================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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                                  FORM 10-KSB/A
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                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                     For fiscal year ended October 31, 1996

                         Commission File Number: 0-24846

                          COLORADO CASINO RESORTS, INC.
             (Exact name of Registrant as specified in its Charter)

           Texas                                               84-1303693
(State or other jurisdiction of                              (IRS Employer
incorporation or organization)                            Identification No.)

                              304 South 8th Street
                                    Suite 201
                           Colorado Springs, CO 80905
                                 (719) 635-7047
               (Address, including zip code, and telephone number,
                 including area code, of Registrant's principal
                               executive offices)

      SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE EXCHANGE ACT:
                         Common Stock, $0.001 Par Value
                                (Title of Class)

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

Check if disclosure of delinquent  filers pursuant to Item 405 of Regulation S-B
is not contained herein, and will not be contained,  to the best of registrant's
knowledge,  in  definitive  proxy  or  information  statements  incorporated  by
reference  in Part III of this Form 10-KSB or any  amendment to this Form 10-KSB
[X]

State the registrant's revenues for its most recent fiscal year: $10,615,318.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant  on January 24,  1997 was  approximately  $51,806,567  based upon the
average reported  closing bid and asked price of such shares.  As of January 24,
1997, there were 34,537,711 shares outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE:
  Proxy Statement from Annual Meeting of Shareholders dated September 19, 1996


================================================================================
<PAGE>
                                     PART II


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

Management has made several restatements and  reclassifications to the Company's
1996  fiscal  year  financial   statements.   A  detailed   description  of  the
restatements is discussed in the "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS" on
page F-14 hereof.

Results of Operations

During the fiscal year ended October 31, 1996, the Company formed a wholly owned
subsidiary,  Double Eagle Resorts, Inc., to conduct business as the Double Eagle
Hotel & Casino in Cripple Creek, Colorado. Effective August 1, 1996, the Company
transferred  assets and  liabilities,  related to the Double  Eagle,  in the net
amount of $15,315,296 to the subsidiary in a tax-free exchange. On July 27, 1996
the Company opened the hotel and Lombard's  Restaurant (at the Double Eagle) for
business and, upon receiving its gaming license from the Colorado State Division
of Gaming,  opened the casino and bars on August 29, 1996. The Company's results
of  operations  for 1996  include a full  year of  Creeker's  and two  months of
activities for the Double Eagle.

The Company reported net operating  revenues for fiscal 1996 of $10,615,318,  an
increase of  $6,408,383,  or 152% from the  $4,206,935  recorded in 1995. Of the
increase,  $3,947,536,  or 62% of the total  increase,  was  attributable to two
months of operations of the Double Eagle Hotel & Casino.  Although,  income from
operations, before pre-opening expenses, amounted to $1,155,390,  representing a
1,139%  increase over the $93,200  reported in 1995, the Company  reported a net
loss of ($4,651,368) or ($0.1445) per share compared to a net loss of ($462,059)
or  ($0.0150)  per share in fiscal  year  1995.  Contributing  to the loss was a
one-time charge for pre-opening expenses of $2,298,763,  an increase in interest
expenses of  $2,426,678  (both  associated  with building and opening the Double
Eagle),  and an imputed non-cash  dividend of $700,000 related to the beneficial
conversion  features of the Series One Preferred Stock. The increase in interest
expense  included  a  one-time  charge of  $900,000  related  to the  beneficial
conversion   features  of  the  convertible   debentures  [See  Note  B  to  the
Consolidated Financial Statements].

Casino.  Fiscal 1996 casino revenues increased  $5,678,424,  up 142% from fiscal
1995 casino  revenues of $4,006,694 to $9,685,118.  The two months of operations
of the Double Eagle casino provided $3,228,098 of the increase. Casino costs and
expenses  increased 42% with the opening of the Double Eagle from  $2,085,345 to
$2,957,923  in fiscal  1996.  While the Double  Eagle  accounted  for 57% of the
casino revenue growth,  it accounted for most of the $872,578 increase in casino
expenses.  Creeker's  casino  revenues grew by over 61%,  while casino  expenses
remained  relatively  flat with a 2% increase  from fiscal 1995 to fiscal  1996.
Management  attributes this  improvement to aggressive  marketing and successful
promotions,  as well as, the selection  and addition of new gaming  devices with
bill  validators.  As of October 31, 1996,  Creeker's had 234 gaming devices and
two  blackjack  tables  while the Double  Eagle had 746 gaming  devices and five
blackjack tables.

Hotel and Gift Shop. Revenues from the hotel and gift shop amounted to $507,825,
representing  approximately  5% of total operating  revenues in fiscal 1996. The
158-room  hotel was open for three  months  while the gift shop was open for one
month  during  the  fiscal  year.  Hotel  and gift  shop  expenses  of  $398,263
constituted  78% of the revenues,  due primarily to salaries and other  start-up
expenses.

                                      -2-
<PAGE>
Restaurant and Bar.  Restaurant and bar revenues improved by 92%, up $174,502 to
$363,200 in fiscal 1996, net of promotional  allowances of $385,432 and $214,518
in fiscal 1996 and 1995,  respectively.  Just over  $130,000 of the increase was
provided by three months of operations of the new Lombard's Restaurant,  located
in the Double  Eagle.  Lombard's  is a  100-seat,  up-scale  restaurant  serving
made-to-order meals from its American-Continental  menu. Food and beverage costs
and expenses rose by 116%, up $650,773 to  $1,210,615,  with  restaurant and bar
operations at the Double Eagle accounting for 63% of the increase.

General and Administrative.  General and administrative expenses increased 237%,
up $2,648,073 to $3,765,232 for fiscal 1996.  Approximately  $672,104, or 25% of
the  increase,  was directly  attributable  to the new  operations at the Double
Eagle.  Marketing and promotional expenses of $670,000 at Creeker's  constituted
another 25% of the total increase, with the balance attributable to increases in
payroll and certain overhead costs at the corporate offices and Creeker's.

Pre-Opening  Expenses. As a result of opening the Double Eagle Hotel & Casino in
fiscal 1996, the Company recognized  $2,298,763 in pre-opening  expenses.  These
charges had been incurred in connection with the development and opening of that
property. Approximately $1,500,000, or 65% of the total pre-opening expenses, is
due to the  establishment of initial  progressive  jackpot  liability  reserves,
while  the  balance  is  composed  of the  pre-opening  payroll,  gaming  taxes,
marketing costs and supplies.

Depreciation. Depreciation expense increased 221%, up $776,506 to $1,127,895 for
fiscal 1996, with 74% of the increase,  approximately $575,000, primarily due to
capital  spending  associated with the Double Eagle.  The remaining  increase of
approximately  $202,000 is attributable to the addition of new gaming devices at
Creeker's.

Interest Expense.  Interest expense increased $2,426,678, or 437%, from $555,259
reported in fiscal 1995 to $2,981,937 in fiscal 1996.  Approximately  $1,526,678
of increase was  attributable  to additional  debt secured to finance the Double
Eagle as well as equipment  financing,  and $900,000  related to the  beneficial
conversion features of the convertible debentures.

Liquidity and Capital Resources

The Company's  primary  sources of liquidity and capital  resources to date have
been cash flow from operations,  borrowings  under various credit  arrangements,
and equity capital from private placements.

At  October  31,  1996  the  Company  had cash  and  cash  equivalents  totaling
$2,828,994 and $1,000,000  available under a revolving line of credit. Cash flow
from operations for fiscal 1996 was  $2,495,032,  while cash flow from financing
activities totaled  $19,817,736.  Net cash used in the purchase and construction
of land,  building and  capitalized  expenditures  for property and equipment of
$21,058,919  was funded by the infusion of $18,395,000 in debt and $4,275,000 in
equity capital during fiscal 1996.

Additionally,  the Company entered into eight equipment financing  agreements to
fund the acquisition of gaming and associated equipment. The outstanding balance
under these equipment  financing  agreements at October 31, 1996 was $7,320,941.
Under the terms of six agreements,  repayments of principal and interest are due
in 36 monthly installments, while two agreements require repayments of principal
and interest in 60 monthly installments.  All equipment financing agreements are
secured by the equipment  financed under such agreements.  The obligations under
the financing agreements are guaranteed by the Company.

                                      -3-
<PAGE>
The $1,000,000 revolving line of credit requires interest payable monthly at the
prime rate plus 1% and contains  certain  financial and other  covenants.  These
covenants  require  the  Company  to use the  line of  credit  only to fund  the
progressive  jackpot liabilities at the Double Eagle Hotel & Casino. The line of
credit is secured by a second  deed of trust on the  hotel/casino.  There was no
outstanding balance under the line at October 31, 1996.

The Company has  demonstrated  its ability to raise debt and equity capital,  as
needed, over the past four years and may seek to raise additional equity capital
in the  future,  although  there are no  present  plans to do so.  However,  the
Company  intends  to seek  permanent  debt  financing  in order to take out more
expensive construction debt.  Specifically,  the Company anticipates refinancing
its near-term obligations of approximately  $13,700,000 during the second fiscal
quarter.  It is expected that substantially all of the assets of the two Cripple
Creek  properties  would be pledged as security for repayment of the debt. It is
likely  that the  terms of the debt  would  place  certain  restrictions  on the
Company's  ability to pay dividends and incur additional debt, and would require
the Company to maintain certain financial ratios. There can be no assurance that
the financing can be obtained on terms acceptable to the Company.


Item 7.       Financial Statements

The consolidated financial statements and supplementary data are as set forth in
"INDEX TO CONSOLIDATED FINANCIAL STATEMENTS" on page F-1 hereof.


                                      -4-
<PAGE>


                                   SIGNATURES

Pursuant to the  requirements  of Section 13 or 15(d) of the  Securities  Act of
1934, as amended, the registrant has duly caused this report to be signed on its
behalf by the  undersigned,  thereunto duly  authorized  this 22nd day of April,
1999.

                                        COLORADO CASINO RESORTS, INC.

                                    By: /s/ Rudy S. Saenz             
                                        ---------------------     
                                        Rudy S. Saenz
                                        President and Chief Executive Officer,
                                        Director (Principal Executive Officer)

                                        /s/ Farid E. Tannous     
                                        ---------------------
                                        Farid E. Tannous
                                        Treasurer and Chief Financial Officer
                                        (Principal Financial Officer)


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

April 22, 1999                          /s/ Rudy S. Saenz              
                                        ---------------------------
                                        Rudy S. Saenz
                                        President and Chief Executive Officer,
                                        Director

April 22, 1999                          /s/ Gilbert M. Sisneros         
                                        ----------------------------
                                        Gilbert M. Sisneros
                                        Vice President, Director

April 22, 1999                          /s/ Michael S. Smith             
                                        ----------------------------
                                        Michael S. Smith
                                        Secretary and General Counsel,
                                        Director

April 22, 1999                          /s/ Farid E. Tannous             
                                        -----------------------------
                                        Farid E. Tannous
                                        Treasurer and Chief Financial Officer

                                      -5-
<PAGE>
                          COLORADO CASINO RESORTS, INC.

                                TABLE OF CONTENTS


                                                                    Page
                                                              -----------------


Independent Auditors' Report                                        F-1

Consolidated Balance Sheets                                         F-2

Consolidated Statements of Operations                               F-4

Consolidated Statements of Changes in Stockholders' Equity          F-5

Consolidated Statements of Cash Flows                               F-7

Notes to Consolidated Financial Statements                          F-10



<PAGE>


                          COLORADO CASINO RESORTS, INC.
                           CONSOLIDATED BALANCE SHEETS
                                   OCTOBER 31,

                   The accompanying notes are an integral part
                   of these consolidated financial statements








                         REPORT OF INDEPENDENT AUDITORS
                         ------------------------------


To the Board of Directors
Colorado Casino Resorts, Inc.
Colorado Springs, Colorado

We have audited the accompanying  consolidated balance sheets of Colorado Casino
Resorts,  Inc. and Subsidiaries as of October 31, 1996 and 1995, and the related
consolidated statements of operations,  stockholders' equity, and cash flows for
the years ended  October 31,  1996 and 1995 and the  ten-month  short year ended
October 31, 1994.  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 audits 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, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Colorado Casino Resorts,  Inc. and Subsidiaries as of October 31, 1996 and 1995,
and the  consolidated  results of their  operations and their cash flows for the
years ended October 31, 1996 and 1995 and the ten-month short year ended October
31, 1994, in conformity with generally accepted accounting principles.

As discussed in Note A, Colorado  Casino Resorts,  Inc.,  merged with Creeker's,
Inc.,  effective March 15, 1995, in a transaction  accounted for as a pooling of
interests.  The financial  statements  for the ten months ended October 31, 1994
have been restated to reflect the pooling of interests.

As  discussed  in Note B to the  financial  statements,  the  October  31,  1996
consolidated  financial statements have been restated to correct errors relating
to  the  accounting  for  convertible  securities  issued  by the  Company,  the
accounting for interest on related-party  debt, and the accounting for a capital
lease agreement of the Company.


Richey, May & Co., P.C. (formerly Williams, Richey & Co., P.C.)
Englewood, Colorado
December 19, 1996 (Except for Notes A, B, G and K as to
which the date is January 25, 1999)


                                      F-1
<PAGE>
                          COLORADO CASINO RESORTS, INC.
<TABLE>
<CAPTION>
                           CONSOLIDATED BALANCE SHEETS
                                   OCTOBER 31,



                                 
                         ASSETS                    (As Restated)
                         ------                         1996            1995
                                                   ------------    ------------
<S>                                                <C>             <C>         
CURRENT ASSETS
      Cash and temporary investments ...........   $  2,828,994    $  1,375,145
      Certificate of deposit, restricted .......           --           450,000
      Inventory ................................        251,662          49,885
      Advances to officers .....................        379,617         114,617
      Other current assets .....................        553,992          87,885
                                                   ------------    ------------
         TOTAL CURRENT ASSETS ..................      4,014,265       2,077,532
                                                   ------------    ------------

REAL ESTATE HELD FOR FUTURE DEVELOPMENT ........      4,504,970       4,504,970
                                                   ------------    ------------

LAND, BUILDING AND EQUIPMENT
      Land .....................................      7,071,644       7,071,644
      Building .................................     23,085,250       1,625,154
      Furniture and equipment ..................     12,061,514       2,244,529
      Construction in process ..................           --         3,301,432
      Accumulated depreciation .................     (1,570,629)       (533,606)
                                                   ------------    ------------
           TOTAL LAND, BUILDING AND EQUIPMENT ..     40,647,779      13,709,153
                                                   ------------    ------------

OTHER ASSETS
      Deposits, land and building option .......         25,000          25,000
      Debt issue costs .........................        224,195            --
      Other ....................................         64,288           8,176
                                                   ------------    ------------
           TOTAL OTHER ASSETS ..................        313,483          33,176
                                                   ------------    ------------

TOTAL ASSETS ...................................   $ 49,480,497    $ 20,324,831
                                                   ============    ============

</TABLE>

                   The accompanying notes are an integral part
                   of these consolidated financial statements

                                      F-2
<PAGE>
                           CONSOLIDATED BALANCE SHEETS
                                   OCTOBER 31,

<TABLE>
<CAPTION>
                                  (As Restated)
                      LIABILITIES AND STOCKHOLDERS' EQUITY                        1996            1995
                      ------------------------------------
                                                                            ------------    ------------
<S>                                                                         <C>             <C>         
CURRENT LIABILITIES
      Accounts payable ..................................................   $    649,895    $     52,975
      Progressive jackpot liabilities ...................................      1,995,388         263,788
      Accrued other expenses ............................................        675,063         199,373
      Interest payable ..................................................        557,098          62,325
      Interest payable, related parties .................................        832,945            --
      Note payable ......................................................           --           500,000
      Current portion, long-term debt,
         related party ..................................................      7,676,209          64,681
      Current portion, long-term debt ...................................      6,015,931         279,794
      Current portion, capital lease obligations ........................      1,636,904            --
                                                                            ------------    ------------
           TOTAL CURRENT LIABILITIES ....................................     20,039,433       1,422,936

LONG-TERM DEBT, RELATED PARTY ...........................................        412,125         665,603
LONG-TERM DEBT ..........................................................      8,238,993       4,318,684
CONVERTIBLE DEBENTURE, RELATED PARTY ....................................      4,500,000       4,500,000
INTEREST PAYABLE, CONVERTIBLE DEBENTURE, RELATED PARTY ..................        699,739         376,297
CONVERTIBLE DEBENTURES ..................................................      2,500,000            --
CAPITAL LEASE OBLIGATIONS ...............................................      4,912,834            --
                                                                            ------------    ------------
         TOTAL LIABILITIES ..............................................     41,303,124      11,283,520
                                                                            ------------    ------------

COMMITMENTS AND CONTINGENCIES (NOTE N)

STOCKHOLDERS' EQUITY
         Preferredconvertible stock, Series One, $10 par value, 5,000,000
                  shares authorized, 250,000 and 650,000
                  issued and outstanding, respectively ..................      2,500,000       6,500,000
         Common stock, $.001 par value, 100,000,000 shares
                  authorized, 34,537,711 and 30,845,000 issued and
                  outstanding, respectively .............................         34,537          30,845
                  Paid-in capital .......................................     12,067,270       4,283,532
         Accumulated deficit ............................................     (6,424,434)     (1,773,066)
                                                                            ------------    ------------
           TOTAL STOCKHOLDERS' EQUITY ...................................      8,177,373       9,041,311
                                                                            ------------    ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..............................   $ 49,480,497    $ 20,324,831
                                                                            ============    ============
</TABLE>

                   The accompanying notes are an integral part
                   of these consolidated financial statements

                                      F-3
<PAGE>
                          COLORADO CASINO RESORTS, INC.
<TABLE>
<CAPTION>
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                              (As Restated)                     Ten-Months
                                               Year Ended       Year Ended        Ended
                                               October 31,      October 31,     October 31,
                                                   1996            1995            1994
                                              ------------    ------------    ------------
<S>                                           <C>             <C>             <C>         
REVENUE
         Casino ...........................   $  9,685,118    $  4,006,694    $  1,485,985
         Hotel and gift shop ..............        507,825            --              --
         Restaurant and bar ...............        363,200         188,698         172,544
         Miscellaneous ....................         59,175          11,543            --
                                              ------------    ------------    ------------
                  Total revenue ...........     10,615,318       4,206,935       1,658,529
                                              ------------    ------------    ------------

EXPENSES
         Casino ...........................      2,957,923       2,085,345       1,129,819
         Hotel and gift shop ..............        398,263            --              --
         Restaurant and bar ...............      1,210,615         559,842         182,599
         General and administrative .......      3,765,232       1,117,159         266,824
         Preopening costs .................      2,298,763            --              --
         Depreciation .....................      1,127,895         351,389         108,506
                                              ------------    ------------    ------------
                  Total expenses ..........     11,758,691       4,113,735       1,687,748
                                              ------------    ------------    ------------

Income (Loss) From Operations .............     (1,143,373)         93,200         (29,219)
                                              ------------    ------------    ------------

NONOPERATING
         INCOME (EXPENSES)
         Interest income ..................        173,942            --              --
         Interest expense .................     (1,321,431)       (147,717)       (216,023)
         Interest expense, related parties      (1,660,506)       (407,542)       (133,207)
                                              ------------    ------------    ------------
                  Total nonoperating income
                           (expense) ......     (2,807,995)       (555,259)       (349,230)
                                              ------------    ------------    ------------

Net Loss ..................................     (3,951,368)       (462,059)       (378,449)
Preferred Stock Dividend ..................       (700,000)           --              --
                                              ============    ============    ============
Net Loss Applicable to Common Stock .......   $ (4,651,368)   $   (462,059)   $   (378,449)
                                              ============    ============    ============

Net Loss Per Common Share .................   $    (0.1445)   $    (0.0150)   $    (0.0135)
                                              ============    ============    ============

Weighted Average Common Shares
         Outstanding ......................     32,170,990      30,747,582      27,960,986
                                              ============    ============    ============
</TABLE>

                   The accompanying notes are an integral part
                   of these consolidated financial statements

                                      F-4
<PAGE>
                          COLORADO CASINO RESORTS, INC.
<TABLE>
<CAPTION>
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
               YEARS ENDED OCTOBER 31, 1996 (As Restated) AND 1995
                        TEN MONTHS ENDED OCTOBER 31, 1994

                                                Preferred Stock        Common Stock                
                                                ---------------------------------------       Paid-in      Accumulated
                                                Shares  Amount    Shares         Amount       Capital        Deficit        Total
                                                ------------------------------------------------------------------------------------
<S>                                                <C>  <C>    <C>             <C>        <C>            <C>            <C>        
BALANCE, DECEMBER 31, 1993 ......................   --  $--    25,000,000      $ 25,000   $ 1,976,953    $  (762,160)   $ 1,239,793
Paid-In Capital, Debt Converted to Equity .......   --   --          --            --         582,424           --          582,424
Issuance of Common Stock in Exchange for
 Common Stock in Lyric Development Co. ..........   --   --     1,000,000         1,000        (1,000)          --             --
Common Stock Issued for Cash at $0.50 Per
 Share ..........................................   --   --       500,000           500       249,500           --          250,000
Common Stock Issued for Services at $0.75
 Per Share ......................................   --   --       100,000           100        74,900           --           75,000
Common Stock Issued for Cash at $0.25 Per
 Share ..........................................   --   --     2,400,000         2,400       597,600           --          600,000
Common Stock Issued for Cash at $2.50 Per
 Share ..........................................   --   --        40,000            40        99,960           --          100,000
Common Stock Issued for Cash at $.25 Per
 Share ..........................................   --   --     1,600,000         1,600       398,400           --          400,000
Net Loss ........................................   --   --          --            --            --         (378,449)      (378,449)
                                                    --   --   -----------   -----------   -----------    -----------    -----------
BALANCE, OCTOBER 31, 1994 .......................   --   --    30,640,000        30,640     3,978,737     (1,140,609)     2,868,768
</TABLE>



                   The accompanying notes are an integral part
                   of these consolidated financial statements

                                      F-5
<PAGE>
                          COLORADO CASINO RESORTS, INC.
<TABLE>
<CAPTION>
      CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
               YEARS ENDED OCTOBER 31, 1996 (As Restated) AND 1995
                        TEN MONTHS ENDED OCTOBER 31, 1994

                                                   Preferred Stock               Common Stock       
                                            -------------------------------------------------------     Paid-in      Accumulated
                                                Shares        Amount         Shares        Amount       Capital        Deficit   
                                            ------------   -----------    -----------   -----------   -----------   ------------ 

<S>                                         <C>            <C>            <C>           <C>           <C>           <C> 
Common Stock Options Exercised at $1 Per
 Share ..................................          --             --            5,000             5         4,995          --   
Common Stock Issued at $1.50 Per Share ..          --             --          200,000           200       299,800          --   
Preferred Stock Issued at $10 Per  Share        650,000      6,500,000           --            --            --            --   
Distribution to Former S-Corporation
 Stockholders ...........................          --             --             --            --            --        (170,398)
Net Loss ................................          --             --             --            --            --        (462,059)
                                            -----------    -----------    -----------   -----------   -----------   -----------
BALANCE, OCTOBER 31, 1995 ...............       650,000      6,500,000     30,845,000        30,845     4,283,532    (1,773,066)
Common Stock Issued at $2.03 Per Share ..          --             --          614,770           614     1,124,386          --   
Convertible Preferred Stock, Series
 Two, Issued at $10 Per Share ...........       350,000      3,150,000           --            --         700,000      (700,000)
Conversion of Series Two, Preferred Stock
 into Common Stock ......................      (350,000)    (3,150,000)     2,056,308         2,057     3,147,943          --   
Intrinsic Value of Beneficial Conversion
 Feature of Convertible Debentures ......          --             --             --            --         900,000          --   
Conversion of Convertible Debentures into
 Common Stock ...........................          --             --        1,021,633         1,021     1,911,409          --   
Conversion of Series One, Preferred Stock
 into Debt ..............................      (400,000)    (4,000,000)          --            --            --            --   
Net Loss ................................          --             --             --            --            --      (3,951,368)
                                            ===========    ===========    ===========   ===========   ===========   ===========
BALANCE, OCTOBER 31, 1996 ...............       250,000    $ 2,500,000     34,537,711   $    34,537   $12,067,270   $(6,424,434)
                                            ===========    ===========    ===========   ===========   ===========   ===========

                                                Total   
                                            -----------
<S>                                         <C>  
Common Stock Options Exercised at $1 Per
 Share ..................................         5,000
Common Stock Issued at $1.50 Per Share ..       300,000
Preferred Stock Issued at $10 Per  Share      6,500,000
Distribution to Former S-Corporation
 Stockholders ...........................      (170,398)
Net Loss ................................      (462,059)
                                            -----------
BALANCE, OCTOBER 31, 1995 ...............     9,041,311
Common Stock Issued at $2.03 Per Share ..     1,125,000
Convertible Preferred Stock, Series
 Two, Issued at $10 Per Share ...........     3,150,000
Conversion of Series Two, Preferred Stock
 into Common Stock ......................          --
Intrinsic Value of Beneficial Conversion
 Feature of Convertible Debentures ......       900,000
Conversion of Convertible Debentures into
 Common Stock ...........................     1,912,430
Conversion of Series One, Preferred Stock
 into Debt ..............................    (4,000,000)
Net Loss ................................    (3,951,368)
                                            ===========
BALANCE, OCTOBER 31, 1996 ...............   $ 8,177,373
                                            ===========
</TABLE>

                   The accompanying notes are an integral part
                   of these consolidated financial statements

                                      F-6
<PAGE>
                          COLORADO CASINO RESORTS, INC.
<TABLE>
<CAPTION>
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                (As Restated)                    Ten Months
                                                 Year Ended        Year Ended       Ended
                                                 October 31,       October 31,    October 31,
                                                    1996             1995           1994
                                               ------------    ------------    -------------
<S>                                            <C>             <C>             <C>          
CASH FLOWS FROM OPERATING
  ACTIVITIES
    Net loss ...............................   $ (3,951,368)   $   (462,059)   $   (378,449)
    Non-cash items-
        Depreciation and amortization ......      1,127,895         351,389         108,506
        Amortization of debt issue costs ...      1,500,939            --              --
        (Gain) loss on sale of fixed assets         (14,467)         13,136            --
        Common stock for services ..........           --              --            75,000
        Interest converted to debt or equity        326,492         415,816          45,852
    (Increase) decrease in:
        Inventory ..........................       (201,777)        (20,204)        (29,681)
        Other current assets ...............       (466,107)        (38,904)         (2,012)
         Other assets ......................         41,497            --              --
    (Decrease) increase in:
        Accounts payable ...................        596,920          27,025          21,391
        Interest payable, related parties ..        832,945            --              --
        Accrued other expenses .............      2,702,063         226,367         159,181
                                               ------------    ------------    ------------
           Net cash provided (used) by
                  operating activities .....      2,495,032         512,566            (212)
                                               ------------    ------------    ------------

CASH FLOWS FROM INVESTING
  ACTIVITIES
    Purchase/construction of land,
         building, and equipment ...........    (21,058,919)     (4,088,492)       (311,469)
    Proceeds from sale of fixed assets .....         30,000          29,100            --
    Certificate of deposit, restricted .....        450,000        (450,000)           --
    Deposits, purchase options .............           --           (50,000)        (50,000)
    Advances to officers ...................       (280,000)        (94,617)        (20,000)
                                               ------------    ------------    ------------
           Net cash used by investing
                  activities ...............    (20,858,919)     (4,654,009)       (381,469)
                                               ------------    ------------    ------------
</TABLE>

                   The accompanying notes are an integral part
                   of these consolidated financial statements

                                      F-7
<PAGE>
<TABLE>
<CAPTION>
                          COLORADO CASINO RESORTS, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                                           (As Restated)                     Ten Months
                                            Year Ended      Year Ended          Ended
                                            October 31,     October 31,      October 31,
                                               1996            1995             1994
                                          ------------    ------------    -------------
<S>                                       <C>             <C>             <C>    
CASH FLOWS FROM FINANCING
  ACTIVITIES
    Advances from officers ............         15,000            --           435,000
    Repayments, advances from officers            --          (120,000)       (480,633)
    Borrowings, note payable ..........           --           500,000            --
    Repayments, note payable ..........       (500,000)        (93,000)           --
    Borrowings, long-term debt ........     10,040,000            --           405,000
    Borrowings, long-term debt, related
         party ........................      8,355,000            --              --
    Repayments, long-term debt ........       (342,130)     (2,046,957)       (644,997)
    Repayments, long-term debt, related
         party ........................     (1,000,000)           --           (66,574)
    Distributions, prior S-Corp
         stockholders .................           --          (170,398)           --
    Debt and stock issue costs ........     (1,025,134)           --              --
    Issuance of common stock ..........      1,125,000         305,000       1,350,000
    Issuance of preferred stock .......      3,150,000       6,500,000            --
                                          ------------    ------------    ------------
        Net cash provided by financing
         activities ...................     19,817,736       4,874,645         997,796
                                          ------------    ------------    ------------

INCREASE  IN CASH AND
  CASH EQUIVALENTS ....................      1,453,849         733,202         616,115

CASH AND CASH EQUIVALENTS,
  BEGINNING ...........................      1,375,145         641,943          25,828
                                          ------------    ------------    ------------

CASH AND CASH EQUIVALENTS,
  ENDING ..............................   $  2,828,994    $  1,375,145    $    641,943
                                          ============    ============    ============
</TABLE>

                   The accompanying notes are an integral part
                   of these consolidated financial statements

                                      F-8
<PAGE>
                          COLORADO CASINO RESORTS, INC.
<TABLE>
<CAPTION>
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                                            (As Restated)               Ten Months
                                             Year Ended    Year Ended     Ended
                                             October 31,   October 31,  October 31,
                                                1996         1995          1994
                                             ----------   ----------   ----------
<S>                                          <C>          <C>          <C>       
NONCASH INVESTING AND FINANCING ACTIVITIES
    Common stock issued for debt .........   $1,912,430         $--    $  657,424
                                             ==========   ==========   ==========

    Common stock issued for property
         and services ....................         $--          $--    $   75,000
                                             ==========   ==========   ==========

    Preferred stock converted to
         common stock ....................   $3,150,000         $--          $--
                                             ==========   ==========   ==========

    Preferred stock converted to debt ....   $4,000,000         $--          $--
                                             ==========   ==========   ==========

    Land, building and equipment
     financed through debt ...............   $7,023,135   $4,262,717   $4,856,651
                                             ==========   ==========   ==========

    Debt, refinanced .....................         $--    $1,180,919         $--
                                             ==========   ==========   ==========
</TABLE>
 

                   The accompanying notes are an integral part
                   of these consolidated financial statements

                                      F-9
<PAGE>
A.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        ------------------------------------------

        Organization and Operations
        ---------------------------
        Colorado Casino Resorts,  Inc. (the Company or CCRI),  (formerly Airline
        of the Virgin Islands, Inc.) was originally  incorporated under the laws
        of the Virgin Islands on March 25, 1982, and was  reincorporated  in the
        state of Texas on March 15,  1993.  On January  14,  1994,  the  Company
        completed a merger with Lyric Development Company, Inc., (Lyric) whereby
        the Company (which had no assets or liabilities and 1,000,000  shares of
        common stock issued and outstanding prior to the reorganization)  issued
        an additional  5,000,000  shares of common stock to the  stockholders of
        Lyric in exchange for 100% of the outstanding common stock of Lyric. The
        transaction has been accounted for as a  recapitalization  of Lyric with
        Lyric's accumulated deficit and operations being carried forward. During
        the year  ended  October  31,  1995,  Lyric  and its  subsidiaries  were
        liquidated into CCRI.

        During the year ended  October 31,  1996,  the  Company  formed a wholly
        owned subsidiary,  Double Eagle Resorts,  Inc. Effective August 1, 1996,
        the Company  transferred  assets and liabilities,  related to the Double
        Eagle Hotel & Casino, in the net amount of $15,315,296 to the subsidiary
        in a tax-free exchange.

        The  Company  through its wholly  owned  subsidiaries,  Creeker's,  Inc.
        (Creeker's)  and Double Eagle  Resorts,  Inc.  (Double  Eagle),  own and
        operate  a  casino  and  a  hotel/casino  in  Cripple  Creek,  Colorado.
        Creeker's  casino has 234 slot  machines and two blackjack  tables.  The
        Double Eagle's  hotel/casino  has 158 hotel rooms, 746 slot machines and
        five  blackjack  tables.  The Double Eagle hotel opened on July 27, 1996
        and the casino opened on August 29, 1996.

        Business Combination
        --------------------
        Effective  March 15, 1995, the Company issued  20,000,000  shares of its
        common stock in exchange for all of the  outstanding  stock of Creeker's
        in  a  merger  accounted  for  as  a  pooling  of  interests.  Financial
        statements  for periods prior to the  combination  have been restated to
        reflect the pooling of interests.  Concurrent with the merger, Creeker's
        became a subsidiary of the Company and conformed its fiscal year to that
        of the Company.  Creeker's briefly operated a casino at another location
        from late 1991 through mid-1993.  The current casino began operations in
        April, 1994. Included in consolidated results of operations for the year
        ended  October 31, 1995,  are the  following  results of the  previously
        separate companies for the period November 1, 1994 to April 30, 1995:
<TABLE>
<CAPTION>
                                             CCRI               Creeker's         Intercompany          Consolidated
                                 -----------------------------------------------------------------------------------
<S>                              <C>                    <C>                  <C>                  <C>               
       Revenue                   $          32,391      $       1,596,108    $      (19,641)      $        1,608,858
                                 ===================================================================================

       Net Income (Loss)         $       (558,831)      $          161,756   $            --      $        (397,075)
                                 ==================================================================================
</TABLE>

        The  following is a  reconciliation  of revenue and earnings  previously
        reported by the Company for the ten months  ended  October 31, 1994 with
        the combined amounts currently presented in the financial statements for
        that period:
<TABLE>
<CAPTION>

                                              CCRI                Creeker's         Intercompany       Consolidated
                                    -------------------------------------------------------------------------------
<S>                                 <C>                 <C>                       <C>              <C>             
       Revenue                      $         9,500     $         1,649,029       $       --       $      1,658,529
                                    ===============================================================================

       Net income (loss)            $      (555,947)    $           177,498       $       --       $      (378,449)
                                    ==============================================================================
</TABLE>

        Principles of Consolidation
        ---------------------------

        The  accompanying   consolidated   financial  statements  include  the
        accounts of the Company's  wholly-owned  subsidiaries,  Creeker's Inc.
        and  Double  Eagle  Resorts,   Inc.  All  intercompany   balances  and
        transactions have been eliminated.

                                      F-10
<PAGE>
A.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
        ------------------------------------------------------

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

        Certificate of Deposit, Restricted
        ----------------------------------
        The  certificate  of  deposit  was  restricted  under a letter of credit
        agreement  with the City of Cripple  Creek to ensure  completion  of the
        hotel/casino construction.  The certificate of deposit was released from
        restriction upon completion of construction.

        Inventory
        ---------
        Inventory  consists  of food,  beverages,  and gift  shop  items  and is
        recorded at the lower of cost (first-in, first-out method) or market.

        Real Estate Held For Future Development
        ---------------------------------------
        In August 1994,  the Company  acquired the Myers Avenue  property from a
        real estate  partnership (a related party effective with the acquisition
        of  Creeker's).  The  property  consists  of 40,705  square feet of land
        located  80 yards west of the  Creeker's  casino  parking  lot and has a
        carrying  value of $4,504,970 at October 31, 1996 and 1995. The property
        was appraised May 26, 1995,  for $6,500,000 and is being held for future
        development.

        Land, Building and Equipment
        ----------------------------
        Real estate held for future development is recorded at the lower of cost
        or fair value.

        Impairment  of real  estate  or other  long-lived  assets  is  evaluated
        whenever there is an indication that there is (a) a significant decrease
        in market  value,  (b) a  significant  change in the extent or manner in
        which an  asset  is used,  (c) a  significant  adverse  change  in legal
        factors  or  the  business   climate,   (d)  an  accumulation  of  costs
        significantly in excess of the amount originally  expected to acquire or
        construct,  or (e) a  forecast  that  demonstrates  continuing  expected
        losses associated with the asset. If the sum of the expected future cash
        flows  (undiscounted  and  without  interest  charges)  is less than the
        carrying amount of the asset,  an impairment loss is recognized.  During
        the years  ended  October  31,  1996 and 1995,  there were no changes in
        condition  that  indicated  that the carrying  amounts of real estate or
        other long-lived assets may not be recoverable.

        Furniture  and  equipment  are being  depreciated  over their  estimated
        useful lives using  accelerated  methods.  Building and improvements are
        being  depreciated  over their estimated useful lives on a straight-line
        basis.  Building  includes  $1,301,049 of capitalized  interest of which
        $1,241,199 and $59,850 was incurred for the years ended October 31, 1996
        and 1995, respectively.  Land, building and equipment used in operations
        consist of the following:

                                      F-11
<PAGE>
A.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
        ------------------------------------------------------
<TABLE>
<CAPTION>
                                         (As Restated)
                                          October 31,   October 31,   Estimated
                                             1996          1995      Useful Life
                                         -----------   -----------   ----------
<S>                                      <C>           <C>           <C>
Land .................................   $ 7,071,644   $ 7,071,644
Buildings and improvements ...........    23,085,250     1,752,059   39 Years
Gaming equipment .....................     6,123,908     1,571,765   4-7 Years
Surveillance equipment ...............       587,550        99,199   5 Years
Coin handling equipment ..............       388,033        91,858   7 Years
Transportation equipment .............        96,292          --     5 Years
Signs ................................       748,523          --     7 Years
Kitchen, bar and
  restaurant equipment ...............       300,627        45,189   7 Years
Hotel furnishings ....................     2,663,614          --     7 Years
Office, computer, audio equipment ....     1,152,967       309,613   5-7 Years
Construction in process ..............          --       3,301,432
                                          -----------   -----------
Total land, building and equipment ...    42,218,408    14,242,759
Less accumulated depreciation ........     1,570,629       533,606
                                         -----------   -----------
                                         $40,647,779   $13,709,153
                                         ===========   ===========
</TABLE>
        Debt Issue Costs
        ----------------
        Debt issue costs are being  amortized over the life of the related loans
        using the effective  interest method.  Debt issue costs of $825,134 less
        accumulated  amortization  of $600,939  are  included in other assets at
        October 31, 1996.

        Stockholders' Equity
        --------------------
        Effective September 30, 1994, the stockholders of Creeker's  contributed
        as additional paid-in capital, debt and related interest payable owed to
        them by Creeker's in the amount of $582,424.

        During the year ended October 31, 1995,  Creeker's made distributions of
        $170,398  to  the  former  S-Corporation   stockholders  to  meet  their
        estimated tax  obligations  for taxable  S-Corporation  earnings  passed
        through to them.

        The  Company has  authorized  5,000,000  shares of Series One  preferred
        convertible  non-voting stock. The preferred stock will be automatically
        converted  into units  upon the  closing of the  Company's  next  public
        offering of common stock units,  provided such closing occurs within two
        years from the date of issue of the preferred stock.  Said units will be
        identical  to the units  offered to the public and should  consist of at
        least one share of common stock and one redeemable common stock purchase
        warrant.

        The preferred  stock will be convertible  at a conversion  rate of three
        units  for each  amount  of par value of  preferred  stock  equal to the
        initial public  offering  price per unit. If the preferred  stock is not
        automatically  converted  within two years, it may be converted,  at the
        option of the holder,  into four units, with each unit consisting of one
        share of common stock and one redeemable common stock purchase warrant.

        Each  warrant  obtained on optional  conversion  will entitle the holder
        thereof  to  purchase  one share of  Common  Stock for a period of three
        years commencing with the date of optional conversion at a price of four
        dollars.  During the exercise period of the warrants, each warrant shall
        be redeemable  by the Company at a redemption  price of $.10 per warrant
        upon 30 days  prior  written  notice to each  warrant  holder  provided,
        however,  that the  closing  average bid price of the  Company's  common
        stock,  for a period of 20  consecutive  trading  days prior to any such
        call for  redemption,  shall  have  been  150% or more of the  effective
        exercise price of the warrants.


                                      F-12
<PAGE>
A.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
        ------------------------------------------------------

        The Series One  convertible  preferred  stockholders  are  entitled to a
        cumulative  annual dividend equal to six percent of the par value of the
        preferred stock. Upon either an automatic or optional  conversion of the
        preferred  stock (as  described  below)  all  cumulative  dividends  are
        forfeited. Cumulative preferred dividends in arrears at October 31, 1996
        and 1995, would be $179,270 and $99,270, respectively.

        During the year ended  October  31,  1996,  the Company  issued  350,000
        shares of Series Two, $10 Par Value,  Convertible  Preferred  Stock, for
        $3,150,000 (net of issuance costs).  The Series Two, Preferred Stock was
        converted  into  2,056,308  shares of common  stock at 80% of the market
        price (average closing bid for the five days prior to conversion) during
        the year ended October 31, 1996.

        Revenues
        --------
        Casino  revenues are the net winnings from gaming  activities,  which is
        the difference between gaming wins and losses.

        Promotional Allowances
        ----------------------
        Bar and  restaurant  revenue does not include the retail  amount of food
        and beverage  provided  gratuitously  to  customers,  which  amounted to
        $385,432  and  $214,518  for the years ended  October 31, 1996 and 1995,
        respectively.

        Preopening Costs
        ----------------
        Preopening  costs  consist of those direct  incremental  costs  incurred
        prior to  commencement  of  hotel/casino  operations and are expensed as
        incurred.

        Income Taxes
        ------------
        The Company and its subsidiaries file  consolidated  income tax returns.
        Creeker's  revoked its  S-Corporation  status effective January 1, 1995,
        filed a short period return for the period  January 1, 1995 to March 31,
        1995 and filed a consolidated  return with the Company effective for the
        period ended October 31, 1995.

        An income tax  provision is provided for the tax effect of  transactions
        reported in the financial  statements.  The provision  consists of taxes
        currently due plus deferred  taxes  related to  differences  between the
        basis of assets and  liabilities for financial and income tax reporting.
        The deferred taxes  represent the future tax return  consequences of the
        differences, which will be either taxable or deductible when the related
        assets or liabilities are recovered or settled. A valuation allowance is
        provided for deferred tax assets not expected to be realized.

        Net Loss Per Share
        ------------------
        Net loss per share is computed by dividing the net loss per common share
        by the weighted average number of common shares  outstanding during each
        period.  Common  stock  equivalents  have been  excluded  since they are
        antidilutive.  Cumulative  Series  One,  Preferred  Stock  dividends  in
        arrears have been excluded from the net loss calculation  since they are
        forfeitable upon automatic or optional conversion to common stock.

        Statement of Cash Flows
        -----------------------
        For purposes of the statement of cash flows,  the Company  considers all
        highly liquid  investments with a maturity of three months or less to be
        cash and cash  equivalents.  Total  interest  paid amounted to $972,058,
        $232,583,  and $162,912,  for the years ended October 31, 1996 and 1995,
        and the ten months ended October 31, 1994, respectively.

        The  Company  and its  subsidiaries  maintain  cash  balances at several
        financial institutions located in Colorado. Accounts at each institution
        are insured by the Federal Deposit Insurance Corporation up to $100,000.
        At October  31,  1996,  the  Company's  uninsured  cash  balances  total
        $1,531,834.

                                      F-13
<PAGE>
A.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
        ----------------------------------------------------

        Recently Issued Accounting Standards
        ------------------------------------
        The Company anticipates  adopting the disclosure  requirements,  but not
        the  optional  recognition  requirements  of  recently  issued  FAS  123
        Accounting  for  Stock-Based  Compensation  (effective  for fiscal years
        beginning   after  December  15,  1995)  in  fiscal  1997.   Stock-based
        compensation  expense will continue to be recognized in accordance  with
        APB 25 Accounting for Stock Issued to Employees.  Pro forma  disclosures
        of  net  income  and  earnings  per  share  as  though  the  recognition
        requirements of the Standard had been adopted will be required beginning
        in fiscal 1997.

        Reclassifications
        -----------------
        Certain  reclassifications  have been made to prior  years'  balances to
        conform to the current financial statement presentation.

B.      RESTATEMENT FOR CORRECTION OF ERRORS
        ------------------------------------

       The  financial  statements  for the year ended October 31, 1996 have been
       restated to reflect the  recording  of  adjustments  for  corrections  of
       errors as follows:

       During the year ended October 31, 1996, the Company issued  $4,500,000 in
       convertible debentures and $3,500,000 in convertible preferred stock. The
       debentures  and  preferred  stock were  convertible  at 80% of the market
       price  of the  common  stock  ("a  beneficial  conversion  feature").  In
       accordance  with EITF D-60, the beneficial  conversion  feature should be
       recognized  and measured by allocating a portion of the proceeds equal to
       the  difference  between the discounted  conversion  price and the market
       price of the  Company's  common  stock at the date of issuance to paid-in
       capital. For debt securities,  the discount resulting from the allocation
       of proceeds to the beneficial  conversion feature increases the effective
       interest  rate of the debt  security  and should be reflected as interest
       expense.  For  preferred  stock,  the  discount  should be reflected as a
       dividend to the preferred stockholders.

       The October 31, 1996 financial  statements  have been restated to account
       for the beneficial conversion feature in accordance with EITF Topic D-60.
       The  amount  of  the  beneficial  conversion  features,  related  to  the
       convertible  debentures and convertible preferred stock issued during the
       year ended  October 31,  1996,  has been  calculated  to be $900,000  and
       $700,000,  respectively.  Accordingly,  $900,000  has been  allocated  as
       additional  paid-in  capital  and as a charge  to  interest  expense  and
       $700,000 has been allocated as additional  paid-in capital and an imputed
       non-cash dividend for the year ended October 31, 1996.

       Effective  August 1, 1996, the Company entered into an agreement to lease
       694 gaming devices.  The Company  classified the lease as a capital lease
       and recorded an asset and  corresponding  liability of $4,892,735 for the
       present value of the future minimum lease  payments  (including the lease
       purchase  option).  Since the purchase option was not a "bargain purchase
       option",  the present  value of the purchase  option should not have been
       capitalized  as  part  of  the  capital  lease  asset  and  corresponding
       liability.  Accordingly,  the October 31, 1996 financial  statements have
       been  restated  to reduce  the  capital  lease  asset  and  corresponding
       liability by $771,203.  Additionally,  interest expense and accrued other
       expenses  have been  decreased  by $20,865 and  depreciation  expense and
       accumulated  depreciation increased by $50,527 for the year ended October
       31, 1996.

                                      F-14
<PAGE>
B.     RESTATEMENT FOR CORECTION OF ERRORS (Continued)
       -----------------------------------------------

       The Company has determined that the interest expense and interest payable
       on the related-party  debt in Note E had been calculated  incorrectly for
       the fiscal year ended October 31, 1996. Accordingly, the interest expense
       and interest  payable has been  decreased by $309,510 for the fiscal year
       ended October 31, 1996.

       The  above  corrections   increased  the  net  loss  from  $3,330,761  to
       $3,951,368,   the  net  loss  applicable  to  common   shareholders  from
       $3,330,761 to  $4,651,368  and the net loss per common share from $0.1035
       to $0.1445 for the year ended October 31, 1996.

C.      ADVANCES TO OFFICERS
        --------------------

        Advances to officers are  unsecured,  due on demand and bear interest at
        2% over the prime rate.  Officers  advanced  funds to the Company in the
        amount of $15,000,  $None,  and $435,000 for the years ended October 31,
        1996 and 1995,  and the ten months ended  October 31, 1994.  The Company
        advanced  funds to officers  in the amount of  $280,000,  $214,617,  and
        $500,633  for the years ended  October  31,  1996 and 1995,  and the ten
        months ended October 31, 1994. Outstanding advances to officers amounted
        to $379,617 and $114,617 at October 31, 1996 and 1995, respectively.

D.      NOTES PAYABLE
        -------------

        Note payable consisted of an unsecured note payable, corporation,  dated
        October,  1995 with  interest  payable at 20% per annum,  due on demand,
        repaid November, 1995.

        The Company has a $1,000,000  revolving  line of credit with a financial
        institution  under a loan agreement dated August 22, 1996 expiring March
        24, 1997,  with interest  payable monthly at the prime rate plus 1%. The
        line of credit is secured by a second deed of trust on the  hotel/casino
        and  may  only  be  used  to  fund  the  Company's  progressive  jackpot
        liabilities.  There was no outstanding balance under the line at October
        31, 1996.

E.      LONG-TERM DEBT, RELATED PARTIES
        -------------------------------

        Long-term debt, related parties consists of the following at October 31:
<TABLE>
<CAPTION>

                                                                                          1996                1995
                                                                                  ----------------     ----------------
<S>                                                                                 <C>                  <C>
       Notes payable,  stockholder,  dated November,  1995-March,  1996, extended
       April 12, 1996, interest at 14.10% per annum, due January 15, 1997 or upon
       permanent financing, collateralized by Creeker's, Inc. common stock          $    2,087,500                  $--

       Notes payable,  stockholder,  dated  November,  1995-March,  1996 extended
       April 12, 1996, interest at 20.10% per annum, due January 15, 1997 or upon
       permanent financing, collateralized by Creeker's,
       Inc. common stock                                                                 5,267,500                   --

       Note payable, related real estate partnership, unsecured, dated September,
       1992, payable in monthly installments of $17,777 including interest at 16%
       per annum, with a final payment due
       November 1, 1997                                                                    733,334              730,284
                                                                                ------------------     ----------------
                                                                                         8,088,334              730,284
       Less current portion                                                              7,676,209               64,681
                                                                                ------------------     ----------------
                                                                                    $      412,125             $665,603
                                                                                ==================     ================
</TABLE>

        Total  related  party  interest  expense  under  all  debt  arrangements
        (including the convertible debenture) amounted to $1,660,506,  $407,542,
        and $133,207  for the years ended  October 31, 1996 and 1995 and the ten
        months ended October 31, 1994, respectively.


                                      F-15
<PAGE>
F.    LONG-TERM DEBT
      --------------

      Long-term debt consists of the following at October 31:
<TABLE>
<CAPTION>
                                                                                     1996                1995
                                                                                 -----------        -------------
<S>                                                                              <C>                  <C>   
      Mortgage payable,  individual,  dated October, 1992 modified August, 1995,
      payable in monthly  installments of $3,400,  including  interest at 8% per
      annum, with a final principal payment due November,  1999,  collateralized
      by deed of trust  
                                                                                    $285,070             $298,022

      Mortgage payable,  individual,  dated September,  1995, payable in monthly
      installments of $7,875,  including  interest at 9% per annum,  due August,
      2000, collateralized by deed of trust
                                                                                   1,050,000            1,050,000

      Mortgage payable  individual,  dated October,  1995,  currently payable in
      monthly  installments  of  $14,764  including  interest  at 8% per  annum,
      interest rate  adjustable to prime plus 2% on March,  1999,  and every 3.5
      years  thereafter,  not  to  exceed  12% or be  less  than  4%,  remaining
      principal due November, 2025, collateralized by deed of trust
                                                                                   2,055,484            2,066,704

      Note payable,  corporation,  dated April, 1996,  extended  December,  1996
      payable in minimum monthly  installments of $46,166,  interest  payable at
      12% per annum,  remaining balance due April, 1997,  collateralized by deed
      of trusts and personal property
                                                                                   5,540,000                   --

      Note payable, corporation, redemption of preferred stock, unsecured, dated
      July, 1996, interest payable at 18% per annum, principal and
      interest due July, 1998                                                      4,000,000                   --

      Note  payable,  corporation,  dated  October,  1995,  payable  in  monthly
      installments of $31,092 including  interest at 11% per annum, with a final
      payment due October, 1998, collateralized by gaming equipment
                                                                                     949,576            1,180,919

      Notes payable,  various  corporations,  dated March , 1995 to July,  1996,
      payable in aggregate monthly installments of $18,550 including interest at
      10.50% to 12% per annum, due January 1997 to July, 1999, collateralized by
      various equipment
                                                                                     374,794                2,833
                                                                                ------------        -------------
                                                                                  14,254,924            4,598,478
      Less current portion                                                         6,015,931              279,794
                                                                                ------------        -------------
                                                                                  $8,238,993           $4,318,684
                                                                                ============        =============
</TABLE>

                                      F-16
<PAGE>
F.      LONG-TERM DEBT (Continued)
        --------------------------

        Future maturities of long-term debt are as follows at October 31, 1996:
<TABLE>
<CAPTION>

             Years Ended October 31,             Unrelated            Related Party              Total
                                             ------------------     ------------------     ------------------
<S>                   <C>                    <C>                    <C>                   <C>        
                          1997                      $6,015,931             $7,676,209            $13,692,140
                          1998                       4,832,276                412,125              5,244,401
                          1999                         119,968                     --                119,968
                          2000                       1,291,068                     --              1,291,068
                          2001                          18,176                     --                 18,176
                       Thereafter                    1,977,505                     --              1,977,505
                                             ------------------     ------------------     ------------------
                                                   $14,254,924             $8,088,334            $22,343,258
                                             ==================     ==================     ==================
</TABLE>

G. CAPITAL LEASE OBLIGATIONS
   --------------------------
<TABLE>
<CAPTION>
         Capital lease obligations consist of the following at October 31, 1996:
                                                                                                 (As Restated)
                                                                                                      1996
                                                                                                -----------------


<S>                                                                                             <C>       
     Gaming  equipment  lease  payable  in  monthly   installments  of  $136,894
     including interest imputed at 12% per annum. The lease expires in November,
     1999 and is  collateralized by gaming equipment with an approximate cost of
     $4,121,532 and a book value of $3,892,558.                                                       $4,121,532

     Equipment  lease  payable in  monthly  installments  of  $23,404  including
     interest imputed at 14.39% per annum. The lease expires in August, 2001 and
     is  collateralized  by various  equipment,  furniture  and fixtures with an
     approximate cost of $1,121,659 and a book value of $1,038,014.                                    1,076,443

     Equipment  leases  payable  in  aggregate  monthly  installments  totaling
     $25,917  including  interest  imputed at 8% and 12% per annum.  The leases
     expire  in August  to  October,  1999 and are  collateralized  by  various
     equipment  with  an  approximate  cost of  $748,523  and a book  value  of
     $717,574.
                                                                                                         744,140

     Equipment  lease  payable  in  monthly  installments  of  $7,369  including
     interest imputed at 8.87% per annum. The lease expires August,  1999 and is
     collateralized  by computer  equipment with an approximate cost of $231,127
     and a book value of $209,795.                                                                       220,837

     Equipment leases payable in aggregate monthly installments totaling $4,909
     including  interest  imputed at 12% per annum.  The leases  expire July to
     September,  2001 and are  collateralized  by telephone and audio equipment
     with an approximate cost of $215,660 and a book value of $204,877.
                                                                                                         213,906

     Equipment  lease  payable  in  monthly  installments  of $1,273  including
     interest  imputed at 13.85% per annum. The lease expires June, 1999 and is
     collateralized  by radio equipment with an approximate cost of $37,200 and
     a book value of $32,506.
                                                                                                          33,709


                                      F-17
<PAGE>

G. CAPITAL LEASE OBLIGATIONS (continued)
   --------------------------------------

                                                                                                 (As  Restated)  
                                                                                                      1996
                                                                                                ----------------
<S>                                                                                            <C>
     Vehicle lease payable in monthly  installments of $2,755 including interest
     imputed  at  8.16%  per  annum.  The  lease  expires  October,  1999 and is
     collateralized  by vehicles with an approximate  cost of $96,292 and a book
     value of $91,477.                                                                                    96,292

     Equipment leases payable in aggregate monthly installments  totaling $1,568
     including  interest  imputed  at 12% per annum.  The  leases  expire May to
     October,  1999  and  are  collateralized  by  computer  equipment  with  an
     approximate cost of $48,003 and a book value of $45,603.                                             42,879

                                                                                                -----------------
      Total lease obligations                                                                          6,549,738
      Less current portion                                                                             1,636,904
                                                                                                =================
                                                                                                      $4,912,834
                                                                                                =================
</TABLE>

        Future minimum lease payments under the leases are as follows at October
31, 1996:
<TABLE>
<CAPTION>

                             Years Ended October 31,                                Amount
                             -----------------------                                ------
<S>                                                                          <C>       
                                           1997                                       $2,471,500
                                           1998                                        2,471,500
                                           1999                                        2,140,666
                                           2000                                          362,200
                                           2001                                          301,830
                                                                              -------------------
                                          Total future lease payments                  7,747,696
                                          Less amount representing interest            1,197,958
                                                                              ===================
                                                                                      $6,549,738
                                                                              ===================
</TABLE>

H.      CONVERTIBLE DEBENTURE, RELATED PARTY
        ------------------------------------

        On August 18, 1994, the Company purchased real property, currently being
        held for future  development,  from a related  party in  exchange  for a
        convertible  debenture  in  the  principal  amount  of  $4,500,000.  The
        convertible  debenture  bears  interest  at 7.05%  per  annum,  with the
        principle  balance and any accrued  interest  due August 20, 1999 and is
        collateralized by deeds of trust on the related property.  The debenture
        is  convertible  into  9,000,000  shares of Company  common  stock.  The
        conversion cannot be exercised prior to November 1, 1997. The balance of
        accrued  interest  payable  amounted to $699,739 and $376,297 at October
        31, 1996 and 1995, respectively.


                                      F-18
<PAGE>
I.    CONVERTIBLE DEBENTURES
      ----------------------

      Convertible debentures consist of the following at October 31, 1996:
<TABLE>
<S>                                                                                            <C>
      10%  Convertible  Debenture,  dated January,  1996,  interest  payable  quarterly in
      arrears,  convertible  in  $10,000  increments  at 80% of the  market  price  of the
      Company's  common  stock  for the  three  business  days  prior  to the  date of the
      holder's  election  to  convert,  any  remaining  principal  balance  on  the  first
      anniversary date will automatically convert into common stock in the same manner                   $1,000,000

      10%  Convertible  Debenture,  dated  March,  1996,  interest  payable  quarterly  in
      arrears,  convertible in $50,000  increments at the lesser of $4.50 per share or 80%
      of the market price of the Company's  common stock for the three business days prior
      to the date of the holder's election to convert,  any remaining principal balance on
      the second  anniversary  date will  automatically  convert  into common stock in the
      same manner                                                                                         1,500,000
                                                                                                --------------------
                                                                                                         $2,500,000
                                                                                                ====================
</TABLE>

J.      STOCK OPTIONS
        -------------

        The following  schedule details activity related to options and warrants
        to officers and employees of the Company for the years ended October 31,
        1996 and 1995, and the ten months ended October 31, 1994:
<TABLE>
<CAPTION>

                                                                                                Weighted Avg.
                                                                          Shares                Exercise Price
                                                                      ----------------     -------------------------
<S>                                                                   <C>                  <C>
      Options Outstanding, December 31, 1993 and
               October 31, 1994                                               400,000               $1.00
               Exercised                                                       (5,000)              $1.00
               Forfeited                                                     (155,000)              $1.00
                                                                      ----------------
      Options Outstanding, October 31, 1995                                   240,000               $1.00
               Granted                                                        817,500               $2.00
                                                                      ================
      Options Outstanding, October 31, 1996                                 1,057,500               $1.77
                                                                      ================
</TABLE>


                                      F-19
<PAGE>
J.      STOCK OPTIONS (continued)
        -------------------------

        The following options and warrants are outstanding at October 31, 1996:
<TABLE>
<CAPTION>

                              Weighted Avg.
          Number of              Exercise                                     Expiration
            Shares                Price                Total                     Date
                             -----------------    -----------------    --------------------------
      -------------------
           Options
      -------------------
<S>   <C>                    <C>                  <C>                       <C> 
                 170,500          $2.00                    341,000           August, 2000
                 165,500          $2.00                    331,000           August, 2001
                 240,000          $1.00                    240,000           August, 2002
                 165,500          $2.00                    331,000           August, 2002
                 165,500          $2.00                    331,000           August, 2003
                 150,500          $2.00                    301,000           August, 2004
      ===================    =================    =================
               1,057,500          $1.77                 $1,875,000
      ===================    =================    =================

           Warrants
      -------------------
                  30,000          $3.00                    $90,000             May, 1998
                  30,000          $3.00                     90,000           January, 2001
      ===================    =================    =================
                  60,000          $3.00                   $180,000
      ===================    =================    =================
</TABLE>

         Total options and warrants  exercisable at October 31, 1996 amounted to
20,000 shares for $3.00 per share.

K.      INCOME TAXES

        The tax effect of significant temporary differences and carrybacks which
        gave rise to the Company's  deferred tax assets and  liabilities  are as
        follows:
<TABLE>
<CAPTION>
                                                                                (As Restated)
                                                                                 October 31,           October 31,
                                                                                     1996                  1995
                                                                               -----------------     -----------------
<S>                                                                            <C>                   <C>     
      Deferred Tax Assets-
              Net operating loss carryforwards                                 $1,107,000            $380,000
              Cash basis tax assets                                            809,000               183,000
              Capitalized construction carrying costs                          127,000               50,000
                                                                               -----------------     -----------------
                                                                               2,043,000             613,000
      Valuation Allowance                                                      (2,043,000)           (613,000)
                                                                               =================     =================
      Net Deferred Tax Asset                                                   $NONE                 $NONE
                                                                               =================     =================
</TABLE>

        The components of income tax expense are as follows:
<TABLE>
<CAPTION>
                                                      (As Restated)                                Ten Months
                                                       Year Ended            Year Ended               Ended
                                                       October 31,           October 31,           October 31,
                                                          1996                  1995                  1994
                                                    ------------------     ----------------     ------------------
<S>                                                 <C>                    <C>                  <C>       
      Deferred Federal Tax (Benefit)                $(1,315,000)           $(233,100)           $(185,400)
      Deferred State Tax (Benefit)                  (115,000)              (25,900)             (20,600)
      Valuation Allowance                           1,430,000              259,000              206,000
                                                    ==================     ================     ==================
              Income Tax Expense                    $NONE                  $NONE                $NONE
                                                    ==================     ================     ==================
</TABLE>


                                      F-20
<PAGE>
K.      INCOME TAXES (continued)
        ------------------------

        The  provision  for income  taxes  differs from the amount of income tax
        determined by applying the applicable statutory federal and state income
        tax rates as a result of the following differences:

<TABLE>
<CAPTION>
                                                      (As Restated)
                                                       Year Ended            Year Ended               Ended
                                                       October 31,           October 31,           October 31,
                                                          1996                  1995                  1994
                                                    ------------------     ----------------     ------------------
<S>                                                 <C>                    <C>                  <C>       
      Federal tax at statutory rates                $(1,315,000)           $(157,100)           $(128,700)
      State tax, net of federal benefit             (115,000)              (15,900)             (13,300)
      (Tax) passed through to former S-
              Corporation stockholders              --                     (86,000)             (64,000)
      Adjustment of the valuation
           allowance                                1,430,000              259,000              206,000
                                                    ------------------     ----------------     ------------------
      Income tax provision                          $NONE                  $NONE                $NONE
                                                    ==================     ================     ==================
</TABLE>

        At October 31,  1996,  the  Company has  estimated  net  operating  loss
        carryforwards  of approximately  $2,954,000  available to offset taxable
        income through 2011.

L.      FAIR VALUE OF FINANCIAL INSTRUMENTS
        -----------------------------------

        The  carrying  value  of  cash,   temporary   investments,   short  term
        receivables  and payables and  long-term  debt  approximates  their fair
        value as of October 31, 1996 and 1995.

M.      CURRENT VULNERABILITY DUE TO CONCENTRATIONS
        -------------------------------------------

        The majority of the  Company's  revenues are from slot  machines and the
        majority of the Company's customers are located in the Colorado Springs,
        Colorado  area.  The Company is dependent on  continued  Limited  Stakes
        Gaming  regulations,  which allow gaming only in the  mountain  towns of
        Cripple Creek,  Black Hawk and Central City,  Colorado,  to maintain its
        customer base.

N.      COMMITMENTS AND CONTINGENCIES
        -----------------------------

        Leases
        ------
        Creeker's exercised its option under a lease to purchase its casino land
        and building on October 31, 1995,  for  $2,500,000.  Total building rent
        expense  prior to  exercising  the  option  amounted  to  $225,000,  and
        $133,335 for the year ended  October 31, 1995,  and the ten months ended
        October 31, 1994.

        The Company leases office space under a  non-cancelable  lease agreement
        expiring July 1998. Total rent expense amounted to $17,285, $13,500, and
        $5,940 for the years ended October 31, 1996 and 1995, and the ten months
        ended October 31, 1994. Future minimum lease payments are as follows:

        Year Ended October 31                     Amount
---------------------------------------       ----------------
                 1997                                 $28,308
                 1998                                  21,231
                                              ================
                                                      $49,539
                                              ================

        Land Option
        -----------
        Creeker's  continues to have the option,  under the building  lease,  to
        purchase the parking lot behind the building for  $750,000.  The Company
        may  exercise  the  option at any time  prior to the  expiration  of the
        agreement on April 1, 1997.


                                      F-21