDECD and Port shall have the right to
cancel the lease after the expiration of the initial term for reason of Port
expansion of its own facilities to handle expanded shipping and related 



                                       13
<PAGE>   15

commerce activities, unrelated to any business or enterprise which may compete
with the Copa Casino operation, upon giving 12 months written notice to the Copa
Casino. Should it be necessary for MDECD and the Port to exercise its right to
cancel the lease, MDECD and the Port shall use their best efforts to obtain an
alternative site on the Port properties for the relocation of the Copa Casino.
The Copa Casino shall also have a right of first refusal for any location that
is determined not to interfere with normal Port operations.

         In July 1996, Copa Casino was notified by the MDECD and the Port that
the Copa Casino lease would be canceled and terminated at the end of the initial
lease term in October 1999 because the Copa Casino's leased site was needed by
the Port to accommodate a purported expansion of Port facilities. Such notice of
cancellation and termination was ruled to be invalid and was voided by a January
1998 judgment in Chancery Court of Harrison County, Mississippi as further
described in Item 3. Legal Proceedings. If the Copa Casino is subsequently
required to vacate its existing site and no suitable replacement sites can be
found, the Company's results of operations could be materially adversely
affected.


ITEM 3.  LEGAL PROCEEDINGS

GCI MATTER

         In December 1994, a lawsuit was filed by Terry W. Green and Joel R.
Carter, Sr. ("Green and Carter") in the Chancery Court of Harrison County,
Mississippi, First Judicial District against GCI because of GCI's failure to
make payments on promissory note obligations of GCI to Green and Carter. These
note obligations, in the aggregate amount of $6 million, plus interest, are
secured by a pledge of GCI's partnership interest in GCP. Although these
promissory notes and the accrued interest thereon are obligations of GCI, they
are reflected as current liabilities in the Company's Consolidated Balance
Sheets at June 30, 1998 and 1997 upon consolidation. These promissory notes were
owed by GCI when the Company purchased GCI in February 1994 and have not been
assumed or guaranteed by the Company.

         In addition to demanding payment of the $6 million plus interest, for
which a partial summary judgment was entered, the lawsuit by Green and Carter
also demanded the appointment of a receiver to take possession of and sell GCI's
ownership interest in GCP and sought attorneys fees which were subsequently
awarded in January 1997 in the amount of $54,000. In May 1995, GCP and Patrician
were joined as necessary parties to the lawsuit.

         In July 1996, following a court hearing, the Chancery Court rendered a
judgment that the reallocation of GCI's interest in the partnership may be
appropriate as to the GCP partners but had no effect on the lien position of
Green and Carter. This ruling related to the reduction in GCI's ownership
interest in GCP from an original 60% interest to a .006% interest as a result of
an amendment to the partnership agreement and a partner capital call. The
amendment to the GCP partnership agreement was entered in April 1994 whereby the
profit and loss allocation percentages were amended from 40% to 80% for
Patrician and from 60% to 20% for GCI. Such amendment was entered into to cure a
monetary partnership breach by GCI which occurred prior to the Company's
acquisition of GCI and to properly reflect the relative financial risks of
Patrician and GCI. The partner capital call occurred in January 1996 and was for
the purpose of improving the partnership capital structure. Patrician and
Artemis complied with the capital call; however, GCI failed to comply. As a
result, and in accordance with the partnership agreement, GCI's interest in GCP
was reduced from 20% to .006%. In May 1997, the Partnership Agreement was again
amended to restore the original 60% interest as to GCI. Such was done to resolve
the Chancery Court ruling dilemma.

         The effect of the July 1996 judgment was that Green and Carter are
secured by GCI's pre-amendment, pre-capital call 60% ownership interest in GCP.
The fact that the partnership amendments which provided or 



                                       14
<PAGE>   16

allowed for the change in partner ownership interests were found to be valid in
a June 1996 arbitration award between Patrician and GCI was ruled as
inconsequential relative to Green and Carter. GCI subsequently filed a motion
for reconsideration of the judgment with the Chancery Court, which was
unsuccessful.

    In January 1997, the Chancery Court issued an amendment judgment which
reaffirmed the prior judgments and reserved ruling on the necessity to appoint a
receiver. The ruling also charged GCP, under Mississippi law, with the
obligation to pay the GCI judgment amounts to Green and Carter and to pay Green
and Carter 60% of all monies not designated for normal operational expenses on a
monthly basis, commencing February 1, 1997, until the judgments due Green and
Carter were satisfied. GCP was also required to provide a monthly accounting of
income and operating expenses to Green and Carter.

    To date, the required monthly reports have been made which report that no
monies are available for distribution by GCP and that no monies have been
distributed by GCP. Such reports were discontinued, by agreement, in March 1998,
in connection with the settlement negotiations discussed below.

    GCI, GCP and Patrician, as joined parties to such lawsuit, have filed an
appeal with the Mississippi Supreme Court because it is the Company's belief
that the Chancery Court's rulings are incorrect and not supported by the facts
or the law. A hearing was scheduled in July 1998 and it was agreed, immediately
before such hearing was to take place, that briefs were to be submitted in lieu
of a hearing because of ongoing settlement negotiations discussed below.

    On January 31, 1997, GCI filed for bankruptcy protection under Chapter 11 of
the United States Bankruptcy Code in the United States Bankruptcy Court of the
Southern District of Mississippi, Southern Division. A Disclosure Statement with
related Plan of Reorganization was filed. A hearing for confirmation has not
been scheduled.

    In February 1997, Carter and Green also each filed separate lawsuits in U.
S. District Court for the Southern District of Mississippi, Biloxi Division,
against The Sands Regent and certain officers and directors of The Sands Regent
and GCI. Such lawsuits allege breach of various common law duties and
contractual interference by the defendants and seek compensatory and punitive
damages. Such actions are presently stayed pending settlement negotiations
described below. Nonetheless, management, and the individual defendants, believe
these legal actions to be without merit and will vigorously defend them.

    In October 1997, the United States Bankruptcy Court ruled that GCI's
ownership interest in GCP was .006% and that the automatic stay provisions of
the Bankruptcy code only applied as to this .006% interest. The Bankruptcy Court
further held that a May 1997 partnership amendment to restore GCI's ownership
interest in the Company to the original 60%, undertaken in order to resolve the
GCI ownership/security dilemma created by the Chancery Court judgment and to
facilitate a resolution of the Chancery Court proceeding by and through the
Chapter 11 reorganization of GCI, was ineffective and void.

    In November 1997, as a result of the above Bankruptcy Court ruling,
Patrician, holder of the 98.744% interest in GCP, also filed for bankruptcy
protection under Chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court of the Southern District of Mississippi, Southern
Division. This action was deemed necessary in order to protect the 59.994%
ownership interest in GCP which was initially owned by GCI and which is now part
of the interest held by Patrician. A Disclosure Statement and Plan of
Reorganization for Patrician have not yet been filed.



                                       15
<PAGE>   17

    Settlement negotiations are presently underway between Green and Carter, the
Company, GCI, Patrician, Artemis and GCP. As a result of such discussions, all
court actions have been stayed including in Chancery Court, United States
Bankruptcy Court and United States District Court.


PORT MATTER

    On January 8, 1998, a judgment was rendered in the Chancery Court of
Harrison County, Mississippi lawsuit between GCP and the MDECD and the Port. The
Chancery Court ruled in favor of GCP in denying the Port's efforts to terminate
the lease at the end of the primary term in October 1999. The Court ruled
adverse to GCP in declaring that the Port was not obligated to approve the
construction of a hotel requested by GCP or approve GCP's request to substitute
another gaming vessel for the present gaming vessel. Damages sought by GCP in
connection with such refusals to approve a hotel or the substitution of a gaming
vessel, and for other claims, were also denied.

    On February 6, 1998, GCP filed a Notice of Appeal with the Chancery Court to
appeal to the Mississippi Supreme Court certain of the Court's rulings adverse
to GCP. Specifically, GCP's appeal included appealing the Court's rulings
denying the Port's obligations to reasonably approve a hotel and the
substitution of a gaming vessel and the court's ruling denying damages. MDECD
and the Port have filed a Notice of Cross-Appeal, claiming that the Chancery
Court's ruling disallowing the termination of the lease was incorrect.
Appropriate appeal briefs are to be filed with the Mississippi Supreme Court in
accordance with a briefing schedule which has not been determined.

    Management believes that the outcome of this appeal is not presently
predictable or subject to reasonable estimation.


OTHER

    GCP is a defendant in a wrongful termination action filed by Mary Ann
Ackerman, a former employee of GCP, in the United States District Court of the
Southern District of Mississippi, Southern Division. Such lawsuit seeks damages
in the amount of $650,000, for alleged violation of the Family Medical Leave
Act. Management believes the lawsuit is without merit and will vigorously defend
against it. The likelihood of an unfavorable outcome is uncertain and a
potential range of losses is not subject to reasonable estimation.

    The Company is also a party to various other legal actions, proceedings and
pending claims arising in the normal course of its business. Management does not
expect the outcome of these claims or suits to have a material adverse effect on
the Company's financial position or results of future operations.


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

    The Company did not submit any matters to a vote of security holders in the
fourth quarter of fiscal 1998.



                                       16
<PAGE>   18

                                     PART II


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


    The Common Stock of the Company is traded in the Nasdaq National Market
under the symbol "SNDS." The Company recently received notification that its
listing will be discontinued in the event the market value of the Company's
Common Stock does not exceed $5.0 million for ten consecutive trading days on or
before October 19, 1998. If such occurs, the Company will seek listing on the
Nasdaq SmallCap Market. The following table sets forth the range of high and low
closing sales prices as reported by Nasdaq.

          FOR THE YEARS ENDED JUNE 30,

<TABLE>
<CAPTION>
                                                     HIGH              LOW
                                                     ----              ---
<S>                                                 <C>                <C>  
1997
 First Quarter............................          $ 5.13             $3.13
 Second Quarter...........................            3.75              2.63
 Third Quarter............................            3.13              2.50
 Fourth Quarter...........................            3.50              1.63

1998
 First Quarter............................           $3.00            $ 1.94
 Second Quarter...........................            2.50              1.63
 Third Quarter............................            2.63              1.56
 Fourth Quarter...........................            2.64              1.63

</TABLE>

-----------

       The declaration and payment of dividends in the future, if any, will be
determined by the Board of Directors in light of the conditions then existing,
including the Company's earnings, financial condition, capital requirements and
other factors.

       As of September 23, 1998, the Company had 157 shareholders of record and
in excess of 400 beneficial shareholders.


ITEM 6. SELECTED FINANCIAL DATA

       There is hereby incorporated by reference the information appearing under
the caption "The Sands Regent - Selected Financial Data" in the Company's 1998
Annual Report, filed as Exhibit 13 to this Form 10-K.


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

       There is hereby incorporated by reference the information appearing under
the caption "The Sands Regent - Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Company's 1998 Annual
Report, filed as Exhibit 13 to this Form 10-K.


                                       17
<PAGE>   19

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

       There is hereby incorporated by reference the Consolidated Financial
Statements and the Notes to the Consolidated Financial Statements in the
Company's 1998 Annual Report, filed as Exhibit 13 to this Form 10-K. Reference
is made to the Consolidated Financial Statements and the Notes to Consolidated
Financial Statements in Item 14(a)(1) hereof.

       With the exception of the aforementioned information and the information
in Items 6 and 7, the Company's 1998 Annual Report is not deemed filed as part
of this Form 10-K.


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

     None.



                                       18
<PAGE>   20


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

       There is hereby incorporated by reference the information appearing under
the caption "Directors and Executive Officers" in the Company's definitive Proxy
Statement for the Annual Meeting of Shareholders to be held on November 2, 1998,
filed or to be filed with the Securities and Exchange Commission.


ITEM 11. EXECUTIVE COMPENSATION

       There is hereby incorporated by reference the information appearing under
the caption "Compensation of Executive Officers" in the Company's definitive
Proxy Statement for the Annual Meeting of Shareholders to be held on November 2,
1998, filed or to be filed with the Securities and Exchange Commission.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

       There is hereby incorporated by reference the information appearing under
the captions "Principal Shareholders" and "Directors and Executive Officers" in
the Company's definitive Proxy Statement for the Annual Meeting of Shareholders
to be held on November 2, 1998, filed or to be filed with the Securities and
Exchange Commission.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

       There is hereby incorporated by reference the information appearing under
the caption "Certain Relationships and Related Transactions" in the Company's
definitive Proxy Statement for the Annual Meeting of Shareholders to be held on
November 2, 1998, filed or to be filed with the Securities and Exchange
Commission.



                                       19
<PAGE>   21

                                     PART IV

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

(a)(1) FINANCIAL STATEMENTS.

            Included in Part II of this Report:

              Independent Auditors' Report

              Consolidated Balance Sheets -- June 30, 1998 and 1997

              Consolidated Statements of Operations -- Years Ended June 30,
              1998, 1997 and 1996

              Consolidated Statements of Stockholders' Equity -- Years Ended
              June 30, 1998, 1997 and 1996

              Consolidated Statements of Cash Flows -- Years Ended June 30,
              1998, 1997 and 1996

              Notes to Consolidated Financial Statements

(a)(2) FINANCIAL STATEMENT SCHEDULES.

            Included in Part IV of this Report:

              As of and for the Years Ended June 30, 1998, 1997 and 1996:

              Independent Auditors' Report on Schedules

              Schedule II -- Valuation and Qualifying Accounts

            All other schedules have been omitted because they are not
applicable or the required information is shown in the financial statements or
notes thereto.



                                       20
<PAGE>   22

(a)(3)   EXHIBITS

<TABLE>
<S>        <C>        <C> 
           3(a)(i)    Restated Articles of Incorporation of the Company (Exhibit
                      3(a) to the Company's Registration Statement (Registration
                      No. 2-93453) on Form S-1).*

           3(a)(ii)   Certificate of Amendment to the Restated Articles of
                      Incorporation of the Company, dated November 2, 1987
                      (Exhibit 4(a) to the Company's Form 10-Q for the quarter
                      ended December 31, 1987).*

           3(b)(i)    Amended and Restated Bylaws of the Company, as amended
                      April 29, 1985, and currently in effect (Exhibit 3(b) to
                      the Company's Form 10-K for the fiscal year ended June 30,
                      1985).*

           3(b)(ii)   Resolution of Amendment to the Bylaws of the Company,
                      dated November 2, 1987 (Exhibit 4(b) to the Company's Form
                      10-Q for the quarter ended December 31, 1987).*

           3(b)(iii)  Certificate of Amendment of the Amended and Restated Code
                      of Bylaws, as Amended, of The Sands Regent, dated January
                      10, 1996 (Exhibit 3(b)(iii) to the Company's Form 10-K for
                      the fiscal year ended June 30, 1996).*

           4(a)       Amended Trust Agreement, dated February 22, 1987, among
                      Antonia Cladianos II as trustor and beneficiary and Pete
                      Cladianos, Jr. as trustee (Exhibit 4(a) to the Company's
                      Form 10-K for the fiscal year ended June 30, 1987).*

           4(b)       Amended Trust Agreement, dated February 19, 1987, among
                      Pete Cladianos III as trustor and beneficiary and Pete
                      Cladianos, Jr. as trustee (Exhibit 4(b) to the Company's
                      Form 10-K for the fiscal year ended June 30, 1987).*

           10(a)      Amended and Restated Stock Option Plan for Executive and
                      Key Employees of the Sands Regent and Forms of Stock
                      Option Agreements (Exhibit 4(a) to the Company's
                      Registration Statement (Registration No. 33-59574) on Form
                      S-8).*

           10(b)      Amendment to the Amended and Restated Stock Option Plan
                      for Executive and Key Employees of The Sands Regent, dated
                      November 4, 1997 (Exhibit 10(a) to the Company's Form 10-Q
                      for the quarter ended December 31, 1997).*

           10(c)      Amendment to the Amended and Restated Stock Option Plan
                      for Executive and Key Employees of The Sands Regent, dated
                      December 12, 1997 (Exhibit 10(b) to the Company's Form
                      10-Q for the quarter ended December 31, 1997).*

           10(d)      Non-Qualified Stock Option Agreement, dated May 11, 1998,
                      by and between Louis J. Phillips and The Sands Regent.**

           10(e)      Deferred Compensation Plan for Directors of the Company
                      (Exhibit 10(e) to the Company's Registration Statement
                      (Registration No. 2-93453) on Form S-1).*

</TABLE>


                                       21
<PAGE>   23

<TABLE>
<S>        <C>        <C> 
           10(f)      Form of Indemnity Agreement for Directors and Officers of
                      the Company (Exhibit 10(f) to the Company's Form 10-K for
                      the fiscal year ended June 30, 1988).*

           10(g)      Amended and Restated Loan Agreement, dated January 31,
                      1998, by and between Wells Fargo Bank, National
                      Association, The Sumitomo Bank, Limited and Zante, Inc.;
                      and the related Amended and Restated Term Promissory Note;
                      Amended and Restated Guaranty of Loan (by The Sands
                      Regent); First Amendment to Deed of Trust, Fixture Filing
                      and Security Agreement with Assignment of Rents (on the
                      hotel/casino properties); Deed of Trust, Fixture Filing
                      and Security Agreement with Assignment of Rents (on
                      non-hotel/casino properties); and Pledge and Assignment.**

           10(h)      International Swap Dealers Association, Inc. Master
                      Agreement for interest rate swap, dated March 23,1994, by
                      and between First Interstate Bank of Nevada N.A. and
                      Zante, Inc., and the related Guarantee by The Sands Regent
                      and Letter Agreement of Confirmation (Exhibit 10(f) to the
                      Company's Form 10-K for the fiscal year ended June 30,
                      1994).*

           10(i)      General Partnership Agreement, effective as of December
                      31, 1992, between Gulfside Casino, Inc. and Patrician,
                      Inc. (a wholly-owned subsidiary of the Sands Regent)
                      (Exhibit 10(a) to the Company's Form 10-Q for the Quarter
                      ended March 31, 1993).*

           10(j)      First Amendment to Gulfside Casino, a Mississippi General
                      Partnership, General Partnership Agreement, dated April
                      15, 1994, between Gulfside Casino, Inc. and Patrician,
                      Inc. (both wholly owned subsidiaries of The Sands Regent)
                      (Exhibit 10(a) to the Company's Form 10-Q for the Quarter
                      ended March 31, 1994).*

           10(k)      Second Amendment to Gulfside Casino, a Mississippi General
                      Partnership, General Partnership Agreement, dated December
                      9, 1994, between Gulfside Casino, Inc. and Patrician,
                      Inc., (both wholly-owned subsidiaries of The Sands
                      Regent)(Exhibit 10(a) to the Company's Form 10-Q for the
                      Quarter ended December 31, 1994).*

           10(l)      Gulfside Casino, Inc. Settlement Agreement, dated August
                      20, 1993, by and between Gulfside Casino, Inc., a
                      Mississippi Corporation, and Joel R. Carter, Sr. and Terry
                      Green (Exhibit 10(j) to the Company's Form 10-K for the
                      year ended June 30,1994).*

           10(m)      Settlement Agreement dated November 2, 1984, by and
                      between Hughes Properties, Inc., and Zante, Inc. (Exhibit
                      10(u) to the Company's Registration Statement
                      (Registration No. 2-93453) on Form S-1).*

           10(n)      Franchise Agreement dated October 9, 1986 and as amended
                      on October 9, 1986, by and between Roma Corporation and
                      Zante, Inc. (Exhibit 10(r) to the Company's Form 10-K for
                      the fiscal year ended June 30, 1987).*

           10(o)      Agreement, dated as of January 2, 1995, between David R.
                      Wood and The Sands Regent (Exhibit 10(n) to the Company's
                      Form 10-K for the fiscal year ended June 30, 1995).*

           10(p)      (Employment) Agreement, dated December 12, 1997, by and
                      between Ferenc B. Szony (as President and Chief Executive
                      Officer) and The Sands Regent (Exhibit 10(c) to the
                      Company's Form 10-Q for the quarter ended December 31,
                      1997).*

</TABLE>


                                       22
<PAGE>   24

<TABLE>
<S>        <C>        <C> 
           10(q)      Lease Agreement by and between the Mississippi Department
                      of Economic and Community Development and the Mississippi
                      State Port Authority at Gulfport and Gulfside Casino,
                      Inc., dated August 20, 1992 (Exhibit 10(o) to the
                      Company's Form 10-K for the fiscal year ended June 30,
                      1996).*

           10(r)      Amendment to Lease and Approval of Stock Purchase by and
                      between the Mississippi Department of Economic and
                      Community Development and the Mississippi State Port
                      Authority at Gulfport and Gulfside Casino, Inc., dated
                      October 28, 1992 (Exhibit 10(p) to the Company's Form 10-K
                      for the fiscal year ended June 30, 1996).*

           10(s)      Second Lease Amendment by and between the Mississippi
                      Department of Economic and Community Development and the
                      Mississippi State Port Authority at Gulfport and Gulfside
                      Casino, Inc., Lessee, and Gulfside Casino Partnership,
                      Substitute Lessee, dated May 12, 1993 (Exhibit 10(q) to
                      the Company's Form 10-K for the fiscal year ended June 30,
                      1996).*

           10(t)      Third Lease Amendment by and between the Mississippi
                      Department of Economic and Community Development and the
                      Mississippi State Port Authority at Gulfport and Gulfside
                      Casino Partnership, dated June 21, 1994 (Exhibit 10(r) to
                      the Company's Form 10-K for the fiscal year ended June 30,
                      1996).*

           13         1998 Annual Report to Shareholders.**

           21         Subsidiaries: Zante, Inc., Patrician, Inc., and Artemis,
                      Inc., Nevada Corporations, and Gulfside Casino, Inc., a
                      Mississippi corporation, are wholly owned by the Company.
                      Patrician, Inc., Gulfside Casino, Inc.,and Artemis, Inc.,
                      are the sole partners in Gulfside Casino Partnership, a
                      Mississippi general partnership.

           23         Independent Auditors' Consent to the incorporation by
                      reference into specified registration statement on Form
                      S-8 of their reports contained in or incorporated by
                      reference into this report.**

           27         Financial Data Schedule.**

</TABLE>

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

           *          Incorporated by reference

           **         Filed herewith

(b)    REPORTS ON FORM 8-K.

       The Company did not file any reports on Form 8-K during the last quarter
       of fiscal 1998.

(c)    INDEX TO EXHIBITS.

(d)    FINANCIAL STATEMENT SCHEDULES.

       Financial statement schedules required by Regulation S-X are excluded
       from the 1998 Annual Report to the Shareholders by Rule 14a-3(b)(1). See
       Schedule II to the Financial Statements appearing under Item 14(a)(2)
       hereof.



                                       23
<PAGE>   25

                                   SIGNATURES

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

                                        THE SANDS REGENT

Date:  September 24, 1998               By:    FERENC B. SZONY
                                           -------------------------------------
                                           Ferenc B. Szony, President
                                           and Chief Executive 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 and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE                                                CAPACITY                                   DATE
---------                                                --------                                   ----
<S>                                               <C>                                        <C>

FERENC B. SZONY                                   President (Chief                            September 24, 1998
---------------------------                       Executive Officer)
Ferenc B. Szony                                   and Director
                                                                    

KATHERENE  LATHAM                                 Chairman of the                             September 24, 1998
---------------------------                       Board of Directors
Katherene Latham                                  


                                                  Vice Chairman of the                        September 24, 1998
---------------------------                       Board of Directors
Pete Cladianos, Jr.                               


DAVID R. WOOD                                     Executive Vice President,                   September 24, 1998
---------------------------                       Treasurer, Chief Financial and
David R. Wood                                     Accounting Officer and Director
                                                                                 

PETE CLADIANOS III                                Executive Vice President,                   September 24, 1998
---------------------------                       Secretary and Director
Pete Cladianos III                                                      


JON N. BENGTSON                                   Director                                    September 24, 1998
---------------------------
Jon N. Bengtson


LOUIS J. PHILLIPS                                 Director                                    September 24, 1998
---------------------------
Louis J. Phillips

</TABLE>



                                       24
<PAGE>   26


INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of The Sands Regent:

We have audited the consolidated financial statements of The Sands Regent and
subsidiaries as of June 30, 1998 and 1997, and for each of the three years in
the period ended June 30, 1998, and have issued our report thereon dated
September 2, 1998. Such consolidated financial statements and report are
included in your 1998 Annual Report to Shareholders and are incorporated herein
by reference. Our audits also included the consolidated financial statement
schedule of The Sands Regent and subsidiaries, listed in Item 14. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such consolidated financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.




Deloitte & Touche LLP
Reno, Nevada
September 2, 1998



                                       25
<PAGE>   27


                                The Sands Regent
                                   Schedule II
                        Valuation and Qualifying Accounts
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                   Additions
                                                    Balance at     Charged to
                                                    Beginning      Costs and      Balance at
            Description                              of Year        Expenses      Deductions(1)   End of Year
            -----------                              -------        --------      -------------   -----------
<S>                                                 <C>            <C>            <C>             <C>  

Allowance for Doubtful Accounts Receivable:

   Year ended June 30, 1998 ...............          $ 119          $ 143          $(190)          $  72

   Year ended June 30, 1997 ...............            107            103            (91)            119

   Year ended June 30, 1996 ...............            147            136           (176)            107

</TABLE>



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


(1)    Write-offs of uncollectible accounts receivable, net of recoveries


                                       26
<PAGE>   28


                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>

                                                                                                           SEQUENTIALLY
EXHIBIT                                                                                                      NUMBERED
NUMBER                                                                                                        PAGE



<S>            <C>                                                                                        <C>     
10(d)          Non-Qualified Stock Option Agreement, dated May 11, 1998, by
               and between Louis J. Phillips and The Sands Regent........................................

10(g)          Amended and Restated Loan Agreement, dated January 31, 1998,
               by and between Wells Fargo Bank, National Association, The
               Sumitomo Bank, Limited and Zante, Inc.; and the related Amended
               and Restated Term Promissory Note; Amended and Restated
               Guaranty of Loan (by The Sands Regent); First Amendment to
               Deed of Trust, Fixture Filing and Security Agreement with
               Assignment of Rents (on the hotel/casino properties); Deed of
               Trust, Fixture Filing and Security Agreement with Assignment
               of Rents (on non-hotel/casino properties); and Pledge and Assignment.....................

13             1998 Annual Report to Shareholders.......................................................

23             Independent Auditors' Consent to the incorporation by reference
               into specified registration statement on Form S-8 of their
               reports contained in or incorporated by reference into this report.......................

27             Financial Data Schedule..................................................................


</TABLE>