<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                                  ___________

                                   FORM 10-K


         [X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                     THE  SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
                                      OR
         [_]       TRANSITION REPORT PURSUANT TO SECTION 13 OR
                   15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

               For the transition period from      to

                            Commission File #0-26922

                         COAST HOTELS AND CASINOS, INC.

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


           NEVADA                                       88-0345706
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)


               4500 WEST TROPICANA ROAD, LAS VEGAS, NEVADA 89103
              (Address of principal executive offices) (Zip Code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (702) 365-7000

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

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                         COMMON STOCK, $1.00 PAR VALUE

                                (Title of class)

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

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

     The number of shares of the Registrant's Common Stock outstanding as of
March 28, 1998 was 1,000 shares, none of which was held by non-affiliates of the
Registrant.
                                  ___________
<PAGE>

                         COAST HOTELS AND CASINOS, INC.

                               TABLE OF CONTENTS

                           ANNUAL REPORT ON FORM 10-K
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
                                                                                                     PAGE
                                                                                                     ----
<S>          <C>                                                                                     <C>
                                     PART I

Item 1.      Business..............................................................................    3
Item 2.      Properties............................................................................   11
Item 3.      Legal Proceedings.....................................................................   12
Item 4.      Submission of Matters to a Vote of Security Holders...................................   12

                                    PART II

Item 5.      Market for the Registrant's Common Equity and Related Stockholder Matters.............   12
Item 6.      Selected Financial Data...............................................................   13
Item 7.      Management's Discussion And Analysis Of Financial Condition And Results Of Operations.   15
Item 8.      Financial Statements and Supplementary Data...........................................   20
Item 9.      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..   21

                                    PART III

Item 10.      Directors and Executive Officers of the Registrant...................................   22
Item 11.      Executive Compensation...............................................................   24
Item 12.      Security Ownership of Certain Beneficial Owners and Management.......................   25
Item 13.      Certain Relationships and Related Transactions.......................................   26

                                    PART IV

Item 14.  Exhibits, Financial Statements, Schedules and Reports on Form 8-K........................   28

</TABLE>

                                       2
<PAGE>

                                     PART I


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

THE COMPANY

     Coast Hotels and Casinos, Inc., a Nevada corporation (the "Company"), a
wholly-owned subsidiary of Coast Resorts, Inc.  ("Coast Resorts"), owns and
operates three Las Vegas hotel-casinos, the Gold Coast Hotel and Casino (the
"Gold Coast"), the Barbary Coast Hotel and Casino (the "Barbary Coast"), and The
Orleans Hotel and Casino ("The Orleans"), which opened on December 18, 1996.

     The Company was formed in 1995 in connection with the reorganization of two
affiliated partnerships, the Gold Coast Hotel and Casino, a Nevada limited
partnership (the "Gold Coast Partnership"), and the Barbary Coast Hotel and
Casino, a Nevada general partnership (the "Barbary Coast Partnership" and,
together with the Gold Coast Partnership, the "Predecessor Partnerships").  The
Gold Coast Partnership, formed in 1986, and the Barbary Coast Partnership,
formed in 1978, previously owned and operated the Gold Coast and the Barbary
Coast, respectively, and the Gold Coast Partnership commenced the development of
The Orleans.

     The principal executive office of the Company is located at 4500 West
Tropicana Road, Las Vegas, Nevada 89103.  The telephone number is (702) 365-
7000.

THE REORGANIZATION

     Effective January 1, 1996, the Predecessor Partnerships were consolidated
and reorganized (the "Reorganization") pursuant to an Agreement and Plan of
Reorganization, as supplemented and amended, entered into among each of the
Predecessor Partnerships, Gaughan-Herbst, Inc., the sole general partner of the
Gold Coast Partnership, and Coast Resorts.  As a result of the Reorganization,
the Company owns and operates the Gold Coast, the Barbary Coast, and The
Orleans.  In the Reorganization, (a) the partners of the Predecessor
Partnerships each transferred to Coast Resorts, by assignment or through the
merger of Gaughan-Herbst, Inc., their respective partnership interests in the
Predecessor Partnerships in exchange for an aggregate of 1,000,000 shares of
common stock, par value $.01 per share, of Coast Resorts (the "Common Stock")
and (b) the Company assumed, jointly and severally with Coast Resorts, all of
the liabilities of the Predecessor Partnerships other than (i) the obligations
under approximately $52.5 million principal amount of notes payable to the
shareholders of Coast Resorts that were exchanged for an aggregate of 494,353
shares of Common Stock on January 16, 1996, and (ii) those liabilities incident
to Coast West Inc. ("Coast West"),  a wholly-owned subsidiary of Coast Resorts,
which leases certain real property held for possible future development.

THE GOLD COAST

     The Gold Coast, which opened in 1986, is located on West Flamingo Road
approximately one mile west of the Las Vegas Strip (the "Strip") in close
proximity to a major exit from Interstate 15, the major highway linking Las
Vegas and Southern California.  The Gold Coast features an approximately 70,000
square foot casino, including approximately 2,050 slot machines, 48 table games,
a keno lounge, a 700-seat bingo parlor and a 160-seat race and sports book.  The
Gold Coast also features an 11-story tower with 712 hotel rooms and a swimming
pool with a covered bar.

     The Gold Coast features three full-service restaurants, including the
Mediterranean Room, the Cortez Room and the Monterey Room, a 380-seat buffet, a
fast-food restaurant, a snack bar and ice cream parlor.  The Gold Coast's
entertainment amenities include a 72-lane bowling center, two movie theaters,
approximately 10,000 square feet of banquet and meeting facilities, four bars,
two entertainment lounges and a showroom/dance hall featuring live
entertainment.  Other amenities include a gift shop, a liquor store, a travel
agency, an American Express office, a Western Union office, a beauty salon, a
barber shop, a child care facility and over 3,000 parking spaces.

                                       3
<PAGE>

     The Gold Coast has developed a number of innovative marketing programs
designed to complement the non-gaming amenities at the Gold Coast and increase
the level of gaming activity. The Gold Coast's slot club (the "Club") has over
100,000 active members.  The Club was established in 1987 to encourage repeat
business from its slot machine players. Each time members win at a Gold Coast
slot machine, points are awarded to their accounts. Upon accumulating sufficient
points, members can redeem the points for awards, including appliances,
vacations and other items. Other Gold Coast marketing programs have included the
original "Pick the Pros" football contest, a $250,000 paycheck cashing contest
and live entertainment in the showroom/dance hall.  In addition, the Gold Coast
is a sponsor of the annual National Finals Rodeo, which attracts thousands of
visitors to Las Vegas each December. The awards ceremonies for the Rodeo are
held nightly at the Gold Coast during the 10-day event.

THE BARBARY COAST

     The Barbary Coast, which opened in 1979, is located at the intersection of
Flamingo Road and the Strip (the "Flamingo Four Corners"), adjacent to the
Flamingo Hilton Hotel and Casino. It is situated directly across from Caesars
Palace and Bally's Grand and is diagonally across from the site where Mirage
Resorts, Inc. is developing a new mega-resort, Bellagio, expected to open in the
latter part of 1998. Historically, the Barbary Coast has relied on foot traffic
on the busy Las Vegas Strip for a significant amount of its revenues.

     The Barbary Coast features an approximately 30,000 square foot casino,
including approximately 524 slot machines, 41 table games, race and sports books
and other amenities. The Barbary Coast also features an 8-story tower with 197
hotel rooms. The Barbary Coast is furnished and decorated in an elegant turn-of-
the-century Victorian theme and includes three bars and three restaurants,
including Michael's gourmet restaurant, Drai's on the Strip (leased to a third
party) and the Victorian Room.

THE ORLEANS

     The Company opened its newest property, The Orleans, on December 18, 1996.
The Orleans was developed to expand the Company's presence in the growing Las
Vegas market and to capitalize on management's belief in the demand for an
upscale, off-Strip hotel-casino alternative for both visitors to Las Vegas and
local residents.  The Orleans site is located on Tropicana Avenue, approximately
one and one-half miles west of the Strip.

     The Orleans is designed with a distinctive theme reflecting the
architectural heritage of the New Orleans French Quarter. The Orleans features
an approximately 92,000 square foot casino, a 22-story tower with 840 hotel
rooms, a 70-lane bowling center, approximately 40,000 square feet of banquet and
meeting facilities, including an approximately 17,000 square foot grand
ballroom, a wedding chapel, five restaurants, specialty themed bars, a barber
shop, a beauty salon and approximately 3,000 parking spaces. The casino includes
approximately 2,200 slot machines, 52 table games, a keno lounge, a poker parlor
and race and sports books.  The Orleans also includes an 827-seat theater that
features live entertainment and other special events.  In December 1997, the
Company completed and opened the second phase of The Orleans, including twelve
"stadium seating" movie theaters, a child care facility and video arcade.

                                       4
<PAGE>

BUSINESS AND MARKETING STRATEGY

     The Company's business strategy is to attract gaming customers to its
various gaming facilities by offering a combination of quality gaming,
entertainment, dining and recreational activities.  In addition, each of the
Company's hotel-casinos seeks to encourage repeat business by providing friendly
service and complimentary or reduced-rate accommodations, meals and automotive
and aircraft transportation.  However, each of the Company's properties targets
different market segments and employs customer-driven market strategies designed
to expand its growing customer base.

     The Gold Coast primarily targets middle-market gaming customers, catering
to local residents as well as repeat visitors to Las Vegas who desire an
alternative to the hotel-casino properties located on the Strip.  Management's
operating strategy is to maximize customer visitation and thereby increase
casino revenues at the Gold Coast by offering value-conscious customers a
combination of friendly service, generous portions of quality food at
competitive prices and clean, comfortable and inexpensive hotel rooms.
Management believes this value-oriented approach has generated a high level of
customer satisfaction, fostering customer loyalty and repeat business. In
addition, the Gold Coast is conveniently located on West Flamingo Road, in close
proximity to a major exit from Interstate 15, offering easy automotive access
from all four directions in the Las Vegas valley.  The Gold Coast has developed
a number of innovative campaigns designed to promote its business and attract
local residents.  See "--The Gold Coast."

     The Barbary Coast's customer base is primarily visitors to the Las Vegas
area.  In addition to its favorable location on the Strip, which has
historically enabled it to attract a large volume of walk-in traffic, the
Barbary Coast has also benefited from its more intimate gaming atmosphere,
allowing it to develop a loyal base of table games customers.

     The Orleans is designed to differentiate itself in the Las Vegas market by
combining an upscale, off-Strip experience in an exciting New Orleans French
Quarter-themed environment with a wide variety of non-gaming amenities. The
Orleans primarily targets middle to upper-middle income gaming customers, both
visitors to Las Vegas and local residents.   Management believes that The
Orleans is an attractive alternative for Las Vegas visitors and local residents,
offering a full-service hotel-casino and entertainment experience complemented
with a value-oriented pricing strategy.  The Orleans employs marketing programs
similar to those which make the Gold Coast a success, including a slot club and
football contests, and tailors its marketing programs to promote The Orleans as
a multi-faceted entertainment complex.

GAMING SECURITY

     Each of the Company's casinos employs extensive supervision and accounting
procedures to control the handling of cash in their gaming operations.  These
measures include security personnel; closed-circuit television observation of
critical areas of the casino; locked cash boxes; independent auditors and
observers; strict sign-in and sign-out procedures which ensure, to the extent
practicable, that gaming chips issued by, and returned to, the casino cashier's
cages are accurately accounted for; and procedures for the regular observation
of gaming employees.  The accounting departments of each of the Company's
casinos, which employ persons who have no involvement in the gaming operations,
review on a daily basis records compiled by gaming employees pertaining to cash
flow and credit extension.  Moreover, regular periodic analysis of the results
of the Company's gaming operations, including analyses of the Company's
compliance with the internal control standards established by the Nevada Board
(as defined herein), are performed by the Company and its independent auditors
to detect significant deviations from industry standards.  Based on the results
of these analyses, management believes that its procedures are in compliance in
all material respects with the requirements established by the Nevada Gaming
Authorities (as defined below).

                                       5
<PAGE>

FUTURE PLANS

     Coast Resorts is contemplating the development of a new gaming property in
the western area of the Las Vegas valley on real property leased by Coast West.
Additionally, the Company owns an approximately 29-acre parcel of undeveloped
land located at the corner of Rancho Drive and Carey Avenue in North Las Vegas,
in close proximity to the Fiesta Hotel and Casino and the Texas Station Hotel
and Casino. The site is zoned for gaming.

     Neither Coast Resorts nor the Company has any agreements, arrangements or
understandings with respect to financing the development of either of the
aforementioned sites. Any future development would be subject to, among other
things, the ability of the Company or Coast Resorts to obtain necessary
financing. No assurance can be given that the Company will develop successfully
any additional properties or, if completed, such properties will be successful.

COMPETITION

     Both the gaming and hotel industries are highly fragmented and
characterized by a high degree of competition among a large number of
participants. Many of the Company's competitors are much larger than the Company
and have substantially greater resources.

     The Company's three hotel-casinos face competition from all other casinos
and hotels in the Las Vegas area.  Such competition includes several hotel-
casinos that, like the Gold Coast and The Orleans, target, to a high degree,
local residents.  The Company also competes with non-hotel gaming facilities
that target local residents.  The Company believes that its convenient locations
together with innovative marketing strategies and value-oriented quality rooms
and food enable it to compete effectively for the local resident customers and
repeat visitors to Las Vegas.

     In recent years, many new Las Vegas area hotel-casinos have opened and many
existing ones have been expanded.  Currently, there are over 100,000 hotel rooms
in the Las Vegas area and more are planned to open in 1998 and 1999 with the
anticipated openings of properties such as Bellagio, Paris and the Venetian.
Management believes that the additional capacity has, to date, not materially
impacted the Company's occupancy levels and overall revenues, but additional new
properties and the expansion of existing hotel-casinos could have a material
adverse effect on the Company's business and results of operations.

     The Company also competes for gaming customers to a lesser extent with
casinos located in the Laughlin and Reno-Lake Tahoe areas of Nevada, in Atlantic
City, New Jersey, and in other parts of the world, including gaming on cruise
ships and international gaming operations, as well as with state-sponsored
lotteries, on- and off-track wagering, card parlors, riverboat and Native
American gaming ventures and other forms of legalized gaming in the United
States. In addition, several states have recently legalized, and several other
states are currently considering legalizing, casino gaming in specific
geographical areas within those states. The Company believes that the
development of casino properties similar to those in Las Vegas in areas close to
Nevada, particularly California and Arizona, could have a material adverse
effect on its business and its results of operations. The Company believes that
the recent widespread legalization of gaming is being fueled by a combination of
increasing popularity and acceptability of gaming activities and the desire and
need for states and local communities to generate revenues without increasing
general taxation. The Company believes that the legalization of unlimited land-
based casino gaming in or near any major metropolitan area, such as Chicago or
Los Angeles, could have a material adverse effect on its business and results of
operations. In addition, the development or expansion of casinos, lotteries and
other forms of gaming in other states, particularly in areas close to Nevada
such as California, could have a material adverse effect on the Company's
business and its results of operations.

                                       6
<PAGE>

     The Gold Coast primarily targets local residents as well as repeat visitors
to Las Vegas. While The Orleans targets a higher income segment of gaming
customers, it also focuses its marketing efforts in part on the same customer
base as the Gold Coast. The Orleans is located approximately one mile south of
the Gold Coast.  The operation of the two hotel-casinos in close proximity and
their overlapping target markets may impact their respective results of
operations.  Additionally, the Company may be subject to greater risks,
including risks related to local competitive and economic conditions, than if
these two gaming properties were more geographically distant or had more diverse
targeted markets.

ENVIRONMENTAL MATTERS

     The Company is subject to a wide variety of federal, state and local laws
and regulations relating to the use, storage, discharge, emission and disposal
of hazardous materials.  While management believes that the Company is presently
in material compliance with all environmental laws, failure to comply with such
laws could result in the imposition of severe penalties or restrictions on
operations by government agencies or courts that could adversely affect
operations.  In 1995, the Company completed Phase I environmental assessments at
the properties owned or leased by it.  The reports did not identify any
environmental conditions or non-compliance, the remediation or correction of
which are reasonably expected to have a material adverse impact on the business
or financial condition of the Company.

EMPLOYEES

     At March 1, 1998, the Company had approximately 4,900 employees.

NEVADA REGULATION AND LICENSING

     The ownership and operation of casino gaming facilities in Nevada are
subject to (i) the Nevada Gaming Control Act and the regulations promulgated
thereunder (collectively, the "Nevada Act"), and (ii) various local regulations.
The Company's gaming operations are subject to the licensing and regulatory
control of the Nevada Gaming Commission (the "Nevada Commission"), the Nevada
State Gaming Control Board (the "Nevada Board") and the Clark County Liquor and
Gaming Licensing Board (the "Clark County Board").  The Nevada Commission, the
Nevada Board and the Clark County Board are collectively referred to as the
"Nevada Gaming Authorities."

     The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which seek to, among
other things, (i) prevent unsavory or unsuitable persons from having any direct
or indirect involvement with gaming at any time or in any capacity, (ii)
establish and maintain responsible accounting practices and procedures, (iii)
maintain effective control over the financial practices of licensees, including
establishing minimum procedures for internal fiscal affairs and the safeguarding
of assets and revenues, providing reliable record keeping and requiring the
filing of periodic reports with the Nevada Gaming Authorities, (iv) prevent
cheating and fraudulent practices and (v) provide a source of state and local
revenues through taxation and licensing fees.  Changes in such laws, regulations
and procedures could have an adverse effect on the Company's gaming operations.

                                       7
<PAGE>

     The Company, which operates the Gold Coast, the Barbary Coast and The
Orleans, is licensed by the Nevada Gaming Authorities and is a corporate
licensee (a "Corporate Licensee") under the terms of the Nevada Act. The gaming
licenses require the periodic payment of fees and taxes and are not
transferable. The Company is registered with the Nevada Commission as a publicly
traded corporation (a "Registered Corporation") and has been found suitable to
own the stock of Coast Hotels. As a Registered Corporation, the Company is
required periodically to submit detailed financial and operating reports to the
Nevada Commission and furnish any other information that the Nevada Commission
may request. No person may become a shareholder of, or receive any percentage of
the profits from, Coast Hotels without first obtaining licenses and approvals
from the Nevada Gaming Authorities. The Company and Coast Resorts have obtained
from the Nevada Gaming Authorities the various registrations, approvals, permits
and licenses required in order to engage in gaming activities at its hotel-
casinos.

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

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

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

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

                                       8
<PAGE>

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

     The Nevada Act requires any person who acquires beneficial ownership of
more than 5% of a Registered Corporation's voting securities to report the
acquisition to the Nevada Commission.  The Nevada Act requires that beneficial
owners of more than 10% of a Registered Corporation's voting securities apply to
the Nevada Commission for a finding of suitability within 30 days after the
Chairman of the Nevada Board mails the written notice requiring such filing.
Under certain circumstances, an "institutional investor," as defined in the
Nevada Act, which acquires more than 10%, but not more than 15% of a Registered
Corporation's voting securities may apply to the Nevada Commission for a waiver
of such finding of suitability if such institutional investor holds the voting
securities for investment purposes only.  An institutional investor will not be
deemed to hold voting securities for investment purposes unless the voting
securities were acquired and are held in the ordinary course of business as an
institutional investor and not for the purpose of causing, directly or
indirectly, the election of a majority of the members of the board of directors
of a Registered Corporation, any change in a Registered Corporation's corporate
charter, bylaws, management, policies or operations, or any of its gaming
affiliates, or any other action which the Nevada Commission finds to be
inconsistent with holding the Registered Corporation's voting securities for
investment purposes only.  Activities which are not deemed to be inconsistent
with holding voting securities for investment purposes only include:  (i) voting
on all matters voted on by shareholders; (ii) making financial and other
inquiries of management of the type normally made by securities analysts for
informational purposes and not to cause a change in its management policies or
operations; and (iii) such other activities as the Nevada Commission may
determine to be consistent with such investment intent.  If the beneficial
holder of voting securities who must be found suitable is a corporation,
partnership or trust, it must submit detailed business and financial information
including a list of beneficial owners.  The applicant is required to pay all
costs of investigation.

     Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Nevada Commission or
the Chairman of the Nevada Board, may be found unsuitable.  The same
restrictions apply to a record owner if the owner, after request, fails to
identify the beneficial owner.  Any shareholder found unsuitable and who holds,
directly or indirectly, any beneficial ownership of the voting securities of a
Registered Corporation beyond such period of time as may be prescribed by the
Nevada Commission may be guilty of a criminal offense.  The Company is subject
to disciplinary action if, after it receives notice that a person is unsuitable
to be a shareholder or to have any other relationship with the Company or Coast
Resorts, the Company (i) pays that person any dividend or interest upon voting
securities of the Company, (ii) allows that person to exercise, directly or
indirectly, any voting right conferred through securities held by that person,
(iii) pays remuneration in any form to that person for services rendered or
otherwise, or (iv) fails to pursue all lawful efforts to require such unsuitable
person to relinquish his voting securities, including, if necessary, the
immediate purchase of such voting securities for cash at fair market value.

     The Nevada Commission may, in its discretion, require the holder of any
debt security of a Corporate Licensee or a Registered Corporation to file
applications, be investigated and be found suitable to own the debt security.
If the Nevada Commission determines that a person is unsuitable to own such
security, then pursuant to the Nevada Act, the Corporate Licensee or the
Registered Corporation can be sanctioned, including the loss of its licenses, if
without the prior approval of the Nevada Commission, it:  (i) pays to the
unsuitable person any dividend, interest or any distribution whatsoever; (ii)
recognizes any voting right by such unsuitable person in connection with such
securities; (iii) pays the unsuitable person remuneration in any form; or (iv)
makes any payment to the unsuitable person by way of principal, redemption,
conversion, exchange, liquidation or similar transaction.

                                       9
<PAGE>

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

     Neither the Company nor Coast Resorts may make a public offering of its
securities without the prior approval of the Nevada Commission if the securities
or proceeds therefrom are intended to be used to construct, acquire or finance
gaming facilities in Nevada, or to require or extend obligations incurred for
such purposes.  Such approval, if given, does not constitute a finding,
recommendation or approval by the Nevada Commission or the Nevada Board as to
the accuracy or adequacy of the prospectus or the investment merits of the
securities.  Any representation to the contrary is unlawful.

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

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

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

                                       10
<PAGE>

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

CERTAIN FORWARD-LOOKING STATEMENTS

     Certain information included in this Form 10-K and other materials filed or
to be filed by the Company with the Securities and Exchange Commission (as well
as information included in oral statements or other written statements made or
to be made by the Company) contains forward-looking statements, within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended.  Such statements include
information relating to plans for future expansion and other business
development activities as well as other capital spending, financing sources and
the effects of regulation (including gaming and tax regulation) and competition.
Such forward-looking information involves important risks and uncertainties that
could significantly affect anticipated results in the future and, accordingly,
such results may differ from those expressed in any forward-looking statements
made by or on behalf of the Company.  These risks and uncertainties include, but
are not limited to, those relating to development and construction activities,
dependence on existing management, leverage and debt service (including
sensitivity to fluctuations in interest rates), domestic or global economic
conditions, pending litigation, changes in federal or state tax laws or the
administration of such laws and changes in gaming laws or regulations (including
the legalization of gaming in certain jurisdictions).


ITEM 2.  PROPERTIES.
         ----------

     The Company owns the approximately 26.0 acres that the Gold Coast occupies
on West Flamingo Road. The Company also owns an 8.33-acre site across the street
from the Gold Coast that contains an approximately 100,000 square foot
warehouse. The warehouse is used by the Gold Coast, Barbary Coast, and The
Orleans primarily as a storage facility.

     The Barbary Coast occupies approximately 1.8 acres at the intersection of
Flamingo Road and the Strip. The hotel-casino occupies real property that is
currently leased by the Company pursuant to a lease that expires on May 1, 2003.
The lease provides for rental payments of $175,000 per annum. The lease contains
two options, exercisable by the Company, to extend the term of the lease for 30-
years each (with the rent to be readjusted as provided in the lease during those
renewal periods). The Company has an option to purchase the leased property at
any time during the six month period prior to the expiration of the lease,
provided that certain conditions are met, at a purchase price equal to the
greater of $3.5 million or the then appraised value of the real property. The
Company also has a right of first refusal in the event the landlord desires to
sell the real property during the initial term of the lease. The Company also
leases approximately 2.5 additional acres of real property located adjacent to
the Barbary Coast. The lease expires on December 31, 2003. The lease provides
for rental payments of $125,000 per annum. The real property is used by the
Company as a parking lot for its employees and for valet parking. The landlord
has the right to terminate the lease upon six months prior notice to the Company
if it requires the use of the property for its own business purposes (which
excludes leaving the property vacant or leasing it to third parties prior to
January 1, 2003).

                                       11
<PAGE>

     The Orleans is located on a portion of an approximately 80.0-acre site
located on West Tropicana Avenue, approximately one mile south of the Gold
Coast. The real property is leased pursuant to a ground lease entered into by
the Company and The Tiberti Company, a Nevada general partnership of which J.
Tito Tiberti, a director of the Company, is managing partner.  The lease had an
effective commencement date as of October 1, 1995, an initial term of 50
years, and includes an option, exercisable by the Company, to extend the initial
term for an additional 25 years. The lease provides for monthly rental payments
commencing in January 1996 of $251,726 per month through December 1996, $175,000
per month during the 26-month period thereafter, $200,000 per month during the
36-month period thereafter, $225,000 per month during the 48-month period
thereafter and $250,000 per month during the 60-month period thereafter. In
March 2011, annual rental payments will increase on a compounding basis at a
rate of 3.0% per annum. In addition, the Company has been granted an option to
purchase the real property during the two-year period commencing in February
2016. The lease provides that the purchase price will be the fair market value
of the real property at the time the Company exercises the option, provided that
the purchase price will not be less than 10 times the annual rent and not more
than 12 times such annual rent at such time.

     The Company owns approximately 29.0 acres of undeveloped land located at
the corner of Rancho Drive and Carey Avenue in North Las Vegas in close
proximity to the Fiesta Hotel and Casino and the Texas Station Hotel and Casino.
The site is zoned for gaming.


ITEM 3.  LEGAL PROCEEDINGS
         -----------------


     The Company is a party to various legal proceedings arising in the ordinary
course of business.  In the opinion of management, the outcome of all pending
claims in such matters will not have a material adverse effect on the Company's
financial position, results of operations or cash flows.

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

     No matters were submitted to the shareholders of the Company during the
quarter ended December 31, 1997.


                                    PART II

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

     The Company is a wholly-owned subsidiary of Coast Resorts.  No equity
securities of the Company are publicly traded.

                                       12
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

     The following Selected Financial Data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and notes thereto included elsewhere in
this Form 10-K. The balance sheets and statements of income data as of and for
each of the five years in the period ended December 31, 1997 are derived from
the financial statements of the Company which have been audited by Coopers &
Lybrand L.L.P. The financial statements of the Company as of December 31, 1996
and 1997 are for each of the three years in the period ended December 31, 1997
and are included in this report on Form 10-K.
<TABLE>
<CAPTION>

                                                                               YEARS ENDED DECEMBER 31,
                                                  ---------------------------------------------------------------------------------
                                                      1993           1994            1995             1996(1)             1997
                                                  -----------    ------------    ------------    --------------      --------------
                                                                                 (DOLLARS IN THOUSANDS)
<S>                                               <C>            <C>             <C>             <C>                 <C>
STATEMENTS OF INCOME DATA:

Net revenues...................................      $169,573        $172,573        $174,756          $195,987            $293,883
Departmental operating expenses (2)............       108,662         115,028         114,253           118,563             191,849
General and administrative expenses............        32,402          32,940          34,686            41,057              64,180
Guaranteed payments to former partners (3).....         2,485           2,672             858                --                  --
Pre-opening expenses...........................            --              --              --             7,125                  --
Depreciation and amortization..................         7,822           6,766           7,280             7,883              18,278
                                                     --------        --------        --------          --------            --------
Operating income...............................        18,202          15,167          17,679            21,359              19,576
Interest expense, net..........................          (837)           (227)         (3,545)           (9,981)            (25,228)
Other income...................................             3              23              92                58                 919
                                                     --------        --------        --------          --------            --------
Net income (loss) before income taxes..........        17,368          14,963          14,226            11,436              (4,733)
Provision (benefit) for income taxes...........            --              --              --             6,617              (1,401)
                                                     --------        --------        --------          --------            --------
Net income (loss)..............................      $ 17,368        $ 14,963        $ 14,226          $  4,819            $ (3,332)
                                                     ========        ========        ========          ========            ========

PRO FORMA INFORMATION TO REFLECT
CHANGE IN TAX STATUS (4):
Provision (benefit) for income taxes...........         6,117           5,251           4,979             4,117              (1,401)
                                                     --------        --------        --------          --------            --------
Net income (loss)..............................      $ 11,251        $  9,712        $  9,247          $  7,319            $ (3,332)
                                                     ========        ========        ========          ========            ========

OTHER DATA:
EBITDA (5).....................................      $ 26,024        $ 21,933        $ 24,959          $ 36,367            $ 40,232
Capital expenditures...........................      $  2,736        $  5,514        $ 32,187          $125,722            $ 57,736
Distributions to partners (6)..................      $ 11,500        $ 25,823        $ 58,660          $     --            $     --
</TABLE>

____________

See Footnotes to Selected Financial Data.

                                       13
<PAGE>

                      SELECTED FINANCIAL DATA (CONTINUED)


<TABLE>
<CAPTION>
                                                                           AS OF DECEMBER 31,
                                                         -------------------------------------------------------
                                                           1993       1994       1995      1996(1)        1997
                                                         --------   --------   --------   --------      --------
                                                                         (DOLLARS IN THOUSANDS)
<S>                                                      <C>        <C>        <C>        <C>           <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................   $ 14,788   $ 16,967   $ 14,539   $ 61,555      $ 29,426
Total assets..........................................    123,570    134,295    152,216    374,122       366,861
Total long-term debt (7)..............................      1,464     11,776     83,357    195,764       207,173
Stockholder's equity..................................     98,628     87,781     43,334    100,678        97,346
----------------------------------------------------------------------------------------------------------------
</TABLE>

FOOTNOTES TO SELECTED FINANCIAL DATA

(1)  On December 18, 1996, The Orleans commenced operations in Las Vegas,
     Nevada.
(2)  Includes casino, food and beverage, hotel and other expenses.
(3)  Prior to the Reorganization (as defined herein), the Predecessor
     Partnerships (as defined herein) made guaranteed payments to partners
     pursuant to the terms of their respective partnership agreements.  In
     connection with the Reorganization, such guaranteed payments were
     eliminated and replaced with annual compensation (reflected in general and
     administrative expenses) to Michael J. Gaughan and certain other former
     partners of the Predecessor Partnerships who are executive officers of the
     Company. See "The Reorganization" and  "Management's Discussion and
     Analysis of Financial Condition and Results of Operations."
(4)  The Gold Coast Partnership and the Barbary Coast Partnership operated as
     partnerships and were not subject to federal income taxes. As a result of
     the Reorganization, the operations of the Gold Coast and the Barbary Coast
     are being conducted by the Company, which has been formed as a "C
     Corporation" and, therefore, is subject to federal income taxes. A pro
     forma provision for federal income taxes has been made, and pro forma net
     income has been calculated, for the historical financial statements for all
     periods presented as if the Gold Coast Partnership and the Barbary Coast
     Partnership had been treated as a C corporation during those periods.
(5)  EBITDA is defined as earnings before interest, taxes, depreciation,
     amortization, deferred (non-cash) rent expense and pre-opening expenses.
     EBITDA should not be construed as an alternative to operating income or net
     income (as determined in accordance with generally accepted accounting
     principles) as an indicator of the Company's operating performance, or as
     an alternative to cash flows generated by operating, investing and
     financing activities (as determined in accordance with generally accepted
     accounting principles) as an indicator of cash flows or a measure of
     liquidity. EBITDA is presented solely as supplemental disclosure because
     management believes that it is a widely used measure of operating
     performance in the gaming industry.
(6)  Because the Gold Coast Partnership and the Barbary Coast Partnership were
     partnerships during these periods, a substantial portion of their net
     income was distributed to the partners.  In 1994, the Barbary Coast
     Partnership distributed $11.0 million of partners' capital in the form of
     notes payable and, in 1995, the Gold Coast Partnership distributed $50.0
     million of partners' capital in the form of notes payable.  Such
     distributions represented previously taxed but undistributed earnings of
     the Predecessor Partnerships.  See Notes to Financial Statements and
     "Management's Discussion and Analysis of Financial Condition and Results of
     Operations."
(7)  Excludes current maturities.

                                       14
<PAGE>

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

     Prior to the Reorganization on January 1, 1996, the Gold Coast and the
Barbary Coast were operated separately by the Predecessor Partnerships.  See
"The Reorganization."


RESULTS OF OPERATIONS

     The following table sets forth, for the periods indicated, certain
financial information regarding the historical results of the Company:

<TABLE>
<CAPTION>
                                                                       DECEMBER 31,
                                                     -------------------------------------------------
                                                          1995              1996             1997
                                                     ---------------   ---------------   -------------
                                                                      (IN THOUSANDS)
<S>                                                  <C>               <C>               <C>
GOLD COAST
  Net operating revenues..........................          $130,695          $140,548        $126,490
  Operating income................................            17,933            28,975          22,603
  EBITDA (1)......................................            23,390            33,609          27,403

BARBARY COAST
  Net operating revenues..........................          $ 44,061          $ 49,419        $ 44,610
  Operating income................................               246             4,155           1,034
  EBITDA (1)......................................             2,069             5,800           2,627

THE ORLEANS
  Net operating revenues..........................          $     --          $  6,020        $122,783
  Operating income................................                --             1,266           3,098
  EBITDA (1)......................................                --             1,669          15,946
  EBITDAR (2).....................................                --             1,669          18,046

TOTAL (INCLUDING CORPORATE)
  Net operating revenues..........................          $174,756          $195,987        $293,883
  Operating income................................            17,679            21,359          19,576
  EBITDA (1)......................................            25,459            36,367          40,232
  EBITDAR (2).....................................            25,459            36,367          42,332
</TABLE>

(1)  "EBITDA" is defined as earnings before interest, taxes, depreciation,
     amortization, deferred rent and pre-opening  costs.
(2)  "EBITDAR" is defined as earnings before interest, taxes, depreciation,
     amortization, pre-opening  costs and rent expense (both cash rent and
     deferred rent).  EBITDA and EBITDAR should not be construed as alternatives
     to operating income as an indicator of the company's operating performance,
     or as alternatives to cash provided by operating activities as an indicator
     of cash flows or a measure of liquidity.  EBITDA and EBITDAR are presented
     solely as supplemental disclosure because management believes that they are
     widely used measures of financial performance in the gaming industry.


FISCAL 1997 COMPARED TO 1996

     Net revenues were $293.9 million for the year ended December 31, 1997, an
increase of 50.0% over 1996 net revenues of $196.0 million.  The increase was
due primarily to the opening of The Orleans on December 18, 1996. Operating
income declined $1.8 million (8.4%) to $19.6 million in 1997 compared to $21.4
million in 1996.  The decline was primarily due to lower-than-expected revenues
in 1997 at the Company's newest property, The Orleans, as well as decreased
revenues at the Company's other two hotel-

                                       15
<PAGE>

casinos, the Gold Coast and the Barbary Coast (discussed below). The lower
operating income as well as increased interest expense contributed to a net loss
of $3.3 million in 1997 compared to net income of $4.8 million in 1996.

     Gold Coast. Net revenues for the year ended December 31, 1997 decreased 10%
to $126.5 million compared to $140.5 million in 1996. Management attributes the
decrease primarily to competition from the opening of The Orleans approximately
one mile from the Gold Coast. Casino revenues declined 10.6% to $93.1 million in
1997 compared to $104.2 million in 1996, due to lower customer wagering volume.
Food and beverage business decreased as a result of the reduced customer
traffic, causing revenues to decline 12.1% to $25.1 million in 1997 compared to
$28.6 million in 1996. In 1997 an increased number of rooms in the Las Vegas
market led to a total room occupancy rate at the Gold Coast of 81.7% compared to
92.3% in 1996, contributing to a $239,000 (2.3%) decline in hotel revenues. Gold
Coast operating expenses were $103.9 million in 1997, down $7.7 million (6.9%)
from $111.6 million in 1996 primarily due to a $9.8 million (16.5%) reduction in
salaries and related costs as management reacted to the reduced customer volume.
Food and beverage expenses declined $3.2 million (13.3%) and general and
administrative expenses declined $3.0 million (11.6%). Despite lower operating
expenses, the reduced revenues contributed to a 22.0% decrease in operating
income to $22.6 million in 1997 compared to $29.0 million in 1996.

     Barbary Coast. Net revenues for the year ended December 31, 1997 decreased
9.7% to $44.6 million compared to $49.4 million in 1996. Casino revenues
declined 13.1% to $34.6 million in 1997 compared to $39.8 million in 1996,
primarily as a result of decreased customer wagering volume and a lower-than-
expected win percentage on table games and decreased wagering volume in the
race book. Management attributes the decline to a reduction in foot traffic
since the January 1997 opening of New York, New York Hotel and Casino one mile
south of the Barbary Coast on the Las Vegas Strip as well as to increased
competition from other recently opened or expanded hotel-casinos (including The
Orleans). Food and beverage revenues increased $837,000 (8.6%) in 1997 primarily
as a result of higher drink prices in the bars. The increase in food and
beverage revenues was partially offset by an increase of $664,000 (11.3%) in
food and beverage expenses. Hotel room revenues declined $367,000 (9.1%) due
primarily to lower average room rates as management reacted to increasing
competition. Operating income at the Barbary Coast declined 75.1% to $1.0
million in 1997 compared to $4.2 million in 1996, primarily as a result of the
decreased revenues discussed above.

     The Orleans.  The year ended December 31, 1997 was the first full year of
operations for The Orleans, which opened on December 18, 1996.  Net revenues for
the fourteen days in 1996 were $6.0 million.  Operating income before pre-
opening expenses of $7.1 million was $1.3 million in 1996.

     For 1997, net revenues for The Orleans were $122.8 million.  Net revenues
were $27.4 million for the quarter ended March 31, 1997, the first full quarter
of operations.  Net revenues were $30.7 million in the second quarter, $29.6
million in the third quarter and $35.1 million in the quarter ended December 31,
1997.  Operating income for 1997 was $3.1 million, including a first-quarter
operating loss of $2.5 million, operating income of $1.3 million in the second
quarter, operating income of $245,000 in the third quarter and operating income
of $4.1 million in the fourth quarter ended December 31, 1997.  The increase in
revenues and operating income since the first quarter is due primarily to
increased casino activity, which management attributes to successful promotions
and an increasing target market familiarity with the property.  Table games
customer wagering volume was 9.2% higher in the fourth quarter than in the first
quarter and slot machine customer wagering volume was 31.0% higher in the fourth
quarter than in the first.

     As is more fully described in the Liquidity and Capital Resources section,
in the first quarter of 1997, the Company began construction on a series of
improvements at The Orleans which included twelve movie theaters, a child care
facility, arcade and additional slot machines. The related construction traffic
reduced access to the property, adversely affecting operating results at The
Orleans. Management believes that, upon completion in December 1997, the
improvements and lack of disruption from construction positively affected
operating results in the fourth quarter.

                                       16
<PAGE>

OTHER FACTORS AFFECTING EARNINGS

     Depreciation and amortization expense increased by 132.0% in 1997 compared
to 1996, principally due to the opening of The Orleans in December 1996. Net
interest expense increased 152.8% in 1997 primarily due to decreases in
capitalized interest and interest income. Capitalized interest was $7.5 million
in 1996 during the construction of The Orleans, but was only $1.0 million in
1997 during the construction of phase two of The Orleans. Additionally, the
proceeds from the sale of $175 million in 13% First Mortgage Notes earned
interest income of $4.8 million in 1996, but were substantially utilized by the
end of 1996.

     Gain on disposal of equipment was approximately $919,000 in 1997 compared
to $58,000 in 1996, primarily due to a crash of the Company's Beechcraft Super
King Air aircraft which, after receipt of insurance proceeds, resulted in a gain
of $785,000.

FISCAL 1996 COMPARED TO 1995

     Net revenues were $196.0 million for the year ended December 31, 1996, an
increase of 12.1% over 1995 net revenues of $174.8 million.  The increase was
due, in part, to the opening of The Orleans on December 18, 1996, which
contributed $6.0 million in net revenues.  Gold Coast net revenues increased
7.5% over 1995, primarily due to an increase in casino revenues.  Barbary Coast
net revenues increased 12.1%, primarily due to an increase in race and sports
book revenues.

     Operating income rose 20.8% in 1996 to $21.4 million from $17.7 million in
1995. The increases in revenues described above were partially offset by pre-
opening costs of $7.1 million related to the opening of The Orleans. Net income
declined 66.1%, primarily due to a 181.6% increase in net interest expense as a
result of the issuance of $175.0 million in principal amount of First Mortgage
Notes in January 1996. The Company incurred $22.2 million in interest expense
which was partially offset by $7.5 million in interest capitalized during the
construction of The Orleans and by $4.8 million in interest income earned on the
proceeds from the sale of the Notes. Additionally, the Company had income tax
expense of $6.6 million in 1996, including $2.5 million relating to the
recognition of deferred taxes in connection with the change in tax status as a
result of the Reorganization, but had no income tax in 1995 since, prior to the
Reorganization, the Company's entities reported income as partnerships.

     Gold Coast. Net revenues for the year ended December 31, 1996 increased
7.5% compared to the same period in 1995.  Casino revenues increased 10.4% in
1996, primarily due to a 13.0% increase in slot machine revenues which
management attributes to an upgrade of  slot equipment completed in December
1995.  Additionally, race and sports book revenues  increased 25% in 1996 due to
higher wagering volume.  Table games revenues remained relatively flat compared
to 1995, with a 4.3% increase in gross wagering (drop) offset by a slightly
lower win percentage.  Food and beverage revenues decreased 0.8% in 1996 due to
lower customer volume partially offset by higher prices than in 1995.  Hotel
revenues increased 6.3% primarily due to increased room rates.

     Gold Coast operating income in 1996 increased 61.6%  compared to 1995,
primarily due to the increased revenues discussed above.  As casino revenues
increased, casino expenses increased 3.3%, primarily as a result of a 2.3%
increase in wages expense and a 9.5% increase in gaming taxes related to the
higher casino revenues.  Food and beverage expenses decreased 7.0%, primarily
due to a 9.9% decrease in cost of sales attributable to lower customer volume
which management believes is a result of higher prices and increased
competition.  Additionally, depreciation and amortization expense decreased
15.1% due to certain items becoming fully depreciated.

     Barbary Coast. Net revenues for the year ended December 31, 1996 increased
12.2% compared to the same period in 1995.  Casino revenues increased 12.6%,
primarily due to an increase in race and sports book revenues attributable to
higher wagering volume.  Additionally, slot revenues increased 9.7%, due to

                                       17
<PAGE>

higher wagering volume which management believes is due primarily to an upgrade
of slot machine equipment and increased promotional activity.  Hotel revenues
increased 14.8% primarily due to higher room rates.

     Barbary Coast operating income increased to $4.2 million in the year ended
December 31, 1996, compared to $246,000 in the same period in 1995, primarily
due to the increased revenues discussed above.  Casino expenses increased 7.8%,
related to the increase in casino revenues.  Depreciation and amortization
decreased 9.7% due to certain items becoming fully depreciated.

     The Orleans.  The Orleans was opened on December 18, 1996.  Net revenues
for the fourteen days were $6.0 million.  Operating income before pre-opening
expenses of $7.1 million was $1.3 million.



LIQUIDITY AND CAPITAL RESOURCES

     The Company's principal sources of liquidity have consisted of cash
provided by operating activities, bank financing and debt financing. Despite a
$9.4 million decrease in net income in 1996 compared to 1995, net cash provided
by operating activities increased $4.2 million (18.4%) primarily due to
increases in accounts payable and accrued liabilities relating to the opening of
the Company's newest hotel-casino, The Orleans. In 1997, cash provided by
operating activities decreased $11.0 million (40.6%) from 1996 primarily due to
the decreased profitability discussed above as well as an increase in
receivables and a decrease in accounts payable.

      On January 30, 1996, the Company issued $175.0 million principal amount of
13% first mortgage notes due 2002 ("13% First Mortgage Notes"). The net proceeds
from the issuance, after deducting discounts and commissions, were approximately
$164.1 million. Of that amount, approximately $29.2 million was used by the
Company to repay all outstanding indebtedness under the Company's then existing
revolving credit facility, which was terminated, $19.3 million was deposited
into an escrow account to fund the Company's first two semi-annual interest
payments on the 13% First Mortgage Notes, and approximately $114.8 million was
applied to the cost of developing The Orleans. The balance of approximately
$800,000 was used to pay, in part, the offering expenses of approximately $2.4
million. Additionally, approximately $30 million of equipment for The Orleans
was financed through a note payable. In August 1997, the Company incurred an
additional $3.2 million in equipment financing. At December 31, 1997,
outstanding equipment financing totaled approximately $25.5 million.

     The Company is permitted by the indenture pursuant to which the 13% First
Mortgage Notes were issued (the "Indenture"), to borrow up to an additional $20
million for working capital purposes. In November 1997 the Company issued $16.8
million principal amount of 10 7/8% first mortgage notes due November 1, 2001
("10 7/8% First Mortgage Notes"), the proceeds of which were used for working
capital purposes.  The 10 7/8% First Mortgage Notes are collateralized on a pari
passu basis with the 13% First Mortgage Notes.

     The Indenture contains covenants that, among other things, limit the
ability of the Company to pay dividends or make advances to Coast Resorts, repay
existing indebtedness, incur additional indebtedness, or sell material assets as
defined in the Indenture. Additionally, pursuant to the Indenture, if on July
20, 1998, the Fixed Charge Coverage Ratio (as defined in the Indenture) of the
Company for the most recently ended four full fiscal quarters is less than 1.5
to 1, the Company would be required to consummate an asset sale of the Barbary
Coast within one year. The proceeds from such asset sale would be required to be
used by the Company to repurchase Notes at a price equal to 101% of the
principal amount of such Notes. As of December 31, 1997, the Fixed Charge
Coverage Ratio was 1.53 to 1. Based upon recent operating results, management
believes that, for the applicable period, the Fixed Charge Coverage Ratio will
equal or exceed 1.5 to 1, although no assurance can be given that such Fixed
Charge Coverage Ratio will be achieved.

                                       18
<PAGE>

     In the first quarter of 1997, the Company began construction of Phase Two
of The Orleans.  The first part of the project was completed and opened in
December 1997 at a cost of approximately $27 million and includes twelve movie
theaters, a child care facility, an arcade and additional slot machines.  The
project is designed to include additional restaurant, entertainment and gaming
facilities, the construction of which is expected to begin in the near future
with financing out of cash flow from operations. In October 1997 the Company
completed and opened a new restaurant at the Barbary Coast which has a total
cost of approximately $1.9 million. Both The Orleans and Barbary Coast projects
were financed with existing cash reserves and cash from operations.

     The Company's cash requirements, in addition to debt service on the 10 7/8%
First Mortgage Notes, the 13% First Mortgage Notes and equipment notes payable
which is anticipated to be approximately $28.0 million in 1998, include land
lease payments for its properties, ongoing maintenance capital expenditures at
its existing facilities and periodic enhancements to those facilities. The
Company's capital expenditures (exclusive of those associated with the
development and construction of The Orleans and Barbary Coast projects) for 1997
were approximately $9.2 million, most of which related to normal maintenance
capital expenditures. Management expects that maintenance capital expenditures
for 1998 will be approximately $7.7 million. Additional expenditures for capital
projects, including additional restaurant, entertainment and gaming facilities
at The Orleans, are expected to cost between $3 million and $5 million in 1998,
although no final plans have been developed concerning the scope or timing of
those projects.

     The Company has agreed to provide advances to Coast West sufficient to make
payments on the Coast West Lease and other obligations, including project
development and site improvement. Pursuant to the Indenture under which the 13%
First Mortgage Notes were issued, the advances to Coast West cannot exceed $8.0
million in aggregate principal amount at any time outstanding. As of December
31, 1997, the Company had advanced Coast West $6.4 million related to the Coast
West Lease and development activities. Based on the cash requirements of Coast
West for lease payments and anticipated development costs, it is likely that
during 1998 Coast West will require cash from the Company (or other sources)
that, when added to the outstanding advances from the Company, would exceed $8
million. Should Coast West not obtain financing from another source for its cash
needs in excess of the aggregate $8 million permitted to be advanced to it by
Coast Hotels, Coast Hotels would be permitted to continue to make advances to
Coast West in excess of $8 million if Coast West becomes a wholly-owned
subsidiary of the Company and remains a guarantor of the 13% First Mortgage
Notes. Coast West has no arrangements for financing any such costs in excess of
$8 million from other sources.

     Management believes that existing cash balances and operating cash flow
will provide the Company with sufficient resources to meet its existing debt
obligations and foreseeable capital expenditure requirements at the Company's
existing properties.

     The Company has no agreements, arrangements or understandings with respect
to financing the development of future properties (see Item 1 - Business -
Future Plans).  Any future development would be subject to, among other things,
the Company's ability to obtain necessary financing.

IMPACT OF INFLATION

     Absent changes in competitive and economic conditions or in specific prices
affecting the industry, the Company does not expect that inflation will have a
significant impact on the Company's operations. Change in specific prices, such
as fuel and transportation prices, relative to the general rate of inflation may
have a material adverse effect on the hotel and casino industry.


REGULATION AND TAXES

     The Company is subject to extensive regulation by the Nevada gaming
authorities.  Changes in applicable laws or regulations could have a significant
impact on the Company's operations.  In 1996, legislation was enacted which
established a federal commission to study the gaming industry.

     The gaming industry represents a significant source of tax revenues,
particularly to the State of Nevada and its counties and municipalities.  From
time to time, various state and federal legislators and officials have proposed
changes in tax law, or in the administration of such law, affecting the gaming
industry.  Proposals in recent years that have not been enacted included a
federal gaming tax and increases in state or local taxes.

     Management believes that the Company's recorded tax balances are adequate.
However, it is not possible to determine with certainty the likelihood of
possible changes in tax law or in the administration of such law.  Such changes,
if adopted, could have a material adverse effect on the Company's operating
results.

     During 1997, the Company recorded a tax benefit of $1.4 million in
relation to its loss before income taxes of $4.7 million. This benefit
represents the amount to be carried-back to prior taxable income.

                                       19
<PAGE>

IMPACT OF THE YEAR 2000 ISSUE

  The "Year 2000 Issue" is the result of computer programs being written using
two digits rather than four to define the applicable year.  If a company's date-
sensitive computer programs should recognize a date "00" as the year 1900 rather
than the year 2000, miscalculations or a system failure could occur, causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices or engage in similar normal business
activities.

  The Company is currently reviewing all of its computer systems with regard to
the Year 2000 Issue and has determined that much of its software is already
compliant.  For those systems not already compliant, the Company will utilize
both internal and external resources to reprogram, replace and test the software
for the Year 2000 modifications so that its computer systems will properly
recognize and utilize dates beyond December 31, 1999. Management believes that
expenditures for these modifications will not be material.  However, the Company
may be adversely affected to the extent that vendors and other entities with
which it does business are unable to achieve Year 2000 compliance by December
31, 1999.

ACCOUNTING PRONOUNCEMENTS

  In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"), which establishes standards for reporting and display of comprehensive
income and its components.  SFAS 130 requires a separate statement to report
components of comprehensive income for each period presented.  The provisions of
SFAS 130 are effective for fiscal years beginning after December 15, 1997.
Management believes that the Company currently does not have items that would
require presentation in a separate statement of comprehensive income.

  In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"), which supersedes FASB
Statement No. 14, "Financial Reporting for Segments of a Business Enterprise."
SFAS 131 establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders.  SFAS 131 is
effective for fiscal years beginning after December 15, 1997 and requires
restatement of earlier periods presented.  SFAS 131 will not have a material
effect on the Company's financial statements as the required information is
either currently being presented by the Company or it is not applicable to the
Company.

     In April 1997, the American Institute of Certified Public Accountants
issued an exposure draft of a proposed Statement of Position (SOP), Reporting on
the Costs of Start-Up Activities. If issued in its current form, the proposed
SOP would require that the Company expense its pre-opening and related
promotional expense as incurred rather than capitalize it and amortize it over
the estimated period of economic benefit of such costs as is the Company's
current policy.

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

     The report of independent accountants, financial statements and financial
statement schedule listed in the accompanying index are filed as part of this
report. See "Index to Financial Statements."

                                       20
<PAGE>

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

  None.

                                       21
<PAGE>

PART III

ITEM 10.  EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT.
          --------------------------------------------------

The following tables set forth the names and ages of the directors and executive
officers of the Company, their respective positions and the expiration dates of
their respective terms.

                        DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
                                                                                         TERM AS A
                                                                                         DIRECTOR
       NAME                          AGE        POSITION(S) HELD                         EXPIRES
--------------------------------------------------------------------------------------------------
<S>                                 <C>        <C>                                    <C>
Michael J. Gaughan                   55         Director, Chairman of the Board             2000
                                                and Chief Executive Officer

Harlan D. Braaten                    47         Director, President and Chief               2000
                                                Operating Officer

Jerry Herbst                         59         Director, Vice President, Treasurer         1999
                                                and Assistant Secretary

J. Tito Tiberti                      53         Director, Vice President and Secretary      1999

Gage Parrish                         44         Director, Vice President, Chief Financial   2000
                                                Officer and Assistant Secretary

F. Michael Corrigan                  62         Director                                    1998

Charles Silverman                    65         Director                                    1998

Joseph Blasco                        54         Director                                    1998
</TABLE>

  MICHAEL J. GAUGHAN.  Mr. Gaughan has been a director of the Company since its
formation  in September 1995 and is the Chairman of the Board and Chief
Executive Officer of the Company.  He is also a director and Chairman of the
Board and Chief Executive Officer of Coast Resorts, Inc. and a director and
President of Coast West.  Mr. Gaughan was a general partner of the Barbary Coast
Partnership  from its inception in 1979 until January 1, 1996, the effective
date of the Reorganization.  Mr. Gaughan served as the managing general partner
of the Gold Coast Partnership from its inception in December 1986 until the
effective date of the Reorganization.  Mr. Gaughan and Mr. Herbst were the sole
shareholders of Gaughan-Herbst, Inc., which was the sole corporate general
partner of the Gold Coast Partnership prior to the Reorganization.  Mr. Gaughan
has been involved in the gaming industry since 1960 and has been licensed as a
casino operator since 1967.

                                       22
<PAGE>

  HARLAN D. BRAATEN.  Mr. Braaten joined the Company as the President, Chief
Financial Officer and a director in October 1995, and was appointed Chief
Operating Officer in February 1996.  Mr. Braaten is also the President and Chief
Operating Officer of Coast Resorts.  Prior to joining the Company, Mr. Braaten
was employed in various capacities, including the general manager and, most
recently, senior vice president, treasurer and chief financial officer of Rio
Hotel & Casino, Inc. in Las Vegas.  From March 1989 to February 1991, Mr.
Braaten was vice president, finance of MGM/Marina Hotel and Casino in Las Vegas,
Nevada.  Prior thereto, from November 1983 to March 1989, Mr. Braaten was
property controller for Harrah's in Reno, Nevada.  Mr. Braaten has over 19 years
of experience in the Nevada gaming market.

  JERRY HERBST.  Mr. Herbst has been a director, Vice President, Treasurer and
Assistant Secretary of the Company since its formation in September 1995.  He is
also a director and Vice President, Treasurer and Assistant Secretary of Coast
Resorts and of Coast West.  Mr. Herbst has been the president of Terrible Herbst
Oil Company, an owner and operator of gas stations and car washes, since 1959.
Mr. Herbst and Mr. Gaughan were the sole shareholders of Gaughan-Herbst, Inc.,
which was the sole corporate general partner of the Gold Coast Partnership prior
to the effective date of the Reorganization.  Mr. Herbst has served as a member
of the board of directors of Bank of America since 1977 and of Nevada Power
Company since 1990.

  J. TITO TIBERTI.  Mr. Tiberti has been a director, Vice President and
Secretary of the Company since its formation in September 1995.  He is also a
director and Vice President and Secretary of Coast Resorts and of Coast West.
Mr. Tiberti is the president, a director and a shareholder of, and together with
his immediate family controls, J.A. Tiberti Construction Company, Inc. ("Tiberti
Construction"), a construction company which served as the general contractor
for the construction of The Orleans Hotel and Casino.  He has also served as
managing partner of The Tiberti Construction Company, a real estate rental and
development company, since 1971.  The Tiberti Company is the lessor of the real
property site for The Orleans.  Mr. Tiberti has been involved in the gaming
industry for 19 years and was a general partner of the Barbary Coast Partnership
prior to the effective date of the Reorganization.

  GAGE PARRISH.  Mr. Parrish was named Vice President, Finance, Assistant
Secretary and a director of the Company and Coast Resorts in October 1995 and
was promoted to Chief Financial Officer in February 1996.  Since 1986, he had
been the Controller and Chief Financial Officer of the Gold Coast Partnership
prior to the effective date of the Reorganization.  From 1981 to 1986, Mr.
Parrish served as Assistant Controller of the Barbary Coast Partnership.  Mr.
Parrish is a certified public accountant and has approximately 18 years
experience in the gaming industry.

  F. MICHAEL CORRIGAN.  Mr. Corrigan was elected as a director of the Company
and Coast Resorts effective as of March 1, 1996.  Since July 1989, Mr. Corrigan
has served as the chief executive officer of Corrigan Investments, Inc., which
owns ands manages real estate in Nevada and Arizona.  In addition, Mr. Corrigan
is the chief executive officer of Corstan, Inc., a mortgage servicing company,
and was previously the owner, president and chief operating officer of Stanwell
Mortgage, a Las Vegas mortgage company.

  CHARLES SILVERMAN.  Mr. Silverman was elected as a director of the Company and
Coast Resorts  effective as of March 1, 1996.  Mr. Silverman is the president
and sole stockholder of Yates-Silverman, Inc., which specializes in developing
theme-oriented interiors and exteriors and is a leading designer of hotels and
casinos.  Completed projects of Yates-Silverman, Inc. include New York, New
York, Excalibur, Circus Circus, Luxor, the Trump Taj Mahal, Trump Castle, and
Atlantic City Showboat.  Yates-Silverman, Inc. also worked on The Orleans.  Mr.
Silverman has served as the president of Yates-Silverman, Inc. since its
inception in 1971.

                                       23
<PAGE>

     JOSEPH BLASCO.  Mr. Blasco was elected as a director of the Company and
Coast Resorts effective as of December 16, 1996.  Since 1984, Mr. Blasco has
been a partner in the real estate development partnership which developed the
Spanish Trail community in Las Vegas, a project which includes over 1,200 homes,
a 27-hole golf course and a country club.  Mr. Blasco is currently the General
Manager of United Realty Investments, a property management company in Las
Vegas.

     Directors of the Company who are also employees of the Company or Coast
Resorts receive no compensation for service on the Company's Board of Directors
or its committees.  All other directors receive an annual director's fee of
$24,000, payable quarterly in arrears.  Directors may also be reimbursed for
out-of-pocket expenses incurred in connection with attending Board of Director
or committee meetings.

ITEM 11.  EXECUTIVE COMPENSATION.
          ----------------------

     The following table sets forth all compensation earned by or paid by the
Predecessor Partnerships and the Company during 1995 1996 and 1997 to each
executive officer (the "Named Executive Officers") whose compensation exceeded
$100,000 (or would have exceeded $100,000 had such person been employed for the
full year), in all capacities in which they served.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

                                                                  ANNUAL COMPENSATION
                                                               -------------------------      ALL OTHER
NAME AND PRINCIPAL POSITION                       YEAR           SALARY         BONUS       COMPENSATION
---------------------------                       ----           ------         -----       ------------
<S>                                               <C>          <C>           <C>           <C>

Michael J. Gaughan.............................   1997         $300,000      $     --          $  4,750
   Partner, Gold Coast Partnership and            1996          300,000       195,000             4,750/(3)/
   Barbary Coast Partnership (1995);              1995               --            --           628,000/(5)/
   Chairman of the Board and Chief
   Executive Officer of the Company

Harlan D. Braaten..............................   1997         $250,000      $250,000/(4)/     $  4,750
   President and Chief Operating Officer,         1996          250,000       162,500                --
   the Company/(1)/                               1995           34,406/(1)/       --                --

Gage Parrish...................................   1997         $200,000      $     --          $  4,750
   Chief Financial Officer, Gold Coast            1996         $150,000      $ 52,500          $  3,040/(3)/
   Partnership and Vice President and             1995          128,741        25,000             3,840/(3)/
   Chief Financial Officer of the Company/(2)/
</TABLE>


(1)  Mr. Braaten joined the Company in October 1995 as President and Chief
     Financial Officer of the Company and Coast Resorts.  Mr. Braaten was
     appointed as Chief Operating Officer of the Company and Coast Resorts in
     February 1996.
(2)  Mr. Parrish served as Vice President, Finance and Controller of the Company
     and Coast Resorts from  September 1995 to February 1996, when Mr. Parrish
     was named Chief Financial Officer of the Company and Coast Resorts.
(3)  The amount reflects matching contributions paid to the Company's 401(k)
     Profit Sharing Plan and Trust.
(4)  Pursuant to the employment agreement with Harlan Braaten described below
     (see Certain Employment Agreements), Mr. Braaten received a bonus of
     $250,000 because Coast Resorts had not made a public offering of its common
     stock by December 31, 1997.
(5)  Amounts shown include guaranteed payments paid to Michael J. Gaughan under
     the partnership agreements of the Barbary Coast Partnership and the Gold
     Coast Partnership. Mr. Gaughan received

                                       24
<PAGE>

     no compensation from the Predecessor Partnerships except as set forth
     above, although Mr. Gaughan participated pro rata with the other partners
     in the distributions made by the Predecessor Partnerships.

CERTAIN EMPLOYMENT AGREEMENTS

     The Company has an employment agreement with Harlan Braaten, President
and Chief Operating Officer,  pursuant to which Mr. Braaten is entitled to
receive a minimum base salary of $250,000.  In addition, in the event of a
termination of Mr. Braaten's employment other than for failure to comply with
Nevada gaming regulations or his arrest on a felony offense, Mr. Braaten will be
entitled to receive a severance payment in an amount equal to one year's salary
plus any pro rata bonus payment to which he is entitled.  Pursuant to the
arrangement, in the event Coast Resorts makes an initial public offering of the
common stock, Mr. Braaten will receive an option to acquire a number of shares
of such common stock of Coast Resorts equal to two percent of Coast Resorts'
common stock issued and outstanding (giving effect to the initial public
offering) at the initial public offering price.  The option, if granted, will be
vested as of the initial public offering date with respect to one-third of the
shares covered thereby, and will vest with respect to one-third of the shares
covered thereby on each of the first and second anniversaries of the initial
public offering. Mr. Braaten's employment arrangement further provides that if
Messrs. Gaughan and Herbst cease to own in the aggregate at least five percent
of the outstanding stock of Coast Resorts, then Mr. Braaten will be entitled to
receive $250,000 from the Company if he is terminated by the Company within six
months after the date on which the collective ownership of Coast Resorts stock
by Messrs. Gaughan and Herbst is less than five percent of the outstanding
stock.

BONUS PLAN

     In 1996, the Company established a bonus plan designed to reward executive
officers and other key employees for their contributions to the Company's
business objectives and operating results.  Bonuses may be awarded in the
discretion of the Board of Directors based upon achievement of financial targets
established by the Board of Directors on an annual basis, and generally will be
equal to a percentage of the recipient's base salary, depending on the target
achieved.

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

  All of the outstanding capital stock of the Company is owned by its parent
company, Coast Resorts, Inc.

                                       25
<PAGE>

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

     The Company maintains numerous racetrack dissemination contracts with Las
Vegas Dissemination Company, Inc. ("LVD").  John Gaughan, Michael J. Gaughan's
son, is the president and sole shareholder of LVD.  LVD provides certain
dissemination and pari-mutuel services to the Gold Coast, Barbary Coast and The
Orleans.  LVD has been granted a license by the Nevada Gaming Authorities to
disseminate live racing for those events and tracks for which it contracts and
has been granted the exclusive right to disseminate all pari-mutuel services and
race wire services in the State of Nevada.  Under these dissemination contracts,
the Company pays to LVD an average of 3% of the wagers accepted for races held
at the racetracks covered by the respective contracts.  The Company also pays to
LVD a monthly fee for race wire services.  For the fiscal year ended December
31, 1997, the Company incurred expenses payable to LVD of approximately $1.1
million.  The terms on which such services are provided are regulated by the
Nevada Gaming Authorities.

  Tiberti Construction served as the general contractor for the original
construction of the Gold Coast and for certain expansions thereof, and for the
original construction of the Barbary Coast and all expansions thereof.  Tiberti
Construction was also the general contractor for the original construction of
The Orleans and for the Phase II expansion in 1997.  Tiberti Construction
entered into a guaranteed maximum price contract with the Company for the
construction of buildings and site improvements for a price not to exceed $100.0
million.  This amount was subsequently modified by the parties to $112.5
million.  J. Tito Tiberti owns approximately 6.7% of the outstanding common
stock of Coast Resorts, and is a director, Vice President and Secretary of the
Company and Coast Resorts and a director of Coast West.  Mr. Tiberti is the
president, a director and shareholder of, and together with his immediate family
members, controls Tiberti Construction.  For the year ended December 31, 1997,
the Company incurred expenses payable to Tiberti Construction of approximately
$26.2 million.

  The Company has entered into a lease with The Tiberti Company, a Nevada
general partnership, with respect to the real property on which The Orleans is
located.  Mr. Tiberti, a director of the Company and a director and shareholder
of Coast Resorts, is the managing partner of The Tiberti Company.  For the
fiscal year ended December 31, 1997, the Company paid rental expenses to The
Tiberti Company of approximately $2.1 million.

  Michael J. Gaughan, Franklin Toti and Leo Lewis are the owners of LGT
Advertising, which serves as the advertising agency for the Gold Coast, the
Barbary Coast and The Orleans.  LGT Advertising purchases advertising for the
Company's casinos from third parties and passes any discounts directly through
to the Company.  LGT Advertising receives no compensation or profit for such
activities, and invoices the Company for actual costs incurred.  LGT Advertising
uses the Company's facilities and employees in rendering its services, but does
not pay any compensation to the Company for such use.  None of Messrs. Gaughan,
Toti or Lewis receives any compensation from LGT Advertising.  For the fiscal
year ended December 31, 1997, the Company incurred expenses payable to LGT
Advertising of approximately $7.5 million.

  The Company has purchased certain of its equipment and inventory for its
respective operations from RJS, a Nevada corporation that is owned by Michael J.
Gaughan's father and Steven Delmont, the Company's restaurant manager ("RJS").
RJS invoices the Company for actual costs incurred.  For the fiscal year ended
December 31, 1997, the Company incurred expenses payable to RJS of approximately
$1.4 million.

  Michael J. Gaughan is the majority shareholder of Nevada Wallboards, Inc., a
Nevada corporation ("Nevada Wallboards"), which prints wallboards and parlay
cards for the use in the Company's race and

                                       26
<PAGE>

sports books. Mr. Gaughan receives no compensation from Nevada Wallboards. The
Company expects to continue to purchase wallboards and parlay cards from Nevada
Wallboards. For the fiscal year ended December 31, 1997, the Company incurred
expenses payable to Nevada Wallboards of approximately $198,000.

  Charles Silverman, a director of the Company and Coast Resorts, is the
president of Yates-Silverman, Inc., which served as the designer of The Orleans.
For the fiscal year ended December 31, 1997, the Company incurred expenses
payable to Yates-Silverman of $176,500.

  The foregoing transactions are believed to have been on terms no less
favorable to the Company than could have been obtained from unaffiliated third
parties and were approved by a majority of the disinterested directors of the
Company.  Any future transactions between the Company and its officers,
directors, principal shareholders or affiliates will be on terms no less
favorable to the Company than may be obtained from unaffiliated third parties,
and will be approved by a majority of the disinterested directors of the
Company.

                                       27
<PAGE>

                                    PART IV

ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
             ----------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                             Page
                                                                                                             ----
<S>      <C>                                                                                                 <C>
(a)       Financial Statements, Financial Statement Schedules and Exhibits
 1.       Financial Statements Index
          A.      Coast Hotels and Casinos, Inc.
Report of Independent Accountants.........................................................................    36
Audited Financial Statements
             Balance Sheets as of December 31, 1996 and 1997..............................................    37
             Statements of Income (Loss) for the years ended December 31, 1995, 1996 and 1997.............    38
             Statements of Stockholder's Equity for the years ended December 31, 1995, 1996 and 1997......    39
             Statements of Cash Flows for the years ended December 31, 1995, 1996 and 1997................    40
Notes to Financial Statements.............................................................................    41

          B.      Coast Resorts, Inc. (Parent Company Only)
Report of Independent Accountants.........................................................................    58
Audited Financial Statements
             Balance Sheets as of December 31, 1996 and 1997..............................................    59
             Statements of Income (Loss) for the years ended December 31, 1995, 1996 and 1997.............    60
             Statements of Stockholders' Equity for the years ended December 31, 1995, 1996 and 1997......    61
             Statements of Cash Flows for the years ended December 31, 1995, 1996 and 1997................    62
Notes to Financial Statements.............................................................................    63
</TABLE>

                                       28
<PAGE>

<TABLE>
<CAPTION>

     C.         Coast West, Inc.
<S>                                <C>                                                                               <C>
Report of Independent Accountants...................................................................................  68
Audited Financial Statements
          Balance Sheets as of December 31, 1996 and 1997...........................................................  69
          Statements of  Loss Incurred During the Development Stage for the period September
            29, 1995 (the date of inception) through December 31, 1995, for the years ended
            December 31, 1996 and 1997 and for the period September 29, 1995 (the date of
            inception) through December 31, 1997....................................................................  70
          Statements of Stockholder's Equity (Deficiency) for the period September 29, 1995
            (the date of inception) through December 31, 1995, for the years ended
            December 31, 1996 and 1997 and for the period September 29, 1995 (the date of inception)
            through December 31, 1997...............................................................................  71
          Statements of Cash Flows for the period September 29, 1995 (the date of inception)
            through December 31, 1995 and for the years ended December 31, 1996 and 1997
            and for the period September 29, 1995 (the date of inception) through December 31, 1997.................  72


          Notes to Financial Statements.............................................................................  73

2.      Financial Statement Schedules Index
        Schedule II - Coast Hotels and Casinos, Inc. -- Valuation and Qualifying Accounts...........................  79
        Schedule II - Coast West, Inc.  Valuation and Qualifying Accounts..........................................  80

3.      Exhibits Index
</TABLE>

                                       29
<PAGE>

                                 EXHIBIT INDEX
<TABLE>
<CAPTION>

Exhibit Number      Description of Exhibit
-------------       ----------------------
<C>                 <S>
   *2.1             Agreement and Plan of Reorganization dated as of September 29, 1995, among Coast
                    Resorts, Inc., the Gold Coast Hotel and Casino, a Nevada limited partnership, the
                    Barbary Coast Hotel and Casino, a Nevada general partnership, and Gaughan-Herbst,
                    Inc., a Nevada corporation
  **2.2             Supplement to Agreement and Plan of Reorganization dated as of December 22, 1995,
                    among Coast Resorts, Inc., the Gold Coast Hotel and Casino, a Nevada limited
                    partnership, the Barbary Coast Hotel and Casino, a Nevada general partnership, and
                    Gaughan-Herbst, Inc., a Nevada corporation
   *3.1             Articles of Incorporation of Coast Resorts, Inc.
   *3.2             Bylaws of Coast Resorts, Inc.
***10.1             Indenture dated as of January 30, 1996, among Coast Hotels and Casinos, Inc., the
                    Guarantors, and American Bank National Association, as Trustee.
***10.2             Registration Rights Agreement dated as of January 30, 1996 among Coast Hotels and
                    Casinos, Inc., the Guarantors, and Bear, Stearns & Co. Inc. and BA Securities, Inc.
***10.3             Form of Note (included in Exhibit 4.1)
***10.4             Note Guarantee of Coast Resorts, Inc.
***10.5             Note Guarantee of Coast West, Inc.
***10.6             Leasehold Deed of Trust, Assignment of Rents, Leases and Security Agreement dated
                    January 30, 1996 of Coast Hotels and Casinos, Inc.
***10.7             Leasehold Deed of Trust, Assignment of Rents, Leases and Security Agreement dated
                    January 30, 1996 of Coast West, Inc.
***10.8             Security Agreement dated January 30, 1996 (Coast Hotels and Casinos, Inc.)
***10.9             Security Agreement dated January 30, 1996 (Coast West, Inc.)
***10.10            Stock Pledge and Security Agreement dated January 30, 1996 (Coast Resorts, Inc.)
***10.11            Disbursement and Escrow Agreement dated January 30, 1996
***10.12            Pledge and Escrow Agreement dated January 30, 1996
***10.13            Collateral Assignment of Contracts dated January 30, 1996
</TABLE>

                                       30
<PAGE>
<TABLE>

<C>                <S>
***10.14            Escrow Agreement dated January 30, 1996
***10.15            Unsecured Environmental Indemnification Agreement (Coast Hotels and Casinos, Inc.)
***10.16            Unsecured Environmental Indemnification Agreement (Coast West, Inc.)
***10.17            Tax Sharing Agreement dated as of January 30, 1996
***10.18            Agreement Between Owner and Contractor dated as of January 24, 1996, between J.A.
                    Tiberti Construction Co., Inc. and Coast Hotels and Casinos, Inc.
  *10.19            Ground Lease dated as of October 1, 1995, between The Tiberti Company, a Nevada
                    general partnership, and Coast Hotels and Casinos, Inc. (as successor of Gold
                    Coast Hotel and Casino, a Nevada limited partnership)
  *10.20            Lease Agreement dated May 1, 1992, by and between Empey Enterprises, a Nevada
                    general partnership, as lessor, and the Barbary Coast Hotel & Casino, a Nevada
                    general partnership, as lessee
  *10.21            Ground Lease Agreement dated October 28, 1994 by and among 21 Stars, Ltd., a
                    Nevada limited liability company, as landlord, Barbary Coast Hotel & Casino, a
                    Nevada general partnership, as tenant, Wanda Peccole, as successor trustee of the
                    Peccole 1982 Trust dated February 15, 1982 ("Trust), and The William Peter and
                    Wanda Ruth Peccole Family Limited Partnership, a Nevada limited partnership
                    ("Partnership"), and, together with Trust, as owner, as amended
***10.22            Form of Subordination Agreement with former Gold Coast partners that hold
                    Subordinated Notes
  *10.23            Lease dated as of November 1, 1982, by and between Nevada Power Company, a Nevada
                    Corporation as landlord, and Barbary Coast Hotel and Casino, a Nevada general
                    partnership
  *10.24            Leasehold Deed of Trust, Assignment of Rents and Security Agreement dated February
                    13, 1991, by and between the Barbary Coast Hotel and Casino, a Nevada general
                    partnership, First American Title Company of Nevada, and Exber, Inc., a Nevada
                    corporation
   10.25            10 7/8% First Mortgage Note due 2001, dated November 21, 1997
   10.26            Indenture dated as of November 21, 1997 among Coast Hotels and Casinos, Inc., the
                    Guarantors, and Firstar Bank of Minnesota, N.A., as Trustee
   10.27            Note Guarantee of Coast Resorts, Inc.
   10.28            Purchase Agreement dated November 21, 1997
   10.29            Security Agreement dated November 21, 1997 (Coast Hotels and Casinos, Inc.)
   10.30            Deed of Trust, Assignment of Rents, Leases and Security Agreement dated November
                    21, 1997
</TABLE>

                                       31
<PAGE>

<TABLE>
<C>              <S>
 10.31             Stock Pledge and Security Agreement dated November 21, 1997 (Coast Resorts, Inc.)
 10.32             Pari Passu Intercreditor Agreement dated November 21, 1997
*16                Letter re Change in Certifying Accountant
*21                List of Subsidiaries of Coast Resorts, Inc.
 27                Financial Data Schedule
</TABLE>
--------------------------
*     Previously filed as an exhibit to the Registrant's Form 10 General Form
      For Registration of Securities, as amended, originally filed on October 3,
      1995 (the "Registration Statement")

**    Previously filed as an exhibit to Amendment No. 2 to the Registration
      Statement, filed on January 12, 1996

***   Previously filed as an exhibit to Coast Resorts' Annual Report on Form 10-
      K for the year ended December 31, 1995

(b) REPORTS ON FORM 8-K The Company filed no Reports on Form 8-K during the last
    quarter of the 1997 fiscal year.

                                       32
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Las Vegas, State of Nevada, on March 31, 1997.

                              COAST HOTELS AND CASINOS, INC.


                                    /s/  MICHAEL J. GAUGHAN
                              By:   _________________________
                                    Michael J. Gaughan
                                    Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual
Report on Form 10-K has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

          SIGNATURE                                               TITLE                                  DATE
          ---------                                               -----                                  ----
<S>                                          <C>                                                   <C>
/s/  MICHAEL J. GAUGHAN                        Chairman of the Board of Directors and Chief          March 31, 1998
------------------------------------------     Executive Officer (Principal Executive Officer)
Michael J. Gaughan

/s/  GAGE PARRISH                              Director and Chief Financial Officer                  March 31, 1998
------------------------------------------     (Principal Financial and Accounting Officer)
Gage Parrish

/s/  HARLAN D. BRAATEN                         Director                                              March 31, 1998
------------------------------------------
Harlan D. Braaten

/s/  JERRY HERBST                              Director                                              March 31, 1998
------------------------------------------
Jerry Herbst

/s/  J. TITO TIBERTI                           Director                                              March 31, 1998
------------------------------------------
J. Tito Tiberti

/s/  CHARLES SILVERMAN                         Director                                              March 31, 1998
------------------------------------------
Charles Silverman

/s/  MICHAEL CORRIGAN                          Director                                              March 31, 1998
------------------------------------------
Michael Corrigan

/s/  JOSEPH A. BLASCO                          Director                                              March 31, 1998
------------------------------------------
Joseph A. Blasco
</TABLE>

                                       33
<PAGE>

                         INDEX TO FINANCIAL STATEMENTS

                        COAST HOTELS AND CASINOS, INC.
<TABLE>

<S>                                                                                                                             <C>
Report of Independent Accountants............................................................................................   36

Balance Sheets of Coast Hotels and Casinos, Inc. as of December 31, 1996 and 1997............................................   37

Statements of Income (Loss) of Coast Hotels and Casinos, Inc. for the years ended December 31, 1995, 1996 and 1997...........   38

Statements of Stockholder's Equity of Coast Hotels and Casinos, Inc. for the years ended December 31, 1995, 1996 and 1997....   39

Statements of Cash Flows of Coast Hotels and Casinos, Inc. for the years ended December 31, 1995, 1996 and 1997..............   40

Notes to Financial Statements................................................................................................   41
</TABLE>


                   COAST RESORTS, INC. (PARENT COMPANY ONLY)
<TABLE>
<S>                                                                                                                       <C>
Report of Independent Accountants.......................................................................................      58

Balance Sheets of Coast Resorts, Inc. (parent company only) as of December 31, 1996 and 1997............................      59

Statements of Income (Loss) of Coast Resorts, Inc. (parent company only) for the years ended
   December 31, 1995, 1996 and 1997 ....................................................................................      60

Statements of Stockholders' Equity of Coast Resorts, Inc. (parent company only) for the years ended
   December 31, 1995, 1996 and 1997.....................................................................................      61

Statements of Cash Flows of Coast Resorts, Inc. (parent company only) for the years ended December 31, 1995,
   1996 and 1997........................................................................................................      62

Notes to Financial Statements...........................................................................................      63
</TABLE>

                                       34
<PAGE>

                                COAST WEST, INC.
<TABLE>

<S>                                                                                                                           <C>
Report of Independent Accountants..........................................................................                   68

Balance Sheets of Coast West, Inc. as of December 31, 1996 and 1997........................................                   69

Statements of Loss Incurred During the Development State of Coast  West, Inc. for the period
   September 29, 1995 (the date of inception) through December 31, 1995, for the years
   ended December 31, 1996 and 1997 and  for the period September 29, 1995 (the date of inception)
   through December 31, 1997...............................................................................                   70

Statements of Stockholder's Equity (Deficiency) of Coast West, Inc. for the period
   September 29, 1995 (the date of inception) through December 31, 1995, for the years
   ended December 31, 1996 and 1997 and  for the period September 29, 1995
   (the date of inception) through December 31, 1997.......................................................                   71

Statements of Cash Flows of Coast West, Inc. for the period September 29, 1995 (the date of inception)
   through December 31, 1995 and for the years ended December 31, 1996 and 1997 and for the period
   September 29, 1995 (the date of inception) through December 31, 1997....................................                   72

Notes to Financial Statements..............................................................................                   73

</TABLE>

                                       35
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS


To the Directors and Stockholder of
Coast Hotels and Casinos, Inc.

  We have audited the financial statements and financial statement schedule of
Coast Hotels and Casinos, Inc. (a Nevada corporation and a wholly owned
subsidiary of Coast Resorts, Inc.) as listed in item 14 of this Form 10-K.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.

  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

  In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Coast Hotels and Casinos, Inc.
as of December 31, 1996 and 1997 and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedule referred to above, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.

COOPERS & LYBRAND L.L.P.

Las Vegas, Nevada
March 13, 1998

                                       36
<PAGE>

                         COAST HOTELS AND CASINOS, INC.
               (A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)
                                 BALANCE SHEETS
                           DECEMBER 31, 1996 AND 1997
                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)



<TABLE>
<CAPTION>
                                     ASSETS
                                                                                        1996              1997
                                                                                    -----------        -----------
<S>                                                                                   <C>                <C>
CURRENT ASSETS:
  Cash and cash equivalents, including restricted cash of $8,186 in 1996.              $ 61,555           $ 29,426
  Accounts receivable, less allowance for doubtful accounts of
    $379 (1996) and $194 (1997)..........................................                 3,659              5,616
  Inventories............................................................                 6,364              5,085
  Due from affiliates....................................................                   631              1,675
  Refundable income taxes................................................                   645              1,772
  Prepaid expenses and other.............................................                 8,563             11,420
                                                                                    -----------        -----------
   TOTAL CURRENT ASSETS..................................................                81,417             54,944
 PROPERTY AND EQUIPMENT, Net.............................................               286,025            305,420
OTHER ASSETS.............................................................                 6,680              6,447
                                                                                    -----------        -----------
                                                                                       $374,122           $366,861
                                                                                    ===========        ===========

                    LIABILITIES AND STOCKHOLDER'S EQUITY

 CURRENT LIABILITIES:
  Accounts payable.......................................................              $ 11,834           $  9,107
  Accrued liabilities....................................................                25,509             27,651
  Construction accounts payable..........................................                23,517              2,491
  Current portion of long-term debt......................................                 6,781              8,076
                                                                                    -----------        -----------
   TOTAL CURRENT LIABILITIES.............................................                67,641             47,325
 LONG-TERM DEBT, less current portion....................................               195,764            207,173
 DEFERRED INCOME TAXES...................................................                 7,462             10,063
 DEFERRED RENT...........................................................                 2,577              4,954
                                                                                    -----------        -----------

 TOTAL LIABILITIES.......................................................               273,444            269,515
                                                                                    -----------        -----------

 COMMITMENTS AND CONTINGENCIES.......................................
 STOCKHOLDER'S EQUITY:
  Common stock, $1.00 par value, 25,000 shares authorized,
   1,000 shares issued and outstanding...................................                     1                  1
  Additional paid-in capital.............................................                95,858             95,858
  Retained earnings......................................................                 4,819              1,487
                                                                                    -----------        -----------
   TOTAL STOCKHOLDER'S EQUITY............................................               100,678             97,346
                                                                                    -----------        -----------
                                                                                       $374,122           $366,861
                                                                                    ===========        ===========
</TABLE>

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

                                       37
<PAGE>

                           COAST HOTELS AND CASINOS, INC.
              (A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)
                          STATEMENTS OF INCOME (LOSS)
             FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
                            (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                           1995             1996              1997
                                                                         ---------         --------         ---------
<S>                                                                     <C>               <C>               <C>
OPERATING REVENUES:
     Casino...........................................                    $129,675         $148,509          $211,026
     Food and beverage................................                      38,468           39,517            61,724
     Hotel............................................                      13,233           14,700            28,095
     Other............................................                       9,968           10,635            19,994
                                                                         ---------         --------         ---------
        GROSS OPERATING REVENUES......................                     191,344          213,361           320,839
     Less: promotional allowances.....................                     (16,588)         (17,374)          (26,956)
                                                                         ---------         --------         ---------
        NET OPERATING REVENUES........................                     174,756          195,987           293,883
                                                                         ---------         --------         ---------

OPERATING EXPENSES:
     Casino...........................................                      67,782           72,849           113,391
     Food and beverage................................                      31,242           30,768            48,968
     Hotel............................................                       6,692            6,921            12,034
     Other............................................                       8,537            8,025            17,456
     General and administrative.......................                      34,686           41,057            64,180
     Pre-opening expenses.............................                          --            7,125                --
     Guaranteed payments to former partners...........                         858               --                --
     Depreciation and amortization....................                       7,280            7,883            18,278
                                                                         ---------         --------         ---------
        TOTAL OPERATING EXPENSES......................                     157,077          174,628           274,307
                                                                         ---------         --------         ---------
        OPERATING INCOME..............................                      17,679           21,359            19,576
                                                                         ---------         --------         ---------

OTHER INCOME (EXPENSES):
     Interest expense:
     Related parties..................................                      (3,126)            (160)             (148)
     Other............................................                        (760)         (22,076)          (26,194)
     Interest income..................................                         106            4,791                98
     Interest capitalized.............................                         235            7,464             1,016
     Gain on disposal of equipment....................                          92               58               919
                                                                         ---------         --------         ---------
        TOTAL OTHER INCOME (EXPENSES).................                      (3,453)          (9,923)          (24,309)
                                                                         ---------         --------         ---------
NET INCOME (LOSS) BEFORE INCOME TAXES.................                      14,226           11,436            (4,733)
PROVISION (BENEFIT) FOR INCOME TAXES..................                          --            6,617            (1,401)
                                                                         ---------         --------         ---------
NET INCOME (LOSS).....................................                   $  14,226         $  4,819         $  (3,332)
                                                                         =========         ========         =========
UNAUDITED PRO FORMA DATA (reflecting
   reorganization change in tax status):
     Provision (benefit) for income taxes.............                       4,979            4,117            (1,401)
                                                                         ---------         --------         ---------
     Net income (loss)................................                   $   9,247         $  7,319         $  (3,332)
                                                                         =========         ========         =========
</TABLE>

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

                                       38
<PAGE>

                        COAST HOTELS AND CASINOS, INC.
              (A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)
                      STATEMENTS OF STOCKHOLDER'S EQUITY
             FOR THE YEARS ENDED DECEMBER 31, 1995, 1996, AND 1997
                            (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                      Common Stock
                                                      ------------       Additional      Unrealized      Retained
                                                  Shares     Amount    Paid-In Capital   Gains(Losses)   Earnings      Total
                                              --------------------------------------------------------------------------------
<S>                                           <C>            <C>          <C>                 <C>         <C>         <C>

Balances at December 31, 1994........            1,000           $1       $ 70,774            $ 13        $ 16,993    $ 87,781
  Net income.........................                                                                       14,226      14,226
  Change in unrealized gains (losses)
     on marketable securities........                                                          (13)                        (13)
  Distributions to former partners...                                      (32,535)                        (26,125)    (58,660)
                                              --------------------------------------------------------------------------------
Balances at December 31, 1995........            1,000            1         38,239              --           5,094      43,334
  Exchange of notes payable of
     subsidiary for common stock.....                                       52,525                                      52,525
  Reclassification of undistributed
     earnings to additional paid-in capital
     upon termination of partnership status..                                5,094                          (5,094)         --
  Net income.........................                                                                        4,819       4,819
                                              --------------------------------------------------------------------------------
Balances at December 31, 1996........            1,000            1         95,858              --           4,819     100,678
  Net loss...........................                                                                       (3,332)     (3,332)
                                              --------------------------------------------------------------------------------
Balances at December 31, 1997........            1,000           $1       $ 95,858            $ --        $  1,487    $ 97,346
                                              ================================================================================

</TABLE>


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

                                       39
<PAGE>

                            COAST HOTELS AND CASINOS, INC.
              (A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)
                           STATEMENTS OF CASH FLOWS
             FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 and 1997
                            (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                       1995             1996            1997
                                                                                     -----------------------------------------
<S>                                                                                  <C>             <C>              <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income (loss)...................................................            $ 14,226        $   4,819        $ (3,332)
                                                                                     --------        ---------        --------
     ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET
     CASH PROVIDED BY OPERATING ACTIVITIES:
          Depreciation and amortization..................................               7,280            7,883          18,278
          Provision for bad debts........................................                 911            2,153           1,935
          Gain on disposal of equipment and securities...................                 (92)             (58)           (919)
          Deferred rent..................................................                  --               --           2,378
          Deferred income taxes..........................................                  --            4,162             789
          Amortization of original issue discount                                          --              497             616
          (Increase) decrease in operating assets:
             Accounts receivable.........................................                (267)          (1,608)         (1,773)
             Income tax receivable.......................................                  --             (645)         (1,127)
             Inventories.................................................                 854           (2,286)          1,279
             Prepaid expenses and other assets...........................                  85           (1,395)         (1,493)
          Increase (decrease) in operating liabilities:
             Accounts payable............................................              (1,057)           4,307          (2,727)
             Accrued liabilities.........................................                 901            9,204           2,142
                                                                                     --------        ---------        --------
               TOTAL ADJUSTMENTS.........................................               8,615           22,214          19,378
                                                                                     --------        ---------        --------
               NET CASH PROVIDED BY OPERATING ACTIVITIES.................              22,841           27,033          16,046
                                                                                     --------        ---------        --------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Capital expenditures................................................             (32,187)        (125,722)        (57,736)
     Proceeds from sale of equipment and securities......................                 219               20           1,070
     Issuance of notes receivable........................................                  --               --              --
     Principal payment from notes receivable.............................                  --               --              --
                                                                                     --------        ---------        --------
               NET CASH USED BY INVESTING ACTIVITIES.....................             (31,968)        (125,702)        (56,666)
                                                                                     --------        ---------        --------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from borrowings under bank lines of credit.................              26,941            1,045              --
     Principal payments on bank lines of credit..........................              (4,000)         (29,200)             --
     Proceeds from issuance of long-term debt, net of  discounts and
      commissions........................................................               4,500          179,570          19,569

     Principal payments on long-term debt................................             (10,413)          (1,826)         (7,913)
     Advances to affiliates..............................................                (500)          (2,568)         (3,165)
     Payments for debt issue costs.......................................              (1,169)          (1,336)             --
     Distributions to former partners....................................              (8,660)              --              --
                                                                                     --------        ---------        --------
               NET CASH PROVIDED BY FINANCING ACTIVITIES.................               6,699          145,685           8,491
                                                                                     --------        ---------        --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                   (2,428)          47,016         (32,129)
CASH AND CASH EQUIVALENTS, at beginning of year..........................              16,967           14,539          61,555
                                                                                     --------        ---------        --------
CASH AND CASH EQUIVALENTS, at end of year................................            $ 14,539        $  61,555        $ 29,426
                                                                                     ========        =========        ========
</TABLE>

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

                                       40
<PAGE>

                         COAST HOTELS AND CASINOS, INC.
               (A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 1--BACKGROUND INFORMATION AND BASIS OF PRESENTATION

 Background Information

  Coast Hotels and Casinos, Inc. (the "Company") is a Nevada corporation and a
wholly owned subsidiary of Coast Resorts, Inc. ("Coast Resorts"), which is
also a Nevada corporation. The Company was formed in September 1995 and owns and
operates the following hotel-casinos in Las Vegas, Nevada:

   - Gold Coast Hotel and Casino, located approximately one mile west of the Las
     Vegas Strip on Flamingo Road.

   - Barbary Coast Hotel and Casino, which is located on the Las Vegas Strip.

   - The Orleans Hotel and Casino, which is located approximately one mile west
     of the Las Vegas Strip on Tropicana Avenue.  The Orleans opened for
     business on December 18, 1996.

  Prior to the Reorganization described below, the Gold Coast Hotel and Casino
and the Barbary Coast Hotel and Casino had previously been operated
independently by Gold Coast Hotel and Casino, a Nevada limited partnership
organized in 1986 ("Gold Coast") and Barbary Coast Hotel and Casino, a Nevada
partnership organized in 1979 ("Barbary Coast").

  On January 1, 1996, the partners of Gold Coast and Barbary Coast (the
"Predecessor Partnerships") completed a reorganization (the
"Reorganization") with Coast Resorts. Coast Resorts was formed in September
1995 for the purpose of effecting such Reorganization of the Predecessor
Partnerships. Coast Resorts, Gold Coast and Barbary Coast were all related
through common ownership and management control.

  In the Reorganization, the partners of the Predecessor Partnerships each
transferred to Coast Resorts, by assignment or through the merger of Gaughan-
Herbst, Inc., a Nevada corporation, the sole general partner of the Gold Coast,
their respective partnership interests in the Predecessor Partnerships in
exchange for an aggregate of 1,000,000 shares of common stock, par value $.01
per share, of Coast Resorts. The partners of the Gold Coast (or their
principals) received in the aggregate 65% of such shares of common stock of
Coast Resorts, and the partners of the Barbary Coast received in the aggregate
35% of such shares. The shares of common stock were issued to the respective
partners (or their principals) of each such Predecessor Partnership based upon
such partners' pro rata interests in such Predecessor Partnership.

  Concurrently with the exchange of the partners' interests in the Predecessor
Partnerships and the merger of Gaughan-Herbst, Inc. into Coast Resorts, Coast
Resorts became the sole partner of each of the Predecessor Partnerships, and
each Predecessor Partnership dissolved and terminated. Immediately upon such
dissolution and termination, all of the assets and liabilities of the
Predecessor Partnerships became the assets and liabilities of Coast Resorts.
Coast Resorts immediately contributed to the Company all of the assets of the
Predecessor Partnerships other than those relating to a certain ground lease
(the "Coast West Lease"), which Coast Resorts contributed to Coast West Inc.,
another wholly-owned subsidiary of Coast Resorts ("Coast West"). In addition,
the Company assumed, jointly and severally with Coast Resorts, all of the
liabilities of the Predecessor Partnerships other than (i) obligations under a
portion of the subordinated notes payable to former partners and $1,500,000
principal amount of demand notes payable to a related party which were retained
by Coast Resorts and were exchanged for shares of Coast Resorts Common Stock (as
defined below), and (ii) those liabilities incident to the Coast West Lease, and
Coast West

                                       41
<PAGE>

                         COAST HOTELS AND CASINOS, INC.
               (A Wholly Owned Subsidiary of Coast Resorts, Inc.)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 1--BACKGROUND INFORMATION AND BASIS OF PRESENTATION--(CONTINUED)

assumed jointly and severally with Coast Resorts, all of the liabilities of the
Predecessor Partnerships incident to the Coast West Lease.

  Coast Resorts retained the liability for an aggregate principal amount of
$51,025,000 in notes payable to former partners and retained the liability for
$1,500,000 relating to demand notes due to a related party (the "Exchange
Liabilities"). On January 16, 1996, the Exchange Liabilities were exchanged for
494,353 shares of common stock, par value $.01 per share, of Coast Resorts (the
"Coast Resorts Common Stock"), based upon management's estimate of the fair
market value of such common stock.

  As a result of the Reorganization, the former partners of the Predecessor
Partnerships (or their principals) own all of the issued and outstanding shares
of capital stock of Coast Resorts, Coast Resorts owns all of the issued and
outstanding capital stock of the Company and Coast West, and the Company and
Coast West own and have assumed in the aggregate all of the assets and
liabilities of the Predecessor Partnerships (other than the Exchange Liabilities
that were exchanged for Coast Resorts Common Stock).

  Coast West holds the Coast West Lease for future development. Coast
West has had no source of income since its inception in September 1995. The
Company has agreed to provide Coast West with advances sufficient to make
payments on the Coast West Lease and to fund development costs, up to a maximum
of $8 million, as more fully explained in Note 9.

 Basis of Presentation

  Gold Coast and Barbary Coast historically operated under a high degree of
common control. The former Managing General Partner of Gold Coast was also the
Managing General Partner of Barbary Coast. Due to the common control of Gold
Coast and Barbary Coast and the continuation of ownership by the former
partners, the Reorganization was accounted for as a reorganization of entities
under common control. Accordingly, the financial statements of the Company for
all periods are presented as if the Reorganization occurred at the beginning of
the earliest period presented and include the accounts of all entities involved
on a historical cost basis, in a manner similar to a pooling of interests.


NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Inventories

  Inventories, which consist primarily of food and beverage, liquor store, and
gift shop merchandise, are valued at the lower of cost or market value (which is
determined using the first-in, first-out and the average cost methods) except
for the base stocks of bar glassware and restaurant china which are stated at
original cost with subsequent replacements charged to expense.

Original Issue Discount and Debt Issue Costs

  Original issue discount is amortized over the life of the related indebtedness
using the effective interest method. Costs associated with the issuance of debt
are deferred and amortized over the life of the related indebtedness also using
the effective interest method.

                                       42
<PAGE>

                         COAST HOTELS AND CASINOS, INC.
               (A Wholly Owned Subsidiary of Coast Resorts, Inc.)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property, Equipment and Depreciation

   Property and equipment are stated at cost. Expenditures for additions,
renewals and betterments are capitalized; expenditures for maintenance and
repairs are charged to expense as incurred. Upon retirement or disposal of
assets, the cost and accumulated depreciation are eliminated from the accounts
and the resulting gain or loss is included in income. Depreciation is computed
by the straight-line method over the estimated useful lives of property and
equipment, which range from 5 to 15 years for equipment and up to 40 years for
buildings and improvements.

Pre-opening and related promotional expense

  Costs associated with the opening of new hotel-casinos, including personnel,
training, certain marketing and other costs, are capitalized and charged to
expense over management's estimate of the period of economic benefit associated
with such costs. Management believes that such period, with respect to major
hotel-casinos, is within one fiscal quarter of the date of opening.

  In April 1997, the American Institute of Certified Public Accountants issued
an exposure draft of a proposed Statement of Position (SOP). Reporting on the
Costs of Start-Up Activities. If issued in its current form, the proposed SOP
would require that the Company expense its pre-opening and related promotional
expense as incurred rather than capitalize it and amortize it over the estimated
period of economic benefit of such costs as is the Company's current policy.

Advertising Costs

  Costs for advertising are expensed as incurred, except costs for direct-
response advertising, which are capitalized and amortized over the period of the
related program. Capitalized advertising costs were immaterial at December 31,
1996 and 1997. Advertising expense was approximately $4.3 million,  $3.8
million, and $7.5 million for the years ended December 31, 1995, 1996 and 1997,
respectively.

Casino Revenue

  In accordance with common industry practice, the Company recognizes as casino
revenue the net win from gaming activities which is the difference between
amounts wagered and amounts paid to winning patrons.

Deferred Revenue

  Wagers received on all sporting events are recorded as a liability until the
final outcome of the event when the payoffs, if any, can be determined.

Progressive Jackpot Payouts

  The Company has a number of progressive slot machines, progressive poker games
and a progressive keno game. As coins are played on the progressive slot
machines, the amount available to win increases, to be paid out when the
appropriate jackpot is hit. The keno game and poker game payouts also increase
with the amount of play, to be paid out when hit. In accordance with common
industry practice, the Company has recorded the progressive jackpot as a
liability with a corresponding charge against casino revenue.

                                       43
<PAGE>

                         COAST HOTELS AND CASINOS, INC.
               (A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Promotional Allowances

  The retail value of hotel accommodations and food and beverage items provided
to customers without charge is included in gross revenues and then deducted as
promotional allowances, to arrive at net revenues.

  The estimated cost of providing these complimentary services is as follows:

<TABLE>
<CAPTION>
                                                                December 31,
                                                      ---------------------------------
                                                         1995        1996        1997
                                                      ---------   ---------   ---------
<S>                                                   <C>         <C>         <C>
                                                               (in thousands)
      Hotel........................................     $ 1,426     $ 1,804     $ 2,023
      Food and beverage............................      14,704      14,725      23,187
                                                        -------     -------     -------
      Total cost of promotional allowances.........     $16,130     $16,529     $25,210
                                                        =======     =======     =======
</TABLE>

The cost of promotional allowances has been allocated to expense as follows:

<TABLE>
<CAPTION>
                                                                 December 31,
                                                      ----------------------------------
                                                          1995        1996        1997
                                                      ----------   ---------   ---------
<S>                                                   <C>          <C>         <C>
                                                                (in thousands)
   Casino..........................................      $15,232     $15,361     $22,280
   Other...........................................          898       1,168       2,930
                                                         -------     -------     -------
                                                         $16,130     $16,529     $25,210
                                                         =======     =======     =======
</TABLE>

Slot Club Promotion

  The Company has established promotional clubs to encourage repeat business
from frequent and active slot machine customers. Members in the clubs earn
points based on slot activity accumulated in the members' account. Points can be
redeemed for certain consumer products (typically household appliances), travel,
food and beverage or cash. The Company accrues for slot club points expected to
be redeemed in the future based on the average cost of items expected to be
redeemed.

Income Taxes

  Prior to the Reorganization, the Company operated as individual partnerships
which did not pay federal income taxes. The partners of Gold Coast and Barbary
Coast were taxed on their proportionate share of each of  their respective
partnership's taxable income or loss. Therefore, these statements do not include
any provision or liability for corporate income taxes prior to January 1, 1996.

                                       44
<PAGE>

                         COAST HOTELS AND CASINOS, INC.
               (A Wholly Owned Subsidiary of Coast Resorts, Inc.)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income taxes (Continued)

  Subsequent to the Reorganization, the Company is included in the consolidated
federal income tax return filed by Coast Resorts. The Company's tax allocation
is based on the amount of tax it would incur if it filed a separate return.
Coast Resorts will pay the Company an amount equal to the tax benefit arising
from the utilization of net operating losses of the Company to the extent that
such losses result in a reduction in the amount of tax payable by Coast Resorts.

  In connection with the Reorganization, effective January 1, 1996, the Company
adopted Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes" ("SFAS 109").  Under SFAS 109 deferred tax assets and liabilities
are recognized for the expected future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases.  Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled.  Under SFAS 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.  The adoption of SFAS 109 on January 1, 1996
resulted in the recognition in the 1996 financial statements of net deferred tax
liabilities and a corresponding charge to earnings through the income tax
provision of approximately $2,500,000.  In addition, upon termination of the
partnership tax status on January 1, 1996, all undistributed earnings of the
predecessor partnerships were reclassified to additional paid-in capital.

Cash and Cash Equivalents

  The Company considers all highly liquid investments with a remaining maturity
at acquisition of three months or less to be cash equivalents. Cash in excess of
daily requirements is typically invested in U.S. Government-backed repurchase
agreements with maturities of 30 days or less. Such investments are generally
made with major financial institutions having a high credit rating. At times,
the Company's cash deposited in financial institutions may be in excess of
federally insured limits.

Concentration of Credit Risk

  The Company extends credit to patrons after background checks and
investigations of creditworthiness and does not require collateral. The Company
records provisions for potential credit losses and such losses have been within
management's expectations. Management believes that as of December 31, 1997, no
significant concentration of credit risk exists for which an allowance has not
already been determined and recorded.

Use of Estimates in the Preparation of Financial Statements

  The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

Accounting Pronouncements

  In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"), which establishes standards for reporting and display of comprehensive
income and its components.  SFAS 130 requires a separate statement to report
components of comprehensive income for each period presented.  The provisions of

                                       45
<PAGE>

                         COAST HOTELS AND CASINOS, INC.
               (A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

SFAS 130 are effective for fiscal years beginning after December 15, 1997.
Management believes that the Company currently does not have items that would
require presentation in a separate statement of comprehensive income.

    In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"), which supersedes FASB
Statement No. 14, "Financial Reporting for Segments of a Business Enterprise."
SFAS 131 establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders.  SFAS 131 is
effective for fiscal years beginning after December 15, 1997 and requires
restatement of earlier periods presented.  SFAS 131 will not have a material
effect on the Company's financial statements as the required information is
either currently being presented by the Company or it is not applicable to the
Company.


Reclassifications

    Certain amounts in the 1995 and 1996 financial statements have been
reclassified to conform with the 1997 presentation.


NOTE 3--PROPERTY AND EQUIPMENT

  Major classes of property and equipment consist of the following:

<TABLE>
<CAPTION>
                                                          December, 31
                                                ---------------------------------
                                                    1996                 1997
                                                ------------         ------------
                                                          (in thousands)
      <S>                                       <C>                  <C>

      Building...............................      $204,582             $232,661
      Furniture and fixtures.................       133,694              139,022
                                             --------------       --------------
                                                    338,276              371,683
      Less accumulated depreciation..........       (68,058)             (81,733)
                                             --------------       --------------
                                                    270,218              289,950
      Land...................................        15,232               15,232
      Construction in progress...............           575                  238
                                             --------------       --------------
      Net property and equipment.............      $286,025             $305,420
                                             ==============       ==============
</TABLE>

                                       46
<PAGE>

                         COAST HOTELS AND CASINOS, INC.
               (A Wholly Owned Subsidiary of Coast Resorts, Inc.)

                         NOTES TO FINANCIAL STATEMENTS


NOTE 4--LEASES

  The Barbary Coast building is located on land which is leased. The lease term
runs through May 2003 with a purchase option and two 30 year renewal options. In
addition, the parking lot adjacent to the building is being leased under a 10
year lease which runs through December 2003.  Annual rental payments under these
leases total $300,000.

  During December 1995, the Company entered into a ground lease for the land
underlying the Orleans. The land is owned by The Tiberti Company, a Nevada
general partnership, of which a stockholder of Coast Resorts is the managing
partner. The stockholder is also the president and a director and stockholder of
the general contractor for the construction of the Orleans, as more fully
described in Note 10. The lease provides for an initial term of fifty years with
a twenty-five year renewal option and includes a purchase option, exercisable by
the Company, at fair market value during the twentieth and twenty-first years of
the lease. Lease payments range from $175,000 to $250,000 per month during the
first sixteen years of the lease increasing by 3% per annum thereafter. The
total amount of the base rent payments on the Orleans lease is being charged to
expense on the straight-line method over the term of the lease. The Company has
recorded deferred rent to reflect the excess of rent expense over cash payments
since inception of the lease.

Future Minimum Lease Payments

  The following is an annual schedule of future minimum lease payments required
under operating  leases that have initial or remaining noncancelable terms in
excess of one year as of December 31, 1997:


<TABLE>

                          OPERATING LEASES
                           (IN THOUSANDS)
        <S>                                      <C>

        1998                                      $  2,400
        1999                                         2,650
        2000                                         2,700
        2001                                         2,700
        2002                                         2,950
        Later years                                207,171
                                                  --------
        Total minimum lease payments              $220,571
                                                  ========
</TABLE>

                                       47
<PAGE>

                         COAST HOTELS AND CASINOS, INC.
               (A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 4--LEASES (CONTINUED)

Rental Expense

  Rent expense for the years ended December 31, 1995, 1996 and 1997 is as
  follows:

<TABLE>
<CAPTION>
                                                           December 31,
                                              --------------------------------------
                                                  1995          1996         1997
                                              ------------   ----------   ----------
                                                          (in thousands)
                <S>                           <C>            <C>           <C>
                Occupancy rentals..........          $ 300       $4,777       $4,777
                Other equipment............            262          414          900
                                              ------------   ----------   ----------
                                                     $ 562       $5,191       $5,677
                                              ============   ==========   ==========
</TABLE>

NOTE 5--ACCRUED LIABILITIES

  Major classes of accrued liabilities consist of the following:

<TABLE>
<CAPTION>
                                                                         December 31,
                                                                    ----------------------
                                                                       1996        1997
                                                                    ----------   ---------
                                                                        (in thousands)
                                                                         ------------
            <S>                                                     <C>            <C>
            Slot club liability..................................      $ 5,010     $ 6,475
            Compensation and benefits............................        7,535       8,177
            Progressive jackpot payouts..........................        4,124       4,101
            Customer deposits and unpaid winners.................        2,726       5,069
            Deferred sports book revenue.........................          675         871
            Taxes................................................          975       1,046
            Accrued interest expense.............................        1,116       1,354
            Other................................................        3,348         558
                                                                       -------     -------
                                                                       $25,509     $27,651
                                                                       =======     =======
</TABLE>

                                       48
<PAGE>

                         COAST HOTELS AND CASINOS, INC.
               (A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 6 - LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                                                           December 31,
                                                                            ----------------------------------------
Long-term debt consists of the following:                                            1996                1997
                                                                            ----------------------------------------
                                                                                      (in thousands)
<S>                                                                            <C>                     <C>
Related parties:

7.5% notes, payable in monthly installments of interest only, with all
principal and any unpaid interest due December 31, 2001.  The notes
are uncollateralized and are payable to the former partners of Barbary
Coast and Gold Coast.  Approximately $51,025,000 of the notes were
exchanged for Coast Resorts Common Stock on January 16, 1996 as more
fully described in Note 1..............................................              $  1,975              $  1,975

Non-related parties:

13% First Mortgage Notes due December 15, 2002, with interest payable
semiannually on June 15 and December 15, net of original issue
discount of $5,293,000 in 1996 and $4,677,000 in 1997..................               169,707               170,323

10 7/8% First Mortgage Notes due November 1, 2001, with interest
payable quarterly on March 15, June 15, September 15 and December 15.                       -                16,800

9.19% note payable, payable in 60 monthly installments of approximately
$750,000, including  principal and interest, collateralized by certain
gaming and other equipment.............................................                29,974                22,481

8.6% note due August 11, 2007, payable in monthly installments of
$26,667 principal plus interest on remaining principal balance,
collateralized by 1980 Hawker aircraft.................................                     -                 3,067

Other notes payable.....................................................                  889                   603
                                                                            ----------------------------------------
                                                                                      202,545               215,249
Less:  current portion..................................................                6,781                 8,076
                                                                            ----------------------------------------
                                                                                     $195,764              $207,173
                                                                            ========================================
</TABLE>

  On January 30, 1996, the Company completed a private placement of $175 million
principal amount of 13% First Mortgage Notes Due December 15, 2002 (the "13%
First Mortgage Notes"). Interest on the 13% First Mortgage Notes is payable
semi-annually commencing June 15, 1996. The 13% First Mortgage Notes are
unconditionally guaranteed by Coast Resorts, Coast West and certain future
Subsidiaries of the Company. Net proceeds from the offering (after deducting
original issue discount and commissions) were approximately $164.1 million. Of
that amount, (i) approximately $114.8 million was deposited in a construction
disbursement account restricted for use by the Company to finance in part the
cost of developing, constructing, equipping and opening the Orleans, (ii)
approximately $19.3 million was used by the Company to purchase U.S. Government
Obligations which were deposited into an interest escrow

                                       49
<PAGE>

                         COAST HOTELS AND CASINOS, INC.
               (A Wholly Owned Subsidiary of Coast Resorts, Inc.)

                         NOTES TO FINANCIAL STATEMENTS

Note 6 - Long-term Debt (continued)

account restricted to fund the interest payable on the 13% First Mortgage Notes
through December 15, 1996 and (iii) approximately $29.2 million was used by the
Company to repay all outstanding indebtedness under the Company's credit
facility, which was terminated. The balance of approximately $800,000 was used
to pay, in part, the estimated offering expenses of $2.4 million.

     The 13% First Mortgage Notes are redeemable at the option of the Company at
106.50% and 103.25% of the principal amount thereof during the twelve month
periods beginning December 15, 2000 and 2001, respectively. In addition, on or
before December 15, 1998, the Company may redeem up to $57.25 million aggregate
principal amount of 13% First Mortgage Notes at 110% of the principal amount
thereof with the net proceeds of a public offering of Coast Resorts Common Stock
subject to certain limitations as outlined in the indenture governing the 13%
First Mortgage Notes (the "Indenture").

     Pursuant to the terms of the Indenture, in December 1996 the Company
incurred approximately $30 million of equipment financing for The Orleans. In
August 1997, the Company incurred an additional $3.2 million in equipment
financing. At December 31, 1997, outstanding equipment financing totaled
approximately $25.5 million.

     The Indenture contains covenants that, among other things, limit the
ability of the Company to pay dividends or make advances to Coast Resorts, repay
existing indebtedness, incur additional indebtedness, or sell material assets as
defined in the Indenture. Additionally, pursuant to the Indenture, if on July
20, 1998, the Fixed Charge Coverage Ratio (as defined in the Indenture) of the
Company for the most recently ended four full fiscal quarters is less than 1.5
to 1, the Company would be required to consummate an asset sale of the Barbary
Coast within one year. The proceeds from such asset sale would be required to be
used by the Company to repurchase Notes at a price equal to 101% of the
principal amount of such Notes. As of December 31, 1997, the Fixed Charge
Coverage Ratio was 1.53 to 1. Based upon recent operating results, management
believes that, for the applicable period, the Fixed Charge Coverage Ratio will
equal or exceed 1.5 to 1, although no assurance can be given that such Fixed
Charge Coverage Ratio will be achieved.

     The Company is permitted by the Indenture governing the 13% First Mortgage
Notes to borrow up to an additional $20 million for working capital purposes. In
November 1997, the Company issued $16.8 million principal amount of 10 7/8%
first mortgage notes due November 1, 2001 ("10 7/8% First Mortgage Notes"). The
10 7/8% First Mortgage Notes are collateralized on a pari passu basis with the
13% First Mortgage Notes. Interest on the 10 7/8% First Mortgage Notes is
payable quarterly on March 15, June 15, September 15 and December 15. The 10
7/8% First Mortgage Notes are unconditionally guaranteed by Coast Resorts and
certain future subsidiaries of Coast Hotels. Net proceeds from the offering
(after deducting commissions) were approximately $16.5 million and were used for
working capital purposes.

     The 10 7/8% First Mortgage Notes are redeemable at any time prior to
November 1, 2001 at a redemption price equal to the principal amount thereof,
plus any accrued and unpaid interest plus an "Applicable Premium" as defined in
the indenture governing the 10 7/8% First Mortgage Notes. That indenture
contains covenants that, among other things, limit the ability of the Company to
pay dividends to Coast Resorts, repay existing indebtedness, incur additional
indebtedness or sell material assets.

  Maturities on long-term debt are as follows:

<TABLE>
<CAPTION>

        Year ending December 31,        Maturities
        -----------------------        ------------
                                      (IN THOUSANDS)
        <S>                            <C>
        1998...................        $  8,076
        1999...................           7,905
        2000...................           7,918
        2001...................          19,196
        2002...................         175,323
        Thereafter.............           1,508
                                       --------
                                       $219,926
                                       ========
</TABLE>

                                       50
<PAGE>

                         COAST HOTELS AND CASINOS, INC.
               (A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)

                         NOTES TO FINANCIAL STATEMENTS


NOTE 7-INCOME TAXES

      As discussed in Note 1, prior to the Reorganization, the Company operated
as individual partnerships which did not pay federal income taxes.  Therefore,
these statements do not include any provision or liability for corporate income
taxes prior to January 1, 1996.  Effective January 1, 1996, the Company adopted
SFAS 109.  The adoption of SFAS 109 resulted in the recognition in the 1996
financial statements of net deferred tax liabilities and a corresponding charge
to earnings through the income tax provision of approximately $2,500,000.

     The components of the income tax provision (benefit) for the years ended
December 31, 1996 and 1997 are as follows:

<TABLE>
<CAPTION>
                                                                                         DECEMBER 31,
                                                                         ----------------------------------------
                                                                                 1996                    1997
                                                                         ------------------      ----------------
Federal:                                                                                (IN THOUSANDS)
<S>                                                                         <C>                     <C>
     Current.............................................................            $2,454               $(2,189)
     Deferred............................................................             4,163                   788
                                                                         ------------------      ----------------
                                                                                     $6,617               $(1,401)
                                                                         ==================      ================
</TABLE>

     The income tax provision (benefit) for the years ended December 31, 1996
and 1997 differs from that computed at the federal statutory corporate tax rate
as follows:

<TABLE>
<CAPTION>
                                                                                      1996               1997
                                                                         -------------------------------------
<S>                                                                         <C>                <C>
Federal statutory rate...................................................              34.0%             (34.0%)
Establishment of deferred taxes..........................................              21.9%                --
Other....................................................................               2.0%               4.4%
                                                                         -------------------------------------
     Effective tax rate..................................................              57.9%             (29.6%)
                                                                         =====================================
</TABLE>

                                       51
<PAGE>

                         COAST HOTELS AND CASINOS, INC.
               (A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 7-INCOME TAXES (CONTINUED)

The tax effects of significant temporary differences representing net deferred
tax assets and liabilities at December 31, 1996 and 1997 are as follows:

<TABLE>
<CAPTION>

                                                                             December 31,
                                                                ---------------------------------------
                                                                      1996                   1997
                                                                ----------------       ----------------
                                                                              (IN THOUSANDS)
<S>                                                                <C>                    <C>
Deferred tax assets:
Current:
      Accrued vacation..........................................         $   226               $    565
      Allowance for doubtful accounts...........................           1,029                  1,776
      Accrued slot club points..................................             717                    902
      Progressive liabilities...................................           1,059                  1,025
      Accrued medical and other benefits........................             188                    131
      Tax credit................................................              --                    398
      NOL carryforward..........................................              --                    273
      Other.....................................................              80                     42
                                                                ----------------       ----------------
           Total current........................................           3,299                  5,112
                                                                ----------------       ----------------
   Non-current:
      Deferred rent.............................................             902                  1,734
                                                                ----------------       ----------------
          Total non-current.....................................             902                  1,734
                                                                ----------------       ----------------
Total deferred tax assets.......................................           4,201                  6,846
                                                                ----------------       ----------------
Deferred tax liabilities:
   Non-current:
      Property, plant and equipment.............................          (8,364)               (11,797)
                                                                ----------------       ----------------
      Total deferred tax liabilities............................          (8,364)               (11,797)
                                                                ----------------       ----------------
Net deferred tax liability......................................         $(4,163)              $ (4,951)
                                                                ================       ================
</TABLE>

     As of December 31, 1997, the Company had a net operating loss carryforward
of $780,000 which expires in 2012 and a tax credit of $398,000 which the Company
can carry forward indefinitely.
                                       52
<PAGE>

                         COAST HOTELS AND CASINOS, INC.
               (A Wholly Owned Subsidiary of Coast Resorts, Inc.)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 8--FAIR VALUE OF FINANCIAL INSTRUMENTS

  The following estimated fair value of the Company's financial instruments has
been determined by the Company using available market information and
appropriate valuation methodologies. The carrying amounts of cash and cash
equivalents, accounts receivable, and accounts payable approximate fair values
due to the short-term maturities of these instruments. The carrying amounts and
estimated fair values of the Company's other financial instruments at December
31, 1997 are as follows:

<TABLE>
<CAPTION>
                                                CARRYING     FAIR
                                                 AMOUNT      VALUE
                                               ---------   ---------
                                                  (in thousands)
<S>                                            <C>         <C>

Liabilities:
 Current portion of long-term debt..........   $  8,076     $  8,076
   First Mortgage Notes.....................   $170,323     $198,625
  Other long-term debt......................   $ 36,850     $ 36,400
</TABLE>

  The methods and assumptions are summarized as follows:

  For current portion of long-term debt, the carrying amount approximates fair
value due to the short-term nature of such debt.  The fair value of the 13%
First Mortgage Notes was determined based upon market quotes.  For all other
long-term debt, the fair value is estimated using a discounted cash flow
analysis, based on the incremental borrowing rates currently available to the
Company for debt with similar terms and maturity.

NOTE 9--CONTINGENCIES AND COMMITMENTS

  The Company has agreed to provide advances to Coast West sufficient to make
payments on the Coast West Lease and other obligations, including project
development and site improvement. The Coast West Lease relates to a parcel of
land located in the western area of Las Vegas to be used for future expansion
opportunities. The Coast West Lease term runs through December 31, 2055, with
three 10-year renewal options, with monthly payments of $166,667 for the year
ending December 31, 1995. Thereafter the monthly rent increases by the amount of
$5,000 in January of each year. The lease includes a put option exercisable by
the landlord requiring the purchase of the land at fair market value at the end
of the 20th through 24th years of the lease, provided that the purchase price
shall not be less than ten times, nor more than fifteen times, the annual rent
at such time. Based on the terms of the lease, the potential purchase price
commitment ranges from approximately $31,000,000 to approximately $51,000,000 in
the years 2014 through 2018. The advances to Coast West are non-interest
bearing and, pursuant to the Indenture, cannot exceed $8.0 million in aggregate
principal amount at any time outstanding.  As of December 31, 1996 and 1997,
the Company had advanced Coast West aggregate totals of $3.2 million and $6.4
million, respectively, related to the Coast West Lease. Coast West is a
development stage enterprise and has no source of income

                                       53
<PAGE>

                         COAST HOTELS AND CASINOS, INC.
               (A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 9--CONTINGENCIES AND COMMITMENTS (CONTINUED)

and is therefore solely dependent on the advances to be provided by the Company.
There can be no assurance that Coast West will develop a gaming property at the
Coast West site or that it will be able to repay any advances made by the
Company. Management believes that the advances related to the capital
improvements at the Coast West site have an asset value that could be
transferred to and used by the Company should Coast West fail to develop the
project. Therefore, the Company has only recorded an allowance for doubtful
accounts in an amount equal to advances provided for lease payments.

    Based on the cash requirements of Coast West for lease payments and
anticipated development costs, it is likely that during 1998 Coast West will
require cash advances from the Company (or from other sources) that, when added
to the outstanding advances from the Company, would exceed the maximum $8
million of advances from the Company permitted under the terms of the Indenture.
Should Coast West not obtain financing from another source for its cash needs in
excess of the $8 million, the Company would be permitted to continue to make
advances to Coast West in excess of $8 million, provided that Coast West becomes
a wholly-owned subsidiary of the Company and remains a guarantor of the 13%
First Mortgage Notes. Coast West is currently a wholly-owned subsidiary of the
Company's parent, Coast Resorts.

    The Company is involved in various legal actions arising in the ordinary
course of business. In the opinion of management, the ultimate disposition of
these matters will not have a material adverse effect on the financial position,
results of operations or cash flows of the Company.

NOTE 10--RELATED PARTY TRANSACTIONS

     The Company's advertising services are provided by LGT Advertising, a
Company owned by several stockholders of Coast Resorts. Advertising expense
amounted to approximately $2.8 million, $3.8 million and $7.5 million for the
years ended December 31, 1995, 1996 and 1997, respectively.

     The Company received laundry services from Exber, Inc. (dba El Cortez Hotel
& Casino). A major stockholder-officer of Exber, Inc. is the father of a major
stockholder of Coast Resorts. Laundry expense payable to Exber, Inc. was
approximately $1.1 million and $864,000 for the years ended December 31, 1995
and 1996, respectively. The Company discontinued its laundry service from Exber,
Inc. in October 1996.

     The Company purchases certain of its equipment and inventory for its
operations from RJS, a company owned by the father of a major stockholder and
director of Coast Resorts and the Company's restaurant manager. RJS invoices the
Company based on actual costs incurred. For the fiscal years ended December 31,
1995, 1996 and 1997, the Company incurred expense payable to RJS of
approximately $388,000, $4.1 million and $1.4 million, respectively.

    The Company purchases wallboards and parlay cards for its race and sports
books from Nevada Wallboards, Inc. A major stockholder and director of Coast
Resorts is the majority stockholder of Nevada Wallboards, Inc. For the fiscal
years ended December 31, 1995, 1996 and 1997, the Company incurred expenses
payable to Nevada Wallboards of approximately $123,000, $145,000 and $198,000,
respectively.


                                       54
<PAGE>

                         COAST HOTELS AND CASINOS, INC.
               (A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 10--RELATED PARTY TRANSACTIONS (CONTINUED)

  A director of the Company is the President and sole stockholder of Yates-
Silverman, Inc. which was retained by the Company as the designer of The Orleans
and the Coast West project. For the fiscal years ended December 31, 1995, 1996
and 1997, the Company incurred expense payable to Yates-Silverman of
approximately $409,000, $508,000 and $177,000, respectively.

 The Company maintains numerous racetrack dissemination contracts with Las
Vegas Dissemination, Inc. ("LVD").  The son of a major stockholder and director
of Coast Resorts is the president and sole shareholder of LVD.  LVD has been
granted a license by the Nevada gaming authorities to disseminate live racing
for those events and tracks for which it contracts and has been granted the
exclusive right to disseminate all pari-mutuel services and race wire services
in the State of Nevada.  Under these dissemination contracts, the Company pays
to LVD an amount based on the wagers accepted for races held at the racetracks
covered by the respective contracts.  The Company also pays to LVD a monthly fee
for race wire services.  For the fiscal years ended December 31, 1995, 1996 and
1997, the Company incurred expenses payable to LVD of approximately $149,000,
$889,000 and $1.1 million, respectively.

  J.A. Tiberti Construction Company ("Tiberti Construction") has served as the
general contractor for the original construction of the Gold Coast and for
certain expansions thereof, for the original construction of the Barbary Coast
and all expansions thereof and for the original construction and Phase II
expansion of The Orleans. The President of Tiberti Construction is a stockholder
and director of Coast Resorts and Coast Hotels. For the years ended December 31,
1995, 1996 and 1997, the Company paid approximately $10.9 million, $80.3 million
and $26.2 million, respectively, to Tiberti Construction in connection with such
construction services.

  As more fully described in Note 5, in December 1995, the Company entered into
a ground lease with The Tiberti Company, with respect to the land underlying The
Orleans.  The President of The Tiberti Company is a director and shareholder of
Coast Resorts.  Amounts paid to the Tiberti Company with respect to the lease
were $3.0 million and $2.1 million for the years ended December 31, 1996 and
1997, respectively.

NOTE 11-- BENEFIT PLANS

401(k) Plans

   In November 1993, the Company adopted separate defined contribution (401(k))
plans for eligible employees of the Gold Coast and the Barbary Coast.  During
1996, the separate plans were consolidated into one plan.  All employees of the
Gold Coast and The Orleans are eligible to participate.  All employees of the
Barbary Coast not covered by a collective bargaining agreement are eligible to
participate. The employees may elect to defer up to 15% of their yearly
compensation, subject to statutory limits. The Company makes matching
contributions of 50% of the first 6% of the employees' contribution.
Contribution expense was $1,224,000, $1,176,000 and $842,000 for the years ended
December 31, 1995, 1996, and 1997, respectively.

Defined Benefit Plan

  Beginning in 1993, certain employees at the Barbary Coast became covered by a
union-sponsored, collectively bargained, multi-employer, defined benefit pension
plan. The Barbary Coast contributed

                                       55
<PAGE>

                         COAST HOTELS AND CASINOS, INC.
               (A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 11--BENEFIT PLANS (CONTINUED)

$312,000, $274,000 and $313,000 during the years ended December 31, 1995, 1996,
and 1997, respectively, for the plan. These contributions are determined in
accordance with the provisions of negotiated  labor contracts and generally are
based on the number of hours worked.

NOTE 12--SUPPLEMENTAL CASH FLOWS INFORMATION

<TABLE>
<CAPTION>
                                                                         December 31,
                                                                         -----------
                                                            1995            1996             1997
                                                            ----            ----             ----
                                                                       (in thousands)
                                                                        ------------
                                                        ----------------------------------------------
<S>                                                     <C>             <C>             <C>
Interest paid........................................         $ 3,164       $21,607         $25,488
Income taxes paid....................................         $    --       $ 3,100         $    --

Supplemental schedule of non-cash investing and financing
   activities:
     Property and equipment acquisitions included
      in accounts payable or financed through notes
      payable........................................         $ 3,101       $38,918         $ 2,491

     Distributions to former partners by issuance of
      notes payable..................................         $50,000       $    --         $    --

     Conversion of notes payable to Coast Resorts
      Common Stock...................................         $    --       $52,525         $    --

</TABLE>

NOTE 13--REGULATION OF GAMING OPERATIONS

  The gaming operations of the Company are subject to the licensing and
regulatory control of the Nevada Gaming Commission (the Nevada Commission), the
Nevada State Gaming Control Board (the Nevada Control Board) and the Clark
County Liquor and Gaming Board (the Clark County Board) (collectively the Nevada
Gaming Authorities). These agencies issue gaming licenses based upon, among
other considerations, evidence that the character and reputation of principal
owners, officers, directors, and certain other key employees are consistent with
regulatory goals. The necessary licenses have been secured by the Company. The
licenses are not transferable and must be renewed periodically upon the payment
of appropriate taxes and license fees. The Nevada Gaming Authorities have broad
discretion with regard to the renewal of the licenses which may at any time
revoke, suspend, condition, limit or restrict a license for any cause deemed
reasonable by the issuing agency. Officers, directors, and key employees of the
Company must be approved by the Nevada Control Board and licensed by the Nevada
Commission and Clark County Board.

                                       56
<PAGE>

                         COAST HOTELS AND CASINOS, INC.
               (A Wholly Owned Subsidiary of Coast Resorts, Inc.)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 14 - UNAUDITED PRO FORMA DATA

  Prior to the Reorganization, the Company operated as individual partnerships
which did not pay federal income taxes.  The partners of Gold Coast and Barbary
Coast were taxed on their proportionate share of each of their respective
partnership's taxable income or loss.  The pro forma provision for income taxes
and the related pro forma net income and pro forma net income per common share
are unaudited and reflect adjustments to income taxes assuming that the change
in corporate income tax status occurred as of January 1, 1994.

                                       57
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Directors and Stockholders of
 Coast Resorts, Inc.

  We have audited the financial statements of Coast Resorts, Inc. (a Nevada
corporation) (parent company only) as listed in item 14 of this Form 10-K.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

  In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Coast Resorts, Inc. (parent
company only) as of December 31, 1996 and 1997 and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1997 in conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

Las Vegas, Nevada
March 13, 1998

                                       58
<PAGE>

                              COAST RESORTS, INC.
                             (Parent Company Only)
                                 BALANCE SHEETS
                           DECEMBER 31, 1996 AND 1997
                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                             December 31,
                                                                            ------------------------------------------
                                                                                    1996                     1997
                                                                            ------------------      ------------------
<S>                                                                            <C>                     <C>
                                   ASSETS

CURRENT ASSETS:
Cash and cash equivalents...................................................           $     3                 $     3
                                                                            ------------------      ------------------
  TOTAL CURRENT ASSETS......................................................                 3                       3
INVESTMENT IN SUBSIDIARIES..................................................            99,102                  94,767
                                                                            ------------------      ------------------
                                                                                       $99,105                 $94,770
                                                                            ==================      ==================

                    LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Due to affiliates...........................................................           $    56                 $   301
Accrued liabilities.........................................................                --                      30
                                                                            ------------------      ------------------
  TOTAL CURRENT LIABILITIES.................................................                56                     331
                                                                            ------------------      ------------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 500,000 shares authorized, none issued
 and outstanding............................................................                --                      --
Common stock, $.01 par value, 2,000,000 shares authorized, 1,494,353
 shares issued and outstanding..............................................                15                      15

Additional paid-in capital..................................................            95,398                  95,398
Retained earnings (deficit).................................................             3,636                    (974)
                                                                             -----------------       -----------------
  TOTAL STOCKHOLDERS' EQUITY................................................            99,049                  94,439
                                                                            ------------------      ------------------
                                                                                       $99,105                 $94,770
                                                                            ==================      ==================
</TABLE>

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

                                       59
<PAGE>

                              COAST RESORTS, INC.
                             (Parent Company Only)
                          STATEMENTS OF INCOME (LOSS)
                 For the Years Ended December 31, 1995, 1996 and 1997
                   (Dollars in thousands, except share data)

<TABLE>
<CAPTION>
                                                                         For the year ended December 31,
                                                                         -------------------------------
                                                              1995                   1996                    1997
                                                           ----------             -----------             -----------
<S>                                                <C>                     <C>                    <C>

Equity interest in income (loss) from subsidiaries.     $      13,780          $       3,689           $      (4,335)
General and administrative expenses................                --                    (81)                   (261)
                                                   ------------------     ------------------      ------------------
Income (loss) before income taxes..................            13,780                  3,608                  (4,596)
Income tax provision (benefit).....................                --                    (28)                     14
                                                   ------------------     ------------------      ------------------

NET INCOME (LOSS)..................................     $      13,780          $       3,636           $      (4,610)
                                                   ==================     ==================      ==================

Basic and diluted net income (loss) per share of
 common stock......................................     $          --          $        2.47           $       (3.08)

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

Weighted average common shares outstanding.........                --              1,472,742               1,494,353
                                                   ==================     ==================      ==================

UNAUDITED PRO FORMA DATA (reflecting
 reorganization and change in tax status of
  subsidiaries):
Income (loss) before income taxes..................             8,957                  6,108                  (4,596)
Provision (benefit) for income taxes...............                --                    (28)                     14
                                                   ------------------     ------------------      ------------------
Net income (loss)..................................     $       8,957          $       6,136           $      (4,610)
                                                   ==================     ==================      ==================

Basic and diluted net income (loss) per share of
 common stock......................................     $        8.96          $        4.17           $       (3.08)

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

Weighted average common shares outstanding.........         1,000,000              1,472,742               1,494,353
                                                   ==================     ==================      ==================
</TABLE>

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

                                       60
<PAGE>

                              COAST RESORTS, INC.
                             (Parent Company Only)
                       STATEMENTS OF STOCKHOLDER'S EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                    COMMON STOCK
                                                    ------------           ADDITIONAL      UNREALIZED    EARNINGS
                                                SHARES        AMOUNT     PAID-IN CAPITAL  GAINS(LOSSES)  (DEFICIT)  TOTAL
                                        ------------------------------------------------------------------------------------
<S>                                           <C>            <C>          <C>              <C>             <C>         <C>


Balances at December 31, 1994...........      1,000,000          $10          $19,340           $ 13    $ 68,418    $ 87,781
  Net income............................                                                                  13,780      13,780
  Change in unrealized gains (losses)
     on marketable securities...........                                                         (13)                    (13)
  Distributions to former partners......                                                                 (58,660)    (58,660)
                                        ------------------------------------------------------------------------------------
Balances at December 31, 1995...........      1,000,000           10           19,340             --      23,538      42,888
  Exchange of notes payable of
     subsidiary for common stock........        494,353            5           52,520                                 52,525
  Reclassification of undistributed
     earnings to additional paid-in
     capital upon termination of
     partnership status.................                                       23,538                    (23,538)         --
  Net income............................                                                                   3,636       3,636
                                        ------------------------------------------------------------------------------------
Balances at December 31, 1996...........      1,494,353           15           95,398             --       3,636      99,049
  Net loss..............................                                                                  (4,610)     (4,610)
                                        ------------------------------------------------------------------------------------
Balances at December 31, 1997...........      1,494,353          $15          $95,398           $ --    $   (974)   $ 94,439
                                        ====================================================================================
</TABLE>

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

                                       61
<PAGE>

                              COAST RESORTS, INC.
                             (Parent Company Only)
                            STATEMENTS OF CASH FLOWS
                 For the Years Ended December 31, 1995, 1996 and 1997
                             (Dollars in thousands)

<TABLE>
<CAPTION>


                                                                            Year Ended December 31,
                                                              ---------------------------------------------------
                                                                  1995                1996               1997
                                                              -------------       ------------       ------------
<S>                                                           <C>                 <C>                <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)........................................       $ 13,780            $ 3,636            $(4,610)
                                                           ---------------     --------------     --------------
  ADJUSTMENTS TO RECONCILE NET INCOME
    (LOSS) TO NET CASH PROVIDED BY
    OPERATING ACTIVITIES:
     Equity interest in net (income) loss from
      subsidiaries.........................................        (13,780)            (3,689)             4,335

     Due to affiliates.....................................             --                 53                245
                                                            ---------------     --------------     --------------
        TOTAL ADJUSTMENTS..................................        (13,780)            (3,636)             4,610
                                                           ---------------     --------------     --------------
        NET CASH PROVIDED BY
          OPERATING ACTIVITIES.............................             --                 --                 --
                                                           ---------------     --------------     --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of common stock...................              4                 --                 --
  Cash used to purchase subsidiaries' stock................             (1)                --                 --
                                                           ---------------     --------------     --------------
        NET CASH PROVIDED BY FINANCING
          ACTIVITIES.......................................              3                 --                 --
                                                           ---------------     --------------     --------------
NET INCREASE IN CASH AND CASH
 EQUIVALENTS...............................................              3                 --                 --
CASH AND CASH EQUIVALENTS, at beginning of year............             --                  3                  3
                                                           ---------------     --------------     --------------
CASH AND CASH EQUIVALENTS, at end of year..................       $      3            $     3            $     3
                                                           ===============     ==============     ==============
</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                       62
<PAGE>

                               COAST RESORTS, INC.
                             (PARENT COMPANY ONLY)

                         NOTES TO FINANCIAL STATEMENTS


NOTE 1--BACKGROUND INFORMATION AND BASIS OF PRESENTATION

 Background Information

  Coast Resorts, Inc. ("Coast Resorts" or the "Company") is a Nevada
corporation and serves as a holding company for Coast Hotels and Casinos, Inc.
("Coast Hotels") and Coast West, Inc. ("Coast West"), also Nevada corporations.
Through Coast Hotels, the Company owns and operates the following hotel-casinos
in Las Vegas, Nevada:

        -  Gold Coast Hotel and Casino, on Flamingo Road located approximately
           one mile west of  the Las Vegas Strip.

        -  Barbary Coast Hotel and Casino, which is located on the Las Vegas
           Strip.

        -  The Orleans Hotel and Casino, which is located approximately one mile
           west of the Las Vegas Strip on Tropicana Avenue, opened for business
           on December 18, 1996.

  Prior to the reorganization described below, the Gold Coast Hotel and Casino
and the Barbary Coast Hotel and Casino had previously been operated
independently by Gold Coast Hotel and Casino, a Nevada limited partnership
organized in 1986 ("Gold Coast") and Barbary Coast Hotel and Casino, a Nevada
partnership organized in 1979 ("Barbary Coast").

  On January 1, 1996, the partners of Gold Coast and Barbary Coast (the
"Predecessor Partnerships") completed a reorganization (the "Reorganization")
with Coast Resorts. Coast Resorts was formed in September 1995 for the purpose
of effecting such Reorganization of the Predecessor Partnerships. Coast Resorts,
Gold Coast and Barbary Coast were all related through common ownership and
management control.

  In the Reorganization, the partners of the Predecessor Partnerships each
transferred to Coast Resorts, by assignment or through the merger of Gaughan-
Herbst, Inc., a Nevada corporation, the sole general partner of the Gold Coast,
their respective partnership interests in the Predecessor Partnerships in
exchange for an aggregate of 1,000,000 shares of common stock, par value $.01
per share, of Coast Resorts. The partners of the Gold Coast (or their
principals) received in the aggregate 65% of such shares of common stock of
Coast Resorts, and the partners of the Barbary Coast received in the aggregate
35% of such shares. The shares of common stock were issued to the respective
partners (or their principals) of each such Predecessor Partnership based upon
such partners' pro rata interests in such Predecessor Partnership.

  Concurrently with the exchange of the partners' interests in the Predecessor
Partnerships and the merger of Gaughan-Herbst, Inc. into Coast Resorts, Coast
Resorts became the sole partner of each of the Predecessor Partnerships, and
each Predecessor Partnership dissolved and terminated. Immediately upon such
dissolution and termination, all of the assets and liabilities of the
Predecessor Partnerships became the assets and liabilities of Coast Resorts.
Coast Resorts immediately contributed to Coast Hotels all of the assets of the
Predecessor Partnerships other than those relating to a certain ground lease
(the "Coast West Lease"), which Coast Resorts contributed to Coast West.  In
addition, Coast Hotels assumed, jointly and severally with Coast Resorts, all of
the liabilities of the Predecessor Partnerships other than (i) obligations under
a portion of the subordinated notes payable to former partners and $1,500,000
principal amount of demand notes payable to a related party which were retained
by Coast Resorts and were exchanged for shares of Coast Resorts Common Stock (as
defined below), and (ii) those liabilities incident to the Coast West Lease, and
Coast West assumed, jointly and severally with Coast Resorts, all of the
liabilities of the Predecessor Partnerships incident to the Coast West Lease.

                                       63
<PAGE>

                              COAST RESORTS, INC.
                             (PARENT COMPANY ONLY)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 1--BACKGROUND INFORMATION AND BASIS OF PRESENTATION--(CONTINUED)


  Coast Resorts retained the liability for an aggregate principal amount of
$51,025,000 in notes payable to former partners and retained the liability for
$1,500,000 relating to demand notes due to a related party (the ''Exchange
Liabilities''). On January 16, 1996, the Exchange Liabilities were exchanged for
494,353 shares of common stock, par value $.01 per share, of Coast Resorts (the
''Coast Resorts Common Stock''), based upon management's estimate of the fair
market value of such common stock.

  As a result of the Reorganization, the former partners of the Predecessor
Partnerships (or their principals) own all of the issued and outstanding shares
of capital stock of Coast Resorts, Coast Resorts owns all of the issued and
outstanding capital stock of Coast Hotels and Coast West, and Coast Hotels and
Coast West own and have assumed in the aggregate all of the assets and
liabilities of the Predecessor Partnerships (other than the Exchange Liabilities
that were exchanged for Coast Resorts Common Stock).

Basis of Presentation

  Gold Coast and Barbary Coast historically operated under a high degree of
common control. The former Managing General Partner of Gold Coast was also a
general partner, and the principal manager, of Barbary Coast. Due to the common
control of Gold Coast and Barbary Coast and the continuation of ownership by the
former partners, the Reorganization was accounted for as a reorganization of
entities under common control. Accordingly, the financial statements of the
Company for all periods are presented as if the Reorganization occurred at the
beginning of the earliest period presented and include the accounts of all
entities involved on a historical cost basis, in a manner similar to a pooling
of interests.  The Consolidated Financial Statements include the accounts of the
Company and all subsidiaries.  All intercompany balances and transactions have
been eliminated.

  The accompanying financial statements present the financial position and
results of operations of Coast Resorts as a parent company only, and thus
include Coast Resort's investment in Coast Hotels and Coast West, as well as
Coast Resort's equity interest in their results of operations.  Accordingly,
these financial statements should be read in conjunction with the financial
statements of Coast Hotels and Coast West.

                                       64
<PAGE>

                              COAST RESORTS, INC.
                             (PARENT COMPANY ONLY)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

  The Company considers all highly liquid investments with a remaining maturity
at acquisition of three months or less to be cash equivalents.

Use of estimates in the preparation of financial statements

  The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

Marketable Securities

    Marketable equity securities have been categorized as available for sale
and, as a result, are stated at fair value, as determined by market quotations
on a national stock exchange.  Realized gains and losses are charged to income
while unrealized holding gains and losses are included as a component of
stockholders' equity until realized.  No marketable securities were outstanding
at December 31, 1996 and 1997.

Net Income (Loss) Per Common Share

  Net income per common share for the years ended December 31, 1996 and 1997 is
computed by dividing net income by the weighted average number of shares of
common stock outstanding, which weighted average totaled 1,472,742 shares and
1,494,353 shares, respectively.  Net income per common share for the year ended
December 31, 1995 has not been presented as the Company operated as individual
partnerships prior to the Reorganization and no common stock was outstanding.
Unaudited pro-forma net income per common share has been presented for the years
ended December 31, 1995 and 1996 assuming that the Reorganization occurred on
January 1, 1994.

  In February 1997, the Financial Accounting Standard Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128").  SFAS
128 is effective for periods ending after December 15, 1997 and replaces
currently reported earnings per share with "basic", or undiluted, earnings per
share and "diluted" earnings per share.  Basic earnings per share is computed
based on weighted average shares outstanding while diluted earnings per share
reflects the additional dilution for all potential dilutive securities, such as
stock options and warrants.

     The Company has adopted the provisions of SFAS 128 in its fiscal 1997
financial statements. The retroactive adoption had no impact on the Company's
operating results for the year ended December 31, 1996.

                                       65
<PAGE>

                              COAST RESORTS, INC.
                             (Parent Company Only)

                         NOTES TO FINANCIAL STATEMENTS


NOTE 3--CONTINGENCIES AND COMMITMENTS

  In connection with the Reorganization, Coast Resorts assumed, jointly and
severally with Coast Hotels, all of the liabilities of the Predecessor
Partnerships other than (i) obligations under a portion of the subordinated
notes payable to former partners and $1,500,000 principal amount of demand notes
payable to a related party which were retained severally by Coast Resorts and
were exchanged for shares of Coast Resorts Common Stock, and (ii) those
liabilities incident to the Coast West Lease, and Coast West assumed jointly and
severally with Coast Resorts, all of the liabilities of the Predecessor
Partnerships incident to the Coast West Lease, as described in Note 1.

  On January 30, 1996, Coast Hotels completed a private placement of $175
million principal amount of 13% First Mortgage Notes Due December 15, 2002 (the
"13% First Mortgage Notes"). Interest on the 13% First Mortgage Notes is payable
semi-annually commencing June 15, 1996. The 13% First Mortgage Notes are
unconditionally guaranteed by Coast Resorts, Coast West and certain future
Subsidiaries of Coast Hotels. Net proceeds from the offering (after deducting
original issue discount and commissions) were approximately $164.1 million. Of
that amount, (i) approximately $114.8 million was deposited in a construction
disbursement account restricted for use by Coast Hotels to finance in part the
cost of developing, constructing, equipping and opening the Orleans, (ii)
approximately $19.3 million was used by Coast Hotels to purchase U.S. Government
Obligations which were deposited into an interest escrow account restricted to
fund the interest payable on the 13% First Mortgage Notes through December 15,
1996 and (iii) approximately $29.2 million was used by Coast Hotels to repay all
outstanding indebtedness under the Company's revolving credit facility, which
facility was terminated. The balance of approximately $800,000 was used to pay,
in part, the estimated offering expenses of $2.4 million.

  The 13% First Mortgage Notes are redeemable at the option of Coast Hotels at
106.50% and 103.25% of the principal amount thereof during the twelve month
periods beginning December 15, 2000 and 2001, respectively. In addition, on or
before December 15, 1998, Coast Hotels may redeem up to $57.25 million aggregate
principal amount of 13% First Mortgage Notes at 110% of the principal amount
thereof with the net proceeds of a public offering of Coast Resorts Common Stock
subject to certain limitations as outlined in the indenture governing the 13%
First Mortgage Notes (the "Indenture").

  The Indenture contains covenants that, among other things, limit the ability
of Coast Hotels to pay dividends or make advances to the Company, repay existing
indebtedness, incur additional indebtedness, or sell material assets as defined
in the Indenture. Additionally, the Indenture provides that, if on July 20,
1998, the Fixed Charge Coverage Ratio (as defined in the Indenture) of Coast
Hotels for the most recently ended four full fiscal quarters for which internal
financial statements are available is less than 1.5 to 1, then Coast Hotels
would be required to consummate a sale of the Barbary Coast within one year
thereafter. The proceeds from such sale would be required to be used by Coast
Hotels to repurchase Notes at a price equal to 101% of the principal amount of
such Notes. Management believes that, for the applicable period, the Fixed
Charge Coverage Ratio will equal or exceed 1.5 to 1, although no assurance can
be given that such Fixed Charge Coverage Ratio will be achieved.

  On November 21, 1997, Coast Hotels completed a private placement of $16.8
million principal amount of 10 7/8% First Mortgage Notes Due November 1, 2001
(the "10 7/8% First Mortgage Notes"). The 10 7/8% First Mortgage Notes are
collateralized on a pari passu basis with 13% First Mortgage Notes. Interest on
the 10 7/8% First Mortgage Notes is payable quarterly on March 15, June 15,
September 15 and December 15. The 10 7/8% First Mortgage Notes are
unconditionally guaranteed by Coast Resorts and certain future subsidiaries of
Coast Hotels. Net proceeds from the offering (after deducting commissions) were
approximately $16.5 million and were used for working capital purposes.

  The 10 7/8% First Mortgage Notes are redeemable at any time prior to November
1, 2001 at a redemption price equal to the principal amount thereof, plus any
accrued and unpaid interest plus an "Applicable Premium" as defined in the
indenture governing the 10 7/8% First Mortgage Notes. That indenture contains
covenants that, among other things, limit the ability of Coast Hotels to pay
dividends to Coast Resorts, repay existing indebtedness, incur additional
indebtedness or sell material assets.

  Coast Resorts is involved in various legal actions arising in the ordinary
course of business. In the opinion of management, the ultimate disposition of
these matters will not have a material adverse effect on the financial position,
results of operations or cash flows of Coast Resorts.

                                       66
<PAGE>

                              COAST RESORTS, INC.
                             (PARENT COMPANY ONLY)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 4--INCOME TAXES

  Effective January 1, 1996, the Predecessor Partnerships were dissolved and
terminated as more fully described in Note 1. In connection therewith, the
Company adopted Statement of Financial Accounting Standards No. 109 "Accounting
for Income Taxes" ("SFAS 109"). Under SFAS 109 deferred tax assets and
liabilities are recognized for the expected future tax consequences attributable
to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under SFAS 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. The adoption of SFAS 109 on January 1, 1996
resulted in the recognition in the 1996 financial statements of net deferred tax
liabilities and a corresponding charge to earnings through the income tax
provision of approximately $2,500,000. In addition, upon termination of the
partnership tax status on January 1, 1996, all undistributed earnings of the
predecessor partnerships were reclassified to additional paid-in capital.

  Subsequent to the Reorganization, the Company files a consolidated federal
income tax return which includes the taxable income (loss) of Coast Hotels and
Coast West.  Under the provisions of the Company's tax sharing agreement, taxes
are allocated to Coast Hotels and Coast West based on the amount of tax they
would incur if they filed separate returns.  Coast Resorts will pay Coast Hotels
and Coast West to the extent that such losses result in a reduction in the
amount of tax payable by Coast Resorts.  The benefit for income taxes for the
year ended December 31, 1996 represents the income tax benefit available as a
result of the utilization of net operating losses of Coast Reports (parent
company only.)

                                       67
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS


To the Directors and Stockholder of
 Coast West, Inc.

  We have audited the financial statements and financial statement schedule of
Coast West, Inc. (a development stage enterprise and a wholly owned subsidiary
of Coast Resorts, Inc.) listed in item 14 of this Form 10-K.  These financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.

  We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

  In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Coast West, Inc. as of December
31, 1996 and 1997, and its statements of loss incurred during the development
stage and its cash flows for the period September 29, 1995 (the date of
inception) through December 31, 1995, for the years ended December 31, 1996 and
1997 and for the period September 29, 1995 (the date of inception) through
December 31, 1997, in conformity with generally accepted accounting principles.
In addition, in our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.

  As more fully explained in Note 1, Coast West, Inc. has no source of income
during the development stage and is solely dependent on advances from Coast
Hotels and Casino, Inc. (an affiliated company).



COOPERS & LYBRAND L.L.P.

Las Vegas, Nevada
March 13, 1998

                                       68
<PAGE>

                                COAST WEST, INC.
                      (A DEVELOPMENT STAGE ENTERPRISE AND
               A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)

                                 BALANCE SHEETS
                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                           DECEMBER 31,                      DECEMBER 31,
                                                                               1996                              1997
                                                                   -------------------------        --------------------------
<S>                                                                   <C>                              <C>
ASSETS

CURRENT ASSETS:
   Cash and cash equivalents............................                             $    11                           $     1
   Receivable from parent for income taxes..............                                 501                             1,230
                                                                   -------------------------        --------------------------
     TOTAL CURRENT ASSETS...............................                                 512                             1,231
                                                                   -------------------------        --------------------------
PROPERTY AND EQUIPMENT..................................                                 556                             1,731
                                                                   -------------------------        --------------------------
                                                                                     $ 1,068                             2,962
                                                                   =========================        ==========================

LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES:
   TOTAL CURRENT LIABILITIES............................              $                   --           $                    --
                                                                   -------------------------        --------------------------

NONCURRENT LIABILITIES
   Advances from affiliates.............................                               2,987                             6,305
   Deferred rent........................................                               2,352                             4,053
                                                                   -------------------------        --------------------------
     TOTAL NONCURRENT LIABILITIES.......................                               5,339                            10,358
                                                                   -------------------------        --------------------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDER'S EQUITY (DEFICIENCY):
   Common Stock, $1.00 par value, 25,000 shares
       authorized, 1,010 shares issued and outstanding                                    --                                --
   Additional paid - in capital.........................                                   1                                 1
   Deficit accumulated during development stage.........                              (4,272)                           (7,397)
                                                                   -------------------------        --------------------------
     TOTAL STOCKHOLDER'S EQUITY (DEFICIENCY)............                              (4,271)                           (7,396)
                                                                   -------------------------        --------------------------
                                                                                     $ 1,068                           $ 2,962
                                                                   =========================        ==========================

</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                       69
<PAGE>

                                COAST WEST, INC.
                      (A Development Stage Enterprise and
               A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)

            STATEMENTS OF LOSS INCURRED DURING THE DEVELOPMENT STAGE
                             (AMOUNTS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                FOR THE PERIOD                                         FOR THE PERIOD
                                                SEPTEMBER 29,                                           SEPTEMBER 29,
                                                1995 (THE DATE                                         1995 (THE DATE
                                                 OF INCEPTION       FOR THE YEAR      FOR THE YEAR     OF INCEPTION
                                                  THROUGH               ENDED            ENDED            THROUGH
                                                 DECEMBER 31,        DECEMBER 31,     DECEMBER 31,      DECEMBER 31,
                                                ---------------------------------------------------------------------

                                                      1995               1996            1997               1997
                                                  ------------      ------------     -------------      --------------
<S>                                          <C>               <C>                     <C>                     <C>
Rent expense..............................               $(946)          $(3,820)          $(3,820)           $(8,586)
General and administrative expenses.......                  --                (7)              (34)               (41)
                                                  ------------      ------------     -------------      --------------
Net loss before income tax benefit........                (946)           (3,827)           (3,854)             (8,627)
Income tax benefit........................                  --               501               729               1,230
                                                  ------------      ------------                        --------------
   Net loss...............................               $(946)          $(3,326)          $(3,125)            $(7,397)
                                                  ============      ============     =============      ==============
</TABLE>

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


                                       70
<PAGE>

                                COAST WEST, INC.
                      (A DEVELOPMENT STAGE ENTERPRISE AND
               A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)
                 STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIENCY)
       FOR THE PERIOD SEPTEMBER 29, 1995, THE DATE OF INCEPTION, THROUGH
 DECEMBER 31, 1995, FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997 AND FOR THE
  PERIOD SEPTEMBER 29, 1995 (THE DATE OF INCEPTION) THROUGH DECEMBER 31, 1997
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                                   DEFICIT
                                                                                                 ACCUMULATED
                                                COMMON STOCK                                     DDURING THE
                                      -------------------------------        ADDITIONAL          DEVELOPMENT
                                               SHARES      AMOUNT          PAID-IN CAPITAL           STAGE          TOTAL
                                      -------------------------------------------------------------------------------------
<S>                                        <C>            <C>             <C>               <C>               <C>
Balances at September 29, 1995                       --    $        --      $         --     $         --      $        --
     Issuance of common stock...........          1,010             --                 1               --                1
     Net loss for the year..............             --             --                --             (946)            (946)
                                           ------------   ------------    --------------   --------------    -------------
Balances at December 31, 1995...........          1,010             --                 1             (946)            (945)
     Net loss for the year..............             --             --                --           (3,326)          (3,326)
                                           ------------   ------------    --------------   --------------    -------------
Balances at December 31, 1996...........          1,010             --                 1           (4,272)          (4,271)
     Net loss for the year..............                                                           (3,125)          (3,125)
                                           ------------   ------------    --------------   --------------    -------------
Balances at December 31, 1997...........          1,010    $        --      $          1     $     (7,397)     $    (7,396)
                                           ============   ============    ==============   ==============    =============
</TABLE>


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

                                       71
<PAGE>

                                COAST WEST, INC.
                      (A DEVELOPMENT STAGE ENTERPRISE AND
               A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)
                            STATEMENTS OF CASH FLOWS
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                 FOR THE PERIOD                                  FOR THE PERIOD
                                                                 SEPTEMBER 29,                                    SEPTEMBER 29,
                                                                 1995 (THE DATE                                  1995 (THE DATE
                                                                 OF INCEPTION     FOR THE YEAR    FOR THE YEAR    OF INCEPTION
                                                                    THROUGH          ENDED           ENDED          THROUGH
                                                                  DECEMBER 31,    DECEMBER 31,    DECEMBER 31,     DECEMBER 31,

                                                                       1995          1996             1997            1997
                                                                     -------      ---------        ---------        ---------
<S>                                                                 <C>            <C>              <C>             <C>

CASH FLOWS FROM DEVELOPMENT STAGE ACTIVITIES:
   Net loss.................................................          $(946)        $(3,326)           $(3,125)       $(7,397)
                                                                      -------------------------------------------------------
   ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
     USED FOR DEVELOPMENT STAGE ACTIVITIES:.................
       Non-cash rent expense................................            446           1,907              1,700          4,053
       Receivables..........................................             --            (501)            (1,230)        (1,230)
                                                                      -------------------------------------------------------
          TOTAL ADJUSTMENTS.................................            446           1,406                470          2,823
                                                                      -------------------------------------------------------
          NET CASH USED BY OPERATING ACTIVITIES.............           (500)         (1,920)            (2,655)        (4,574)
CASH FLOWS FROM INVESTING ACTIVITIES:.......................
   Capital expenditures.....................................           (143)           (413)            (1,175)        (1,731)
                                                                      -------------------------------------------------------
          NET CASH USED FOR INVESTING ACTIVITIES............           (143)           (413)            (1,175)        (1,731)
CASH FLOW FROM FINANCING ACTIVITIES:........................
   Borrowings from affiliate................................            643           2,343              3,821          6,305
   Issuance of common stock.................................              1              --                 --
                                                                      -------------------------------------------------------
          NET CASH PROVIDED BY FINANCING ACTIVITIES.........            644           2,343              3,821          6,306
                                                                      -------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........              1              10                (10)             1
CASH AND CASH EQUIVALENTS, at beginning of period...........             --               1                 --
                                                                      -------------------------------------------------------
CASH AND CASH EQUIVALENTS, at end of period.................          $   1         $    11            $     1         $    1
                                                                      =======================================================
</TABLE>

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

                                       72
<PAGE>

                                COAST WEST, INC.
                      (A DEVELOPMENT STAGE ENTERPRISE AND
               A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 1--BACKGROUND INFORMATION AND BASIS OF PRESENTATION

  Coast West, Inc. ("Coast West") is a development stage Nevada corporation,
and a wholly owned subsidiary of Coast Resorts, Inc. ("Coast Resorts"), which
is also a Nevada corporation. Coast West was formed in September 1995 as part of
a reorganization (the "Reorganization") with Coast Resorts, Inc. and the
following two partnerships (collectively, the "Predecessor Partnerships"):

 .  Gold Coast Hotel and Casino, located approximately one mile west of the Las
   Vegas Strip on Flamingo Road.

 .  Barbary Coast Hotel and Casino, a Nevada partnership organized in 1979
   ("Barbary Coast"), operated the Barbary Coast Hotel and Casino which is
   located on the Las Vegas Strip.

  Coast Resorts was formed in September 1995 for the purpose of effecting the
Reorganization of the Predecessor Partnerships. Coast West was initially
capitalized in the amount of $1,000 through the issuance of 10 shares of common
stock to Coast Resorts. Coast Resorts, Gold Coast and Barbary Coast were all
related through common ownership and management control.

  In the Reorganization, the partners of the Predecessor Partnerships each
transferred to Coast Resorts, by assignment or through the merger of Gaughan-
Herbst, Inc., a Nevada corporation, the sole general partner of the Gold Coast,
their respective partnership interests in the Predecessor Partnerships in
exchange for an aggregate of 1,000,000 shares of common stock, par value $.01
per share, of Coast Resorts. The partners of the Gold Coast (or their
principals) received in the aggregate 65% of such shares of common stock of
Coast Resorts, and the partners of the Barbary Coast received in the aggregate
35% of such shares. The shares of common stock were issued to the respective
partners (or their principals) of each such Predecessor Partnership based upon
such partners' pro rata interests in such Predecessor Partnership.

  Concurrently with the exchange of the partners' interests in the Predecessor
Partnerships and the merger of Gaughan-Herbst, Inc. into Coast Resorts, Coast
Resorts became the sole partner of each of the Predecessor Partnerships, and
each Predecessor Partnership dissolved and terminated. Immediately upon such
dissolution and termination, all of the assets and liabilities of the
Predecessor Partnerships became the assets and liabilities of Coast Resorts.
Coast Resorts immediately contributed to Coast Hotels and Casinos, Inc. ("Coast
Hotels"), a wholly owned subsidiary of Coast Resorts, all of the assets of the
Predecessor Partnerships excluding those relating to a certain ground lease,
(the "Coast West Lease") which Coast Resorts contributed to Coast West in
exchange for 1,000 shares of Coast West common stock. (The Coast West Lease is
an operating lease for accounting purposes and, accordingly, has no value in the
accompanying balance sheet.) In addition, Coast Hotels assumed, jointly and
severally with Coast Resorts, all of the liabilities of the Predecessor
Partnerships other than obligations under a portion of the subordinated notes
payable to former partners and $1,500,000 principal amount of demand notes
payable to a related party which were retained by Coast Resorts and were
exchanged for shares of Coast Resorts Common Stock (as defined below) and those
liabilities incident to the Coast West Lease, and Coast West assumed jointly and
severally with Coast Resorts, all of the liabilities of the Gold Coast
Partnership Predecessor Partnerships incident to the Coast West Lease.

  Coast Resorts retained the liability for an aggregate principal amount of
$51,025,000 in notes payable to former partners and retained the liability for
$1,500,000 relating to demand notes due to a related party (the "Exchange
Liabilities"). On January 16, 1996, the Exchange Liabilities were exchanged for
494,353

                                       73
<PAGE>

                                COAST WEST, INC.
                      (A Development Stage Enterprise and
               A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 1--BACKGROUND INFORMATION AND BASIS OF PRESENTATION (continued)

shares of common stock, par value $.01 per share, of Coast Resorts (the "Coast
Resorts Common Stock"), based upon management's estimate of the fair market
value of such common stock.

  As a result of the Reorganization, the former partners of the Predecessor
Partnerships (or their principals) own all of the issued and outstanding shares
of capital stock of Coast Resorts, Coast Resorts owns all of the issued and
outstanding capital stock of  Coast Hotels and Coast West, and Coast Hotels and
Coast West own and have assumed in the aggregate all of the assets and
liabilities of the Predecessor Partnerships (other than the Exchange Liabilities
that will be exchanged for Coast Resorts Common Stock).

  Coast West holds the Coast West Lease for future development. Coast West has
had no source of income during its development stage. Coast Hotels has agreed to
provide Coast West with advances sufficient to make lease payments on the Coast
West Lease, as more fully explained in Note 3.

 Basis of Presentation

  Gold Coast and Barbary Coast historically operated under a high degree of
common control. The former Managing General Partner of Gold Coast was also a
general partner, and the principal manager, of the Barbary Coast. Due to the
common control of Gold Coast and Barbary Coast and the continuation of ownership
by the former partners, the Reorganization was accounted for as a reorganization
of entities under common control. Accordingly, the financial statements of Coast
West are presented as if the Reorganization occurred at the beginning of the
earliest period presented and include the accounts of all entities involved on a
historical cost basis, in a manner similar to a pooling of interests.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 Property, Equipment and Depreciation

  Property and equipment are stated at cost. Expenditures for additions,
renewals and betterments are capitalized; expenditures for maintenance and
repairs are charged to expense as incurred. Upon retirement or disposal of
assets, the cost and accumulated depreciation are eliminated from the accounts
and the resulting gain or loss is included in income. Depreciation is computed
by the straight-line method over the estimated useful lives of property and
equipment.

  At December 31, 1996 and 1997, property and equipment consists primarily of
leasehold improvements, architectural design and other related costs incurred in
connection with the execution of the Coast West Lease. Such costs are not being
amortized as the underlying property is in the development stage.

 Cash and cash equivalents
  Coast West considers all highly liquid investments with a maturity at
acquisition of three months or less to be cash equivalents.

 Income taxes

  Prior to the Reorganization, Coast Resorts operated as individual partnerships
 which did not pay federal income taxes. The Partners of Gold Coast and Barbary
Coast were taxed on their proportionate

                                       74
<PAGE>

                                COAST WEST, INC.
                      (A Development Stage Enterprise and
               A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

share of each of their respective partnership's taxable income or loss.
Therefore, these statements do not include any benefit for corporate income
taxes prior to January 1, 1996.

  Subsequent to the Reorganization, Coast West is included in the consolidated
federal income tax return filed by Coast Resorts. Coast West's tax allocation is
based on the amount of tax it would incur if it filed a separate return. Coast
Resorts will pay Coast West an amount equal to the tax benefit arising from the
utilization of net operating losses of Coast West to the extent that such losses
result in a reduction in the amount of tax payable by Coast Resorts.

  In connection with the Reorganization, effective January 1, 1996, the Company
adopted Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes" ("SFAS 109").  Under SFAS 109 deferred tax assets and liabilities
are recognized for the expected future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases.  Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled.  Under SFAS 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.

Use of Estimates in the Preparation of Financial Statements

  The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

Reclassifications
    Certain amounts in the 1996 financial statements have been reclassified to
conform with the 1997 presentation.

NOTE 3--LEASES AND COMMITMENTS

    In January 1996, in connection with the Reorganization, Coast Resorts
contributed its rights under the Coast West Lease to Coast West. The Coast West
Lease is for a parcel of land located in the northwest area of Las Vegas which
is to be used for future expansion opportunities. The Coast West Lease term runs
through December 31, 2005, with three 10-year renewal options, with monthly
payments of $166,667 through December 31, 1995. Thereafter the monthly rent
increases by the amount of $5,000 in January of each year. The lease includes a
put option exercisable by the landlord requiring the purchase of the land at
fair market value at the end of the 20th through 24th years of the lease,
provided that the purchase price shall not be less than ten times, nor more than
fifteen times, the annual rent at such time. Based on the terms of the lease,
the potential purchase price commitment ranges from approximately $31 million to
approximately $51 million in the years 2014 through 2018. Coast West has no
source of income during its development stage and Coast Hotels has agreed to
provide advances to Coast West sufficient to make payments for its lease and
other obligations during Coast West's development stage, provided the maximum
aggregate amount of outstanding advances may not exceed $8 million. Such
advances are non-interest bearing. As of December 31, 1996 and 1997, Coast
Hotels had advanced Coast West aggregate totals of $3.2 million and $6.4
million, respectively, related to the Coast West Lease and other development
expenses.

     Based on the cash requirements of Coast West for lease payments and
anticipated development costs, it is likely that during 1998 Coast West will
require cash from advances from the Coast Hotels (or from other sources) that,
when added to the outstanding advances from Coast Hotels, would exceed the
maximum $8 million of advances from Coast Hotels permitted under the terms of an
indenture governing certain first mortgage notes issued by Coast Hotels and
guaranteed by Coast West (see Note 4). Should Coast West not obtain financing
from another source for its cash needs in excess of the $8 million, Coast Hotels
would be permitted to continue to make advances to Coast West in excess of $8
million, provided that Coast West becomes a wholly-owned subsidiary of Coast
Hotels and remains a guarantor of Coast Hotels first mortgage notes. Coast West
and Coast Hotels are each currently wholly-owned subsidiaries of the Company's
parent, Coast Resorts. Coast West has no other arrangements for financing and no
assurances can be made that it will be able to develop a hotel-casino on the
site or that it will be able to repay the advances from Coast Hotels.

                                       75
<PAGE>

                               COAST WEST, INC.
                      (A Development Stage Enterprise and
               A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)

                         NOTES TO FINANCIAL STATEMENTS


FUTURE MINIMUM LEASE PAYMENTS

  The following is an annual schedule of future minimum lease payments required
under the Coast West Lease, assuming that the put option is not exercised:

<TABLE>
<CAPTION>
                                                     MINIMUM
                                                     PAYMENT
                                                 ---------------
                                                 (IN THOUSANDS)
<S>                                              <C>
      1998....................................         $  2,180
      1999....................................            2,240
      2000....................................            2,300
      2001....................................            2,360
      2002....................................            2,420
      Later years.............................          218,967
                                                       --------
      Total minimum lease payments............         $230,467
                                                       ========
</TABLE>

                                       76
<PAGE>

                                COAST WEST, INC.
                      (A Development Stage Enterprise and
               A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 4--GUARANTEE OF AFFILIATE DEBT

  On January 30, 1996, the Coast Hotels completed a private placement of $175
million principal amount of 13% First Mortgage Notes Due December 15, 2002 (the
"First Mortgage Notes"). Interest on the First Mortgage Notes is payable semi-
annually on June 15 and December 15.  The First Mortgage Notes are
unconditionally guaranteed by Coast Resorts, Coast West and certain future
Subsidiaries of Coast Hotels. Net proceeds from the offering (after deducting
original issue discount and commissions) were approximately $164.1 million. Of
that amount, (i) approximately $114.8 million was deposited in a construction
disbursement account restricted for use by the Company to finance in part the
cost of developing, constructing, equipping and opening the Orleans, (ii)
approximately $19.3 million was used by the Company to purchase U.S. Government
Obligations which were deposited into an interest escrow account restricted to
fund the interest payable on the First Mortgage Notes through December 15, 1996
and (iii) approximately $29.2 million was used by the Company to repay all
outstanding indebtedness under the Company's revolving credit facility, which
facility was terminated. The balance of approximately $800,000 was used to pay,
in part, the estimated offering expenses of $2.4 million.

     The indenture governing the Notes (the "Indenture") contains covenants
that, among other things, limit the ability of Coast Hotels to pay dividends or
make advances to Coast Resorts, repay existing indebtedness, incur additional
indebtedness, or sell material assets as defined in the Indenture. Additionally,
if on July 20, 1998, the Fixed Charge Coverage Ratio (as defined in the
Indenture) of Coast Hotels for the most recently ended four full fiscal quarters
is less than 1.5 to 1, Coast Hotels would be required to consummate an asset
sale of the Barbary Coast within one year. The proceeds from such asset sale
would be required to be used by Coast Hotels to repurchase Notes at a price
equal to 101% of the principal amount of such Notes.

     The Indenture also limits the activities of Coast West to (i) activities
relating to the Coast West Lease including related borrowings and repayments to
Coast Hotels, (ii) activities related to the planning and future development of
the property underlying the Coast West Lease and (iii) other activities
incidental or related to those indicated above.


NOTE 5--INCOME TAXES


     The components of the income tax benefit for the years ended December 31,
1996 and 1997 were as follows:

<TABLE>
<CAPTION>
                                                                                         December 31,
                                                                         -----------------------------------------
                                                                                  1996                    1997
                                                                         ------------------       ----------------
Federal:                                                                                (IN THOUSANDS)
<S>                                                                         <C>                      <C>
     Current.............................................................             $(501)                 $(729)
     Deferred............................................................                --                     --
                                                                         ------------------       ----------------
                                                                                      $(501)                 $(729)
                                                                         ==================       ================
</TABLE>

                                       77
<PAGE>

                                COAST WEST, INC.
                      (A Development Stage Enterprise and
               A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)

                         NOTES TO FINANCIAL STATEMENTS

     The income tax benefit for the years ended December 31, 1996 and 1997
differs from that computed at the federal statutory corporate tax rate as
follows:


<TABLE>
<CAPTION>
                                                                                  1996                      1997
                                                                         ------------------        ------------------
<S>                                                                         <C>                       <C>
Federal statutory rate...................................................             (34.0%)                   (34.0%)
Valuation allowance on deferred tax asset................................             (19.0%)                   (15.1%)
                                                                         ------------------        ------------------
     Effective tax rate..................................................             (15.0%)                   (18.9%)
                                                                         ==================        ==================
</TABLE>

          The tax effects of significant temporary differences representing net
deferred tax assets and liabilities at December 31, 1996 and 1997 are as
follows:

<TABLE>
<CAPTION>
                                                                                          December 31,
                                                                         -------------------------------------------
                                                                                  1996                     1997
                                                                         ------------------       ------------------
                                                                                         (IN THOUSANDS)
<S>                                                                         <C>                      <C>
Deferred tax assets:
Non-current
     Deferred rent.......................................................               847                    1,419
                                                                         ------------------       ------------------
         Total non-current...............................................               847                    1,419
     Valuation allowance.................................................              (847)                  (1,419)
                                                                         ------------------       ------------------
         Total deferred tax assets.......................................                --                       --
                                                                         ==================       ==================
</TABLE>

                                       78
<PAGE>

                                                                     SCHEDULE II




                         COAST HOTELS AND CASINOS, INC.
               (A WHOLLY OWNED SUBSIDIARY OF COAST RESORTS, INC.)
                       VALUATION AND QUALIFYING ACCOUNTS
              FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
                                 (IN THOUSANDS)




<TABLE>
<CAPTION>                                                       ADDITIONS      ADDITIONS
                                                BALANCE AT     CHARGED TO      CHARGED TO                         BALANCE
                                                 BEGINNING      COSTS AND        OTHER            DEDUCTIONS       END OF
             DESCRIPTION                          OF YEAR       EXPENSES        ACCOUNTS              (a)            YEAR
-----------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>             <C>              <C>              <C>             <C>
Allowance for doubtful accounts (casino
 receivables)
  Year ended December 31, 1995................        $  382       $  423         $    --              $431          $  374
                                                      =====================================================================
  Year ended December 31, 1996................        $  374       $   94         $    --              $ 89          $  379
                                                      =====================================================================
  Year ended December 31, 1997................        $  379       $  448         $    --              $633          $  194
                                                      =====================================================================
   (a) Accounts written off

Allowance for doubtful accounts (advances to
 Coast West)
  Year ended December 31, 1995................        $   --       $  500         $    --          $    --           $  500
                                                      =====================================================================
  Year ended December 31, 1996................        $  500       $2,060         $    --          $    --           $2,560
                                                      =====================================================================
  Year ended December 31, 1997................        $2,560       $2,120         $    --          $    --           $4,680
                                                      =====================================================================
</TABLE>

                                       79
<PAGE>

                                                                     SCHEDULE II


                                COAST WEST, INC.
               (A Wholly Owned Subsidiary of Coast Resorts, Inc.)
                       VALUATION AND QUALIFYING ACCOUNTS
              FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
                                 (IN THOUSANDS)




<TABLE>
<CAPTION>

                                                                 ADDITIONS        ADDITIONS
                                                BALANCE AT       CHARGED TO       CHARGES TO                          BALANCE
                                                BEGINNING        COSTS AND        OTHER            DEDUCTIONS          END OF
                   DESCRIPTION                   OF YEAR         EXPENSES         ACCOUNTS            (a)               YEAR
----------------------------------------------------------      ------------    ------------      ------------      -------------
<S>                                            <C>             <C>              <C>            <C>                   <C>
Deferred tax asset valuation allowance
Year ended December 31, 1995................     $    --         $    --          $    --         $    --              $     --
                                            =====================================================================================

  Year ended December 31, 1996..............     $    --         $    847         $    --         $    --              $    847
                                            =====================================================================================

  Year ended December 31, 1997..............     $   847         $    572         $    --         $    --              $  1,419
                                            =====================================================================================
</TABLE>

                                       80