SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

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


For the fiscal year ended:  December 31, 1996        Commission File No. 0-22290


                              CENTURY CASINOS, INC.
                 (Name of small business issuer in its charter)

           Delaware                                      84-1271317
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

       Suite 203, 26 South Tejon Street, Colorado Springs, Colorado    80903
               (Address of principal executive offices)              (Zip code)

                                 (719) 473-7770
                (Issuer's telephone number, including area code)

   Securities Registered Pursuant to Section 12(b) of the Exchange Act: None.
      Securities Registered Pursuant to Section 12(g) of the Exchange Act:

             Common Stock, $.01 Par Value, and 1994 Class I Warrants
                               (Title of classes)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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 [ ]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B contained in this form and no disclosure  will 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-KSB or any
amendment to this Form 10-KSB. [ X ]

State the issuer's revenues for its most recent fiscal year:  $11,478,042

The aggregate market value of the voting common stock held by  non-affiliates of
the registrant on March 13, 1997, was  approximately  $14,052,000 based upon the
average of the reported closing bid and asked price of such shares on Nasdaq for
that date. As of March 13, 1997,  there were  15,861,885  shares of common stock
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: Part III incorporates by reference from the
Registrant's   Definitive  Proxy  Statement  for  its  1997  Annual  Meeting  of
Stockholders  to be filed with the  Commission  within 120 days of December  31,
1996.

                                        1
<PAGE>


Item 1. Business.

General

     Century Casinos, Inc. and its subsidiaries (the "Company"), own and operate
a limited-stakes gaming casino in Cripple Creek, Colorado; act as concessionaire
of a small  casino  on a luxury  cruise  ship;  and are  pursuing  a  number  of
additional gaming opportunities in the United States and internationally.  Prior
to July 1, 1996, the Company's operations in Cripple Creek, Colorado,  consisted
of Legends  Casino  ("Legends"),  which the Company  acquired on March 31, 1994,
through a merger with  Alpine  Gaming,  Inc.  ("Alpine").  On July 1, 1996,  the
Company acquired the net assets of Gold Creek  Associates,  L.P. ("Gold Creek"),
the owner of Womack's Saloon & Gaming Parlor  ("Womacks"),  which is adjacent to
Legends.  Following the Company's  acquisition of Womacks,  interior renovations
were  undertaken on both properties to facilitate the operation and marketing of
the  combined  properties  as one casino  under the name  "Womacks  Casino." The
Company's operating revenue for 1996, 1995 and 1994 was derived principally from
its  casino  operations  in  Cripple  Creek.  See  the  Consolidated   Financial
Statements included herein.

     The Company was formed to acquire equity and other participation  interests
in, and to obtain management  contracts with respect to, gaming  establishments,
with a primary  focus on gaming  markets  in the  United  States.  The  Company,
formerly  known as Alpine,  is a result of a business  combination  completed on
March 31, 1994,  pursuant to which Century Casinos  Management,  Inc.  ("Century
Management")  shareholders  acquired  approximately  76% of the then  issued and
outstanding  voting stock of the Company and all officer and board  positions of
the Company  were  assumed by the  management  team of Century  Management.  See
"Change of Control" below for a more detailed  description  of the  transaction.
Effective  June 7, 1994 the Company  reincorporated  in Delaware  under the name
"Century  Casinos,  Inc."  Because the Company is the result of the  transaction
discussed above,  the Company's  business has been combined with that of Century
Management, and references herein to the Company refer to the combined entities,
unless the context otherwise requires.

     Century  Management  was  founded  in  1992  by a  team  of  career  gaming
executives  who had worked  primarily for an Austrian  gaming company that owned
and operated  casinos  throughout  the world.  These persons  included the chief
executive  officer,  the  deputy  to the chief  executive  officer,  a  managing
director and the head of international finance and control. See Item 9 herein.

     The Company  generally seeks to enter into gaming  operations in areas with
attractive demographic attributes, high population density, local tourism and/or
predictable  traffic patterns with a long-term objective of maintaining a policy
of geographic  diversification  of its projects.  The Company's primary economic
analysis  covers  the  potential  market  area  surrounding  a  proposed  gaming
location,  although it takes into  consideration the economic  conditions in any
community in which it intends to establish a gaming facility, as many of the new
gaming  jurisdictions  have  approved  gaming  as a means  to  revitalize  local
economies.  Management believes that there are a number of gaming  opportunities
in the  United  States  and  internationally,  and that the  Company  will  have
opportunities  to acquire  casino  sites that have  underperformed  financially,
although favorable outcomes of these opportunities cannot be assured.

     The Company has  developed a brand name  concept for gaming  operations  --
Legends(R).  The Company owns the  trademark  under the name  Legends(R)  in the
United States and similar rights in 20 other countries.

     Information   contained  in  this  Form  10-KSB  contains   forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995,  which  can be  identified  by the use of  words  such as  "may,"  "will,"
"expect,"  "anticipate,"  "estimate" or  "continue,"  or  variations  thereon or
comparable  terminology.  In addition,  all statements  other than statements of
historical  facts  that  address  activities,  events or  developments  that the
Company expects,  believes or anticipates,  will or may occur in the future, and
other such matters, are forward-looking statements.

                                        2
<PAGE>


     The  future  results  of  the  Company  may  vary   materially  from  those
anticipated  by  management,  and may be affected by various  trends and factors
which are beyond the control of the Company. These risks include the competitive
environment in which the Company  operates,  the Company's  dependence  upon the
Cripple Creek,  Colorado gaming market,  the effects of governmental  regulation
and other risks described herein.

Change of Control

     On March  31,  1994 the  Company  completed  a Plan of  Reorganization  and
Agreement (the  "Reorganization  Agreement")  with Alpine  Acquisition,  Inc., a
Delaware  corporation ("Merger  Subsidiary") and Century Management,  a Delaware
corporation.  Pursuant to the Reorganization  Agreement, the Company created the
Merger  Subsidiary to effectuate a merger of the Merger  Subsidiary into Century
Management.   Under  the  Reorganization   Agreement,  each  holder  of  Century
Management common stock received shares of the Company's common stock for shares
of the common stock of Century  Management  on a  one-for-one  basis.  In total,
6,213,971  shares of the  Company's  common  stock were issued;  former  Century
Management  stockholders  acquired  approximately  76% of the  then  outstanding
shares  of  the  Company's  common  stock.  For  accounting  purposes,   Century
Management  is   considered   to  have  acquired  the  Company,   since  Century
Management's  stockholders  hold a majority of the common  stock of the combined
entity.  This  transaction  was  accounted  for  under  the  purchase  method of
accounting.  For further information see the Consolidated  Financial  Statements
included  herein.  The Plan was  negotiated and executed by the parties at arms'
length, and the consideration in the transaction was determined by weighing each
corporation's  present  and future  prospects,  tangible  assets and  management
capabilities,  along with the trading  price of the Company's  common stock.  As
part of the transaction,  the Board of Directors of the Company was restructured
such that effective  March 31, 1994 all Board seats became held by directors and
executive  officers  of  Century  Management.  Prior  to  the  execution  of the
Reorganization  Agreement,  no  relationship  existed  between  the  Company and
Century Management or any of their respective affiliates, directors or officers,
or any associates of such persons.

Property and Project Descriptions

     Womacks Casino, Cripple Creek, Colorado.

     On July 1, 1996, the Company purchased substantially all of the assets, and
assumed  substantially  all of the  liabilities,  of Gold Creek,  the owner of a
casino  known as  Womacks,  which is  located in Cripple  Creek,  Colorado.  The
purchase  price was  approximately  $13.6  million and  consisted of a base cash
payment of $5 million plus $425,000 for the amount of working capital of Womacks
as of the closing date, a promissory  note of $5.2 million  issued to Gold Creek
and the assumption of existing debt of Gold Creek of  approximately  $3 million.
Additionally,  the  agreement  provides  that two years after the closing of the
transaction, the Company will issue 1,060,000 shares of its common stock, valued
at $1.8 million based on the July 1, 1996 trading  price,  to two  principals of
the  seller  who  entered  into  consulting  contracts  with the  Company at the
closing.  The  number of shares to be issued is  subject  to upward  adjustment,
determined  by a formula,  to the extent that the trading price of the Company's
stock is less  than  $1.58 at the time of  issuance,  and  subject  to  downward
adjustment  to the extent  that the trading  price  exceeds  $4.00.  For further
information  concerning  the  acquisition  of Womacks,  please see Note 3 to the
Consolidated Financial Statements.

     Following the Company's acquisition of Gold Creek, the Womacks property was
consolidated with the Company's Legends Casino, and the combined properties have
been  operated  and marketed  since then as one casino  under the name  "Womacks
Casino."  Management  implemented certain  consolidation,  expansion and capital
improvement  programs in connection with the combined  casinos.  The Company (i)
created  openings  in the  common  walls in order to open up and  integrate  the
gaming areas of Legends  Casino and Womacks;  (ii) expanded the existing  player
tracking  system of Womacks to include all of the Legends Casino gaming devices;
(iii) added and promoted gaming  activities on second floor areas; and (iv) made
general interior  enhancements.  Also,  approximately 75 new gaming devices were
installed. At some time in the future management may consider expanding Womacks,
although  no plans  are  being  made at this  time.  Although  the  Company  has
considered the purchase of adjacent  property for  development  of a hotel,  the
Company is not actively pursuing such efforts at this time.

                                        3
<PAGE>


     Womacks has a total of 573 slot and video  devices and nine gaming  tables.
It has approximately  40,000 square feet of floor space. Womacks has 150 feet of
frontage on Bennett  Avenue,  the main gaming  thoroughfare in Cripple Creek and
110 feet of frontage on Second  Street.  Womacks and Legends  both began  gaming
operations in July 1992.

     Management believes that an integral component of attracting gaming patrons
in Cripple Creek is adequate, nearby parking spaces. Management believes that it
has secured or will be able to secure  adequate  parking for the  operations  of
Womacks.  The Company  presently  controls  approximately 240 parking spaces. Of
this number, 110 spaces are held pursuant to an agreement,  see "--Parking Lease
and Option to  Purchase."  An  additional  30 spaces are  leased  pursuant  to a
lease/purchase  agreement  which expires on August 31, 1997,  but which provides
for automatic  renewal,  as well as an extension for the purchase option, for an
additional  six month term,  unless  terminated by either party 30 days prior to
the  expiration  date.  The purchase  price for the  property is  $785,000.  The
remaining  parking  spaces  are  subject  to month to  month  lease  agreements.
Management believes that it could obtain satisfactory parking spaces if existing
arrangements were terminated or became inadequate.

     Marketing Strategy.  The marketing strategy of Womacks highlights promotion
of the Womacks Gold Club. The Gold Club is a players club  comprising a database
which  contains  profiles  on over 40,000  members.  Gold Club  members  receive
benefits from membership, such as cash, merchandise, food and lodging. Those who
qualify for VIP status receive  additional  benefits in addition to regular club
membership.  Status is  determined  through  player  tracking.  Members  receive
monthly  newsletters of upcoming  events and parties,  and,  depending on player
ranking, also receive invitations to special events and monthly coupons.

     In January 1997 the Company entered into a three-year advertising agreement
with Western Pacific  Airlines  ("WestPac"),  under which the entire exterior of
one of  WestPac's  aircraft  prominently  displays the logos and color scheme of
Womacks and the Company.  WestPac operates flights  nationwide out of its hub in
Colorado  Springs,  which is  located in the  primary  market  area for  Womacks
Casino.  The  agreement  also  provides for various  other joint  marketing  and
advertising  activities.  Please  see  Note  7  to  the  Consolidated  Financial
Statements of the Company for further information.

     Also,  on February 1, 1997,  Womacks  became a  co-sponsor  of the Ramblin'
Express  shuttle  service to Cripple Creek.  Ramblin'  Express buses depart from
three locations in Colorado Springs every hour from 8:00 a.m. to 10:00 p.m. Upon
arrival at Womacks Casino, passengers receive valuable coupons, including buffet
tickets.

     The Cripple Creek Market.  Cripple Creek, Colorado is a small mountain town
located  approximately  45 miles  southwest  of Colorado  Springs on the western
boundary of Pikes Peak.  Cripple  Creek is an historic  mining town,  originally
founded in the late 1800's  following a large gold  strike.  Cripple  Creek is a
tourist town and its heaviest traffic is in the summer months. Traffic generally
decreases to its low point in the winter months.

                                        4
<PAGE>


     Cripple  Creek is one of three  Colorado  historical  cities  where  casino
gaming is legal,  the others being Black Hawk and Central  City.  Cripple  Creek
operated  approximately  33% of the gaming  devices and  generated 25% of gaming
revenues for these three cities  during the year ended  December 31, 1996. As of
December  31, 1996,  there were  approximately  25 casinos  operating in Cripple
Creek.

     The tables below set forth information  obtained from the Colorado Division
of Gaming  regarding  gaming revenue by market and slot machine data for Cripple
Creek from calendar 1993 through 1996.

                            Gaming Revenue by Market
<TABLE>
<CAPTION>
                               % Change                  % Change                   % Change                    % Change
                                 Over                       Over                       Over                       Over
                    1993      Prior Year       1994      Prior Year       1995      Prior Year      1996        Prior Year
                    ----      ----------       ----      ----------       ----      ----------      ----        ----------
<S>             <C>              <C>       <C>              <C>        <C>             <C>       <C>              <C>  
CRIPPLE CREEK   $ 68,736,000     30.9%     $ 82,319,000     19.8%     $ 94,019,000     14.2%     $103,373,000     10.0%
Black Hawk ..   $101,586,000     80.8%     $173,704,000     71.0%     $195,857,000     12.8%     $219,911,000     12.3% 
Central City    $ 78,965,000     10.7%     $ 69,702,000    (11.7)%    $ 94,468,000     35.5%     $ 88,870,000     (5.9)%
</TABLE>


                             Cripple Creek Slot Data
<TABLE>
<CAPTION>
                               % Change                  % Change                   % Change                    % Change
                                 Over                       Over                       Over                       Over
                    1993      Prior Year       1994      Prior Year       1995      Prior Year      1996        Prior Year
                    ----      ----------       ----      ----------       ----      ----------      ----        ----------

<S>             <C>              <C>       <C>              <C>        <C>             <C>       <C>              <C>  
Total Slot
 Revenue        $63,194,000      31.8%     $75,979,000      20.2%      $87,311,000     14.9%     $97,024,000      11.1%
Average Number
 of Slots           3,437        24.5%        3,285         (4.4)%         3,843       17.0%        4,175          8.6%
Average Win Per
Slot Per Day         $50          6.4%         $63           26.0%          $62        (1.6)%        $63           1.6%
</TABLE>


     Gaming in Colorado is "limited stakes," which restricts any single wager to
a maximum of $5.00.  While this limits the  revenue  potential  of table  games,
management believes that slot machine play, which accounts for over 90% of total
gaming revenues, is currently impacted only marginally by the $5.00 limitation.

     The Company faces intense  competition from other casinos in Cripple Creek,
including a handful of casinos of similar size and many other  smaller  casinos.
There can be no assurance that other casinos in Cripple Creek will not undertake
expansion efforts similar to those recently made by the Company, thereby further
increasing  competition,  or that large,  established  gaming operators will not
enter the Cripple  Creek  market.  The Company  seeks to compete  against  these
casinos through  promotion of Womacks Gold Club and superior service to players.
Management believes that the casinos which will be more successful and best able
to take  advantage of the market  potential of Cripple  Creek will be the larger
casinos that have reached a certain critical mass.

     The Company competes,  to a lesser extent, with approximately 19 casinos in
Black Hawk and  approximately 12 casinos in Central City. Black Hawk and Central
City are also small  mountain  tourist  towns  which  adjoin  each other and are
approximately  30 miles  from  Denver  and a two and  one-half  hour  drive from
Cripple  Creek.  The main  market  for  Cripple  Creek is the  Colorado  Springs
metropolitan  area,  and the main market for Black Hawk and Central  City is the
Denver metropolitan area.

                                        5
<PAGE>


     In addition,  there is intense  competition  among  companies in the gaming
industry generally,  and many gaming operators have greater name recognition and
financial and marketing  resources than the Company.  The Company  competes with
many  established  gaming  operators in gaming venues other than Cripple  Creek.
Many of these  operators  have  greater  financial,  operational  and  personnel
resources than the Company.  There can be no assurance that the number of casino
and hotel  operations  will not exceed  market demand or that  additional  hotel
rooms or  casino  capacity  will not  adversely  affect  the  operations  of the
Company.

     Description  of  Property.  Womacks is  located at 200 to 220 East  Bennett
Avenue in Cripple Creek, Colorado.

     The lots  comprising  200 East Bennett  Avenue are owned by a subsidiary of
the Company,  subject to a real estate sales contract which secures a promissory
note issued to the previous  holder of the property.  The note bears interest at
13.3% per year and has a principal  amount of $504,274 as of December  31, 1996.
The lots  comprising  210 East Bennett  Avenue are owned by a subsidiary  of the
Company and are subject to several  encumbrances,  including a security interest
granted  to  Gold  Creek.  See  Notes  3 and  5 to  the  Consolidated  Financial
Statements of the Company for further information.

     The  Company   holds  a  leasehold   interest  in  the  real  property  and
improvements located at 220 East Bennett Avenue. An unaffiliated third party, as
fee  owner of the  property,  granted  first and  second  deeds of trust for the
benefit of Park State Bank  ("Park")  and  Community  Banks of Colorado  Cripple
Creek ("Community"),  respectively.  The third party then leased the property to
Teller  Realty,  Inc.  ("Teller") and granted to Teller an option to acquire the
fee interest in the  property.  Teller  subsequently  executed a sublease to the
property with Gold Creek,  and granted to Gold Creek a suboption to purchase the
property through Teller's purchase option. The Company's wholly-owned subsidiary
which purchased Womacks,  WMCK Acquisition Corp.  ("WMCK") has executed separate
subordination,  non-disturbance and attornment  agreements with each of Park and
Community,  pursuant to which WMCK has agreed that its  interest in the sublease
is  subordinate to the liens arising out of the deeds of trust in the fee estate
in favor of Park and Community.  In return,  Park and Community have each agreed
(i) not to disturb WMCK's possessory rights in and to the property,  and (ii) to
honor the sublease and suboption,  should either  foreclose on their  respective
lien, so long as WMCK is not in default under the sublease,  and so long as WMCK
attorns to Park, Community or any purchaser at a foreclosure.  The sublease,  as
assigned to WMCK,  provides for monthly rental payments of $16,000,  and expires
on June 20, 2005 unless terminated  earlier by WMCK with 12 months' notice.  The
suboption  may be  exercised  at the  expiration  of the sublease at an exercise
price of $1,500,000.  Teller, the third party, Gold Creek and WMCK have executed
a four-party  agreement evidencing the assignment of the sublease and suboption,
as well as the consent to these  assignments.  None of the above  entities other
than WMCK is affiliated with the Company.

     The real property and  improvements  at 208 East Bennett Avenue were leased
by Gold  Creek  from  Louie  D.  Carleo  d/b/a/  L.D.C.  Properties  ("Carleo").
Subsequently,  Carleo  executed a deed of trust on the fee  interest to secure a
promissory  note issued to  Community.  Carleo then conveyed the fee interest in
the property, subject to the lease and the deed of trust, to T.J.L. Enterprises,
Inc. ("TJL"). Gold Creek conveyed its interest in the lease to WMCK, and TJL and
WMCK have executed a new lease on the property. WMCK and Community have executed
a subordination, non-disturbance and attornment agreement pursuant to which WMCK
has agreed that its interest in the lease is  subordinate  to  Community's  lien
arising out of the deed of trust in the fee estate, and Community has agreed not
to disturb  WMCK's  possessory  rights in and to the property  should  Community
foreclose on its lien, so long as WMCK is not in default under the lease, and so
long as WMCK attorns to Community or any purchaser at foreclosure.  The terms of
the final lease  between TJL and WMCK  provide  for monthly  rental  payments of
approximately  $14,600,  and the lease expires in 2006.  In addition,  the lease
provides  WMCK with an option to purchase  the property at any time from July 1,
1997 through the end of the lease term for approximately $2,000,000. None of the
above entities other than WMCK is affiliated with the Company.

                                        6
<PAGE>


     Parking  Lease and Option to Purchase.  In October  1995,  an  unaffiliated
third party entered into an agreement with a subsidiary of the Company,  Century
Casinos Cripple Creek,  Inc. ("CCC") to assign to CCC a parking lease ("Lease"),
with an option to purchase  ("Option")  relating to approximately 110 contiguous
parking  spaces in Cripple  Creek.  The lease and option expire on September 30,
1998.  The initial  payment  was  $246,000  and CCC agreed to pay an  additional
$88,400 if the Option is exercised.  Lease payments are $15,000 per quarter. The
Option exercise price is $3,250,000.

Additional Projects of the Company

     In  addition  to its  operating  project in Cripple  Creek,  Colorado,  the
Company  has a  number  of  potential  gaming  projects  in  various  stages  of
development. In addition to the capital needs of these potential projects (which
may require  outside  financing),  there are various other risks which,  if they
materialized,  could materially adversely affect a proposed project or eliminate
its feasibility  altogether.  For example, in order to conduct gaming operations
in most jurisdictions,  the Company must first obtain gaming licenses or receive
regulatory  clearances.  To date the Company  has  obtained  gaming  licenses or
approval to operate gaming facilities in Colorado,  Louisiana and on an American
Indian reservation in California.  While management believes that the Company is
licensable in any jurisdiction,  each licensing process is unique and requires a
significant  amount of funds and management  time. The licensing  process in any
particular  jurisdiction can take significant time and expense through licensing
fees,  paying for  background  investigation  costs,  fees of counsel  and other
associated  preparation  costs.  Moreover,  should the  Company  proceed  with a
licensing approval process with industry  partners,  such industry partners will
be subject to regulatory  review as well.  The Company  seeks to satisfy  itself
that  industry  partners are  licensable,  but cannot  assure that such partners
will, in fact, be  licensable.  Additional  risks before  commencing  operations
include the time and expense  incurred and unforeseen  difficulties in obtaining
suitable sites, liquor licenses, building permits, materials, competent and able
contractors,  supplies,  employees,  gaming  devices  and  related  matters.  In
addition,  certain licenses include  competitive  situations  where, even if the
Company is licensable,  other factors such as the economic  impact of gaming and
financial  and  operational  capabilities  of  competitors  must be  analyzed by
regulatory  authorities.  All of these  risks  should  be viewed in light of the
Company's limited staff and limited capital.

     Also, the Company's  ability to expand to additional  locations will depend
upon a number of factors,  including, but not limited to: (i) the identification
and  availability  of suitable  locations,  and the  negotiation  of  acceptable
purchase,  lease,  joint  venture or other terms;  (ii) the securing of required
state and local licenses, permits and approvals, which in some jurisdictions are
limited in number; (iii) political factors;  (iv) the risks typically associated
with any new construction project; (v) the availability of adequate financing on
acceptable  terms;  and (vi) for locations  outside the United  States,  all the
risks of foreign  operations,  including  currency  controls,  unforeseen  local
regulations,   political   instability   and  other   related   risks.   Certain
jurisdictions  issue  licenses or  approval  for gaming  operations  by inviting
proposals from all interested parties,  which may increase  competition for such
licenses or approvals.  The  development  of dockside and riverboat  casinos may
require  approval  from  the Army  Corps of  Engineers  and will be  subject  to
significant  Coast Guard  regulations  governing  design and operation.  Most of
these factors are beyond the control of the Company.  As a result,  there can be
no assurance that the Company will be able to expand to additional locations or,
if such  expansion  occurs,  that it will be  successful.  Further,  the Company
anticipates  that  it  will  continue  to  expense  certain  costs,  which  were
substantial  in 1994,  1995 and 1996 and may continue to be  substantial  in the
future,  in  connection  with the  pursuit  of  expansion  projects,  and may be
required to write off any  capitalized  costs incurred in connection  with these
ventures.  In 1996 the Company terminated its pursuit of a previously  disclosed
gaming development  project in Louisiana (due to the local citizenry rejecting a
gaming initiative),  and the Company terminated its previously  disclosed casino
marketing agreement with HFS Gaming Corp.

                                        7
<PAGE>


     The following describes other activities of the Company.

     Casino  Management  Agreement-Rhodes,  Greece.  The Company has  executed a
casino management  consulting  agreement with Rhodes Casino,  S.A., a consortium
including Playboy Enterprises,  Inc., under which the Company, as an independent
contractor,  will supply services and assistance in establishing a casino on the
island of Rhodes,  Greece. The consortium has been awarded the exclusive license
for casino  gaming on Rhodes  for a 12-year  period  commencing  when the casino
begins  operations.  The  Company's  management  consulting  agreement  with the
consortium,  which has an initial term running through the third  anniversary of
the casino opening, provides for fees to the Company of $200,000 for services to
be rendered in the pre-opening  phase,  $300,000 per year during the first three
years of operation and $50,000 per year thereafter,  if renewed.  The Company is
not required to commit any capital in  connection  with the proposed  activities
under the agreement. In the fourth quarter of 1996, the Company received $50,000
with  respect  to  pre-opening  phase  services.  Although  the  consortium  has
indicated  a target  opening  date for the  casino  of late  1997,  the  Company
believes that such target date may be optimistic,  and it cannot predict whether
the casino opening will occur in 1997.

     South Africa. Recently enacted legislation in South Africa provides for the
award of up to 40 casino  licenses  throughout  the  country.  The  Company  has
entered  into  agreements  with three  local  consortia  to  provide  consulting
services during the application  phase,  as well as casino  management  services
should  the  Company's  partners  be  awarded  one or more  licenses.  The first
application  has  been  filed  by the  Company's  partners  in the  province  of
Mpumalanga  and was put on the short  list of  finalists.  In  January  1997 the
Mpumalanga  provincial  gaming board indicated that another group (including MGM
Grand) had been given preferred  applicant  status,  and this group is presently
negotiating  with the gaming board for the award of a license.  In the event the
gaming  board and the  preferred  applicant do not reach  agreement,  the gaming
board could consider  other  finalists for the license.  The second  application
could be filed with the gaming  board in the  province  of Gauteng in 1997 for a
hotel/casino resort in the greater  Johannesburg area. The Gauteng gaming board,
however,  has not yet set a definitive date for the filing of  applications.  If
successful  in this  application,  the  Company  would  be  required  to make an
investment of approximately $2 million for a 3% equity interest in the licensee.
Later in 1997 the  Company  expects the filing of the third  application  in the
Northern   Province  for  a  hotel/casino   resort  close  to  the   Pietersburg
metropolitan  area.  The  Company  cannot  predict  whether  any  licenses  will
ultimately be awarded to the Company's partners.

     Cruise  Vessels -  Concession  Agreements.  The  Company has been acting as
casino  concessionaire  for Silver Seas Cruises,  Ltd. ("Silver Seas"), a cruise
vessel  operator  which  presently  operates  two luxury  vessels.  Silver  Seas
commenced  operating  the vessel known as the Silver Cloud in April 1994 and the
vessel known as the Silver Wind in January 1995. The  concessionaire  agreements
require the Company to  guarantee to Silver Seas $1.00 per adult  passenger  per
gaming day (defined as a cruising day on which the slot machines are operated in
excess of four hours),  with the next $1.50 of gross  gaming  revenues per adult
passenger  per gaming day being  retained by the Company.  Any such gross gaming
revenues in excess of $2.50 per adult  passenger per gaming day are split 50% to
the Company and 50% to Silver Seas.  The Company is  responsible  for all gaming
related operating expenses of these casinos. The Company operates the casinos on
its own  behalf  and for its own  account  and  provides  all  necessary  gaming
equipment (three gaming tables and  approximately 20 gaming machines per vessel,
respectively),  together  with the casino  bankroll.  Furthermore,  the  Company
covers  all  casinorelated   operating  expenses  such  as  payroll  for  casino
employees,  travel  expenses,  recruitment  fees,  printing  costs for necessary
paperwork and concession  fees.  The  concession  agreement for the Silver Cloud
expires in April 1997; the  concession  agreement for the Silver Wind expires in
January 1998. The Company has been informed by Silver Seas that the Silver Cloud
agreement  will not be renewed in April 1997. The Company  understands  that the
casino  concession  may be awarded to an affiliate  of Silver Seas.  The Company
believes  that it is likely that the  agreement  for the Silver Wind will not be
renewed  when it  expires  in January  1998.  Please see "Item 6 -  Management's
Discussion and Analysis of Financial  Condition and Results of  Operations"  for
further discussion of the impact of the termination of these agreements.

                                        8
<PAGE>


     Nonoperating  Casino in Wells,  Nevada.  In 1994, the Company purchased the
Ranch House Casino in Wells, Elko County, Nevada from an unaffiliated party. The
total purchase price of $850,000 was determined based on arm's length bargaining
with the seller.  In May 1995, the Company made a down payment of $150,000.  The
remaining  balance of $700,000 was  evidenced by a note secured by the property.
In 1996 the  Company and the seller  revised the terms of the note.  The Company
made principal  payments  totaling $237,493 and paid interest of $87,507 through
December  31,  1996.  Under the revised  terms,  the Company is required to make
monthly  payments  of $25,000  including  interest at 6.02% per year until March
1998 when the remaining  principal of $110,100 is due. In addition to the casino
facility  itself,  the Company  acquired seven acres of land directly across the
street from the casino for a purchase  price of $69,000.  The  property,  closed
since 1992 but in operable  condition,  is an 18,000  square foot  building with
approximately 6,000 square feet of gaming space.  Management  currently does not
intend to pursue a gaming license with respect to the facility, and is seeking a
sale or lease of the casino and land.

     Sale of Interest in Riverboat Project in Indiana. On December 21, 1995, the
Company  sold  its 80%  interest  in  Pinnacle  Gaming  Development  Corporation
("Pinnacle"),  to Switzerland County Development  Corporation (the "Buyer"). The
Buyer is an affiliate of Hilton Gaming  Corporation and Boomtown,  Inc. Pinnacle
had  applied  for a gaming  license  from the Indiana  Gaming  Commission  and a
certificate  of  suitability  from  Switzerland  County,  Indiana to develop and
operate a riverboat casino project in the county.  Pinnacle has incurred various
costs and  expenses  including  payments for the  options,  license  application
expenses,  and  professional  fees.  All  of  Pinnacle's  operations  since  its
inception have been related to its efforts to obtain the gaming license. Through
the date of the Company's sale of its Pinnacle  stock,  the Company had incurred
approximately $500,000 in costs and expenses related to Pinnacle.

     The  agreement for sale of the Pinnacle  stock to the Buyer  provides for a
potential  total purchase  price payable to the Company of $3,440,000,  of which
$80,000 was paid on December  21,  1995.  The  agreement  is subject to numerous
terms which could result in its termination and excuse the Buyer from paying the
remainder of the purchase price.  These terms essentially  require that a gaming
license and  certificate  of  suitability  be awarded to  Pinnacle  and that the
project  commence  operations  for the  Buyer  to be  required  to pay the  full
purchase  price.  Switzerland  County  remains  one of two  Indiana  counties in
competition  for the  remaining  Ohio  River  license to be  granted.  The stock
agreement requires the Buyer to continue the efforts to obtain a gaming license,
but the  likelihood  of  Pinnacle  being  awarded  a gaming  license  cannot  be
predicted.

     The remainder of the potential  purchase price,  beyond the $80,000 paid at
closing,  is  scheduled  to be paid as follows:  (i)  $400,000  seven days after
receipt of a certificate of  suitability  from Indiana  regulatory  authorities;
(ii) $1,040,000 seven days after the ground breaking for the project;  and (iii)
$32,000 per month for 60 months (or a total of $1,920,000) following the opening
of the project for business.  No interest will be accrued for the unpaid portion
of the purchase  price,  although late payments  will bear  interest.  After the
project commences gaming operations, the Company may require the Buyer to prepay
the monthly payments,  discounted to present value on the date of the prepayment
at the rate of 12% per year. The Buyer also has the option to prepay all or part
of the monthly payments, discounted at the rate of 12%.


                                        9
<PAGE>


     The Buyer  may  terminate  the  agreement  (a) for a number  of  enumerated
reasons, or (b) for no reason, but in the latter case must pay a termination fee
to the Company of $200,000 if the agreement is terminated 60 days or more before
the state hearings on the gaming  license,  $320,000 if terminated  less than 60
days before the hearings but before award of a certificate of  suitability,  and
$160,000 if  terminated  after the award of a  certificate  of  suitability  but
before its actual  receipt  thereof by  Pinnacle.  The Buyer may  terminate  the
agreement  without incurring any obligation or a termination fee for a number of
reasons, including: (i) laws or regulations are enacted increasing the number of
riverboat or other gaming licenses in Indiana or Kentucky or in nearby counties,
permitting  additional  license  applications  in  Switzerland  County or nearby
counties,   or  placing  a  moratorium  on  gambling,   or  imposing  additional
requirements which reduce the profitability of gaming in such areas; or (ii) the
two remaining gaming licenses to be granted in Indiana (as of December 1995) are
awarded to other  applicants,  the Indiana  Gaming  Commission  indicates that a
certificate of suitability will not be awarded to Pinnacle, or Pinnacle does not
receive the  certificate  within 12 months of the date of the  agreement  (which
date has passed);  or (iii) the prime rate of interest increases to 10% or more;
or (iv) there is a material  default or breach of the  agreement by the Company,
or the Company fails to provide a title policy as required by the agreement.

     In January 1997 the parent  company of Hilton  Gaming  Corporation,  Hilton
Hotels Corporation ("Hilton"),  announced a hostile takeover bid seeking control
of a business competitor,  ITT Corporation ("ITT"). Two effects of this proposed
takeover  directly affect the contractual  relationship  between the Company and
the Buyer:  first, the proposed  acquisition  places in peril the ability of the
Buyer to engage in commercially  reasonable efforts to pursue the Indiana gaming
license  application,  and; second, a successful  acquisition by the Buyer would
implicate the "10%  interest  rule" in Indiana,  mandating  that a license owner
hold no more than a 10%  interest in any other  Indiana  gaming  license (an ITT
business unit, Caesars, owns a controlling interest in the gaming license issued
for the Harrison County, Indiana site).

     Because of the actual and potential  adverse affects of the Hilton business
strategy,  the Company  initiated  an action,  in January  1997 for  declaratory
judgment  in the United  States  District  Court for the  Southern  District  of
Indiana.  The complaint seeks a declaration of the rights and obligations of the
parties to the Pinnacle  Stock  Purchase  Agreement,  and requests  compensation
should the court find the Buyer to be in breach of its  contractual  obligations
to the Company. It is expected that the defendants will respond with a motion to
dismiss,  or an alternative  motion to stay  consideration on the merits pending
the outcome of the Hilton  takeover  bid. The Company has been in  communication
with  representatives  of  the  defendants   concerning  the  possibility  of  a
negotiated  settlement.  Management  believes  that the  litigation  presents no
materially adverse consequences to the Company.

     Payments Relating to Former Indian Tribal Management  Agreement-California.
In August 1995, the Company terminated its management  agreement with the Soboba
Band of Mission  Indians (the "Tribe") with respect to Legends  Casino at Soboba
in  Riverside  County,  California.  In  connection  with  the  termination,  an
unaffiliated  third party issued a promissory note to the Company for $3,100,000
payable over three years in monthly  installments,  based on percentage of gross
revenue from certain  operations of the facility.  The Company received payments
on the note in 1996 of $947,954 and $48,183 in 1995.

     The Company's  unrecovered  capitalized  costs  associated  with the Soboba
contract at December 31, 1996 were  $844,367.  The Company  recognizes  payments
received on the note as reductions of its capitalized  costs. Since payments are
based on revenue  generated by the facility,  satisfaction  of the note, and the
Company's  recovery of its  capitalized  costs,  is dependent upon the continued
successful  operation of the facility.  The Company  periodically  evaluates the
recoverability  of the remaining  capitalized  costs and if it becomes  probable
that all or a portion of such costs are not recoverable, the Company will record
a charge to operations.  Payments in excess of total  capitalized  costs will be
recognized as income if, and when, received.  The Company is aware that there is
an  unresolved  dispute  within  the  State  of  California  between  the  state
government  and Indian tribes  regarding the types of gaming devices that may be
operated at casinos on Indian tribal lands. An adverse outcome could potentially
affect the  recoverability  of the Company's  remaining  capitalized  costs. The
Company  cannot  predict the  likelihood  of an outcome  adverse to the Company;
however,  management believes that the Company's remaining  capitalized costs at
December 31, 1996 are fully recoverable.

                                       10
<PAGE>


     Portage des Sioux,  Missouri. In 1994, the Company entered into a riverboat
development  agreement  with  the  City of  Portage  des  Sioux,  Missouri.  The
agreement  provided that the Company would be the developer and operator for the
development  of a  riverboat  gaming  enterprise,  and that the City  would  not
actively pursue additional or alternative casino operations. The Company elected
not to renew this  agreement,  which expired on February 25, 1997.  Although the
Company maintains  current a gaming  application filed in November 1994 with the
Missouri  Gaming  Commission,  management  believes  that  consideration  of the
Company's application is unlikely in the foreseeable future.

Employees

     The Company employs  approximately  200 persons on an equivalent  full-time
basis,  including  cashiers,  dealers,  food  and  beverage  service  personnel,
facilities  maintenance staff, and accounting and marketing personnel.  No labor
unions represent any employee group. A standard package of employee  benefits is
provided  to  full-time  employees  along  with  training  and  job  advancement
opportunities.

Seasonality

     The  Company's  business is not  considered  to be seasonal;  however,  the
anticipated  highest  levels of business  activity,  at least in Colorado,  will
occur in the tourist season (i.e., from May through  September).  Its base level
(i.e.,  November  through May) is expected to remain  fairly  constant  although
weather  conditions  during  this  period  could  have a  significant  impact on
business levels in Colorado.

                             GOVERNMENTAL REGULATION

     The  Company's  gaming  operations  are  subject  to  strict   governmental
regulations at federal,  state and local levels.  Statutes and  regulations  can
require the Company to meet various standards  relating to, among other matters,
business   licenses,   registration  of  employees,   floor  plans,   background
investigations of licensees and employees, historic preservation, building, fire
and  accessibility  requirements,  payment  of  gaming  taxes,  and  regulations
concerning  equipment,  machines,  tokens,  gaming  participants,  and ownership
interests.  Civil and  criminal  penalties  can be assessed  against the Company
and/or  its  officers  or  stockholders  to  the  extent  of  their   individual
participation in, or association with, a violation of any of the state and local
gaming  statutes  or  regulations.  Such  laws  and  regulations  apply  in  all
jurisdictions  within the United  States in which the Company  may do  business.
Management  believes that the Company is in compliance  with  applicable  gaming
regulations.  For  purposes  of the  discussion  below,  the term "the  Company"
includes its applicable subsidiaries.

Colorado Regulation

     The Colorado Limited Gaming Control  Commission  ("Commission") has adopted
regulations  regarding the ownership of gaming  establishments  by publicly held
companies (the  "Regulations").  The Regulations  require the prior clearance or
notification  of the Commission  before any public offering of any securities of
any gaming  licensee or any  affiliated  company.  The  Regulations  require all
publicly  traded or publicly  owned  gaming  licensees  to comply with  numerous
regulatory gaming requirements.  These requirements include, but are not limited
to, those listed below.


                                       11
<PAGE>


     A publicly  traded gaming  licensee that sends to the holders of its voting
securities  any proxy  statements  subject to Regulation  14A of the  Securities
Exchange Act of 1934, as amended (the "1934 Act"),  or an information  statement
subject to  Regulation  14C of the 1934 Act,  must file such  material  with the
Colorado Division of Gaming (the "Colorado Division").

     Whenever any document is furnished to the holders of voting securities of a
publicly  traded gaming  licensee or filed by a publicly  traded gaming licensee
with the SEC, the  publicly  traded  gaming  licensee is required to file a true
copy of that document  with the Colorado  Division.  Whenever a publicly  traded
gaming licensee  receives any material  document filed with the SEC by any other
person relating to the publicly traded gaming licensee, it must file a true copy
of the document with the Colorado Division. Each publicly traded gaming licensee
must file with the Colorado Division,  on an annual basis, a list of the holders
of its voting securities.

     Each publicly  traded gaming licensee is required to report promptly to the
Colorado  Division the election or  appointment  of any director,  any executive
officer  and  any  other   officers   actively  and  directly   engaged  in  the
administration  or supervision of the gaming  activities at any licensed  gaming
establishment.

     The following  provisions are required to be included in the certificate of
incorporation for every publicly traded gaming licensee or holding company which
has a gaming license in the State of Colorado.

          (i)  The entity is precluded from issuing any voting securities except
               in accordance with the provisions of the Colorado  Limited Gaming
               Act ("Gaming Act") and the  regulations  promulgated  thereunder.
               The issuance of any voting  securities in violation of the Gaming
               Act is ineffective  and such voting  securities are deemed not to
               be  issued  and  outstanding  until (a) the  entity  ceases to be
               subject  to the  jurisdic  tion  of the  Commission,  or (b)  the
               Commission,  by  affirmative  action,  validates  the issuance or
               waives any defect in the issuance.

          (ii) No voting  securities issued by the entity and no interest in the
               entity can be transferred in any manner except in accordance with
               the  provisions  of the  Gaming  Act  and  its  regulations.  Any
               transfer in violation of the Gaming Act is ineffective  until (a)
               the  entity  ceases  to be  subject  to the  jurisdiction  of the
               Commission,   or  (b)  the  Commission,  by  affirmative  action,
               validates the transfer or waives the defect in the transfer.

          (iii)If the Commission at any time  determines that a holder of voting
               securities of the entity is  unsuitable  to hold the  securities,
               then the issuer of the securities  may,  within 60 days after the
               finding  of  unsuitability,  purchase  the  securities  of the un
               suitable  person at the lesser of (i) the cash equivalent of such
               person's  investment  in the entity,  or (ii) the current  market
               price  of the  date  of  finding  of  unsuitability,  unless  the
               securities are transferred to a suitable person, as determined by
               the   Commission,   within   60  days   after  the   finding   of
               unsuitability. Until the securities are owned by persons found by
               the  Commission to be suitable to own them, (a) the entity is not
               required or permitted to pay any dividend or interest with regard
               to the  securities,  (b)  the  holder  of the  securities  is not
               entitled  to vote on any matter as the  holder of the  securities
               and such securities  shall not for any purpose be included in the
               voting securities of the entity,  and (c) the entity is precluded
               from  paying  any  remuneration  in any form to the holder of the
               securities.

     The Company has the above provisions in its Certificate of Incorporation.


                                       12
<PAGE>


     The  Colorado   regulations  for  publicly  traded  gaming  licensees  (the
"Regulations")  also require each person who individually or in association with
others acquires,  directly or indirectly,  beneficial ownership of 5% or more of
any class of voting  securities of a publicly  traded gaming  licensee to notify
the Colorado Division within 10 days after the person acquired 5% or more of the
securities.  The person who acquires 5% or more of the securities  shall provide
any additional  information requested by the Colorado Division and be subject to
a finding of suitability as required by the Colorado  Division.  Publicly traded
gaming  licensees  are also  required  to  notify  each  person  subject  to the
Regulations  of the  Colorado  Division's  requirements  as soon  as the  gaming
licensee becomes aware of the acquisition.

     Each person who,  individually  or in  association  with others,  acquires,
directly or indirectly,  the beneficial ownership of 10% or more of any class of
voting  securities of a publicly traded gaming licensee  required to contain the
above charter provisions is required to apply to the Commission for a finding of
suitability  within 10 days after  acquiring  10% or more of the  securities.  A
publicly  traded gaming  licensee is also required to notify each person subject
to the Regulations of its  requirements  as soon as the gaming licensee  becomes
aware of the acquisition.  However, the obligations of the person subject to the
Regulations are independent of and unaffected by the gaming  licensee's  failure
to give the notice.

     Any person found unsuitable by the Commission is not permitted ownership of
any  voting  security  of a  publicly  traded  gaming  licensee,  subject to the
provisions of the Regulations, and must be removed immediately from any position
as a director, officer or employee of the publicly traded gaming licensee.

     The State of Colorado  created the Colorado  Division within the Department
of Revenue to license, implement,  regulate and supervise the conduct of limited
gaming.  The  Director of the  Colorado  Division,  under the  supervision  of a
five-member  Colorado  Commission,  has  been  granted  broad  power  to  ensure
compliance with the law, and regulations  adopted  thereunder.  The Director may
inspect, without notice, premises where gaming is being conducted; he may seize,
impound or remove any gaming  device.  He may  examine  and copy any  licensee's
records,  may  investigate  the  background  and conduct of licensees  and their
employees,  and may bring  disciplinary  actions.  He may also conduct  detailed
background checks of persons who loan money to the Company.

     The  Commission  is  empowered  to issue  five  types of gaming  and gaming
related licenses. The Colorado Division has broad discretion to revoke, suspend,
condition,  limit or restrict a license at any time.  The license of the Company
must be renewed  each year.  All licenses are  revocable,  non-transferable  and
valid only for the particular location initially authorized.  No person, such as
the Company,  can have an ownership interest in more than three retail licenses.
Hence,  the  Company's  business  opportunities  in  Colorado  could be  limited
accordingly. All of the Company's employees must apply for and receive a support
gaming  license  prior to  commencing  employment.  The  Commission  has adopted
comprehensive  rules and  regulations  which  require  the  Company to  maintain
adequate  books and records and these rules also  prescribe  minimum  operating,
security and payoff procedures. The Commission has the power to deny any license
or renewal  thereof  to any person it  considers  to be  "unsuitable,"  a broad,
discretionary  standard.  The Commission has also promulgated a list of excluded
persons;  it is unlawful for any person on this list to enter licensed  premises
or to hold shares in a licensee.  Rules  regarding  gaming,  cheating  and other
fraudulent  practices  have also  been  adopted,  which  rules  the  Company  is
obligated to police and enforce.

     Other  state  regulatory  agencies  also impact the  Company's  operations,
particularly its license to serve alcoholic beverages.  Rules and regulations in
this  regard  are  strict,  and loss or  suspension  of a liquor  license  could
significantly  impair,  if not ruin, a  licensee's  operation.  Local  building,
parking and fire codes and similar  regulations  could also impact the Company's
operations and proposed development of its properties.


                                       13
<PAGE>


Item 2. Properties.

     The Company maintains its corporate offices at 26 South Tejon Street, Suite
203, Colorado Springs, Colorado, pursuant to a lease with an unaffiliated party.
The lease term runs  through  September  1999,  and monthly  lease  payments are
$2,600.  The  Company  remains  obligated  under an office  lease for its former
corporate offices in Denver, Colorado. This lease expires in September 1998. The
Company has sublet this space to an  unaffiliated  third party for the remainder
of the lease term. The Company pays monthly rent of $6,162 and receives  monthly
payments of $5,225 from the  subtenant.  The Company has the right to  terminate
the  lease  effective  September  1997 for a  termination  fee of  approximately
$10,000.  If the Company  exercises this right,  the sublease would terminate as
well.  See "Item 1. Business  -Property and Project  Descriptions"  herein for a
description of the Company's other properties.

Item 3. Legal Proceedings.

     Other than as set forth  above in Item 1, the Company is not a party to any
litigation which is individually or in the aggregate material to the Company.

Item 4. Submission of Matters to a Vote of Securityholders.

     The 1996 annual meeting of stockholders of the Company was held on November
25, 1996. At the annual meeting,  the two Class II directors to the Board, Peter
Hoetzinger and James D. Forbes, were elected to the Board for a three-year term,
and a proposal to increase  the number of shares of Common  Stock  reserved  for
issuance  under  options  which  may be  granted  under  the  Employees'  Equity
Incentive  Plan   (2,500,000   shares  to  3,500,000   shares)  was  adopted  by
stockholders of the Company. On the proposal to elect the Class I directors, the
votes  were:  James  D.  Forbes,  10,124,647  for,  1,490  against,  and  19,399
abstained;   Peter  Hoetzinger,   10,124,547  for,  1,590  against,  and  19,399
abstained.  On the  proposal  with respect to the  amendment  to the  Employees'
Equity Incentive Plan, the results were:  7,166,050 for,  130,135  against,  and
12,000 abstained.

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

     The Common Stock began  trading in the Nasdaq  SmallCap  Market on November
10, 1993.  The  following  table sets forth the low and high bid price per share
quotations as reported on the NASDAQ SmallCap Market of the Common Stock for the
periods indicated.  These quotations reflect inter-dealer prices, without retail
markup,  mark  down  or  commission  and may not  necessarily  represent  actual
transactions. Actual prices may vary.

Quarter Ended                          Low             High

March 31, 1995                       $1.62            $2.50
June 30, 1995                        $1.88            $2.38
September 30, 1995                   $1.50            $2.38
December 31, 1995                    $1.25            $2.25
March 31, 1996                       $1.50            $2.13
June 30, 1996                        $1.13            $2.00
September 30, 1996                   $1.25            $1.69
December 31, 1996                    $1.06            $1.81

     At December 31, 1996, the Company had  approximately  200 holders of record
of its Common Stock;  management  estimates that the number of beneficial owners
is approximately 1,000.


                                       14
<PAGE>


     At the present time,  management of the Company intends to use any earnings
which  may be  generated  to  finance  the  growth  of the  Company's  business.
Accordingly, while payment of dividends rests within the discretion of the Board
of Directors,  no dividends  have been  declared or paid by the Company,  and it
does not presently intend to pay dividends. One of the Company's debt agreements
restricts  payment of cash  dividends.  There can be no assurance that dividends
will be paid.

Item 6. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations.

Business Environment and Risk Factors

     The following  discussion  should be read in conjunction with the Company's
consolidated  financial  statements and related notes included elsewhere herein.
The Company's  future  operating  results may be affected by various  trends and
factors  which are beyond the  Company's  control.  These  include,  among other
factors,  the  competitive  environment in which the Company  operates,  present
dependence upon the Cripple Creek, Colorado gaming market,  changes in the rates
of  gaming-specific  taxes,  shifting public attitudes toward the  socioeconomic
costs and benefits of gaming, actions of regulatory bodies,  dependence upon key
personnel,  the  speculative  nature of gaming  projects the Company may pursue,
risks associated with expansion,  and other uncertain  business  conditions that
may affect the Company's business.

     With the exception of historical  information,  the matters discussed below
under the headings "Results of Operations" and "Liquidity and Capital Resources"
may include forward-looking statements that involve risks and uncertainties. The
Company cautions the reader that a number of important factors discussed herein,
and in other reports filed with the  Securities and Exchange  Commission,  could
affect  the  Company's  actual  results  and  cause  actual  results  to  differ
materially from those discussed in forwardlooking statements.

Results of Operations

     As discussed more fully in Note 3 to the financial  statements,  on July 1,
1996,  the Company  acquired the assets of Gold Creek  Associates,  L.P.  ("Gold
Creek"),  owner of Womack's Saloon & Gaming Parlor ("Womacks") in Cripple Creek,
Colorado.  Following  the  Company's  acquisition  of Gold  Creek,  the  Womacks
property was consolidated with the Company's Legends casino.  Subsequent to June
30, 1996, the combined  properties have been operated and marketed as one casino
under the name Womacks Casino. The accompanying financial statements include the
results of operations acquired form Gold Creek for the period subsequent to June
30,  1996.  Consequently,  results  of  operations  for 1996  cannot be  readily
compared with those of 1995.

     Net operating  revenue  increased to $11,478,042 in 1996 from $4,222,088 in
1995,  primarily as a result of the  acquisition  of Gold Creek on July 1, 1996.
Casino  revenue was  $10,984,499  in 1996 and  $4,003,485 in 1995. The Company's
share of the Cripple Creek market  increased from 4.3% in December 1995 to 17.8%
in December 1996, following the acquisition.  On a pro forma basis, the combined
casino  increased  its market share in Cripple Creek to 16.0% in 1996 from 13.6%
in the prior year.  The Company's  Cripple Creek  operations  now offer 573 slot
machines and nine table games versus 189 slot  machines and three table games at
the end of 1995. In addition to the increased  revenue from the combined Womacks
properties,  revenue from the Company's cruise ship casinos grew 27% to $546,956
in 1996.  The operating  margin for the cruise ship casinos was $130,378 in 1996
and $27,933 in 1995.  The revenue  growth for the cruise ship casinos is chiefly
attributable  to the Silver Wind,  which began operating in the first quarter of
1995 and  gradually  improved its  performance  throughout  the remainder of its
first year. The Company has been advised by the cruise ships' management company
that the Company's  concession  agreement for the Silver Cloud, which expires in
April 1997, will not be renewed. The Silver Cloud produced net operating revenue
of  $218,495  and an  operating  margin  of  $34,481  in 1996.  (The  concession
agreement for the Silver Wind is presently due to expire in January 1998 and the
Company  believes it is likely that this agreement  will not be renewed.)  Gross
margin from company-wide  casino activities  improved from 47% in 1995 to 58% in
1996. The margin improvement is largely  attributable to the operating synergies
and  cost  reductions   realized  from  the  Gold  Creek   acquisition  and  the
consolidation of the two Cripple Creek properties under the Womacks name.

                                       15
<PAGE>


     Food and beverage revenue increased 71% from 1995 to 1996 due to the larger
scale of operations resulting from the Gold Creek acquisition. Womacks currently
staffs a  full-service  restaurant  and five bars. In  anticipation  of the Gold
Creek  acquisition,  Legends  scaled back its restaurant  operations  during the
first quarter of 1996 and  discontinued  them  completely in the second quarter.
The cost of food and  beverage  promotional  allowances,  which are  included in
casino costs, increased to $439,811 in 1996 from $349,087 in 1995. However, this
represents a decrease as a percentage of the retail value of the promotions, due
to the writeoff of food costs  associated  with changing the Legends  restaurant
concept during 1995.

     The  increase  in other  revenue was  primarily  due to receipt of payments
related to casino management contracts. The Company received $50,000 pursuant to
its  management  contract for the Rhodes,  Greece casino and received a one-time
payment of $66,000  from a  consulting  contract in South Africa which has since
expired.  Womacks'  parking lot revenue and gift shop sales  account for most of
the remaining increase.

     General and  administrative  expenses  increased from $3,223,922 in 1995 to
$4,254,666 in 1996, but as a percentage of net operating  revenue decreased from
76% to 37%. An increase in these expenses at the Cripple Creek casino, following
the  Gold  Creek  acquisition,   was  partially  offset  by  a  lower  level  of
expenditures  related to riverboat gaming  development  projects in Indiana,  in
which the Company sold its interest in December 1995,  and in Missouri.  General
and  administrative  expenses for Cripple Creek were higher due to the increased
size of operations,  but declined as a percentage of net operating  revenue from
22% in 1995 to 20% in 1996.  The 1996 amount also includes  $150,000 of up-front
costs related to the Company's  three-year  advertising  agreement  with Western
Pacific Airlines.

     Depreciation  increased from $456,636 in 1995 to $894,561 in 1996 primarily
as a result of the Gold  Creek  acquisition,  and to a lesser  extent due to the
addition of gaming equipment in the first half of 1996 and interior  renovations
to the  combined  Cripple  Creek  properties  in the  second  half of 1996.  The
increase  in  amortization  expense  of  $246,714  principally  relates  to  the
amortization of goodwill recognized in the Gold Creek acquisition.

     Interest  expense  increased  from  $209,945 to $577,914 as a result of the
seller-financed  portion of the Gold Creek purchase price, existing debt of Gold
Creek assumed by the Company, a convertible  promissory note issued to a private
investor and additional vendor-financed equipment acquisitions.  The other items
included  in the  caption  "Other  income  (expense),  net" in the  consolidated
statements of operations, for both 1996 and 1995, are described in Note 9 to the
consolidated financial statements

Liquidity and Capital Resources

     At December  31, 1996 the  Company had cash and cash  equivalents  totaling
$4,556,540 and a net working capital  position of $1,259,310.  Net cash provided
by  operations  was  $2,635,788  in 1996,  as  compared  with  net cash  used in
operations of $1,308,497 in 1995. The Company invested almost $7,000,000 of cash
to acquire the assets of Gold Creek and to upgrade and combine the Cripple Creek
properties.  In  addition  to  operating  cash flow,  the  Company  also  raised
$5,856,785 in two private stock placements and issued a convertible debenture of
$500,000  during 1996,  the  proceeds  from which were used to complete the Gold
Creek acquisition.

                                       16
<PAGE>


     The Company has  received a  commitment  letter from a  commercial  bank to
refinance  substantially all of the Company's debt through a reducing  revolving
credit facility.  The facility would be for  $13,000,000,  to be amortized on an
eight and one-half year basis with all  outstanding  principal due at the end of
the fourth year. Borrowings under the facility would be secured by substantially
all of the Company's real and personal  property in Cripple  Creek.  The Company
would be subject to certain  financial  covenants  and  restrictions  on capital
expenditures  and paying  dividends.  The Company believes that the contemplated
refinancing would, among other benefits,  afford the Company more flexibility in
further  developing the profit potential of its Cripple Creek properties as well
as in the pursuit of gaming opportunities in other markets.  Finalization of the
agreement is subject to satisfactory  completion of due diligence  procedures by
the bank and, consequently,  there can be no assurance that the refinancing will
be completed.

     The Company is presently  pursuing  several gaming  opportunities  in South
Africa,  as  more  fully  discussed  in  Note  7 to the  consolidated  financial
statements.  In  connection  with  one  of  its  partner's  anticipated  license
applications,  should a license  ultimately be awarded and the project financing
fully  secured,  the Company  would be required to make an equity  investment of
approximately  $2  million in the  licensee.  The  likelihood  or timing of this
potential  investment  cannot be predicted with certainty;  however,  management
believes that an equity  investment,  if any, would not be required  before late
1997. In the absence of completing  the  refinancing  described in the preceding
paragraph,  a portion of the  Company's  consolidated  cash balance at March 31,
1997 would be restricted to satisfy a working capital  covenant of a subsidiary.
Management believes that cash flow generated from operations,  supplemented with
outside financing, if required,  would be sufficient to fund the possible equity
investment.

     Regardless of whether the contemplated  bank refinancing is completed,  and
subject  to the  possible  restriction  on the  Company's  ability  to fund  its
contingent  equity  investment in South Africa from its existing cash resources,
as described in the previous  paragraph,  the Company  believes that its present
cash and working  capital  positions,  together  with  expected  cash flows from
operations,  are  sufficient  to meet its nearand  medium-term  obligations  and
contemplated  capital  expenditures.  Due to an existing  debt  covenant,  which
requires a  subsidiary  of the Company to maintain a specified  level of working
capital,  the Company's  ability to pursue other new gaming  opportunities  that
require significant capital investment could be limited.

Item 7. Financial Statements.

     See "Index to Financial Statements" on page F-1 hereof.

Item 8.  Changes  In  and  Disagreements  With  Accountants  on  Accounting  and
         Financial Disclosure.

     Not applicable.


                                       17
<PAGE>


                             CENTURY CASINOS, INC.
                         INDEX TO FINANCIAL STATEMENTS

                                                                     Page Number
                                                                     -----------

Independent Auditors' Report                                               F2

Consolidated Balance Sheet as of December 31, 1996                         F3

Consolidated  Statements of Operations for the Years Ended 
December 31, 1996 and 1995                                                 F4  

Consolidated  Statements  of  Shareholders'  Equity for the Years 
Ended December  31,  1996 and 1995                                         F5  

Consolidated  Statements  of Cash Flows for the

Years  Ended  December  31,  1996 and 1995                                 F6  

Notes to  Consolidated  Financial Statements                               F8

                                      -F1-
<PAGE>


INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
   of Century Casinos, Inc.

We have audited the accompanying  consolidated balance sheet of Century Casinos,
Inc. and  subsidiaries  as of December 31,  1996,  and the related  consolidated
statements of operations,  shareholders' equity and cash flows for the two years
in the period then ended.  These financial  statements are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our 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 financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,   the  financial  position  of  Century  Casinos,  Inc.  and
subsidiaries at December 31, 1996, and the results of their operations and their
cash  flows  for the two  years in the  period  then  ended in  conformity  with
generally accepted accounting principles.


DELOITTE & TOUCHE LLP

Denver, Colorado
February 28, 1997

                                      -F2-
<PAGE>


CENTURY CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
                                                                       December 31, 1996 
                                                                       ----------------- 
<S>                                                                       <C>
ASSETS 

CURRENT ASSETS:
     Cash and cash equivalents ........................................   $  4,556,540
     Prepaid expenses and other .......................................        791,632
                                                                          ------------
          Total current assets ........................................      5,348,172

PROPERTY AND EQUIPMENT, net ...........................................     12,566,108

GOODWILL, net of accumulated amortization of $2,386,277 ...............     13,857,545

OTHER ASSETS ..........................................................      1,064,292
                                                                          ------------
TOTAL .................................................................   $ 32,836,117
                                                                          ============


LIABILITIES AND SHAREHOLDERS'  EQUITY

CURRENT LIABILITIES:
Current portion of long-term debt,  including $280,240 to related party   $  1,959,080
Accounts payable and accrued liabilities ..............................      2,129,782
                                                                          ------------
     Total current liabilities ........................................      4,088,862

LONG-TERM DEBT,  including  $140,120 to related party .................      8,249,356

COMMITMENTS AND CONTINGENCIES (Note 7)

SHAREHOLDERS' EQUITY:
     Preferred stock; $.01 par value; 20,000,000 shares
          authorized; no shares issued and outstanding
     Common stock; $.01 par value; 50,000,000 shares
          authorized; 15,861,885 shares issued and outstanding ........        158,619
     Additional paid-in capital .......................................     24,820,275
     Foreign currency translation .....................................        (13,854)
     Accumulated deficit ..............................................     (4,467,141)
                                                                          ------------
          Total shareholders'  equity .................................     20,497,899
                                                                          ------------
TOTAL .................................................................   $ 32,836,117
                                                                          ============
</TABLE>
See notes to consolidated financial statements.

                                      -F3-
<PAGE>


CENTURY CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                              For the Year Ended December 31,
                                                   1996             1995
                                               ------------    ------------
<S>                                            <C>             <C>
OPERATING REVENUE:
     Casino ................................   $ 10,984,499    $  4,003,485
     Food and beverage .....................        543,379         318,013
     Hotel .................................         31,443            --
     Other .................................        350,728          85,687
                                               ------------    ------------
                                                 11,910,049       4,407,185
     Less promotional allowances ...........       (432,007)       (185,097)
                                               ------------    ------------
          Net operating revenue ............     11,478,042       4,222,088
                                               ------------    ------------

OPERATING COSTS AND EXPENSES:
     Casino ................................      4,660,482       2,131,901
     Food and beverage .....................        323,454         220,688
     Hotel .................................          8,326            --
     General and administrative ............      4,254,666       3,223,922
     Depreciation and amortization .........      1,936,065       1,251,426
                                               ------------    ------------
          Total operating costs and expenses     11,182,993       6,827,937
                                               ------------    ------------

INCOME (LOSS) FROM OPERATIONS ..............        295,049      (2,605,849)

OTHER INCOME (EXPENSE), net ................     (1,541,191)      3,517,913
                                               ------------    ------------

INCOME (LOSS) BEFORE INCOME TAXES ..........     (1,246,142)        912,064

PROVISION FOR INCOME TAXES .................         49,000         300,000
                                               ------------    ------------

NET INCOME (LOSS) ..........................   $ (1,295,142)   $    612,064
                                               ============    ============

INCOME (LOSS) PER SHARE ....................   $      (0.09)   $       0.06
                                               ============    ============

WEIGHTED AVERAGE COMMON SHARES
     OUTSTANDING ...........................     13,902,150      10,471,052
                                               ============    ============
</TABLE>
See notes to consolidated financial statements.

                                      -F4-
<PAGE>


CENTURY CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
                                                       Common Stock          Additional   Foreign
                                                   ----------------------      Paid-in    Currency     Accumulated
                                                     Shares      Amount        Capital   Translation     Deficit            Total
                                                   ----------   ---------   ------------   --------    ------------    ------------
<S>                                                 <C>         <C>         <C>            <C>         <C>             <C>         
BALANCE AT DECEMBER 31, 1994 .................      9,278,652   $  92,787   $ 15,188,947   $ (2,443)   $ (3,784,063)   $ 11,495,228

Exercise of warrants .........................         51,000         510           --         --              --               510

Private placement ............................      1,460,000      14,600      2,043,960       --              --         2,058,560

Foreign  currency  translation ...............           --          --             --       (5,980)           --            (5,980)

Net  income ..................................           --          --             --         --           612,064         612,064
                                                   ----------   ---------   ------------   --------    ------------    ------------
BALANCE AT DECEMBER  31, 1995 ................     10,789,652     107,897     17,232,907     (8,423)     (3,171,999)     14,160,382

Private placement ............................      1,000,000      10,000      1,365,665       --              --         1,375,665

Private placement ............................      4,072,233      40,722      4,428,898       --              --         4,469,620

Contingent shares to be issued July 1, 1998 in
  connection with Gold Creek acquisition .....           --          --        1,788,750       --              --         1,788,750

Warrants issued to consultant ................           --          --            4,055       --              --             4,055

Foreign currency translation .................           --          --             --       (5,431)           --            (5,431)

Net loss .....................................           --          --             --         --        (1,295,142)     (1,295,142)
                                                   ----------   ---------   ------------   --------    ------------    ------------
BALANCE AT DECEMBER 31, 1996 .................     15,861,885   $ 158,619   $ 24,820,275   $(13,854)   $ (4,467,141)   $ 20,497,899
                                                   ==========   =========   ============   ========    ============    ============
</TABLE>
See notes to consolidated financial statements.


                                      -F5-
<PAGE>


CENTURY CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                       For the Year Ended December 31,
                                                                            1996           1995
                                                                         -----------    -----------
<S>                                                                      <C>            <C>
CASH FLOWS FROM OPERATIONS
     Net income (loss) ...............................................   $(1,295,142)   $   612,064
          Adjustments to reconcile net income (loss) to net cash
           provided by (used in) operations:
               Depreciation ..........................................       894,561        456,636
               Amortization ..........................................     1,041,504        794,790
               Gain from termination of gaming development projects ..          --       (3,681,107)
               Noncash consulting fees ...............................       140,555        136,500
               Loss on note receivable ...............................       422,476           --
               Costs associated with terminated debt offering ........        65,800           --
               Loss on disposition of assets and other noncash charges       413,094        160,934
               Deferred tax provision ................................        32,000        264,000
               (Gain) loss from foreign currency transactions ........          (741)        54,608
               Changes in operating assets and liabilities:
                 Prepaid expenses and other assets ...................        46,671       (398,856)
                 Accounts payable and accrued liabilities ............       875,010        291,934
                                                                         -----------    -----------
                 Net cash provided by (used in) operations ...........     2,635,788     (1,308,497)
                                                                         -----------    -----------


CASH FLOWS FROM INVESTING ACTIVITIES:
     Acquisition of Gold Creek, net of cash acquired .................    (5,309,027)          --
     Expenditures for gaming development projects and other ..........      (104,923)    (2,281,669)
     Purchases of property and equipment .............................    (1,554,115)      (561,024)
     (Purchases) redemptions of short-term investment securities .....       747,588       (747,588)
     Purchase of note receivable .....................................    (1,337,500)          --
     Sale of note receivable .........................................     1,231,119           --
     Principal payments received on note receivable ..................        24,668         15,020
     Proceeds from terminated gaming development projects ............       947,954      4,128,183
     Proceeds received from disposition of assets ....................        33,761         59,599
                                                                         -----------    -----------
               Net cash provided by (used in) investing activities ...    (5,320,475)       612,521
                                                                         -----------    -----------
</TABLE>

                         -Continued on following page-

                                      -F6-
<PAGE>


CENTURY CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
<TABLE>
<CAPTION>
                                                    For the Year Ended December 31,
                                                         1996            1995
                                                      -----------    -----------
<S>                                                   <C>            <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from borrowings .....................       800,000           --
     Principal repayments on borrowings ...........    (1,449,029)      (279,647)
     Proceeds from sales of common stock ..........     5,856,785      2,059,070
                                                      -----------    -----------
          Net cash provided by financing activities     5,207,756      1,779,423
                                                      -----------    -----------

INCREASE IN CASH AND CASH EQUIVALENTS .............     2,523,069      1,083,447

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ....     2,033,471        950,024
                                                      -----------    -----------

CASH AND CASH EQUIVALENTS AT END OF YEAR ..........   $ 4,556,540    $ 2,033,471
                                                      ===========    ===========

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

                                                         1996             1995
                                                      -----------    -----------

Equipment acquired through long-term financing        $  355,615      $  398,352
Acquisition of nonoperating casino for note payable         --        $  700,000
</TABLE>

See  Note  3  for  details  of  noncash   transactions  related  to  Gold  Creek
acquisition.

SUPPLEMENTAL  DISCLOSURE OF CASH FLOW INFORMATION:  

     Interest paid by the Company was $563,698 in 1996 and $124,161 in 1995.

     Income  taxes paid by (refunded  to) the Company were  $(1,125) in 1996 and
     $37,500 in 1995.

See notes to consolidated financial statements.

                                      -F7-
<PAGE>


CENTURY CASINOS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Century  Casinos,  Inc.  and  subsidiaries  (the  "Company")  own and  operate a
limited-stakes gaming casino in Cripple Creek,  Colorado;  act as concessionaire
of a small  casino  on a luxury  cruise  ship;  and are  pursuing  a  number  of
additional gaming opportunities in the United States and internationally.  Prior
to July 1, 1996, the Company's operations in Cripple Creek, Colorado,  consisted
of Legends  Casino  ("Legends"),  which the Company  acquired on March 31, 1994,
through a merger with  Alpine  Gaming,  Inc.  ("Alpine").  On July 1, 1996,  the
Company acquired the net assets of Gold Creek  Associates,  L.P. ("Gold Creek"),
the owner of Womack's Saloon & Gaming Parlor  ("Womacks"),  which is immediately
adjacent  to  Legends  (see Note 3).  Following  the  Company's  acquisition  of
Womacks,  interior  renovations were undertaken on both properties to facilitate
the operation  and marketing of the combined  properties as one casino under the
name Womacks Casino. The accompanying  financial  statements include the results
of  operations  acquired  from Gold Creek for the period  subsequent to June 30,
1996.

The Company's  operating  revenue for 1996 and 1995 is derived  principally from
its casino operations in Cripple Creek.

2. SIGNIFICANT ACCOUNTING POLICIES

Consolidation - The accompanying  consolidated  financial statements include the
accounts of the Company and its  majority-owned  subsidiaries.  All  significant
intercompany transactions and balances have been eliminated.

Use of Estimates - The preparation of the accompanying  financial  statements in
accordance with generally  accepted  accounting  principles  requires the use of
estimates by management in determining  the reported  amount of certain  assets,
liabilities,  revenues  and  expenses.  Actual  results  could differ from those
estimates.

Cash Equivalents - All highly liquid investments with a maturity of three months
or less at the time of purchase are considered to be cash equivalents.

Fair Value of Financial  Instruments  - In  accordance  with the  reporting  and
disclosure  requirements of Statement of Financial Accounting Standards ("SFAS")
No. 107,  "Disclosures  about Fair Value of Financial  Instruments," the Company
calculates the fair value of financial  instruments and includes this additional
information  in the notes to its financial  statements  when the fair value does
not approximate the carrying value of those financial instruments. Fair value is
determined  using quoted market prices  whenever  available.  When quoted market
prices are not available, the Company uses alternative valuation techniques such
as  calculating  the present  value of  estimated  future  cash flows  utilizing
risk-adjusted   discount  rates.  The  Company's  carrying  value  of  financial
instruments approximates fair value at December 31, 1996.

                                      -F8-
<PAGE>


Property and Equipment - Property and equipment are stated at cost. Depreciation
of  assets in  service  is  provided  using the  straight-line  method  over the
estimated useful lives or the applicable lease term, if shorter.

Goodwill  -  Goodwill   represents   the  excess  of  purchase  price  over  net
identifiable  assets acquired.  Goodwill  recognized in the Alpine  acquisition,
which is not  deductible  for  income  tax  purposes,  is being  amortized  on a
straight-line  basis  over 10  years.  Goodwill  recognized  in the  Gold  Creek
acquisition  is being  amortized on a  straight-line  basis over 15 years and is
deductible for tax purposes.

Impairment  of Long-Lived  Assets - The Company  reviews  long-lived  assets for
possible impairment whenever events or circumstances  indicate that the carrying
amount  of an  asset  may not be  recoverable.  If  there  is an  indication  of
impairment,   which  is  estimated  as  the   difference   between   anticipated
undiscounted  future cash flows and carrying value, the difference is charged to
operations.  Estimates of future cash flows are  inherently  subjective  and are
based on management's best assessment of expected future conditions.

Revenue  Recognition  - Casino  revenue is the net win from  gaming  activities,
which is the  difference  between  gaming wins and losses.  Consulting  fees are
recognized as revenue as services are provided.

Promotional Allowances - Food and beverage furnished without charge to customers
is  included  in gross  revenue at a value  which  approximates  retail and then
deducted as complimentary  services to arrive at net revenue. The estimated cost
of such complimentary  services is charged to casino operations and was $439,811
in 1996 and $349,087 in 1995.

Foreign Currency Translation - Adjustments resulting from the translation of the
accounts of the Company's Austrian subsidiary from the local functional currency
to U.S. dollars are recorded as a separate  component of  shareholders'  equity.
Adjustments resulting from the translation of transactions which are denominated
in a  currency  other than U.S.  dollars  are  recognized  in the  statement  of
operations.

Income Taxes - The Company follows Statement of Financial  Accounting  Standards
("SFAS") No. 109,  "Accounting  for Income  Taxes," which requires the liability
approach to computing  deferred income taxes. The liability method provides that
deferred tax assets and liabilities are recorded based on the difference between
the tax bases of assets and liabilities and their carrying amounts for financial
reporting  purposes.

Stock-Based  Compensation - The Company follows the intrinsic value based method
for valuing stock options or similar equity instruments granted to employees, as
permitted by SFAS No. 123, "Accounting for Awards of Stock-Based  Compensation."
The intrinsic value based method generally provides that no compensation expense
is  recognized  when the option  exercise  price is equal to or greater than the
trading  price of the stock on the date of grant.  The Company  follows the fair
value  based  method for valuing  stock  options or similar  equity  investments
granted to non-employees.

Reclassifications  -  Certain  reclassifications  have  been  made  in the  1995
financial statements to conform with the 1996 presentation.

                                      -F9-
<PAGE>


3. ACQUISITION OF WOMACKS AND RELATED FINANCING

On July 1, 1996,  the Company  purchased  substantially  all of the assets,  and
assumed  substantially  all of the  liabilities,  of Gold  Creek,  the  owner of
Womacks in Cripple Creek,  Colorado.  The total purchase price was approximately
$14.2 million, consisting of a base cash payment of $5 million plus $425,000 for
the amount of working  capital as of the closing date, a promissory note of $5.2
million  issued to Gold Creek,  the assumption of existing debt of Gold Creek of
approximately  $3  million,  and  direct  out-of-pocket  costs of  approximately
$600,000.  Additionally, the agreement provides that two years after the closing
of the transaction, the Company will issue 1,060,000 shares of its common stock,
valued  at  $1.8  million  based  on the  July 1,  1996  trading  price,  to two
principals of the seller who entered into consulting  contracts with the Company
at closing.  The number of shares to be issued is subject to upward  adjustment,
determined  by a formula,  to the extent that the trading price of the Company's
stock is less  than  $1.58 at the time of  issuance,  and  subject  to  downward
adjustment to the extent that the trading price  exceeds  $4.00.  Based upon the
closing price of the Company's  common stock on December 31, 1996, the number of
shares to be issued would have been  1,249,850.  No adjustment  has been made in
the accompanying  financial  statements for the potential increase in the number
of such shares to be issued.

The  promissory  note issued to Gold Creek bears interest at 9% and provides for
monthly  payments of only interest through  December 1997;  thereafter,  monthly
principal  payments  of $43,121,  plus  interest  on the unpaid  principal,  are
required, with a final principal payment of $2,328,000 in July 2003. The note is
secured  by  substantially  all of the  tangible  assets  purchased,  subject to
existing  encumbrances,  and the Company is required to meet  certain  financial
covenants.  The Company is also restricted from paying  dividends until the note
has been paid in full.

In addition to the financing  provided by Gold Creek,  additional funds required
to complete  the  acquisition  were raised  through  private  sales of 4,072,233
shares of the  Company's  common  stock at an average  price of $1.43 per share,
with proceeds,  net of selling  commissions,  of  approximately  $4,470,000.  In
connection with sales of common stock by a placement  agent,  the Company issued
warrants to the placement  agent to purchase  150,000 shares of its common stock
at $2.36 per share. The warrants expire in June 2001.

On May 30, 1996,  the Company  issued a  convertible  debenture in the principal
amount of $500,000 to a private  investor.  The proceeds  were used in financing
the Gold Creek  acquisition.  The  debenture  bears  interest at 10.5%,  payable
quarterly.  The holder has the option to convert,  in one or more  transactions,
all or a portion of the outstanding principal into the Company's common stock at
$1.84 per share, subject to a minimum per conversion transaction of $50,000. The
Company has the option to prepay the debenture,  in whole or in part,  after the
first  anniversary  date at 132% of the  outstanding  principal.  The prepayment
amount declines to 127% after the second  anniversary date, 122% after the third
anniversary date and 116% after the fourth  anniversary  date. The entire unpaid
principal is due on May 30, 2001.

In  anticipation  of  completing  the Gold Creek  acquisition  and to facilitate
closing the transaction, the Company purchased in May 1996, from an unaffiliated
third  party,  a 9% first  mortgage  note on the  Womacks  casino  property  for
$1,337,500.  The  principal  amount of the note,  the  obligation  for which was
assumed by the Company in the Gold Creek acquisition, was $1,248,000 at the date
of purchase by the  Company.  In  September  1996 the Company sold the note to a
commercial  bank  for  net  proceeds  of  $1,231,119.  The  premium  of  $89,500
previously paid by the Company to purchase the note was charged to operations in
the third  quarter of 1996.  The Company  remains  obligated  under the original
terms of the note, which matures in July 1999.

                                      -F10-
<PAGE>


The Company has  accounted  for the Gold Creek  acquisition  using the  purchase
method  of  accounting,  whereby  the total  purchase  price,  including  direct
out-of-pocket  costs of the  acquisition,  has been  allocated  to  identifiable
assets  acquired and  liabilities  assumed based on their  estimated fair market
value.  The excess of the purchase price over the fair value of identifiable net
assets ("goodwill") will be amortized to expense ratably over 15 years.

The Company's  allocation of purchase price and direct costs of the  acquisition
is as follows:

          Cash                          $    304,815
          Other current assets               214,154
          Property and equipment           6,924,678
          Goodwill                         8,810,389
          Current liabilities               (238,850)
          Long-term debt                  (2,969,622)
                                        ------------ 
                                        $ 13,045,564
                                        ============


4. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1996 consists of the following:

                                                                     Estimated
                                                                    Service Life
                                                                      in Years
                                                                      --------
Land                                                  $  3,066,283
Buildings and improvements                               4,347,508     7 - 31
Gaming equipment                                         4,159,221     3 - 7
Furniture and office equipment                             481,342     5 - 7
Other                                                    1,019,219     3 - 7
                                                      ------------
                                                        13,073,573
Less:  accumulated depreciation                         (1,427,969)
                                                      ------------
                                                        11,645,604
Nonoperating casino and land                               920,504
                                                      ------------
Property and equipment, net                           $ 12,566,108
                                                      ============

                                      -F11-
<PAGE>


5. LONG-TERM DEBT

Long-term debt at December 31, 1996, consists of the following:
<TABLE>
<S>                                                                             <C>         
Note payable secured by assets purchased from Gold Creek (see Note 3)           $  5,174,540
Note payable secured by first mortgage on Womacks building in Cripple Creek;
     payable in monthly installments of $14,945, including interest at 9%;
     maturing in July 1999 with a balloon payment of $1,010,853                    1,208,014
Note payable to bank, secured by second mortgage on Womacks building in 
     Cripple Creek; payable in monthly installments of $8,262, including
     interest at a floating rate; maturing in July 1999                              230,438 
Note payable secured by first mortgage on Legends building in Cripple Creek; 
     payable in monthly installments of $9,936, including interest at 13.3%; 
     maturing in January 2003                                                        504,274 
Note payable secured by nonoperating casino property in Wells, Nevada; 
     payable in monthly installments of $25,000, including interest at 6.02%; 
     maturing in March 1998 with a balloon payment of $110,100                       462,507 
Notes payable secured by gaming and other equipment                                1,681,070 
Note payable, unsecured; payable in monthly installments of $1,660,
     including interest at 12%; maturing in June 1998                                 27,233 
Convertible debenture (see Note 3)                                                   500,000 
Note payable to founding shareholder, unsecured; noninterest-bearing                 420,360 
                                                                                ------------
Total long-term debt                                                              10,208,436 
Less current portion                                                              (1,959,080) 
                                                                                ------------
Long-term portion                                                               $  8,249,356
                                                                                ============
</TABLE>

The Company has acquired  certain of its gaming and other  equipment  subject to
vendor financing. The financing agreements provide for: a floating interest rate
of prime plus 2%, which  approximated  10.25% at December 31, 1996, on principal
amounts totaling  $285,924;  and fixed rates of 10% to 12% on principal  amounts
totaling $1,395,146.

Scheduled maturities of long-term debt are as follows:

          1997                $  1,959,080
          1998                   1,609,412
          1999                   1,707,072
          2000                     599,934
          2001                   1,111,598
          Thereafter             3,221,340
                              ------------
          Total               $ 10,208,436
                              ============

                                      -F12-
<PAGE>


6. SHAREHOLDERS' EQUITY

In connection with a purchase of the Company's common stock in 1994, the Company
granted to an  unaffiliated  third party  options to acquire  230,000  shares of
common  stock at $3.00 per share in the event the  trading  price of the  common
stock reaches $10.00 (115,000 shares may be purchased) and $13.00 (the remaining
115,000 shares may be purchased). The Company has the right to require the third
party to exercise the options if these conditions are met. The options expire in
March 1999.

In connection with the business  combination with Alpine,  warrants were granted
to certain key Alpine employees to purchase 235,000 shares of common stock at an
exercise  price of $3.49.  Warrants for 150,000  shares  remain  outstanding  at
December  31,  1996.  The  warrants  expire in March 1999.  Warrants to purchase
1,000,000  shares of common  stock at an  exercise  price of $2.25,  which  were
issued in  conjunction  with a private  placement  of common stock in July 1994,
expire June 30, 1999.

In early 1995 the Company  completed a private  placement of 1,460,000  units at
$1.50  per  unit,  each unit  consisting  of one  share of common  stock and one
warrant to purchase one share of common stock at an exercise  price of $2.50 per
share,  exercisable  until  December 31, 1999. The Company,  at its option,  may
redeem the  warrants in the event its common stock trades at a price above $6.00
per share for a minimum of five consecutive  trading days for a redemption price
of $0.01 per warrant. Net proceeds to the Company were $2,058,560.

Additionally, in early 1995 the Company entered into a consulting agreement with
a third party whereby the consultant will assist the Company, from time to time,
in seeking investors and business  opportunities.  The agreement  provides that,
upon the  consummation  of certain  transactions,  the Company will issue to the
consultant warrants to purchase the Company's common stock. The number of shares
and exercise  price are  determined  based on a formula,  which depends upon the
type and size of  transaction  consummated  and the recent  trading price of the
common stock. In connection with the 1995 private placement discussed above, the
Company on March 20, 1995 issued  warrants to the  consultant  for 71,428 shares
exercisable at $1.05 per share. The warrants have a five-year term from the date
of issue.  The  consulting  agreement  may be terminated by either party upon 30
days notice.

In January 1996 the Company completed a private placement of 1,000,000 shares of
its  common  stock  at  $1.50  per  share.  Net  proceeds  to the  Company  were
$1,375,665.

In December 1996 the Company issued  warrants to purchase  450,000 shares of its
common  stock to a  consulting  firm in  connection  with a two-year  agreement,
whereby the  consulting  firm will  provide the Company with  institutional  and
individual  contacts in the  investment  community.  The warrants were issued in
increments of 150,000 shares with exercise prices of $1.75,  $2.25 and $2.75 per
share and  expiration  dates of  December  1997,  June 1998 and  December  1998,
respectively.  The estimated fair value of the warrants at issuance was $97,327,
which  will be charged  ratably  to  earnings,  with a  corresponding  credit to
additional paid-in capital, over the term of the consulting contract.

                                      -F13-
<PAGE>


In April 1994 the Board of  Directors  of the  Company  adopted  the  Employee's
Equity  Incentive Plan (the "Plan"),  which was amended  effective  November 22,
1995, and further amended  November 25, 1996. The Plan provides for the grant of
awards to  eligible  employees  in the form of stock,  restricted  stock,  stock
options, stock appreciation rights, performance shares or performance units, all
as defined in the Plan.  The Plan  provides  for the issuance of up to 3,500,000
shares of common stock  through the various  forms of award  permitted.  Through
December 31, 1995,  only stock  option  awards had been granted  under the Plan.
Stock options may be either incentive stock options,  for which the option price
may not be less than fair  market  value at the date of grant,  or  nonstatutory
options,  which may be granted at any option  price.  All  options  must have an
exercise  period not to exceed ten years.  Except for certain options granted in
1995 coincident with Plan amendments, options generally vest in annual one-third
increments beginning with the date of grant. Transactions regarding the Plan are
as follows:
<TABLE>
<CAPTION>
                                                1996                     1995
                                        --------------------     ---------------------
                                                    Weighted-                 Weighted-
                                                    Average                   Average
                                                    Exercise                  Exercise
                                         Shares      Price        Shares       Price
                                        ---------   --------     ---------    --------
<S>                                     <C>         <C>          <C>          <C>     
Incentive Stock Options:
Outstanding at January 1 .              2,266,000   $   1.50     1,675,000    $   3.33
Granted ..................                105,400   $   1.54     2,268,500    $   1.51
Cancelled or forfeited ...                   --         --      (1,677,500)   $   3.33
                                        ---------                ---------
Outstanding at December 31              2,371,400   $   1.50     2,266,000    $   1.50
                                        =========                =========

Options exercisable at December 31      2,321,133                1,986,000
                                        =========                =========
</TABLE>

Summarized information regarding options outstanding at December 31, 1996, is as
follows:

                                        Weighted-
                           Number        Average      Number
        Exercise        Outstanding     Remaining   Exercisable
          Price         At Year End   Term in Years at Year End
          -----         -----------   ------------- -----------

          $1.50          2,331,900         8.7      2,281,633
          $1.63             30,000         9.0         30,000
          $2.25              9,500         8.6          9,500
                         ---------                  ---------
                         2,371,400         8.7      2,321,133
                         =========                  =========

                                      -F14-
<PAGE>


The  Company  applies  Accounting  Principles  Board  Opinion No. 25 and related
Interpretations  in accounting for the Plan.  Accordingly,  no compensation cost
has been recognized in the accompanying  financial statements.  Had compensation
cost for the Plan been determined based on the fair value at the grant dates for
awards under the Plan, consistent with the method recommended, but not required,
by SFAS No.123,  the Company's  net income (loss) and earnings  (loss) per share
would have been adjusted to the pro forma amounts indicated below:

                                                   1996              1995
                                                   ----              ----

Net income (loss)             As reported      $ (1,295,142)      $  612,064
                              Pro forma        $ (1,660,324)      $  620,689
Earnings (loss) per share     As reported      $      (0.09)      $     0.06
                              Pro forma        $      (0.12)      $     0.06

The fair value of options  granted  under the Plan was  estimated on the date of
grant  using  the   Black-Scholes   option  pricing  model  with  the  following
assumptions:

                                               1996             1995
                                               ----             ----
Weighted-average fair value of
  options granted during the year              $1.16            $1.35
Weighted-average risk-free interest rate        6.1%             6.0%
Weighted-average expected life               10 yrs.          10 yrs.
Weighted-average expected volatility             74%              94%
Weighted-average expected dividends               $0               $0

7. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS

Concession  Agreements  - The  Company has been  acting as  concessionaire  to a
shipping management company to provide unlimited-stakes gaming operations on two
luxury cruise ships,  the Silver Cloud and Silver Wind. The Company operates the
casinos for its own account and pays the  management  company a  concession  fee
based on passenger  count and gross gaming  revenue.  The  agreements  expire in
April 1997 and January 1998,  respectively.  The Company has been advised by the
management company that it will not renew the agreement with the Company for the
Silver Cloud. The Company  understands that the casino concession may be awarded
to an affiliate of the  management  company.  The Company  believes it is likely
that the  agreement  for the Silver Wind will not be renewed  when it expires in
January 1998.

In the fourth  quarter of 1996,  the Company  entered into an agreement  with an
unaffiliated  third party to manage casinos  aboard  several  cruise ships.  The
third party is presently  negotiating  for the purchase of the cruise ships from
their  current  owner.  The Company has invested  $75,000,  with a commitment to
invest  an  additional  $125,000,  in the third  party  upon  completion  of the
acquisition. The Company's investment would represent an approximate one percent
equity interest in the third party. If the acquisition is not  consummated,  the
third party has agreed to repurchase the Company's equity investment at cost.

                                      -F15-
<PAGE>


WestPac  Advertising  Agreement  - The Company  has  entered  into a  three-year
advertising agreement, beginning in January 1997, with Western Pacific Airlines,
Inc.  ("WestPac"),  whereby  the entire  exterior of one of  WestPac's  aircraft
prominently  displays  the logos and color  scheme  of  Womacks  Casino  and its
corporate parent,  Century Casinos.  WestPac operates flights  nationwide out of
its hub in Colorado  Springs,  which is located in the  primary  market area for
Womacks Casino in Cripple  Creek.  The agreement also provides for various other
joint marketing and advertising activities. The Company recognized an expense of
$150,000,  representing the full cost of painting the logos on the aircraft,  in
1996,  prior to the  commencement  of the  three-year  term. The Company is also
required  to make  payments  for  advertising  rights  of  $100,000  per year to
WestPac.

Casino Management  Agreement-Rhodes,  Greece - The Company has executed a casino
management consulting agreement with Rhodes Casino, S.A., a consortium including
Playboy Enterprises, under which the Company, as an independent contractor, will
supply services and assistance in establishing a casino on the island of Rhodes,
Greece.  The consortium has been awarded the exclusive license for casino gaming
on Rhodes for a 12-year period. The Company's  management  consulting  agreement
with the  consortium,  which  has an  initial  term  running  through  the third
anniversary of the casino opening,  provides for fees to the Company of $200,000
for services to be rendered in the pre-opening  phase,  $300,000 per year during
the first three years of operation and $50,000 per year thereafter,  if renewed.
The  Company is not  required  to commit  any  capital  in  connection  with the
proposed  activities  under the  agreement.  In the fourth  quarter of 1996, the
Company  received $50,000 with respect to pre-opening  phase services.  Although
the  consortium has indicated a target opening date for the casino of late 1997,
the Company believes that such target date is aggressive and cannot predict with
reasonable certainty whether the casino opening will occur in 1997.

South Africa - Recently  enacted  legislation  in South Africa  provides for the
award of up to 40 casino  licenses  throughout  the  country.  The  Company  has
entered  into  agreements  with three  local  consortia  to  provide  consulting
services during the application  phase,  as well as casino  management  services
should  the  Company's  partners  be  awarded  one or more  licenses.  The first
application  has  been  filed  by the  Company's  partners  in the  province  of
Mpumalanga and has been put on the short list of finalists.  In January 1997 the
provincial  gaming board indicated that another group  (including MGM Grand) has
been given preferred  applicant status, and this group is presently  negotiating
with the gaming  board for the award of a license.  In the event the  parties do
not reach  agreement,  the gaming board could consider  other  finalists for the
license.  The second  application  could be filed  with the gaming  board in the
province  of Gauteng as early as the second  quarter of 1997 for a  hotel/casino
resort in the greater Johannesburg area. The Gauteng gaming board,  however, has
not yet set a definitive date for the filing of  applications.  If successful in
this  application,  the  Company  would be  required  to make an  investment  of
approximately $2 million for a 3% equity interest in the licensee. Later in 1997
the Company expects the filing of the third application in the Northern Province
for a  hotel/casino  resort  close to the  Pietersburg  metropolitan  area.  The
Company  cannot  reasonably  predict  whether any licenses  will  ultimately  be
awarded to the Company's partners.

Riverboat Development  Agreement-Indiana - In December 1995 the Company sold its
80% interest in Pinnacle Gaming  Development Corp.  ("Pinnacle") to an affiliate
of Hilton Gaming Corporation and Boomtown,  Inc.  ("Hilton/Boomtown").  Pinnacle
had been pursuing a riverboat gaming license  application in Switzerland County.
Upon signing the agreement,  the Company  received a cash payment of $80,000 and
recognized  a gain on the  sale of its  investment  of  $26,627.  The  agreement
provides  for  additional  payments to the Company of up to  approximately  $3.3
million upon the occurrence of certain  events.  The agreement may be terminated
by  the  buyer  under  specified  circumstances,   some  of  which  provide  for
termination payments to the Company. The Company will recognize future payments,
if any, from the buyer as income when earned.

                                      -F16-
<PAGE>


In January 1997,  Hilton Hotels  Corporation  ("Hilton"),  the parent company of
Hilton Gaming Corporation, announced a hostile takeover bid seeking to acquire a
controlling  interest in a business  competitor,  ITT Corporation  ("ITT").  Two
effects of this proposed merger  directly  affect the  contractual  relationship
between  the  Company  and  Hilton/Boomtown:  first,  the  proposed  acquisition
jeopardizes the ability of Hilton/Boomtown to engage in commercially  reasonable
efforts  to pursue  the  Switzerland  County  gaming  license,  and;  second,  a
successful  acquisition of ITT by Hilton would implicate the "10% interest rule"
in Indiana, which mandates that a license owner hold no more than a 10% interest
in any other  Indiana  gaming  license (an ITT business  unit,  Caesars,  owns a
controlling  interest  in the gaming  license  issued for the  Harrison  County,
Indiana site).

Because of the  actual  and  potential  adverse  effects of the Hilton  business
strategy, the Company initiated an action for declaratory judgment in the United
States District Court for the Southern District of Indiana.  The complaint seeks
a declaration of the rights and obligations of the parties to the Pinnacle Stock
Purchase  Agreement,  and requests  compensation should the court find Hilton or
Hilton/Boomtown  to be in breach of its contractual  obligations to the Company.
It is expected that the defendants will respond with a motion to dismiss,  or an
alternative  motion to stay  consideration  on the merits pending the outcome of
the Hilton takeover bid.

The Company has been in  communication  with  representatives  of the defendants
concerning  the  possibility  of a  negotiated  settlement.  At  this  time  the
litigation presents no materially adverse consequences to the Company.

Indian  Tribal  Management  Agreement-California  - In August  1995 the  Company
terminated its management agreement with the Soboba Band of Mission Indians with
respect to the Legends  Casino at Soboba in  Riverside  County,  California.  In
connection with the termination, an unaffiliated third party issued a promissory
note  to the  Company  for  $3,100,000  payable  over  three  years  in  monthly
installments,  based on a percentage of gross revenue from certain operations of
the facility.  The Company received payments on the note of $947,954 in 1996 and
$48,183 in 1995.

The Company's unrecovered  capitalized costs associated with the Soboba contract
at December 31, 1996 are $844,367.  The Company recognizes  payments received on
the note as reductions of its  capitalized  costs.  Since  payments are based on
revenue  generated by the facility,  satisfaction of the note, and the Company's
recovery of its capitalized  costs,  is dependent upon the continued  successful
operation of the facility. The Company periodically evaluates the recoverability
of the  remaining  capitalized  costs and if it becomes  probable  that all or a
portion of such costs are not  recoverable,  the Company will record a charge to
operations.  Payments in excess of total capitalized costs will be recognized as
income if, and when, received.  The Company is aware that there is an unresolved
dispute within the State of California  between the state  government and Indian
tribes  regarding the types of gaming devices that may be operated at casinos on
Indian  tribal  lands.   An  adverse  outcome  could   potentially   affect  the
recoverability of the Company's remaining  capitalized costs. The Company cannot
predict the likelihood of an outcome adverse to the Company; however, management
believes  that the  remaining  capitalized  costs at December 31, 1996 are fully
recoverable.

Operating Lease Commitments - The Company has entered into certain noncancelable
operating leases for real property, equipment and vehicles. Future minimum lease
payments under these leases are $807,083 in 1997,  $802,480 in 1998, $692,911 in
1999,  $487,717 in 2000,  $367,200  in 2001 and  $1,066,200  thereafter.  Rental
expense was $387,410 in 1996 and $125,297 in 1995.

                                      -F17-
<PAGE>


Stock  Redemption   Requirement  -  Colorado  gaming  regulations   require  the
disqualification  of any  shareholder  who  may be  determined  by the  Colorado
Division of Gaming to be unsuitable as an owner of a Colorado  casino.  Unless a
sale of such common stock to an acceptable party could be arranged,  the Company
would  repurchase  the common stock of any  shareholder  found to be  unsuitable
under the  regulations.  The  Company  could  effect the  repurchase  with cash,
Redemption  Securities,  as such term is defined in the  Company's  Articles  of
Incorporation, or a combination thereof.

8. INCOME TAXES

The provision for income taxes consists of the following:

                                                            1996       1995
                                                           --------  ---------
Currently payable:
     Federal                                               $ 17,000   $ 27,000
     State                                                     --        9,000
                                                           --------  ---------
                                                             17,000     36,000
Utilization of acquired net operating loss carryforward
     recorded as a reduction to goodwill                     32,000    264,000
                                                           --------  ---------
                                                           $ 49,000  $ 300,000
                                                           ========  =========

The provision for income taxes differs from the amount of income tax  calculated
by applying the U.S.  statutory  federal income tax rate (34% for the income tax
bracket applicable to the Company) to pretax income as follows:
<TABLE>
<CAPTION>

                                                             1996         1995
                                                           ---------    ---------
<S>                                                        <C>          <C>      
Federal income tax provision (benefit) at statutory rate   $(423,688)   $ 310,102
Increase (decrease) due to:
     Goodwill amortization .............................     252,111      255,507
     Income of foreign subsidiary ......................     (24,507)      (2,208)
     State income taxes, net of federal benefit ........     (18,681)      55,831
     Alternative minimum tax ...........................      17,000       27,000
     Other nondeductible expenses ......................       3,612         --
     Change in valuation allowance .....................     243,153     (346,232)
                                                           ---------    ---------
Provision for income taxes .............................   $  49,000    $ 300,000
                                                           =========    =========
</TABLE>

                                      -F18-
<PAGE>


Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax  purposes.  Deferred tax assets and
liabilities at December 31, 1996, consist of the following:

Deferred tax assets:
     Net operating loss carryforward ..................   $   304,863
     Property, plant and equipment ....................       298,089
     Deferred costs from terminated management contract       162,282
     Unrealized loss on note receivable ...............       157,584
     Accrued liabilities and other ....................       477,389
                                                          -----------
                                                            1,400,207
Deferred tax liabilities:
     Prepaid expenses .................................       (80,385)
                                                          -----------
Net deferred tax assets ...............................     1,319,822
Valuation allowance ...................................    (1,319,822)
                                                          -----------
                                                          $      --
                                                          ===========  

At  December  31, 1996 the Company has a net  operating  loss  carryforward  for
income  tax  purposes  of  approximately  $817,000,  which  expires  in 2009.  A
valuation  allowance  has been recorded to offset the amount of net deferred tax
assets due to the uncertainty of realizing the related tax benefits.

9. OTHER INCOME (EXPENSE), NET

Other income (expense), net, consists of the following:
<TABLE>
<CAPTION>

                                                                     1996          1995
                                                                 -----------    -----------
<S>                                                              <C>            <C>        
Interest income ..............................................   $   188,411    $   187,710
Interest expense .............................................      (577,914)      (209,945)
Costs associated with sale of mortgage note receivable .......       (97,909)          --
Costs associated with terminated debt offering ...............      (318,502)          --   
Loss on note receivable ......................................      (422,476)          --
Gain on termination of riverboat management agreement ........          --        3,928,479
Equity in operating losses and writeoff of investment in China          --         (273,999)
Gain on sale of investment in Pinnacle .......................          --           26,627
Loss on disposal of equipment ................................      (263,542)       (86,351)
Other ........................................................       (49,259)       (54,608)
                                                                 -----------    -----------
                                                                 $(1,541,191)   $ 3,517,913
                                                                 ===========    ===========
</TABLE>

In the first  quarter of 1995 the Company  reached  agreement to  terminate  its
management  agreement  with  respect  to its  Louisiana  riverboat  project  and
received a cash payment of $4 million. After the writeoff of previously deferred
project costs and other  associated  expenses  related to the  termination,  the
Company recognized a gain of $3,928,479.

                                      -F19-
<PAGE>


10. SUPPLEMENTAL FINANCIAL INFORMATION (UNAUDITED)

Pro forma results of operations  for the years ended December 31, 1996 and 1995,
as if the  acquisition  of Gold  Creek (see Note 3) had  occurred  on January 1,
1995, are as follows:

                                        1996           1995
                                    ------------    ------------

Casino revenue ..................   $ 17,155,000    $ 13,644,000
Other operating revenue .........        634,000         463,000
Operating costs and expenses ....    (13,442,000)    (13,004,000)
Depreciation and amortization ...     (2,525,000)     (2,468,000)
Other income (expense), net .....     (2,009,000)      2,672,000
                                    ------------    ------------
Income (loss) before income taxes       (187,000)      1,307,000
Provision for income taxes ......        207,000         302,000
                                    ------------    ------------
Net income (loss) ...............   $   (394,000)   $  1,005,000
                                    ============    ============
Income (loss) per share .........   $      (0.02)   $       0.06
                                    ============    ============

The foregoing pro forma financial  information  reflects the combined historical
financial  information of the Company and Gold Creek, as adjusted for additional
interest expense resulting from certain financing  transactions  associated with
the acquisition,  as well as additional  depreciation  and amortization  charges
resulting from  application of purchase  accounting to the net assets  acquired.
Other income,  net, for 1995 includes a nonrecurring gain of $3,928,000 from the
termination of a riverboat management contract.  Income (loss) per share assumes
that all common stock  outstanding  after the acquisition,  including shares the
Company is obligated to issue to two principals of Gold Creek's  general partner
two years following the  acquisition,  had been  outstanding for all of 1996 and
1995. The increase in the pro forma effective tax rate from 1995 to 1996 results
from the assumed use of available NOLs, which would be completely  utilized on a
pro  forma  basis  at the  end of  1996.  (For  historical  financial  reporting
purposes,  however, the Company has approximately $817,000 of NOLs available for
utilization  beyond 1996.) The foregoing pro forma financial  information is not
necessarily  indicative  of  results  that  would  have  been  achieved  had the
acquisition  occurred at the  beginning of either  period,  nor is the pro forma
information  indicative of future operating results of the Company subsequent to
July 1, 1996, the date of the acquisition.

                                      -F20-
<PAGE>


Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        with Section 16(a) of the Exchange Act.

     The  information  required by this item will be  included in the  Company's
Proxy  Statement with respect to its 1997 Annual Meeting of  Stockholders  to be
filed  with the  Commission  within 120 days of  December  31,  1996,  under the
captions   "Information   Concerning   Directors  and  Executive  Officers"  and
"Compliance with Section 16(a) of the Securities Exchange Act."

Item 10. Executive Compensation.

     The  information  required by this item will be  included in the  Company's
Proxy  Statement with respect to its 1997 Annual Meeting of  Stockholders  to be
filed  with the  Commission  within 120 days of  December  31,  1996,  under the
caption "Information Concerning Directors and Executive Officers."

Item 11. Security Ownership of Certain Beneficial Owners and Management.

     The  information  required by this item will be  included in the  Company's
Proxy  Statement with respect to its 1997 Annual Meeting of  Stockholders  to be
filed  with the  Commission  within 120 days of  December  31,  1996,  under the
caption "Voting Securities."

Item 12. Certain Relationships and Related Transactions.

     The  information  in this  item  is  incorporated  by  reference  from  the
Company's  Definitive  Proxy  material in respect of the 1997 Annual  Meeting of
Stockholders  to be filed with the  Commission  within 120 days of December  31,
1996, under the caption "Certain Relationships and Related Transactions."


Item 13. Exhibits and Reports on Form 8-K.

     a.   Exhibits  Filed  Herewith or  Incorporated  by  Reference  to Previous
          Filings with the Securities and Exchange Commission:

     1.   The following  exhibits were included with the filing of the Company's
          Registration Statement #33-67370-D effective November 10, 1993 and are
          hereby incorporated by reference:

Exhibit No.                    Description

 4.3           Form of Convertible Promissory Note.

10.1           Contract to Buy and Sell Real Estate - Long Branch Casino.

10.2           Real Estate Contract  Modification  and Promissory Note Extension
               Agreement - Long Branch Casino.

10.3           Assumption Agreement and Consent.

10.5           Lease Agreement between Remington Gaming, Inc. and Registrant.

10.6           Installment  Sales Contract between  Remington  Gaming,  Inc. and
               Firestone Financial Corp.


                                       18
<PAGE>


10.7           Lease Agreement between  Remington  Gaming,  Inc. and PDS Leasing
               Corporation.

10.8           Agreement  between   Remington  Gaming,   Inc.  and  IGT-Colorado
               Corporation.

10.9           Business Lease Agreement between  Remington Gaming,  Inc. and LFC
               Inc.

10.11          Consulting Agreement between Consultant and Registrant.

10.12          Registration Rights Agreement between Consultant and Registrant.

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

     2.   The  following  exhibits were included with the filing of the Alpine's
          Form  10-KSB  for the year  ended  December  31,  1993 and are  hereby
          incorporated by reference:

Exhibit No.               Description

10.14          Plan of Reorganization  and Agreement Among Alpine Gaming,  Inc.,
               Alpine Acquisition,  Inc. and Century Casinos Management,  Inc. -
               Filed with Form 8-K dated December 24, 1993 and  incorporated  by
               reference therein.

10.15          Amendments  One,  Two and  Three  to Plan of  Reorganization  and
               Agreement Among Alpine Gaming, Inc., Alpine Acquisition, Inc. and
               Century Casinos Manage ment, Inc.

10.16          Consulting Agreement - Dr. Alfred Liebich.

10.18          Switzerland   County/Vevay   Town  Cooperation   Agreement  dated
               September 14, 1993.

10.19          Land Purchase Option - James A. Glatthaar.

10.20          Option to Lease and Land Lease - James Chaskel.

10.21          Agreement  among  Century  Casinos  Management,   Inc.,  Pinnacle
               Development  Group and The Benefit Group, Inc. dated December 13,
               1993.

10.22          Commercial  Contract to Buy and Sell Real Estate - Central  City,
               Colorado  - C.C.  Traders,  Inc.;  Deed  of  Trust  and  Security
               Agreement - C.C. Traders,  Inc.;  Secured  Promissory Note - C.C.
               Traders,  Inc.; Assignment of Right of Action/Bill of Sale - C.C.
               Traders,  Inc.;  Addendum to Commercial  Contract to Buy and Sell
               Real Estate - C.C. Traders, Inc.

10.23          Concession  Agreement - Silver Cloud and Silver Wind - Silver Sea
               Cruises.

10.27          Management Agreement - Soboba Bingo Hall - Soboba Band of Mission
               Indians.

10.28          Missouri Riverboat Agreement - City of Portage des Sioux.

10.29          Subscription   Agreement  -  Registration   Rights   Agreement  -
               Hospitality Franchise Systems, Inc.

                                       19
<PAGE>


10.30          Soboba Debt Financing Commitment - Hospitality Franchise Systems,
               Inc.

10.31          Marketing  Services  Agreement - Hospitality  Franchise  Systems,
               Inc.

10.33          Warrant to purchase common stock - Stephan J. Ossello.

10.34          Warrant to purchase common stock - Andrew J. Bartoletti.

10.35          Warrants to purchase common stock - Christopher S. Wrolstad.

10.36          Office Lease and Amendment Thereto - Century Casinos  Management,
               Inc.

10.39          Letter Agreement - Orion Corporate Funding; Representation Letter
               and Release.

10.42          Agreement Among Century Casinos Management, Inc.; Century Casinos
               Missouri,  Inc.  (a  corporation  to be formed)  and The  Benefit
               Group, Inc. dated March 18, 1994.

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

     3.   The following  exhibits were filed with the Form 10-KSB for the Fiscal
          Year Ended  December  31, 1994 and are hereby  incorporated  herein by
          reference:

Exhibit No.                        Description

10.45          Agreements regarding Wells, Nevada Nonoperating Gaming Facility.


10.47          Amendment   to   Agreement   -  Missouri  -  Casino   Development
               Corporation.

10.48          Amended Management Contract - Soboba Indian Tribe,

10.49          Buyout Agreement - St. Charles Gaming Company.

10.50          Amendment  Agreements - Hospitality  Franchise Systems,  Inc. and
               Affiliate - August 25, 1994 and February 2, 1995.

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

     4.   The following  exhibits were filed with the Form 10-KSB for the Fiscal
          Year Ended December 31, 1995 and are incorporated herein by reference:

Exhibit No.                        Description

3.1            Certificate  of  Incorporation  (filed  with Proxy  Statement  in
               respect of 1994 Annual Meeting of Stockholders  and  incorporated
               herein by reference).

 3.2           Bylaws  (filed  with Proxy  Statement  in respect of 1994  Annual
               Meeting of Stockholders and incorporated herein by reference).


10.51          Asset  Purchase  Agreement  dated as of September 27, 1995 by and
               among Gold Creek  Associates,  L.P., WMCK  Acquisition  Corp. and
               Century Casinos,  Inc.,  including Exhibits and Schedules,  along
               with First Amendment thereto.

                                       20
<PAGE>


10.52          Agreement dated August 18, 1995 between SSK Game  Enterprises and
               Century Casinos Management,  Inc.,  including:  Exhibit A, Gaming
               Machine Lease and Purchase Agreement; Exhibit B, Promissory Note;
               and  Agreement  and  Release  between The Soboba Bank of Missouri
               Indians and Century Casinos Management, Inc.

10.53          Assignment and Assumption of Lease dated October 12, 1995 between
               Cripple Creek Properties, Inc., Star Casinos International,  Inc.
               and Century  Casinos  Cripple Creek,  Inc.,  including short form
               Assignment  and Assumption of Lease and Assignment and Assumption
               of Lease made  November  1995  between  Century  Casinos  Cripple
               Creek, Inc. and Gold Creek Associates, L.P., d/b/a Womacks Saloon
               and Gaming Parlor.

10.54          Letter  Agreement  dated  November 8, 1995 between  Oppenheimer &
               Co., Inc. and Century Casinos, Inc.

10.55          Agreement  dated May 5, 1995 between Dain  Bosworth  Incorporated
               and Century Casinos, Inc., as modified on August 8, 1995.

10.56          Casinos  Management  Consulting  Agreement by and between  Rhodes
               Casino, S.A. and Century Casinos, Inc.

10.57          Stock  Purchase   Agreement   dated  December  21,  1995  between
               Switzerland  County  Development  Corp.   ("Buyer")  and  Century
               Casinos Management, Inc. and Cimarron Investment Properties Corp.
               ("Sellers").

10.58          Consultancy Agreement - Chalkwell Limited.

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

     5.   The  following  exhibits  were filed with the Form 8-K Current  Report
          dated July 1, 1996 and are hereby incorporated by reference:

Exhibit No.                        Description

10.59          Second  Amendment to Asset Purchase  Agreement  dated as of April
               10, 1996,  among Gold Creek  Associates,  L.P., WMCK  Acquisition
               Corp. and Century Casinos, Inc.

10.60          Promissory Note dated March 19, 1992,  made by Chrysore,  Inc. in
               the  original  amount of  $1,850,000  payable  to R. & L Historic
               Enterprises, together with Assignment dated September 14, 1992 of
               said  Promissory  Note to TJL  Enterprises,  Inc. and  Assignment
               dated May 16, 1996 of said  Promissory  Note to Century  Casinos,
               Inc.

10.61          Promissory  Note  dated July 1,  1996,  made by WMCK  Acquisition
               Corp. in the original  principal amount of $5,174,540  payable to
               Gold Creek Associates, L.P., together with Guaranty dated July 1,
               1996, of said Promissory Note by Century Casinos, Inc.


                                       21
<PAGE>


10.62          Building Lease dated as of July 1, 1996,  among TJL  Enterprises,
               Inc., WMCK Acquisition Corp. and Century Casinos,  Inc., together
               with  Memorandum of Building  Lease with Option to Purchase dated
               as of July 1, 1996, among the same parties.

10.63          Four Party Agreement, Assignment and Assumption of Lease, Consent
               to  Assignment  of Lease,  Confirmation  of Option  Agreement and
               Estoppel  Statements  dated  as of July  1,  1996,  among  Harold
               William Large, Teller Realty, Inc., Gold Creek Associates,  L.P.,
               and WMCK Acquisition Corp.

10.64          Consulting  Agreement  dated  as of July 1,  1996,  between  WMCK
               Acquisition Corp. and James A. Gulbrandsen.

10.65          Consulting  Agreement  dated  as of July 1,  1996,  between  WMCK
               Acquisition Corp. and Gary Y. Findlay.

10.66          Stock Transfer and Registration Rights Agreement dated as of July
               1, 1996,  between Century Casinos,  Inc. and James A. Gulbrandsen
               and Gary Y. Findlay. 
-------------------

     6.   The following exhibits are filed herewith:

Exhibit No.                        Description

10.67          Office Lease - 26 South Tejon Street, Colorado Springs, Colorado.

21             Subsidiaries of the Registrant.

23.1           Consent of Independent Accountants.

     b.   Reports  on Form 8-K  Filed  During  the  Registrant's  Fourth  Fiscal
          Quarter:

               No reports on Form 8-K were filed by the Company  during the last
               quarter of its fiscal year ended December 31, 1996.

                                       22
<PAGE>


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its  behalf  by the  undersigned,  thereunto  duly  authorized,  in the  City of
Colorado Springs, State of Colorado on March 24, 1997.

                                       CENTURY CASINOS,  INC.

                                       By:/s/ James D. Forbes
                                       ----------------------
                                       James D. Forbes, President

                                       /s/ Brad Dobski
                                       ---------------
                                       Brad Dobski, Chief Accounting
                                       Officer (Principal Financial and
                                       Accounting Officer)

                                POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS,  that each person whose  signature  appears
below  constitutes  and appoints James D. Forbes and Norbert  Teufelberger,  his
true and lawful  attorneys-in-fact  and agents,  with full power of substitution
and  resubstitution,  for him and in his name,  place and stead,  in any and all
capacities,  to sign any and all pre-effective and post-effective  amendments to
this Form 10- KSB, and to file the same,  with all exhibits  thereto,  and other
documentation  in  connection  therewith,   with  the  Securities  and  Exchange
Commission,  granting  unto  said  attorneys-in-fact  and agent  full  power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in  person,  hereby  ratifying  and  confirming  all that said
attorneys-in-fact  and agent, or his substitute or substitutes,  may lawfully do
or cause to be done by virtue hereof.

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report has been signed by the following  persons on behalf of the Registrant and
in the capacities indicated on March 24, 1997.

Signature
Title
/s/ Erwin Haitzmann                                  Chairman of the Board
-------------------
Erwin Haitzmann

/s/ Peter Hoetzinger                                 Vice Chairman of the Board
-------------------
Peter Hoetzinger

/s/ James D. Forbes                                  President and Director
-------------------
James D. Forbes

/s/ Norbert Teufelberger                             Director
-------------------
Norbert Teufelberger

                                       23
<PAGE>


                                  EXHIBIT INDEX

Exhibit No.                         Description

10.67          Office Lease - 26 South Tejon Street, Colorado Springs, Colorado,
               filed herewith.

21             Subsidiaries of the Registrant, filed herewith.

23.1           Consent of Independent Accountants, filed herewith.


                                       24