<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                               ------------------
                                    FORM 10-K

(Mark One)

 x       ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 
---      OF 1934.

For the fiscal year ended June 30, 1998

                                       OR

___      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
         ACT OF 1934.

For the transition period from              to

                         Commission file number 0-22191

                           CCA COMPANIES INCORPORATED
             (Exact Name of Registrant as Specified in Its Charter)

              Delaware                                        65-0675901
   (State or Other Jurisdiction of                         (I.R.S. Employer
   Incorporation or Organization)                        Identification No.)

                           3250 Mary Street, Suite 405
                             Coconut Grove, FL 33133
                    (Address of Principal Executive Offices)

                                  305-444-3888
                (Issuer's Telephone Number, Including Area Code)

         Securities registered under Section 12(b) of the Exchange Act:

                                                     Name of Each Exchange
         Title of Each Class                          on Which Registered
         -------------------                     ------------------------------
   Common Stock, $0.001 par value                 12(g)(Nasdaq SmallCap Market)

        Securities registered pursuant to Section 12(g) of the Act: None

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

         Indicate by check mark if disclosure of delinquent filers in response
to Item 405 of Regulation S-K is not contained in this form, 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.
                                   ----

         The aggregate market value of voting stock held by non-affiliates as of
November 15, 1998 was $10,613,925.

         The number of shares of Common Stock, $0.001 par value, outstanding as
of November 15, 1998 was 11,793,925.

                    Documents Incorporated By Reference: None

<PAGE>

                                TABLE OF CONTENTS

                                     PART I

<TABLE>
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                                                                                    Page
<S>                                                                                 <C>
Item 1.      Business............................................................... 4
             Company Overview....................................................... 4
             Summary of Recent Business............................................. 4
             Division Overviews..................................................... 6
             Casino Division........................................................ 6
             Hotel Management Division.............................................. 6
             Sakhalin Project....................................................... 9
             Food Preservation Technology........................................... 12
             Insurance.............................................................. 15
             Employees.............................................................. 15
             Segments/foreign operations............................................ 15
Item 2.      Properties............................................................. 15
Item 3.      Legal Proceedings...................................................... 16
Item 4.      Submission of Matters to a Vote of Securities Holders.................. 16

                                     PART II

Item 5.      Market for Common Equity and Related Stockholder Matters............... 16
Item 6.      Selected Financial Data................................................ 18

Item 7.      Management's Discussion and Analysis of Financial Condition and
                Results of Operations

             Company Overview....................................................... 19
             Change in Fiscal Year.................................................. 20
             Results of Operations.................................................. 21
             Liquidity and Capital Resources........................................ 24
             Year 2000 Compliance................................................... 26
             New Accounting Standards............................................... 27
             Subsequent Events...................................................... 27
             Factors That Could Affect Operating Results............................ 28

Item 7a.     Market Risk............................................................ 30

                                    PART III

Item 8.      Financial Statements................................................... 30
Item 9.      Changes in and Disagreements with Accountants on Accounting
                and Financial Disclosure............................................ 30

                                     PART IV

Item 10.     Directors and Executive Officers of the Registrant..................... 30
             Compliance with Section 16(a) of the Securities Exchange Act of 1934... 34

Item 11.     Executive Compensation................................................. 34
             Summary Compensation Table............................................. 34
             Employment Agreement................................................... 35
             Option Grants For the Twelve Months Ended June 30, 1998................ 35
Item 12.     Security Ownership of Certain Beneficial Owners and Management......... 36
Item 13.     Certain Relationships and Related Transactions......................... 39
Item 14.     Exhibits, Financial Statements and Schedules, and Reports on Form 8-K.. 41
</TABLE>

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<TABLE>
<S>                                                                                 <C>
             Financial Statements................................................... 41
             Exhibits............................................................... 42
             Signatures............................................................. 44
</TABLE>

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     This Annual Report on Form 10-K contains forward-looking statements.
     Additional written and oral forward-looking statements may be made by the
     Company from time to time in Securities and Exchange Commission ("SEC")
     filings and otherwise. The Company cautions readers that results predicted
     by forward-looking statements, including, without limitation, those
     relating to the Company's future business prospects, revenues, working
     capital, liquidity, capital needs, interest costs, and income are subject
     to risks and uncertainties that could cause actual results to differ
     materially from those indicated in the forward-looking statements due to
     risks and factors identified from time to time in the Company's filings
     with the SEC, including those discussed in this Report, and other risks and
     uncertainties.

     Item 1.  Business

                                COMPANY OVERVIEW

     Summary of Recent Business

          CCA Companies Incorporated was incorporated under the laws of the
     State of Delaware on March 6, 1996 as Conserver Corporation of America and
     changed its name on December 2, 1997. The active business of CCA Companies
     Incorporated (with its subsidiaries, the "Company") now is (i) operation
     and ownership of a gaming casino in Budapest and of a temporary gaming
     casino in Suriname, where a permanent casino is nearly completed, and (ii)
     development of a casino and hotel project in Sakhalin in the Russian
     Federation.

          The Company needs cash (i) to continue its basic operation; (ii) to
     complete the Suriname Casino so as to realize that casino's cash flow
     potential; and (iii) to pay any material expenses of continuing
     negotiations for the Sakhalin project and for maintaining its position in
     that project. The Company recently has been unable to raise adequate cash
     for all those needs by a sale of its securities or by other financing on
     terms acceptable to it. Largely as a result of the Company's need for cash,
     the report of independent certified public accountants covering the
     Company's certified financial statements for the year ended June 30, 1998
     as contained in this Form 10-K contains a going concern emphasis paragraph.
     However, the Company believes it can meet its cash needs under certain
     conditions. For further discussion of the Company's cash needs and how it
     proposes to meet them, see "Liquidity and Capital Resources Summary" below.

          The Company's original principal business was food preservation
     technology. Exploitation of that business and development and market entry
     of the Company's principal product in that business is now being
     re-evaluated, possibly for a sale or joint venture of that business.

          After mid-1997 the Company entered into various agreements (i) to
     acquire and operate gaming casinos in Hungary and Suriname; (ii) to obtain
     (over about two years) eight hotel management operating contracts, mostly
     for hotels in Asia; and (ii) to build during the next two years and then to
     own and operate, a hotel and casino in Sakhalin, a Russian Federation
     island just North of Japan (the "Sakhalin Project").

          In September 1998 the Company acquired the fully operating casino in
     Budapest, Hungary. A Suriname casino, owned by a 50% joint venture of the
     Company, is now operating as a small casino in temporary quarters in the
     hotel where the Company is completing a larger permanent casino for
     operation. The Company, with its joint venturer, has provided the joint
     venture entity with funds to build, and to be used to complete and
     begin operating, the permanent casino by February 1999. Additionally, the
     Company has provided the gaming equipment to be used in the operation of
     the joint venture casino. The Company is also seeking to acquire, develop
     and/or operate other casinos abroad.

          Until November 1998, the Company held Hotel Operating Contracts for
     three open hotels with a total of about 1300 rooms, one of which was being
     actively managed by the Company. The Company had entered into Hotel
     Management Agreements providing for the Company to enter into future Hotel
     Operating Contracts to operate five other hotels. The Company had received
     operating fees for one of the open hotels since January 1998 and for two of
     the open hotels since 

                                       4
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     March 1998.

          As a result of the failure of the other parties to the Hotel
     Management Agreements to deliver to the Company physical control and
     practical management power over two open hotels, and their notice to the
     Company that renovation or construction of five other hotels was deferred
     and being reviewed, the Company began negotiations with those parties over
     the status of the Hotel Management Agreements. In November 1998, the
     Company reached a settlement, described below, terminating the Hotel
     Management Agreements and all then existing Hotel Operating Contracts, and
     exchanging mutual releases of related obligations. The Company received
     $450,000 cash, was returned 700,000 shares of its Common Stock, retained
     $1,625,000 in payments of management fees and loans, and the other parties
     took over other obligations of the Company's hotel management operation
     estimated at about $350,000. Consequently, as of November 4, 1998 the
     Company had no active hotel management or operation business. The Company
     intends to resume its hotel operating activity in the future.

          Until March 1998 the Company was for accounting purposes deemed a
     development stage company. Receipt of revenues, primarily from hotel
     management operation, technically ended that status. However, the Company's
     operations are still subject to all of the risks inherent in the
     establishment of new business enterprises, including the need to obtain
     financing, lack of significant revenues, unreliability of sources of supply
     and the uncertainty of market acceptance of its products and services. The
     Company has incurred losses since inception. From March, 1996 to June, 1997
     the Company did not have any revenues. During the year ended June 30, 1998
     the Company had revenues of $649,620 primarily attributable to the
     commencement of its hotel management operations in January 1998 under then
     existing Hotel Operating Contracts. The Company's accumulated deficit at
     June 30, 1998 was $22,492,210 (which included $6,823,876 of non-cash
     compensation charges related to the value attributed to stock options and
     warrants issued by the Company). Furthermore, as a consequence of the
     settlement of the Hotel Management Agreements, for accounting purposes the
     Company recorded a write down of assets of $4,200,000, including a
     $2,400,000 loss relating to (i) the difference between the stock price on
     the date the stock was issued and the stock price on the date of the
     settlement and (ii) the value of the stock retained by FEC as part of the
     settlement.

          The casino and hotel project in Sakhalin requires the Company to
     obtain substantial financing to progress further. In September 1998 the
     Company entered into a letter of intent with JSC Rosneftegazstroy ("RNGS"),
     which is a large Russian construction company. That letter of intent may
     lead to RNGS guaranteeing the financing of the full cost of a turnkey
     construction contract on the Company's Sakhalin Project, for which RNGS
     would be the major subcontractor. The letter of intent also contemplated
     joint development of a start-up hotel management business in the Russian
     Federation and the Commonwealth of Independent States through a RNGS
     management subsidiary to be acquired by the Company. The consummation of
     any of those transactions is still conditional on substantial further
     negotiations and agreements with RNGS and others. If fully consummated as
     described in the letter of intent, the Company would arrange for RNGS to
     obtain a 51% interest in the Sakhalin Project in consideration of the
     guarantee, and the Company would issue 3,000,000 shares of the Common Stock
     for the acquisition of the start-up hotel management Company. For three
     years the 51% interest in the Sakhalin Project could be exchanged at the
     option of the Company or RNGS for the Company's issuance of additional
     shares of Common Stock which, together with the three million shares
     previously issued would give RNGS 51% of the Common Stock of the Company to
     be thereupon outstanding. This letter of intent is described below in more
     detail.

          The Asian countries where the Company formerly managed a hotel and
     formerly sought to manage more hotels, the Russian Federation where the
     Company has the Sakhalin Project, and Japan (which is a significant
     potential source of gaming visitors to Sakhalin), are all currently having
     significant economic problems. Some are having significant political,
     social and governmental problems. These problems are generally regarded as
     an over-all "Asian Crisis", although circumstances vary from country to
     country. The "Asian Crisis" substantially reduced tourist use and business
     use of all the hotels the Company had managed or sought to manage in Asia.
     The Company's related fees and fee structure, which was largely based on
     percentages of gross revenue and profit, was adversely affected by this
     fact. The situation in the Russian Federation has delayed and might further
     delay, or even prevent, financing, construction and operation of the
     Sakhalin Project.

                                       5
<PAGE>

                              DIVISIONAL OVERVIEWS

     Casino Division

          The Company's subsidiary and joint venture are currently operating 
     one temporary gaming casino in Suriname and one open and operating
     casino in Budapest, and the Company anticipates eventually operating the
     casino in the Sakhalin Project, if and when that project is built. The
     Company is also seeking to operate, or acquire interests in, other casinos
     outside the U.S. The Company has one officer (Mr. David Hartley) and 205
     employees engaged directly in casino operations.

          The Company's joint venture Suriname casino currently under
     construction will occupy two leased floors, totaling about 20,000 square
     feet, in the Plaza Hotel, which is a downtown hotel in the capital city.
     The casino will have about 20 gaming tables, 161 slot machines and a
     50-seat restaurant. The temporary casino there is currently fully
     operating, and the permanent one is projected to be completed and
     operational by January 1999. There are other casinos in the capital city,
     but only one competes for the same gaming clientele. Other casinos in the
     region compete with the Suriname casino for an international clientele.

          The Suriname casino is being constructed by the Company pursuant to an
     agreement with a local company that owned the casino license, and the
     casino license is now held by a local joint venture company owned 50% by
     the Company. The joint venture company entered into a Suriname Casino
     Management Agreement in April 1998 for the Company to operate the Casino
     for fifteen years at a base fee equal to 3% of gross revenues calculated on
     an annual basis and payable monthly, plus an incentive fee of ten percent
     of gross operating profits. The joint venture company leased the casino
     premises from the hotel owner, its joint venture partner for fifteen years
     beginning February 1998 for $200,000 per year, subject to locally based
     escalation.

          The Budapest casino was acquired in September of 1998 when the
     Company's subsidiary Dorsett Hotels and Resorts, Inc. ("Dorsett Hotels")
     acquired the 95% interest in the equity of Roulette Kft. ("Roulette"), the
     local company that owns rights to the casino, and various obligations of
     Roulette to others. On the September 1998 closing of the acquisition the
     Company issued to the Roulette stockholders 17,857 shares of the Company's
     Common Stock (at a value of $7 per share), subject to additional
     shares being issued to make up any then short-fall in value from $125,000
     if the market price for shares in February 1999 is less than $7.00. Further
     shares with a market value of $225,000 will be issued when the gaming
     license is renewed when it expires in November 1999. The Company issued
     7,143 shares and paid $45,000 to a consultant. At June 30, 1998 the Company
     had paid $100,000 to the former stockholders as a deposit towards the
     purchase, and had loaned $667,000 to Roulette. The Company entered into
     agreements to manage the casino.

          The Company's Budapest Casino occupies about 5,000 leased square feet
     in the downtown Beke Radisson Hotel. The casino is in full operation and
     has about 11 gaming tables and 20 slot machines. The lease and the casino
     gaming license expire November 1999 and are not assured of renewal. This
     casino has been marginally losing money since the Company assumed
     management in April 1998 through August 1998. The Company anticipates it
     will be profitable for the fiscal year ending June 1999. There are several
     other casinos in Budapest that compete for the same gaming clientele.

     Hotel Management Division

          Until November 1998 the Company had one officer (Mr. Michaelsen) and
     three employees engaged directly in hotel management and had hotel
     operating contracts on three open hotels, only one of which it actively
     managed (the Dorsett Regency Hotel in Kuala Lumpur, Malaysia). Through June
     30, 1998, the Company had earned fees for managing these three hotels
     totaling $640,000. The Company's management office was located in leased
     offices in Kuala Lumpur. Mr. Michaelsen was previously employed by Dorsett
     International and held an employment contract with the Company. If the
     Company had undertaken further hotel management it would have required
     further subordinate personnel.

                                       6
<PAGE>

          When the Company settled and terminated its Hotels Management
     Agreements in November 1998 various obligations related to its hotel
     management operations were taken over by others.

     Initial Entry into the Hotel Managing and Operating Business Under Hotel
     Management Agreements; Current Status.

          To make its initial entry into the hotel management and operating
     business, from mid-1997 and into early 1998 the Company entered into two
     agreements (as amended, the "Hotel Management Agreements"). One was with
     Dorsett Hotels and Resorts International Ltd. ("Dorsett International") and
     one with Far East Consortium International Ltd. ("FEC"). Under the
     agreements the Company was granted the right (directly or through a
     subsidiary) to be exclusive manager and operator of three particular hotels
     then open, and five others then to be opened, and to do so pursuant to
     long-term contracts ("Hotel Operating Contracts") to be entered into with
     the owners of the various hotels. The Company's "Hotel Management Division"
     held Hotel Operating Contracts, all dated January 28, 1998 and with
     20-year terms for four existing hotels with a total of about 1,300 rooms.
     These hotels were in Kuala Lumpur, Malaysia; Bali, Indonesia; Dallas,
     Texas; and Melbourne, Australia. The Company commenced active management
     only of the Dorsett Regency Hotel in Kuala Lumpur, Malaysia, and received
     the regular fee rates for its management. The owners of the other hotels
     did not deliver physical possession of those hotels or the practical power
     to manage those hotels. Commencement of the Company's management of the
     Dallas Grand Hotel, which was fully open and operating but in need of
     repair, was deferred pending final plans for renovations.

          In July 1998 FEC paid the Company $500,000, which the Company treated
     as a loan to be repaid in six months together with interest at a rate of
     prime plus 1%. In the alternative the principal and interest could have
     been repaid by way of offset against management fees for the Kuala Lumpur,
     Dallas, and Melbourne hotels, which latter two hotels FEC has not yet
     delivered for management by the Company. In July 1998 FEC paid the Company
     a further $500,000, which the Company booked as a loan also to be repaid in
     the future or offset against future management fees.

          The Hotel Management Agreements granted management rights to four
     unopened hotels. None of the unopened hotels was then under construction.
     They were (i) the Dorsett Plaza Hotel, an about 180-room hotel in Edmonton,
     Canada that was formerly scheduled to open in 1998, and (ii) three other
     hotels in Asia with a proposed total of about 550 rooms, formerly scheduled
     to open in 1999.

          The status on signing the Hotel Management Agreements and, prior to
     the settlement on November 4, 1998, of the three groups of hotels mentioned
     above is summarized as follows:

     Opened
     ------
     Dallas Grand Hotel*            +       Dallas, Texas, U.S.A.
     Rockman's Regency*             +       Melbourne, Australia
     Dorsett Regency*               +       Kuala Lumpur, Malaysia

     Formerly Scheduled
     To Open in 1998
     ---------------

     Dorsett Regency                +       Bali, Indonesia
     Dorsett Plaza*                 +       Edmonton, Alberta, Canada

     Formerly Scheduled
     To Open in 1999
     ------------------

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     Dorsett Court         x        Seremban, Malaysia
     Dorsett Court         x        Ankor Wat, Siem Riep, Cambodia
     Dorsett Hotel         x        Phuket, Thailand

     *Hotels subject to FEC Hotel Management Agreement. All others are subject
     to the Dorsett International Hotel Management Agreement.

     A + indicates the Company had a Hotel Operating Contract; an x that it does
     not.

          Prior to November 1998 the owners of all the unopened hotels advised
     the Company that plans to open these hotels were under re-examination and,
     more particularly, each was generally in the following status. Scheduled
     conversion of an office building for the Dorsett Plaza Hotel in Edmonton,
     Canada (which was to be a downtown commercial hotel) had not been
     commenced, although the owners advised the Company that they were
     evaluating financing proposals. Owners of the Dorsett Court Hotel in
     Seremban, Malaysia advised the Company that construction of that hotel
     (which is a golf resort hotel) may be soon commenced and may be completed
     by the end of 1999, but plans are not definite. Owners of the Dorsett Court
     Hotel at Ankor Wat, Cambodia (a resort or tourist hotel serving the famous
     ruins) and of the Dorsett Hotel in Phuket, Thailand (a beach resort hotel)
     told the Company that the construction of these two hotels had been
     indefinitely deferred.

     November 1998 Termination and Settlement

          In connection with the foregoing problems, the Company had
     negotiations with the owners of the hotels, Mr. David Chiu (who was
     represented to the Company as having been the sole stockholder in Dorsett
     International) and with representatives of the parties (the "HMA Parties")
     to the Hotel Management Agreements. A successor to Dorsett Hotels and
     Resorts International Ltd. was that party in the case of the four hotels in
     Indonesia, (Seremban) Malaysia, Cambodia and Thailand. Far East Consortium
     International Ltd. was that party in the case of the four hotels in
     Malaysia (Kuala Lumpur), Australia, Canada and Texas.

          On November 4, 1998 the Company entered into a settlement agreement
     (the "November Settlement Agreement") with the HMA Parties, Far East
     Consortium (M) Limited, their subsidiaries and Mr. Chiu. Pursuant to that
     agreement the Company was paid $450,000 cash, was returned 700,000 shares
     of its Common Stock and retained $1,625,000 theretofore paid the Company as
     management fees or loans. Various obligations related to the hotel
     management operations were taken over by the other parties. CCA and the
     other parties to that agreement waived all claims and matters between them
     and rescinded agreements between them. Consequently, as of November 4,
     1998 the Company had no active hotel management or operation business. The
     company intends to resume its hotel operating activity in the future.

     Original Acquisition of Hotel Management Division

          The Company had entered into the Hotel Management Agreement ("HMA") 
     with Dorsett International on October 2, 1997. It was subsequently amended
     through January 28, 1998 (as amended, the "Dorsett International Hotel
     Management Agreement"). Under that agreement the Company (i) paid Dorsett
     International $1,000,000 upon or after execution of the original Dorsett
     Hotel Management Agreement, and (ii) beginning on the commencement of
     management of the Dorsett Regency hotel in Bali, Indonesia under the
     Company's Hotel Operating Contract, and until January 28, 2000, agreed to
     grant Dorsett International "rights" to purchase up to an aggregate 800,000
     shares of the Company's Common Stock. The 800,000 shares were to be issued
     in the following amounts for, and upon delivery of, a duly executed and
     legally enforceable Hotel Operating Contract for each of the following
     hotels once opened and operating: 200,000 shares for the Dorsett Court
     Hotel, Malaysia, 300,000 shares for the Dorsett Court, Cambodia, and
     300,000 shares for the Dorsett Hotel, Thailand. Dorsett International
     assigned to Mr. Chiu its rights to receive the cash payments and stock.

          The Company had entered into the Hotel Management Agreement with FEC
     on January 28, 1998. That agreement corrected and carried out aspects of
     the original Dorsett International Hotel Management Agreement. The Company
     (i) paid FEC $1,500,000 upon or after execution of the FEC Hotel Management
     Agreement, and (ii) agreed to issue 1,200,000 shares 

                                       8
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     of Common Stock of the Company. The 1,200,000 shares were agreed to be
     issued in the following amounts upon the delivery of a duly executed and
     legally enforceable Hotel Operating Contract for each of the following
     hotels: 275,000 for the Dallas Grand Hotel, Dallas; 400,000 for the
     Rockman's Regency, Melbourne; 275,000 for the Dorsett Regency, Kuala
     Lumpur; and 250,000 for the Dorsett Plaza, Edmonton. All that stock was
     issued upon delivery of related Hotel Operating Contracts except for the
     stock identified to the Dorsett Plaza, Edmonton which was to be issued
     contingent on the opening and operation of the hotel.

          The Company thus paid a total of $2,500,000 and issued a total of
     950,000 shares pursuant to the Dorsett International and FEC Hotel
     Management Agreements. The fair value of the shares issued to FEC was
     recorded by the Company at about $3.5 million, and the $1.5 million payment
     was allocated to the hotels, including $300,000 allocated to the Edmonton
     Canada hotel.

          On January 30, 1998, the Company acquired from David Chiu for $500,000
     all the stock in four British Virgin Islands companies, including that of
     Dorsett International, as evidenced by four bearer share certificates. As a
     result of the acquisitions the Company also acquired rights to use the name
     "Dorsett" in the hotel business. (See "November 1998 Termination and
     Settlement" above.)

     Common Stock Aspects of Hotel Management Agreements

          The shares issued or issuable to the HMA Parties were for three years
     after issue, subject to contractual restrictions on transfer and to an
     irrevocable proxy which the Company has authorized be exercised by its
     Chairman, Mr. Charles Stein, and indefinitely thereafter were subject to
     the Company's "first option" to purchase any of the shares, exercisable
     within ten days after notice that the holder proposes to sell them. The
     first option was to purchase either at the reported Small Cap Nasdaq market
     price on the date of the notice of proposed sale (if the proposed sale is
     to be on the market), or the price under a bona fide offer submitted with
     the notice (if the proposed sale is pursuant to that offer).

     Other Agreements

          In August 1997 the Company entered into a two-year Casino Consulting
     Agreement with Star Casinos Limited ("Star") as consultant, primarily to
     obtain the services of Mr. David Hartley, who is an experienced casino
     consultant. He is now the full-time President of the Company's Casino
     Division. Star is owned and controlled by Mr. Hartley. The active term of
     the agreement began in October 1997 at a $250,000 annual salary paid direct
     to Mr. Hartley by the Company. In December 1997 the Company granted to Star
     Plan options to purchase 100,000 shares of Common Stock at $6.50 per share,
     reduced to $1.50 in September 1998. The options vest and become exercisable
     in 2 equal installments, on each succeeding October anniversary. If it has
     fully performed, at the end of the term of the Casino Consulting Agreement
     Star will be entitled to a $250,000 bonus. The agreement imposes
     non-compete and non-solicitation restrictions on Star for two years after
     the term.

     Sakhalin Project

          In August 1997 the Company entered into agreements to acquire all the
     stock of Sakhalin General Trading and Investments Limited ("SGTI"), a
     Cyprus company that holds 65% of the stock in Sakhalin City Center Limited
     ("SCC"). In December 1997 the Company acquired the stock in SGTI for 2
     million shares of the Company's Common Stock valued for accounting purposes
     at $5.20 per share (or a total of $10,400,000) and in addition, advanced
     SGTI $3,000,000 primarily to be used for clearing the construction site and
     relocating the residents occupying the site. The Company's Common Stock
     price was $6.50 when the relevant agreements were first entered into, as
     well as when the stock was issued on December 12, 1997. SCC is a Russian
     Federation company that holds construction, development and operating
     rights to the Sakhalin Project. The Sakhalin Project is the construction
     and operation of an about 450-room hotel and casino in Sakhalin City on
     Sakhalin Island in the Russian Federation 25 miles from Northernmost Japan.
     No building has yet begun, but architectural plans have been prepared, the
     site has been cleared, and foundation construction bids are being
     negotiated. The currently 

                                       9
<PAGE>

     estimated cost of completing the Sakhalin Project is about $100 million.
     The hotel and casino will be on a City-owned site (long-term leased to SCC
     rent free, with the option to buy) in the center of the regional capital
     City. The City and the Regional government agreed with SCC to issue it the
     requisite gaming license (renewable at the same time as the lease is
     renewable), not to issue a gaming license to any near-by new casino, and to
     maintain the small size of the three small other local casinos. The City
     and the Regional Government hold the 35% of SCC's shares not held by SGTI.
     The City also (i) agreed to grant certain tax relief, including relief from
     the City's 90% tax on gaming revenues, and (ii) to authorize a private
     airport terminal for the hotel's arriving visitors. The hotel and casino
     may accept US dollars, and may export dollars without exchange control. The
     casino is planned as a magnet destination for the regional gaming
     clientele. The City's international airport can be reached by direct and
     indirect flights from hub airports in Japan and Asia, and by a short hop
     from international airports and cities in Northern Japan. The local
     Sakhalin governments are expected to use their current oil-boom revenues to
     develop air and land connections so as to realize some of the Island's
     potential as a gaming, tax-free shopping, and mountain and ski resort.

          In view of the current conditions in the Russian Federation and Asia,
     the Company believes its undertaking of the Sakhalin Project is subject to
     many serious risks and contingencies. Many of these risks are inherent in a
     hotel and casino construction and operation specifically in the Russian
     Federation or in Sakhalin, or even in any such project abroad. Some risks
     result from the Company's lack of specific experience in construction, or
     from the nature of agreements or other arrangements for the Project.
     Currently, the economic and political situation in the Russian Federation
     appears to be even more unstable than it was last November 1997. The
     so-called "Asian Crisis" has continued to be highly volatile, and Japan,
     where much of the potential gaming clientele resides, has had an economic
     slow-down.

          In September 1998 the Company entered into negotiations with JSC
     Rosneftegazstroy ("RNGS"). RNGS is a very large construction company in the
     Russian Federation, generally viewed as the "privatized" main successor to
     the construction arm of the former government of the USSR. On September 23,
     1998 the Company and the President of RNGS, on behalf of RNGS, executed and
     delivered a letter, designated a "letter of intent", expressing their
     intent to negotiate and enter into definitive agreements for certain
     transactions outlined in that letter. The execution and delivery of
     definitive agreements are subject to extensive further negotiations and
     many contingencies. The letter of intent provides for the Company and RNGS,
     until one gives notice to the other that the negotiations are ended, each
     to proceed in good faith and at is own respective expense to negotiate and
     draft definitive agreements with the terms set forth in the letter of
     intent, and such other terms as are customary for a transaction of this
     nature. Neither RNGS nor CCA has given such notice.

          The letter of intent provides more specifically as follows. The
     Company, RNGS, Roshotel Management Limited ("Roshotel Management"), and
     Roshotel International Limited ("Roshotel International") express their
     respective intentions, but not their obligation, to enter into definitive
     agreements for the transactions outlined below. The Company owns 100% of
     the capital stock in Sakhalin General Trading and Investments Ltd.
     ("SGTI"), which owns 65% of the capital stock of Sakhalin City Centre
     Limited ("SCC"), which in turn holds development rights to the "Sakhalin
     Project", a project to build and operate a hotel and gaming casino in
     Yuzhno-Sakhalinsk ("City") in the Sakhalin state ("Oblast") of the Russian
     Federation. The Company needs and seeks financing for the Sakhalin Project.
     The parties seek to combine their mutual expertise, opportunities and
     resources (i) to complete the Sakhalin Project, and (ii) to develop a hotel
     and casino management business in the Russian Federation and the Common
     wealth of Independent States. Roshotel Management has been formed by RNGS
     and Valmet International Limited ("Valmet") to develop that business.
     Roshotel International is an affiliate of RNGS formed to hold property
     interests related to that business, which RNGS will cause to retain
     Roshotels Management as its exclusive hotel manager. SCC will enter into a
     turnkey contract ("Turn-Key Contract") with a contractor for building and
     equipping the Sakhalin Project and for its delivery, tested and fully ready
     for first beneficial use. RNGS will be the favored subcontractor if its
     offer of a contract is substantially equal to the best other offer, and in
     any event, as guarantor of the financing, will have a right of reasonable
     disapproval of any other contractor. RNGS will directly guarantee when due
     on acceptance of delivery of the Project the repayment to the financing
     person of (or will itself provide all or part of) 100% 

                                       10
<PAGE>

     of the cost of the TurnKey Contract. That financing is to be on
     substantially the most favorable terms as RNGS could obtain for itself if
     it stood in the place of SCC. The Company, Valmet and RNGS will jointly
     cooperate to negotiate that financing, the terms of which will be subject
     to the reasonable disapproval of either. No financing will be with recourse
     to the Company, but can be with recourse to SCC and its interest in the
     project, SGTI or its interest in SCC. When the financing of the TurnKey
     Contract is firmly bound and ready, RNGS will issue to the financing person
     RNGS's guarantee ("Financing Closing"). Thereupon, Roshotel International
     will be, as RNGS's designee, entitled to receive from SCC 51% of the
     capital stock in SCC to be then outstanding after such issuance, as full
     payment for the RNGS guarantee and all RNGS financing services. However, it
     is a condition to SCC's obligation to issue that 51% interest (and thus to
     issuance of the RNGS guarantee) that the regional government Oblast and the
     City Sakhalin agreements have agreed to reduce their combined percentage in
     SCC from 35% to 17% (as SGTI reduces its percentage to 32%), all without
     their changing the land lease, tax on gaming, or their other benefits
     provided for the Sakhalin Project. At the Financing Closing the Company
     will acquire from the stockholders in Roshotel International all the
     capital stock in Roshotel Management, in exchange for three million shares
     of Common Stock in CCA issued by the Company (the "Hotel Management
     Shares"). The Company would then merge Roshotels into the Company's Dorsett
     hotel division. At the Financing Closing a three-year put/call option will
     be granted pursuant to which the Company or RNGS may elect to exchange
     Roshotel International's 51% interest in SCC for such number of shares of
     the Company's Common Stock to be issued by the Company, as, when combined
     with the previously issued Hotel Management Shares, would equal 51% of the
     Common Stock in the Company to be then outstanding after such exchange. The
     Company's obligation to consummate the transactions contemplated will be
     subject to, among other things, the following being acceptable to the
     Company: (i) the Company's due diligence review of RNGS, Roshotel
     International and Roshotel Management; (ii) approval by the SCC
     stockholders of the reductions in their respective interest and the
     issuance of the 51% interest to Roshotels International; (iii) obtaining
     the Company stockholder and board approvals; (iv) execution of a definitive
     agreement and related documents, and satisfaction of all the conditions
     contained therein; (v) execution by SCC of a financing agreement with a
     financing person for the Project; and (v) receipt of a guaranty issued by
     RNGS to the financing person. The issuance of the guaranty by RNGS will be
     subject to, among other things, the following being acceptable to RNGS,
     Roshotel International, and Roshotel Management: (i) receipt of a financing
     agreement with a financing person on terms and conditions (including
     period, interest and amount) acceptable to RNGS; (ii) completion of an
     agreed budget for the Project's construction; (iii) receipt of license and
     permits that may be required under federal or local Russian law regarding
     the Project; (iv) RNGS's due diligence of the Company, its subsidiaries and
     SCC; (v) execution of a definitive agreement and related documents, and
     satisfaction of the conditions contained therein; (vi) satisfaction that
     the shares to be issued for Roshotel Management and to Roshotel
     International are not subject to unacceptable dilution through option,
     warrants or otherwise; (vii) agreement on management, officers and
     directors of the Company. The senior management is expected to include Mr.
     Dallas Dempster as President, Chief Executive Officer and Chief Operating
     Officer, and RNGS nominees.

          When the Company acquired the stock in SGTI, its subsidiary SCC and
     Sovereign Gaming and Leisure Ltd., a Cyprus company, already had a 1994
     Construction Management Agreement (for Sovereign to manage the construction
     of the Sakhalin Project) and a 1994 Operation Management Agreement (for it
     to operate the Project). As part of the SGTI transaction Sovereign assigned
     both to the Company, along with Sovereign's other rights relating to the
     Project, and received 200,000 shares of the Company's Common Stock. The
     Common Stock was valued at $5.25 per share and thus the value attributed to
     the shares was $1,050,000. Consequently, the Company is currently the
     holder of the rights thereunder to manage the development and construction
     of the Sakhalin Project, and upon its completion to operate and manage it.
     Under the 1994 Construction Management Agreement, SCC is to pay to the
     Company an overhead fee of 5% of the estimated cost of the Project for its
     general office expenses and a management supervisory fee for overhead. The
     management supervisory fee is to be paid monthly over the construction
     period timetable, commencing when that timetable commences. If the
     construction period were to commence, the Company would be required to
     itself provide those services for those fees, to subcontract for those
     services, to assign or renegotiate the 1994 Construction Management
     Agreement, or take other related action or combination of actions. The
     local City and Regional Governments currently hold a 35% interest in SCC,
     and the Company anticipates possible broad negotiations with those
     stockholders if and when the Company proceeds to negotiate terms of its
     letter of intent with RNGS, or other matters. Sovereign agreed that, upon
     request of the Company, Sovereign would become construction manager,

                                       11
<PAGE>

     subject to agreement on reasonable compensation, not to exceed the lesser
     of 5% of construction costs or $5,000,000.

          The Sakhalin Project (other than its financing) has been managed by
     SCC in Sakhalin City, primarily by Mr. Valery Mozolevsky, who has had
     long-term employment with SCC and is experienced in the Project. The
     Company in August 1998 retained the services of an experienced project
     manager that will oversee and manage the project with Mr. Mozolevsky. If
     the Sakhalin Project substantially proceeds, SCC (and the Company) may have
     to substantially expand relevant management and staff, and obtain
     consultants and contractors in design, construction and management. Mr.
     Dallas Dempster was, and still is, one of two Executive Directors of SCC.
     Mr. Valery Mozolevsky was, and still is, the other Executive Director.

          On December 2, 1997, the Company issued to Mr. Brian Bryce (then a
     director of the Company) and Mr. Jay Haft (then a director of the Company),
     respectively, Plan options to purchase 300,000 and 200,000 of the Company's
     Common Stock at $6.125 per share. The options had previously been granted
     to them in August 1997 conditional on the stockholders of the Company
     approving the Company's entry into the new hotel and casino business,
     including the Sakhalin Project. That approval was obtained at the December
     1997 meeting of the Company's stockholders. The options were granted to
     them in recognition of their services in obtaining the Sakhalin Project for
     the Company. On December 2, 1997 the closing market price of the Company's
     Common Stock was $6.50 per share. The value of these options was about $1.1
     million on the Black-Scholes option-pricing model. Messrs. Bryce, Haft and
     James Stanton (the latter two both then directors) had also agreed that if
     the stockholders did not approve the Company's entry into the hotel and
     casino business they and Jasmine Trustees Ltd., an affiliate of Mr.
     Bryce's, would collectively reimburse the Company for up to $750,000 that
     might be incurred by the Company for the Sakhalin Project.

             Although Mr. David Chiu had not theretofore been associated with
     the Sakhalin Project, in October 1997 the Company entered into a
     Development Services Agreement with him for him to provide various services
     to the Project. That agreement provided that he (i) may receive 38
     percentage points of the 65 percentage points of the Company's stock
     interest in SGTI, and (ii) grants him one share of convertible Preferred
     Stock of the Company with nominal dividend rights and liquidation value.
     The share of Preferred Stock was to be convertible into 1,500,000 shares of
     Common Stock of the Company only if and when he timely procures loan
     financing for the Sakhalin Project acceptable to the Company. The stock
     interest in SGTI is also to be transferred upon fulfillment of that
     condition. The shares of Common Stock would be subject to the same kind of
     restrictions on transfer, irrevocable proxy and first option as the shares
     issued under the Hotel Management Agreements. As of August 1998, the
     Development Services Agreement has expired.

     Food Preservation Technology

          The Company has been developing and seeking to exploit a product that
     extends the life of harvested fresh fruits, vegetables and flowers. The
     product is made in granules used to absorb gases that would otherwise
     accelerate ripening. The granules are in packets that are put in confined
     storage or transport spaces, or are in filters that are put in the cooling
     or ventilation systems for those spaces. The Company believes it has made
     sufficient exploitation plans, and has done sufficient marketing studies
     and testing of its current product, Preservit(Trademark), and of like
     products, to have substantially completed pre-sales development for
     Preservit(Trademark). The Company believes that its product is
     substantially ready for initial market entry. The Company's exploitation
     plans for this type of product had called for initial market entry and
     continuing marketing efforts to be made by close co-operative analysis of a
     particular potential customer's operations, and by specific demonstration
     of the product's benefits. While use of such a product is not complicated,
     these marketing plans also called for the Company to help assure its proper
     on-site use by providing on-site use supervision. The Company has stopped
     building these market-entry techniques and on-site capabilities for what it
     had called its "Preservit(Trademark) Program" style of marketing in the
     U.S. and Canada. In view of the cost of the Preservit(Trademark)Program,
     the Company is reconsidering the necessity for these techniques and
     capabilities. Abandonment of its prior similar product had delayed market
     entry of any product. One factor formerly delaying market entry of such a
     product was the need for certain regulatory action, primarily a finding by
     the U.S. EPA that the incidental generation of carbon dioxide did not
     classify the product as a pesticide. That finding has been substantially

                                       12
<PAGE>

     obtained. The Company has become aware that commercial use of
     Preservit(Trademark) in the United States does not currently require other
     material regulatory approvals. 

          The Company believes there are other products comparable to
     Preservit(Trademark)and competitive with it. The Company has become aware
     that Extend-A-Life Systems, a subsidiary of Agway, has begun some trade
     advertising for a similar product. The Company does not expect to benefit
     from any U.S. patent on Preservit(Trademark), and there is none. The
     Company is not aware of any U.S. patent (or any other patent) infringed by
     manufacture, sale or commercial use of Preservit(Trademark), and is not
     relying on any patent to exclude others from manufacture, sale or use of
     any such other product. The Company would not currently have the financial
     resources to engage in patent litigation, which is often very prolonged and
     expensive.

          The Company's Preservit(Trademark)business involves substantial risk.
     Preservit(Trademark)has not been accepted as commercially viable in
     significant actual use, or otherwise successfully exploited. It may not be
     successfully exploitable with or without supplemental services or products,
     and, although tested acceptably to the Company in controlled conditions on
     various food products, may not function satisfactorily in actual use in
     specific applications or with specific food products.

     Acquisition of Preservit(Trademark) Rights

          Preservit(Trademark)replaces another similar product,
     Conserver21(Trademark), which the Company had previously brought to its
     market-entry stage. Problems with the packaging and pricing of the prior
     product by its foreign manufacturer forced the Company to end its
     exploitation plans for that product and to terminate the distribution
     agreement through which it held distribution rights to that product.
     Meanwhile the Company identified "Preservit(Trademark)", then manufactured
     in France but without significant market acceptance there, as a replacement
     product. The Company has come to the conclusion, and still believes, that
     Preservit(Trademark)is commercially similar to its prior abandoned product,
     that it is equally efficacious, and that it would satisfactorily substitute
     in the Company's existing exploitation plans, or in adapted plans.

          The Company does not currently directly hold or own any rights to
     Preservit(Trademark). It holds an option to purchase the 51% interest held
     by Conserver Purchasing Corporation ("CPC") in Atmos Concepts S.A.
     ("Atmos"), a French manufacturer and patent holder.

          The Company's option is to acquire from CPC its 51% stock ownership in
     Atmos for the same price CPC paid the Atmos stockholders to acquire 51% of
     the Atmos stock. That price was $1,650,000, payable $650,000 in cash to
     Atmos to discharge existing obligations and the balance, to the Atmos
     stockholders, in the Company's Common Stock valued at $1,000,000 contingent
     upon delivery of patents on the Atmos product. In October 1998, the
     Company's Common Stock was issued but not delivered to the Atmos
     stockholders. The Company's Common Stock is being held by the Company to
     secure CPC and the Company against breach of the same warranties as were
     made by Atmos and its stockholders to CPC. CPC has asserted that those
     warranties have been breached because, among other things, the debt and
     other obligations of Atmos exceed the limits warranted. Consequently, the
     Company does not currently plan to exercise its option to acquire CPC's 51%
     interest in Atmos. 

          In December 1997 and February 1998 the Company loaned CPC a total of
     $650,000 for its use in discharging the Atmos debts and obligations, and
     through June 30, 1998 loaned CPC an additional $970,000 for inventory
     purchases, overhead requirements and for the discharge of additional Atmos
     obligations, bringing the total loans made to CPC to $1,620,000. If the
     Company does not exercise its option to acquire 51% of the Atmos stock, CPC
     would likely be unable to repay these loans, except possibly from any
     available proceeds from sale of its stock in Atmos or of the partially
     developed business, which currently has a high level of uncertainty.
     Consequently, the Company established a reserve equal to the full amount of
     the $1,620,000 loans made to CPC. 

     Preservit(Trademark)Plant

          In August 1998 the sole plant formerly manufacturing
     Preservit(Trademark), together with ten tons of inventory of
     Preservit(Trademark), was moved from France to a rented site in Kent,
     England. A long-term lease is currently being negotiated. The relocated

                                       13
<PAGE>

     plant has not been actually operated. The Company believes that attaining
     normal production is not difficult, and can be promptly achieved when
     needed. However, any sustained delay in normal production, any
     unanticipated costs, or any material incapacity of the plant could
     adversely affect market entry of Preservit(Trademark).

     Previous Financings of Food Preservation Technology Division

          From March to November 1996 the Company raised the capital necessary
     for its initial business development in food preservation technology
     through debt and equity private offerings. In June 1997 the Company
     completed an underwritten initial public offering, largely on the basis of
     its prospective exploitation of its food preservation technology. It
     received in the offering net proceeds of approximately $10,306,000 from the
     sale of 2,530,000 shares of its Common Stock at a per share price of $5.00.
     At June 30, 1997, approximately $2,130,000 of the proceeds from the initial
     public offering had been used for general business purposes, including a
     $1,000,000 loan to the manufacturer of Conserver21(Trademark)under the
     related distribution agreement, and the repayment of principal and interest
     under an unrelated $1,000,000 convertible debenture of the Company. During
     the year ended June 30, 1998, about $6,477,000 of the proceeds from the
     initial public offering were used for general business purposes, including
     payments for the retirement of all other convertible debentures of the
     Company (in the amount of $385,000) and the above-noted advances of
     $1,620,000, made to CPC relating to Preservit(Trademark). The Company did
     not use directly for its food preservation technology business any part of
     the proceeds of its subsequent November 1997 Private Offering.

     Current Status of Food Preservation Technology Division

          During the year ended June 30, 1998, the Company incurred a total of
     $377,000 in marketing and sales expenses primarily for its food
     preservation technology business. If the Company begins actual market entry
     of Preservit(Trademark), the Company anticipates having to make significant
     related marketing and selling expenditures during the 12 months thereafter.
     These expenditures would be largely for inventory purchases, warehousing,
     shipping, and hiring of additional employees and consultants, all as
     Preservit(Trademark)begins and proceeds with any market entry. The Company
     might experience a significant increase in the number of employees or
     consultants as it implements market entry with or without its on-site
     service concept. This increase and the attendant cost cannot be estimated
     at this time. Management would seek to phase in such a work force increase
     to coincide with such sales as appear to have the potential to generate
     sufficient revenues to help offset related costs. No operating revenues are
     anticipated from Preservit(Trademark)until such time, if ever, as the
     Company can actually begin selling significant quantities of
     Preservit(Trademark). Even if substantial sales can be made, they will be
     made beyond the period in which many of the above expenditures will be
     made. Right after the Company began minimal actual market entry of
     Conserver21(Trademark), the Company had only nominal sales or orders for
     that comparable product. Although the Company believes the pre-sales
     development stage for Preservit(Trademark)has been completed and it is
     substantially ready for market-entry if the Company decided to begin market
     entry for Preservit(Trademark), it is not clear when or whether the Company
     can reach even nominal initial sales or orders, implement its business
     plans, or operate profitably with Preservit(Trademark). The Company
     estimates that almost all its available cash reserves and foreseen future
     cash will be allocated to other uses, and after such use would not be
     sufficient to permit it to begin market entry, or to itself further
     continue the Preservit(Trademark)business. Thus, any continued operation or
     expansion of that business by the Company would likely be dependent on the
     Company's ability to obtain additional financing specifically for the food
     preservation technology business. As a consequence of the Company's current
     lack of allocated funds to itself undertake market entry and development of
     Preservit(Trademark), and its current limited ability to obtain financing,
     the Company is considering various alternatives. These include possible
     joint venture (whereby the Company might manufacture and package
     Preservit(Trademark), but it would be marketed by others), other various
     arrangements, and even sale of the Preservit(Trademark) partially developed
     business.

          In early 1998 the Company terminated its distribution agreement with
     the manufacturer of the Company's former food preservation product largely
     because of breaches and failures by the manufacturer. Under that agreement
     the Company had loaned the manufacturer $1,000,000 and the Company believes
     it might have been required to loan the manufacturer $500,000 more but for
     the termination. The $1,000,000 loan was repayable over three years by
     offset against the Company's purchase of the former food preservation
     product over that period. The Company believes that the loans may not be
     repaid, 

                                       14
<PAGE>

     due to the manufacturer's financial condition and possible disputes over
     the termination, none of which has yet been asserted by the manufacturer.
     In May 1997, delivery of the initial $500,000 of the loan to the
     manufacturer was advanced on behalf of the Company by Mr. James V. Stanton,
     a director and Vice-Chairman of the Company, at an interest rate of 10% per
     annum. In June 1997, the Company repaid the $500,000 loan, together with
     accrued interest of $5,000, from the proceeds of its initial Public
     Offering. During the ten months ended June 30, 1997, the Company
     established a reserve equal to the $1,000,000 loan to that manufacturer.

     Insurance

          The Company currently maintains comprehensive general liability
     insurance with coverage of $1,000,000 per occurrence and umbrella insurance
     of $4,000,000 per occurrence. There can be no assurance that the Company's
     coverage will be adequate to protect the Company from all potential losses.

     Employees

          As of June 30, 1998, the Company had 219 employees, including its 6
     executive officers.

     Segments/foreign operations

          See Note 14 to the consolidated financial statements.

     Available Information

          The Company files reports and information with the Securities and
     Exchange Commission pursuant to Section 13 or 15(d) of the Securities
     Exchange Act. These reports include quarterly reports (Form 10-Q), annual
     reports (Form 10-K) and sometimes periodic reports (Form 8-K). The Company
     also files its proxy statements and has filed a registration statement
     under the Securities Act of 1993 for a June 1997 public offering of its
     Common Stock. Its Commission File Number is 0-22191. The Company's June 6,
     1997 Prospectus and its November 21, 1997 proxy statement contains
     substantial historical information about its business and proposed business
     as at the date of those documents. The public may read and copy materials
     filed with the SEC at the SEC's Public Reference Room at 450 Fifth Street,
     NW , Washington, D.C. Information on the operation of that room may be
     obtained by calling the SEC at 1-800-SEC-0330. Since the Company files its
     material electronically, the filed material may be obtained from the SEC's
     Internet site at http://www.sec.gov.

     Item 2.  Properties

          The Company maintains its principal executive offices at 3250 Mary
     Street, Suite 405, Coconut Grove, Florida 33133. This office space occupies
     approximately 4,300 square feet, and is subject to a 5-year lease,
     commenced October 1997, at monthly rental of approximately $7,800.
     Effective September 30, 1997, the Company terminated its month-to-month
     lease for its 1,000 square foot headquarters in an executive office suite
     in Coral Gables, Florida, at a rental of approximately $6,000 per month.
     The Company anticipated opening a small London office to replace it present
     facilities. The Company also maintains an office in New York at a monthly
     rental of $1,800 per month.

          The Company's Sakhalin project is managed from a small leased office
     space in Sakhalin city.

          The Company's hotel management office was in a small leased office
     space in Kuala Lumpur, Malaysia.

          The Company's casino properties are described in the above Divisional
     Overview for the Casino Division.

          The Company believes its existing facilities are adequate to meet
     current needs.

                                       15
<PAGE>

     Item 3.  Legal Proceedings

          There are no material pending legal proceedings to which the Company
     or any of its subsidiaries is a party or to which any of their material
     property is subject. The Company knows of no such proceedings contemplated
     by any government authorities, or of any material legal proceeding to which
     a director, officer or affiliate of the Company or any owner of record or
     beneficially of more than 5% of its Common Stock (or any associate of any
     of the same) is a party adverse to the Company or any of its subsidiaries
     or in which any such person has a material adverse interest to the Company.

     Item 4.  Submission of Matters to a Vote of Securities Holders

          No matters were submitted by the Company to a vote of security
     holders, through the solicitation of proxies or otherwise, during the last
     quarter of the fiscal year ended 1998.

                                     PART II

     Item 5.  Market for Common Equity and Related Stockholder Matters

          Price Range of Common Stock. Since June 6, 1997 (the date the Common
     Stock was first listed), the Common Stock has been quoted on the Nasdaq
     SmallCap market under the symbol "RIPE". Prior to June 6, 1997, there was
     no market for the Company's Common Stock.

          The following sets forth, for the quarterly periods indicated, high
     and low per share bid information for the Common Stock reported by Nasdaq
     on the Nasdaq SmallCap market:

                            For the quarterly periods
                             beginning June 6, 1997
                            ending September 30, 1998

                                                High          Low

     June 6, 1997 - June 30, 1997           $   5 7/8        $  5
     July 1 - Sept. 30, 1997                    11              5.5
     Oct. 1 - Dec. 31, 1997                     11 5/8          5 1/8
     Jan. 1 - March 31, 1998                    8 13/16         4.5
     April 1 - June 30, 1998                    8               4
     July 1, 1998 - Sept. 30, 1998              4.125           1.25


     (The above prices reflect inter-dealer prices, without retail mark-up,
     markdown or commission, and may not represent actual transactions.
     Beginning in 1998 the Small Cap market began quoting on the decimal
     system.)

          Approximate Number of Security Holders. As of Novemver 15, 1998, the
     Company had about 775 registered holders of record of its Common Stock.

          Dividend Information. The Company has not paid any cash dividends to
     date and does not anticipate or contemplate 

                                       16
<PAGE>

     paying dividends in the foreseeable future. It is the present intention of
     management to utilize all available funds and profits, if any, in the
     development of the Company's business.

          Sale of Unregistered Securities; Uses of Proceeds from Registered
     Securities. Information required by Item 701 of Regulation S-K (as to
     unregistered equity securities sold during fiscal 1997), and by Rule 46B of
     the Securities Act of 1933 (as to use of proceeds of a public offering) was
     previously reported in the Company's Report on Form 10-Q for the quarterly
     period ended March 31, 1998.

          The following information is furnished in connection with
     unregistered securities sold or issued by the Company since the filing of 
     the Company's March 31, 1998 Form 10-Q:

     On September 14, 1998, 250,000 shares of the Company's Common Stock were
     sold for $2 per share to Parbhoes Handelmij NV, the Company's joint venture
     partner in its Suriname casino.

     On September 16, 1998, the Company issued unregistered shares of its Common
     Stock to the shareholders of Roulette Kft., ownership company of the
     Budapest casino, in accordance with the terms and conditions of the
     purchase agreement with Roulette. The following is a list of the shares
     issued:

                  Casino Bahia De Cadiz SA           16,917
                  Teresa Juste Picon                    940
                  Domosthenis Nassopoulos             7,143

     On September 30, 1998, 89,000 shares of the Company's Common Stock were
     issued to Maritime Services Corporation, the building contractor for the
     Suriname casino currently under construction. These shares were issued at a
     price of $2.25 per share or $200,250, which Maritime agreed to accept as
     consideration and payment towards its construction contract with the
     Company.

          The following information is furnished in connection with the 
     Company's Initial Public Offering:

     The effective day of the Securities Act registration: June 5, 1997

     The commission file number assigned to the subject registration statement:
     333-15639

     The date on which the offering commenced: June 6, 1997

     The date on which the offering terminated: June 13, 1997; the offering
     terminated after all of the securities were sold.

     The names of the sole underwriter(s): Janssen/Meyers Associates, L.P.

     The title of securities registered: Common Stock, $0.001 par value

     For each of securities registered, the amount registered: 2,530,000 shares
     (including underwriter's overallotment)

     Aggregate price of the offering amount registered: $12,650,000

     For each of securities, the amount sold: 2,530,000 shares (including
     underwriter's overallotment) Aggregate offering price of the amount of each
     securities sold: $12,650,000

     From the effective date of the Securities Act registration statement to the
     ending date of the reporting period, the amount of expenses incurred for
     the Company's account in connection with the issuance and distribution of
     the Securities registered: $2,344,000.

             Underwriters discounts and commissions           $ 1,075,250
             Expenses paid to or for underwriter              $   561,750
             Auditors Fees                                    $    85,000
             Legal Fees                                       $   280,000
             Printing Expenses                                $   233,000
             Miscellaneous Filing Fees and Other Expenses     $   109,000

     Such payments referred to above were not direct or indirect payments to
     officers, directors, general partners of the issuer or their associates,
     affiliates of the issuer or any person owning 10% or more of any class of
     equity securities of the issuer, nor were such payments referred to above
     direct or indirect payments to others.

     Net offering proceeds were:  $10,306,000

     From the effective date of the Securities Act registration to the end of
     the reporting period the amount of net offering proceeds used for any
     purpose for which at least 5% of the issuer's total offering proceeds,
     whichever is less, has been used were:

                                      17

<PAGE>

            Retirement of Convertible Debentures, together
              with accrued interest thereon                     $1,583,000
            Loan pursuant to Distribution Agreement             $1,000,000
            Advances to Conserver Purchasing Corporation        $1,621,000
            Acquisitions and General Business Purposes          $6,102,000

     Such payments referred to above were not direct or indirect payments to
     officers, directors, general partners of the issuer or their associates,
     affiliates of the issuer or any person owning 10% or more of any class of
     equity securities of the issuer, nor were such payments referred to above
     direct or indirect payments to others. 

     Item 6.  Selected Financial Data

                          STATEMENT OF OPERATIONS DATA

<TABLE>
<CAPTION>
                                                                 March 6, 1996 (Date       For the 
                                                                   of Inception)       Ten Month Period 
                                                                       Through               Ended             Year Ended
                                                                 August 31, 1996(1)     June 30, 1997(1)      June 30, 1998
                                                                 ------------------     ----------------      -------------
<S>                                                             <C>                    <C>                  <C>          
       Revenues                                                 $                 ___  $              ___   $         649,620
       Operating expenses:
          Marketing and sales                                                     ___              115,576            376,589
          General and administrative expenses                                 458,611            1,739,419          6,287,544
          Write down of inventory                                                 ___              355,800
          Write down in value of management contracts                             ___                  ___          4,200,000
          Compensation charges in connection with issuance
             of stock options and warrants                                    907,201            4,995,106            921,569
          Provision for bad debt                                                  ___            1,000,000          1,620,830
                                                                         ------------       --------------  -----------------
       Operating loss                                                     $(1,365,812)       $  (8,205,901)     $ (12,756,912)

       Other expenses:
          Interest income (expense), net                                      (21,259)            (356,166)           213,840
                                                                         ------------       --------------  -----------------
       Net Loss                                                           $(1,387,071)         $(8,562,067)      $(12,543,072)
                                                                         ------------       --------------  -----------------
       Net Loss per share of common stock - basic and diluted                   $(.32)         $     (1.83)       $     (1.37)
                                                                         ------------       --------------  -----------------
       Weighted average number of
          common shares outstanding                                         4,390,767            4,667,490          9,175,536
                                                                         ------------       --------------  -----------------
</TABLE>
----------
            (1) The Company was incorporated on March 6, 1996 and initially
       adopted a fiscal year ending August 31. During the 1997 year, the Company
       elected to change its fiscal year end to June 30.

     Item 7.  Management's Discussion and Analysis of Financial Condition 
              and Results of Operations

     This Annual Report on Form 10-K contains forward-looking statements.
     Additional written and oral forward-looking statements may be made by the
     Company from time to time in Securities and Exchange Commission ("SEC")
     filings and otherwise. The Company cautions readers that results predicted
     by forward-looking statements, including, without limitation, those
     relating to the Company's future business prospects, revenues, working
     capital, liquidity, capital needs, interest costs, and income are subject
     to risks and uncertainties that could cause actual results to differ
     materially from those indicated in 

                                       18
<PAGE>

     the forward-looking statements due to risks and factors identified from
     time to time in the Company's filings with the SEC, including those
     discussed in this Report, and other risks and uncertainties.

     Company Overview

         CCA Companies Incorporated was incorporated under the laws of the State
     of Delaware on March 6, 1996 as Conserver Corporation of America and
     changed its name on December 2, 1997. The active business of CCA Companies
     Incorporated (with its subsidiaries, the "Company") now is (i) operation
     and ownership of a gaming casino in Budapest and of a temporary gaming
     casino in Suriname, where a permanent casino is nearly completed, and (ii)
     development of a casino and hotel project in Sakhalin in the Russian
     Federation.

         The Company needs cash (i) to continue its basic operation; (ii) to
     complete the Suriname Casino so as to realize that casino's cash flow
     potential; and (iii) to pay any material expenses of continuing
     negotiations for the Sakhalin project and for maintaining its position in
     that project. The Company recently has been unable to raise adequate cash
     for all those needs by a sale of its securities or by other financing on
     terms acceptable to it. Largely as a result of the Company's need for cash,
     the report of independent certified public accountants covering the
     Company's certified financial statements for the year ended June 30, 1998
     as contained in this Form 10-K contains a going concern emphasis paragraph.
     However, the Company believes it can meet its cash needs under certain
     conditions. For further discussion of the Company's cash needs and how it
     proposes to meet them, see "Liquidity and Capital Resources Summary" below.

         The Company's original principal business was food preservation
     technology. Exploitation of that business and development and market entry
     of the Company's principal product in that business is now being
     re-evaluated, possibly for a sale or joint venture of that business.

         After mid-1997 the Company entered into various agreements (i) to
     acquire and operate gaming casinos in Hungary and Suriname; (ii) to obtain
     (over about two years) eight hotel management operating contracts, mostly
     for hotels in Asia; and (ii) to build during the next two years and then to
     own and operate, a hotel and casino in Sakhalin, a Russian Federation
     island just North of Japan (the "Sakhalin Project").

         In September 1998 the Company acquired the fully operating casino in
     Budapest, Hungary. A Suriname casino, owned by a 50% joint venture of the
     company, is now operating as a small casino in temporary quarters in the
     hotel where the Company is completing a larger permanent casino for
     operation. The Company, with its joint venturer, has provided the joint
     venture entity with loans used to build, and to be used to complete and
     begin operating, the permanent casino by January 1999. The Company is also
     seeking to acquire, develop and/or operate other casinos abroad.

         Until November 1998 the Company held Hotel Operating Contracts for
     three open hotels with a total of about 1200 rooms, one of which was being
     actively managed by the Company. The Company had entered into Hotel
     Management Agreements providing for the Company to enter into future Hotel
     Operating Contracts to operate five other hotels. The Company had received
     operating fees for one of the open hotels since January 1998 and for two of
     the open hotels since March 1998.

         As a result of the failure of the other parties to the Hotel Management
     Agreements to deliver to the Company physical control and practical
     management power over two open hotels, and their notice to the Company that
     renovation or construction of five other hotels was deferred and being
     reviewed, the Company began negotiations with those parties over the status
     of the Hotel Management Agreements. In November 1998 the Company reached a
     settlement, described below, terminating the Hotel Management Agreements
     and all then existing Hotel Operating Contracts, and exchanging mutual
     releases of related obligations. The Company received $450,000 cash, was
     returned 700,000 shares of its Common Stock, retained $1,625,000 in
     payments of management fees and loans, and the other parties took over
     other obligations of the Company's hotel management operation estimated at
     about $350,000. Consequently, as of November 4, 1998 the Company 

                                       19
<PAGE>

     had no active hotel management or operation business. The Company intends
     to resume its hotel operating activity in the future.

         Until March 1998 the Company was for accounting purposes deemed a
     development stage company. Receipt of revenues, primarily from hotel
     management operation, technically ended that status. However, the Company's
     operations are still subject to all of the risks inherent in the
     establishment of new business enterprises, including the need to obtain
     financing, lack of significant revenues, unreliability of sources of supply
     and the uncertainty of market acceptance of its products and services. The
     Company has incurred losses since inception. From March, 1996 to June, 1997
     the Company did not have any revenues. During the year ended June 30, 1998
     the Company had revenues of $649,620 primarily attributable to the
     commencement of its hotel management operations in January 1998 under then
     existing Hotel Operating Contracts. The Company's accumulated deficit at
     June 30, 1998 was $22,492,210 (which included $6,823,876 of non-cash
     compensation charges related to the value attributed to stock options and
     warrants issued by the Company). Furthermore as a consequence of the
     settlement of the Hotel Management Agreements, for accounting purposes the
     Company recorded a write down of assets of $4,200,000, including a
     $2,400,000 loss relating to (i) the difference between the stock price on
     the date the stock was issued and the stock price on the date of the
     settlement and (ii) the value of the stock retained by FEC as part of the
     settlement.

         The casino and hotel project in Sakhalin requires the Company to get
     substantial financing to progress further. In September 1998 the Company
     entered into a letter of intent with JSC Rosneftegazstroy ("RNGS"), which
     is a large Russian construction company. That letter of intent may lead to
     RNGS guaranteeing the financing of the full cost of a turnkey construction
     contract on the Company's Sakhalin Project, for which RNGS would be the
     major subcontractor. The letter of intent also contemplated joint
     development of a start-up hotel management business in the Russian
     Federation and the Commonwealth of Independent States through a RNGS
     management subsidiary to be acquired by the Company. The consummation of
     any of those transactions is still conditional on substantial further
     negotiations and agreements with RNGS and others. If fully consummated as
     described in the letter of intent, the Company would arrange for RNGS to
     obtain a 51% interest in the Sakhalin Project in consideration of the
     guarantee, and the Company would issue 3,000,000 shares of the Common Stock
     for the acquisition of the start-up hotel management Company. For three
     years the 51% interest in the Sakhalin Project could be exchanged at the
     option of the Company or RNGS for the Company's issuance of additional
     shares of Common Sock which, together with the three million shares
     previously issued would give RNGS 51% of the Common Stock of the Company to
     be thereupon outstanding. This letter of intent is described below in more
     detail.

         The Asian countries where the Company formerly managed a hotel and
     formerly sought to manage more hotels, the Russian Federation where the
     Company has the Sakhalin Project, and Japan (which is a significant
     potential source of gaming visitors to Sakhalin), are all currently having
     significant economic problems. Some are having significant political,
     social and governmental problems. These problems are generally regarded as
     an over-all "Asian Crisis", although circumstances vary from country to
     country. The "Asian Crisis" substantially reduced tourist use and business
     use of all the hotels the Company had managed or sought to manage in Asia.
     The Company's related fees and fee structure, which was largely based on
     percentages of gross revenue and profit, was adversely affected by this
     fact. The situation in the Russian Federation has delayed and might further
     delay, or even prevent, financing, construction and operation of the
     Sakhalin Project.

         For a detailed discussion and analysis of the Company's individual
     operating divisions, see "Divisional Overviews" in Item 1 of this report.

     Change in Fiscal Year

         The Company initially adopted a fiscal year ending August 31. During
     the 1997 calendar year, the Company elected to change its fiscal year end
     to June 30. Accordingly, the following discussion of the Company's results
     for the year ended June 30, 1998 is compared to the ten months ended June
     30, 1997.

                                       20
<PAGE>

     Results of Operations

         The Company has a limited operating history upon which an evaluation of
     its performance and prospects can be made. During the period from March 6,
     1996 to March 31, 1998, the Company's activities were primarily limited to
     organizational efforts and raising public and private capital to defray its
     organizational expenses and the development and initial implementation of
     its business plan for its food technology business. Commencing in August
     1997, the Company's activities also included organizational and fund
     raising efforts relating to its entrance into the business of managing and
     owning hotels and casinos. From March 6, 1996 to June 30, 1997 the Company
     had no revenues. During the year ended June 30, 1998 the Company had
     revenues of $649,620 primarily attributable to the commencement of its
     hotel management operations.

             Results of Operations for the Year Ended June 30, 1998

          Net Loss. The Company incurred a net loss of $12,543,072 or $1.37 per
     share, for the year ended June 30, 1998. Included in the net loss for the
     year were (i) non-cash compensation charges of $921,569 recorded in
     connection with the value attributed to stock options and warrants issued
     by the Company, (ii) a $1,620,830 charge for provision of bad debt, (iii)
     general and administrative expenses of $6,287,544 and (iv) $4,200,000
     write-down in the value of management contracts.

          Revenues. For the year ended June 30, 1998, the Company had revenues
     of $649,620, almost all of which ($639,740) were attributable to its
     signing in January 1998 hotel management operating contracts. The Company
     generated no revenues in prior fiscal periods.

          Compensation Charges. During the year ended June 30, 1998, non-cash
     compensation charges were $921,569 for the issuance of stock options to
     purchase 390,000 shares of Common Stock and of warrants to purchase 100,000
     shares of Common Stock. The Company incurred $4,995,106 of charges for the
     ten months ended June 30, 1997 for the issuance of stock options to
     purchase 1,835,000 shares of Common Stock and of warrants to purchase
     550,000 shares of Common Stock. This represents a decrease during the
     current period in the Company's utilization of the issuance of stock
     options and warrants as compensation payments.

          General and Administrative Expenses. General and administrative
     expenses, which included travel expenses, salaries and professional and
     consulting fees, were $6,287,544 for the year ended June 30, 1998 compared
     to $1,739,419 for the ten months ended June 30, 1997. This increase over
     the prior period resulted from increases in the Company's business
     activities for its food technology business, additional expenses incurred
     as a result of the Company's status as a publicly traded entity, and
     expenses incurred in exploring and entering the business of managing and
     owning hotels and casinos. The increase during the current period is
     primarily attributable to increases in payroll and consulting expenses of
     $944,542, legal and professional fees of $777,654, travel expenses of
     $798,596 and amortization of $342,578. In addition, the Company recorded a
     writedown of $554,262 related to construction in progress originally
     recorded on the acquisition of SGTI and the Sakhalin project. 

          Marketing and Sales. During the year ended June 30, 1998, the Company
     incurred $376,589 in marketing and sales expense in connection with
     increased marketing and sales efforts for its food technology product after
     the completion of its initial public offering in June 1997. The Company
     incurred $115,576 in marketing and sales expenses for the ten months ended
     June 30, 1997.

          Write-down in value of management contracts. Subsequent to June 30, 
     1998, the Company entered into a settlement agreement with FEC, Dorsett and
     Mr. Chiu in which both parities withdrew from and released all of the above
     mentioned Hotel Management Agreements. According to the terms of the
     Agreement, FEC will keep 250,000 of the 950,000 shares 

                                       21
<PAGE>

     of the Company's Common Stock originally issued to FEC. At June 30, 1998,
     the carrying value of the related assets was reduced to the fair value
     based on the terms of the settlement agreement, and accordingly, the
     Company recorded a charge of $4,200,000 to write down the carrying amount
     of the management contract agreements, trade names, and deposit on assets
     to be acquired. The charge is reflected in the accompanying consolidated
     statements of operations for the year ended June 30, 1998.

          Provision for Bad Debt. In December 1997 and February 1998 the Company
     loaned CPC a total of $650,000 for its use in discharging the Atmos debts
     and obligations, and through June 30, 1998 loaned CPC an additional
     $970,000 for inventory purchases, overhead requirements and for the
     discharge of additional Atmos obligations, bringing the total loan made to
     CPC to $1,620,000. Presently, the Company does not anticipate that it will 
     exercise its options to  acquire  51% of the Atmos stock, and CPC would
     likely be unable to repay these loans, except possibly from any available
     proceeds from sale of its stock in Atmos or of the partially developed
     business, which proceeds are likely to be less than the loans.
     Consequently, the Company established a reserve equal to the $1,620,000 in
     loans made to CPC. 

          Interest Income. For the year ended June 30, 1998, interest income was
     $288,518, compared to $51,180 for the ten months ended June 30, 1997. This
     increase was due to additional cash being available for investment from the
     proceeds of the Company's public and private offerings.

          Interest Expense.For the year ended June 30, 1998, interest expense
     including amortization of debt discount was $74,678 compared to $407,346
     for the ten months ended June 30, 1997. These amounts included non-cash
     charges related to the amortization of $60,328 and $252,000, respectively,
     on debt discount recorded for the value of Common Stock shares issued to
     convertible debentureholders. The decrease in actual accrued interest
     expenses from $155,346 during the prior period to $14,350 in the current
     period was the result of the repayment of certain outstanding obligations
     by the Company from the proceeds of its June 1997 initial public offering.

          Results of Operations for the Ten Months Ended June 30, 1997

          Net Loss. Net loss for the ten months ended June 30, 1997 was
     $8,562,067, or $1.83 per share. Included in the net loss for the period
     were (i) non-cash compensation charges of $4,995,106 recorded in connection
     with the value attributed to stock options and warrants issued by the
     Company, (ii) general and administrative expenses of $1,739,419, (iii) a
     $1,000,000 charge for provision of bad debt, (iv) interest expense of
     $356,166 (net of interest income), (v) a $355,800 write-down of Conserver
     21(Trademark)inventory, and (vi) marketing and sales expenses of $115,576.

          Compensation Charges. During the ten months ended June 30, 1997,
     non-cash compensation charges were $4,995,106 for the issuance of stock
     options to purchase 1,835,000 shares of Common Stock and warrants to
     purchase 550,000 shares of Common Stock.

          General and Administrative Expense. For the ten months ended June 30,
     1997, general administrative expenses were $1,739,419 and included
     expenditures consisting primarily of travel expenses, salaries and
     professional and consulting fees.

          Marketing and Sales. During the ten months ended June 30, 1997, the
     Company incurred $115,576 in marketing and sales expenses in connection
     with its preliminary marketing and sales expenses for Conserver
     21(Trademark).

          Write-down of Inventory. Initial purchases of Conserver
     21(Trademark)packets by the Company have indicated certain manufacturing
     limitations in the packaging process of the Conserver 21(Trademark)packets,
     which management of the Company believes can be ultimately rectified. In
     light of these limitations and the unmarketablility of the inventory
     purchased, the 

                                       22
<PAGE>

     Company wrote down $355,800 of its Conserver 21(Trademark)inventory during
     the ten months ended June 30, 1997.

          Provisions for Bad Debt. Under the terms of the Distributing
     Agreement, the Company advanced $1,000,000 to Agrotech as of June 30, 1997
     which was repayable over a three year period as an offset against Conserver
     21(Trademark)purchases by the Company in excess of the purchase of a
     minimum of $2,000,000 of Conserver 21(Trademark)products by April 1998 (the
     "Initial Volume Commitment"). The Company attempted to renegotiate the
     Distribution Agreement with a view to reduce the pricing arrangements
     regarding the Conserver 21(Trademark)packet and manufacturing arrangements
     so that all packaging is done in the United States. Due to the uncertainty
     that existed as to the outcome of the renegotiations of the Distributing
     Agreement, the Company's ability to exceed the Initial Volume Commitment
     for Conserver 21(Trademark) products based on the pricing levels and the
     anticipated renegotiated lower pricing level, and the manufacturing
     difficulties, management of the Company believed that achieving the Initial
     Volume Commitment necessary to offset the Company's purchases from Agrotech
     against the Agrotech Loan was remote. Accordingly, for the ten months ended
     June 30, 1997, the Company established a reserve equal to the Agrotech
     Loan. The Company terminated its Distribution Agreement with Agrotech
     during the fiscal year ended June 30, 1998.

          Interest Expense.For the ten months ended June 30, 1997, interest
     expense was $356,166, net of interest income of $51,180, resulting from
     interest accrued on the Company's convertible debentures and non-cash
     charges related to the amortization of $252,000 on debt discount recorded
     for the value of Common Stock issued to convertible debentureholders.

          Income Taxes. For the ten months ended June 30, 1997, the Company, for
     tax purposes, did not have any operations, or net operating losses. The
     Company's expenses were preoperating and therefore, are capitalized and
     will be amortized starting on the date operations commenced.

                Result of Operations for the period March 6, 1996
                     (date of inception) to August 31, 1996

          Net Loss. Net loss for the period from March 6 to August 31, 1996, was
     $1,387,071 or $0.32 per share. Included in the net loss for this period
     were (i) general and administrative expenses of $458,611 and (ii) non-cash
     compensation charges of $907,201 in connection with the value attributed to
     stock options and warrants issued by the Company.

          General and Administrative Expenses. For the period from March 6 to
     August 31, 1996, general and administrative expenses were $458,611 and
     primarily included expenditures of travel expenses, salaries and
     professional and consulting fees.

          Compensation Charges. For the period from March 6 to August 31, 1996,
     non-cash compensation charges were $907,201 for value attributed to the
     issuance of stock options to purchase 100,000 shares of Common Stock and
     warrants to purchase 325,000 shares of the Company's Common Stock.

          Interest Expense. For the period from March 6 to August 31, 1996,
     interest expense was $21,259, net of interest income of $8,741.

          Income Taxes. During the period from March 6, to August 31, 1996, the
     Company, for tax purposes, did not have any operations, or net losses. The
     Company's expenses are preoperating and therefore, were capitalized and
     will be amortized starting on the date operations commenced.

                                       23
<PAGE>

Liquidity and Capital Resources Summmary

          Due to its lack of available cash and its limited ability to obtain
     financing, the Company has been forced to suspend its market entry for
     Preservit(Trademark). The suspension of market entry plans for
     Preservit(Trademark)suspends the prospective substantial research,
     development and start-up expenditures that would have been required for
     such market entry. No substantial expenditures are associated with the
     suspension. Although the Company is considering seeking a joint venture or
     other transaction for resumption of that business, with another party
     financing the transaction, it has not identified any other such party. If
     the Company were able to sell the business, then the sale might produce
     some cash. The amount of such cash, if any, cannot be predicted. 

          The Company's joint venture may soon complete the Suriname
     Casino, which, once fully open, is anticipated to provide cash
     distributions to the Company. The Company anticipates that as of November
     30, 1998, the Suriname Casino will require about $1.5 million further cash
     over the next 3 months to complete it, which is to be funded by either the
     Company, its joint venture partner, or both. At November 15, 1998, the
     Company had funded its joint venture $4,000,000 for these purposes. In
     September 1998 the other joint venturer loaned the subsidiary $600,000 at a
     3% per month interest rate. It was then agreed that all loans or
     investments made or to be thereafter made by the venturers would be repaid,
     together with interest, from the joint venture's cash available from net
     operating income and on a basis pro rata to the total of such loan or
     investment balances and accrued interest.

          The fully operating small Budapest casino should soon provide some
     cash distributions. In September 1998 the Company purchased 95% of the
     Hungarian company operating that Budapest casino. That casino has generated
     cash losses from April, when the Company undertook its management, to
     August 1998. However, by the end of August the casino had begun to operate
     near breakeven. The Company has received no cash distributions from the
     Budapest casino.

          While the Company has entered into a letter of intent with RNGS dated
     September 23, 1998 relating to the Sakhalin Project, that project is not
     expected to produce operating income for at least 18 to 24 months from that
     date. The negotiation of, and any favorable progress toward, definitive
     agreements under that letter of intent might increase the Company's ability
     to obtain cash for incidental interim financing, which might be secured by
     the Company's interests in the Project. Such progress would probably
     require the Company to make expenditures for travel, accounting, legal,
     expert and other related charges, and possibly substantial expenditures to
     bring the budget, design and construction plans to more final stages. If
     the agreement with RNGS is consummated, the Company's need for most or all
     of the cash for the construction phase might be fulfilled or obviated. In
     December 1997, the Company advanced $3,000,000 and issued 2,000,000 shares
     of its Common Stock as part of the agreement to purchase the 100% interest
     in SGTI, which in turn owns 65% of SCC, the Company directly developing the
     Project. As of June 30, 1998, the Company had advanced $3,421,000 as loans
     to SGTI for the development of the Sakhalin Project.

          At June 30, 1998 the Company had no debt for borrowed money, and
     little or no cash interest expenses. Consequently, interest payments are
     not material to the Company's cash position. (In 1997, the Company had
     repaid all its then outstanding debt obligations from the proceeds of its
     June 6, 1997 initial public offering. A significant portion of interest
     expense in the statement of operations are non-cash items for amortization
     of debt discount recorded for the value of Common Stock then issued in
     exchange for convertible debentures.) 

          The November 1998 settlement of the Hotel Management Agreements ended 
     all related payments, although the Company received a $450,000 cash payment
     in that settlement and retained $1,000,000. In addition, on December 3,
     1998, the Company received $300,000 from two individuals for the purchase
     of 400,000 shares of Common Stock at the market value. The individuals were
     also issued warrants to purchase 200,000 shares of Common Stock at an
     exercise price of $1 per share. These cash payments were and  are being
     applied primarily to urgent cash payment obligations arising from the
     overall operation of its businesses.

          Since July 1998 the Company has actively sought to raise cash through
     loans or sales of securities. It has been unable to do so on terms
     acceptable to it, but is continuing its efforts. The current financial
     condition of the Company, the current market price of its stock, the
     unresolved prospects of its business and future business prospects all have
     impaired the Company's ability to borrow or otherwise raise capital other
     than on disadvantageous terms. If the Company is not successful in
     obtaining additional financing for its operations, it will undertake to
     reduce its operating overhead, negotiate payment terms with vendors and
     attempt to obtain additional casino management contracts. However, there
     can be no assurance that the Company will be successful in accomplishing
     its objectives. Consequently, the report of the independent certified
     public accountants covering the Company's consolidated financial statements
     for the  year ended June 30, 1998 contains a going concern emphasis
     paragraph.

          At September 30, 1998, the Company had a working capital deficit of
     $1.3 million, excluding liabilities which were relieved by the termination
     of the Hotel Management Agreements. The Company is seeking at least 

                                       24
<PAGE>

     $3,000,000 in financing to meet the $1.5 million estimated cost commitment
     ($2,200,000 at June 30, 1998) to bring the Suriname Casino to full
     operation, to discharge current payment obligations, and for working
     capital. At September 30, 1998 the Company had approximately $495,000 cash
     or cash equivalents on hand. As of that date, its only predicted (but
     contingent) sources of cash were (i) about $150,000 to $200,000, per month
     anticipated from the operating profits of the temporary Suriname Casino. If
     funds can be made promptly available for remaining work, the permanent
     Suriname Casino might be open and operating by late February 1999. It is
     impossible to reliably predict what distributable cash flow that casino
     will generate. Nevertheless, the Company has previously projected for
     internal planning purposes a distributable cash flow of $300,000 in the
     first month after full operation, a 10% increase each month thereafter for
     4 months, and then a leveling off.

          The Company believes the additional financing and cash sources, if
     realized, will provide adequate cash flow to maintain the Company's
     current operations for the next 12 months. As a result of the delinquent
     filing of this form 10-K, the Company was notified by Nasdaq of possible
     delisting from its 12(g) SmallCap Market Exchange. The Company has
     consequently written the Nasdaq Listings Hearings Director to explain the
     reason for delay in filing this report. If the Company were to become
     delisted it would have an adverse affect on the Company's ability to obtain
     the additional financing it is currently seeking.

     Prior Financing

          The Company was a development stage company through March 1998. The
     Company's activities since its inception in March 1996 have been primarily
     focused on raising both debt and equity financing (public and private),
     organizing and developing its food preservation technology business, and,
     since mid-1997, organizing and developing its hotel management business and
     casino business. The Company has incurred losses since its inception, and ,
     as of June 30, 1998, the Company has yet to derive any substantial income
     from operations, except for about $640,000 from fees under hotel management
     contracts that commenced in January and March, 1998. The Company's
     accumulated deficit at June 30, 1998 was $22.5 million.

          From March 1996 through February 1998, the Company raised capital
     necessary for its business development through debt and equity private
     placements. In 1996 it had a private offering of Common Stock and
     convertible debentures in which it raised about $4.9 million. In June 1997,
     while the Company was developing its food preservation technology business,
     the Company completed an initial underwritten public offering (the "Initial
     Public Offering") in which it received net proceeds of about $10,306,000
     from the sale of 2,530,000 shares of its Common Stock at a per share price
     of $5.00. At that time the Common Stock began being quoted on the Nasdaq
     SmallCap market and is still so quoted. In November 1997 through February
     1998 the Company began and completed another private offering of Common
     Stock (the "1997 Private Offering") in which it received net proceeds of
     about $8.9 million from the sale of 2,044,763 shares of its Common Stock
     at $5.14 per share. The 1997 Private Offering was largely intended by the
     Company to raise cash for its initial expenditures for its new hotel and
     casino businesses. The Company's stockholders at a meeting in December 1997
     approved entry into those businesses. As of June 30, 1998, the Company had
     spent all proceeds of the 1997 Private Offering directly for those initial
     expenditures.

          The Company's accumulated deficit at June 30, 1998 included $6.8
     million of non-cash compensation charges related to the value attributed to
     stock options and warrants issued by the Company. The Company has
     historically made extensive use of options granted under its 1996 Stock
     Option Plan (the "Plan") and of non-Plan options and warrants. By November
     30, 1998 the closing bid market price of the Company's Common Stock had
     fallen from a 1998 high of $8.813 to a new low of $.469 on November 10,
     1998. On September 14, 1998 the Board of Directors and its Compensation
     Committee expressed 

                                       25
<PAGE>

     their concern that during future critical times the Company might face
     problems with maintaining the loyalty and diligence of key personnel. The
     Board voted on such date to reduce the exercise price to $1.50 of all Plan
     and non-Plan options and warrants held by any then-current directors,
     officers or employees of the Company, and of persons associated with
     principal London counsel on such date. About 80,000 non-Plan options,
     325,000 warrants and 1,502,500 Plan options for Common Stock were so
     affected. In addition, the Board voted to grant non-Plan and Plan options
     at market price to seven officers or directors to purchase 1.5 million
     shares. As a result of effecting the reductions and grants the Company
     estimates that it will incur an additional $750,000 in non-cash
     compensation charges in the fiscal year ending June 30, 1999.

     Year 2000 Impact on Business Operations

          Computers, software and other equipment utilizing microprocessors that
     use only two digits to identify a year in a date field may be unable to
     process accurately certain date-based information at or after the year
     2000. The Company recognizes the need to insure that its operations will
     not be adversely affected by Year 2000 software failures. Software failures
     due to processing errors potentially arising from calculations using the
     year 2000 date are a recognized risk, and the Company is addressing this
     issue on several different fronts.

          The Company is in contact with its suppliers to assess their
     compliance. There can be no assurance that there will not be a material
     adverse effect on the Company if third parties do not covert their computer
     systems in a timely manner and in way that is compatible with the Company's
     systems. The Company believes that its actions with suppliers will minimize
     these risks.

          Through June 30, 1998, the Company has not incurred material expenses
     relating to Year 2000 compliance efforts and believes that the expenses
     associated with completing its Year 2000 compliance plans will not have a
     material adverse impact on the Company's operations and is not expected to
     exceed $50,000. Internal and external expenses specifically associated with
     modifying internal-use software for the Year 2000 will be expensed as
     incurred. The Company's current estimates of the amount of time and
     expenses necessary to implement and test its computer systems are based on
     the facts and circumstances existing at this time. Nevertheless, achieving
     Year 2000 compliance is dependent on many factors, some of which are not
     completely within the Company's control. Should either the Company's
     internal system or the internal systems of one or more significant vendors
     or suppliers fail to achieve Year 2000 compliance, the Company's business
     and its results of operations could be adversely affected.

          The Company uses a significant number of computer software programs
     and operating systems in its casino and internal operations, including
     applications used in financial business systems and various administration
     functions. To the extent that these software applications contain source
     code that is unable to appropriately interpret the upcoming calendar year
     "2000", some level of modification or even replacement of such source code
     or applications will be necessary. The Company is in the process of
     identifying the software applications that are not "Year 2000" compliant
     and anticipates completion of this process by September 1999. Given the
     information known at this time about the Company's systems, coupled with
     the Company's ongoing efforts to upgrade or replace business critical
     systems as necessary, it is currently not anticipated that these "Year
     2000" costs will have a material adverse impact on the Company's business,
     financial condition and results of operations. 

                                       26
<PAGE>

     New Accounting Standards

          In June 1997, the Financial Accounting Standards Board issued
     Statement of Financial Accounting Number 130 (SFAS 130) "Reporting
     Comprehensive Income." This statement, which is required to be adopted for
     financial statements issued for annual periods beginning after December 15,
     1997, establishes standards for reporting and display of comprehensive
     income and its components in full set of general-purpose financial
     statements. At that time, the Company will be required to report total
     comprehensive income, an amount that will include net income as well as
     other comprehensive income. Other comprehensive income refers to revenues,
     expenses, gains and losses that under generally accepted accounting
     principles have previously been reported as separate components of equity
     in the Company's consolidated financial statements. SFAS 130 will not have
     a material impact on the Company's financial statements since its
     requirements deal mainly with financial disclosures.

          In June 1997, the Financial Accounting Standards Board issued
     Statement of Financial Accounting Standards Number 131 (SFAS 131)
     "Disclosure about Segments of an Enterprise and Related Information." This
     statement, which is required to be adopted for financial statements issued
     for annual periods beginning after December 15, 1997, establishes standards
     for the way that public business enterprises report information about
     operating segments in financial reports issued to shareholders. The Company
     has not yet determined the financial statement impact of SFAS 131.

          In June 1998, the Financial Accounting Standards Board Issues SFAS
     133, Accounting for Derivative Instruments and Hedging Activities, SFAS 133
     requires companies to recognize ALL derivatives contracts as either assets
     or liabilities in the balance sheet and to measure them at fair value. If
     certain conditions are met, a derivative may be specifically designated as
     a hedge, the objective of which is to match the timing of gain or loss
     recognition on the hedging derivative with the recognition of (i) the
     changes in the fair value of the hedged asset or liability that are
     attributable to the hedged risk or (ii) the earnings effect of the hedged
     forecasted transaction. For a derivative not designated as a hedging
     instrument, the gain or loss is recognized in operations in the period of
     change. SFAS 133 is effective for all fiscal quarters of fiscal years
     beginning after June 15, 1999.

          Historically, the Company has not entered into derivatives contracts
     either to hedge existing risks or for speculative purposes. Accordingly,
     the Company does not expect adoption of the new standard on July 1, 1999
     to affect its consolidated financial statements.

     Subsequent Events:

          Subsequent events are described in Item 1 of this report, above  in
     this Management Discussion and Analysis and in the Company's consolidated
     financial statements included herein.

                                       27
<PAGE>


     Factors That Could Affect Operating Results

          This Annual Report on Form 10-K contains forward-looking statements.
     Additional written and oral forward-looking statements may be made by the
     Company from time to time in Securities and Exchange Commission ("SEC")
     filings and otherwise. The Company cautions readers that results predicted
     by forward-looking statements, including, without limitation, those
     relating to the Company's future business prospects, revenues, working
     capital, liquidity, capital needs, interest costs, and income are subject
     to certain risks and uncertainties that could cause actual results to
     differ materially from those indicated in the forward-looking statements,
     due to the following factors, among other risks and factors identified from
     time to time in the Company's filings with the SEC.

     Food Technology Business

     .    The Company was, for accounting purposes, in the development stage
          until March 1998. Its operations are still in fact subject to all of
          the risks inherent in the establishment of a new business enterprise,
          including the need to obtain financing, lack of significant revenues,
          reliability of sources of supply and the uncertainty of market
          acceptance of its business. The Company has not as yet derived any
          significant revenues from operations and has incurred losses since
          inception.

     .    No operating revenues are anticipated from its food technology
          business until such time, if ever, as the Company can demonstrate the
          commercial viability of Preservit(Trademark). There can be no
          assurance whether or when the Company will successfully implement its
          business plan or operate profitably.

     .    The Company believes that its proposed use of Preservit(Trademark)does
          not currently subject it to any material federal, state, or local
          regulatory approvals. There can be no assurance, however, that future
          regulatory approvals will not be required in the United States or
          Canada (where the Company anticipated will be the sites of any market
          entry), leading to unanticipated expenses and delays inherent in the
          regulatory process.

     .    The Company has not undertaken any investigation as to the applicable
          requirements that may be imposed by regulatory agencies outside the
          United States. There can be no assurance that such legal restrictions
          in jurisdictions outside the United States will not result in a delay
          in the Company's ability to commercially develop the
          Preservit(Trademark)in those jurisdictions.

     .    The Company has no orders for Preservit(Trademark)products, and there
          can be no assurance that potential customers will be willing to incur
          the costs of Preservit(Trademark), that Preservit(Trademark)will be
          contracted for by any supermarkets or other 

                                       28
<PAGE>

          retailers, distributors or growers or, even if accepted by any such
          entities, that it will prove profitable or attractive to potential
          customers. In addition, there can be no assurance that other competing
          products will not be more economical or attractive to the Company's
          potential customers.

     .    The Company has never utilized Preservit(Trademark)under the
          conditions and in the volumes that will be required to make
          Preservit(Trademark)profitable, and cannot predict all of the
          difficulties that may arise in connection therewith.

     .    The Company's ability to operate its Preservit(Trademark)business
          successfully itself or with others will depend on a variety of
          factors, many of which are outside the Company's control, including
          competition, cost and availability of the product and changes in
          regulatory requirements.

     .    Any market or initial marketing activities might have to be performed
          by its executive officers and advisors. To varying degrees, such
          persons have had prior experience in the food industry and marketing
          food products and services. However, none have had any experience with
          Preservit(Trademark)or in marketing that product. In order to market
          and sell Preservit(Trademark), the Company may need to maintain or
          retain a sales force with technical expertise in the food preservation
          and food transportation industries. There can be no assurance that the
          Company will be able to gain or obtain such expertise or that such
          marketing efforts will be successful.

     .    There are several methods of food preservation commercially available
          that compete directly or indirectly with Preservit(Trademark). Many of
          the Company's potential competitors may have substantially greater
          financial, human and other resources than the Company as well as more
          experience in the marketing and selling of post-harvest life extension
          products. There can be no assurance that Preservit(Trademark)will gain
          commercial acceptance or establish any meaningful market share.
          Furthermore, any such market share, if and when achieved, could be
          lost or reduced by enhanced competition or the emergence of new and
          more effective preservation technologies.

     Hotel Business and Casino Business

     .    The Company's current and future business plans with respect to the
          ownership and management of hotels and casinos are affected, in large
          part, by changes in conditions which favorably or unfavorably affect
          investments in those enterprises. Many of these conditions are beyond
          the Company's control and affect: (i) the ability of the Company to
          operate any hotels and casinos; (ii) competition from other
          hospitality and entertainment properties; (iii) changes in regional
          and local population and disposable income composition; (iv)
          unanticipated increases in operating costs; (v) legal restrictions as
          to the use of advertising typically utilized in marketing gaming
          operations; (vi) restrictive changes in zoning and similar land use
          laws and regulations or in health, safety and environmental laws,
          rules and regulations; (vii) the inability to secure property and
          liability insurance to fully protect against all losses, or to obtain
          such insurance at reasonable costs; (viii) the exercise of the power
          of eminent domain; (ix) seasonality; and (x) changes in travel
          patterns or preferences which may be affected by increases in gasoline
          prices, changes in airline schedules and fare, strikes, weather
          patterns and/or relocation or reconstruction of highways, among other
          factors. Given the rapid developments and changes in the hotel and
          casino industries, it is impossible to accurately predict future
          trends or changes in those industries or their effect on the Company.
          In particular, the success of the Company's Sakhalin Project is
          largely dependent on tourism from the active gaming populations of
          Japan, Korea, China and the Russian Federation. Although the economic
          viability of any of that project is at least in part based upon
          tourist incentives which would streamline the process of tourists
          entering the regions in which the Company plans to operate casinos for
          gaming in such regions, there can be no assurance that restrictions
          will not be imposed on gaming generally in the regions in which the
          Company plans to operate and/or on tourists 

                                       29
<PAGE>

          entering such regions for gambling, which may adversely impact the
          Company's results of operations.

     .    The collection of the casino receivables with respect to the projects
          from international customers could be adversely affected by future
          business or economic trends or significant events in the countries in
          which such customers reside. There can be no assurance that operating
          cash flows and results of operations will not be adversely impacted by
          any inability to collect receivables from high--end players. In
          addition, gaming debts may not be legally enforced in certain foreign
          jurisdictions or in certain jurisdictions within the United States on
          grounds that they are against public policy. Such unenforceability may
          have an adverse impact on the collectability of such receivables.

     .    As a result of the Company's proposed expansion into the hotel and
          casino industries internationally, the Company's operations with
          respect to the proposed projects will be subject to greater risks
          inherent in international operations such as the possibility of the
          loss of revenues, property or equipment due to expropriation,
          nationalization, war, insurrection, terrorism or civil disturbance,
          the instability of foreign economies, currency fluctuations and
          devaluations, adverse tax policies and governmental activities that
          may limit or disrupt markets, restrict payments or the movement of
          funds or result in the deprivation of contract rights. The Company is
          subject to taxation in a number of jurisdictions, and the final
          determination of its tax liabilities involves the interpretation of
          the statutes and requirements of various domestic and foreign taxing
          authorities. Foreign tax authorities routinely examine foreign income
          tax returns of foreign subsidiaries, unconsolidated affiliates and
          related entities.

      .   For factors affecting the Sakhalin Project, including the current
          economic climate in Russia, see Item 1, "Sakhalin Project".

          There can be no assurance that any of these risks will not have an
     adverse effect on the Company's results of operations.

     Item 7a. Quantitative and Qualitative Disclosure About Market Risk 

          The Company held no material market risk sensitive financial
     instruments or interest therein, and held none at June 30, 1998. The
     Company's loans, payables, or receivables to or from others (including
     loans, payables or receivables to or from its subsidiaries or joint
     ventures) and the interest thereon, are all expressed as dollar obligations
     and payable in dollars.

          However, the Company's routine daily foreign operations are usually
     conducted in local foreign currencies. The Company is exposed to foreign
     currency exchange rate risk between the time foreign gaming revenue or
     other revenues are received and the time they are converted into dollars. 
     The Company has not entered into any exchange rate protection arrangements.

     Item 8.  Financial Statements and Supplementary Data

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

          In December 1997 the Company's principal independent accountant
     Richard A. Eisner & Company LLP resigned because the Company and its
     accountants believed that the Company's proposed entry into the
     international hotel and casino businesses required a principal accountant
     with more substantial and conveniently located international offices and
     resources. In April 1998 the Company retained BDO Seidman, LLP as its
     principal independent accountant. The decision to change accountants was
     approved by the Audit Committee and the Board of Directors.

                                    PART III

     Item 10.  Directors and Executive Officers of the Registrant

     Identification of Directors

          The Board of Directors is divided into three classes, the terms of
     which expire successively over a three-year period. At each annual meeting
     of stockholders, successors to directors whose terms expire at that meeting
     are to be elected for three-year terms. The current directors of the
     Company are as follows, except that in November 1998 Mr. Haft resigned as 
     a director:

                                       30
<PAGE>

                                Class A Directors

     JAY M. HAFT, 62, has served as a director of the Company since October
          1996. Mr. Haft resigned in November 1998 and has not been replaced. A
          practicing attorney for over 25 years, Mr. Haft also serves as
          Chairman of Noise Cancellation Technologies, Inc., Extech, Inc. and
          Jenna Lane, Inc. He is a Managing General Partner of Venture Capital
          Associates, Ltd. and of Gen Am "1" Venture Fund, a domestic and an
          international venture capital fund, respectively. From 1989 until
          1994, he was a partner at Parker Duryee Rosoff & Haft, counsel to the
          Company for its initial public offering, in New York, New York. He is
          currently of counsel to such firm. Since 1994, Mr. Haft has been a
          consultant and director to various public and private companies. He is
          a member of the Florida State Commission for Government Accountability
          to the People.

     DALLAS DEMPSTER, 57, was elected to the Board and also elected
          President and Chief Executive Officer on July 20, 1998. Since its
          inception he has been one of the two executive directors of the entity
          developing the Sakhalin Project, and is a founder of that project.
          From 1985 to 1991 Mr. Dempster was the Chairman and Managing Director
          of Burswood Resort Complex, of which he was the founder. Burswood is
          the largest tourist destination resort development in Western
          Australia, costing A$320 million, employing over 2,700 employees, and
          with revenues in excess of A$400 million. Between 1983 and 1990 he was
          Chairman of the Rottnest Island Authority on behalf of the Western
          Australia government. Mr. Dempster was principal project director
          and/or owner of substantial other property development projects in
          Sydney and Perth, a member of the Airline Deregulation/Committee, and
          a member of the Board of the Aboriginal Enterprise Company Limited. In
          March 1994 Mr. Dempster was fined A$4,000 for having violated the
          Australian Companies Code by counseling or procuring, or being
          directly or indirectly knowingly concerned in or party to, the making,
          by a bank officer, of a false book entry relating of the affairs of an
          Australian merchant bank. A person so found is automatically
          prohibited for five years from the management of a company in
          Australia. In October 1993 an Australian Court found that in 1986 Mr.
          Dempster failed to disclose to a co-venturer with his family company a
          payment to be made to him upon the co-venturer's withdrawal from the
          co-venture project. The co-venturer was awarded A$22 million judgment
          against Mr. Dempster and his family company. The family company had
          received A$50 million from the sale of the project several years after
          the withdrawal. The family company paid A$11 million in settlement,
          and in 1997 Mr. Dempster filed for voluntary bankruptcy in Australia,
          which has since been annulled on his reaching an agreed settlement of
          A$1.0 million. The Company has been provided with a legal opinion that
          under applicable Australian law the effect of the annullment of Mr.
          Dempter's bankruptcy is to retrospectively annihilate the bankruptcy
          and its consequences at law and to treat it as if it never happened
          (except that all acts done by the trustee or Court before the
          annullment shall be deemed to have been validly made or done).

                                Class B Directors

     JAMES V. STANTON, 66, has been Vice Chairman and a director of the
          Company since its inception in March 1996. From 1981 to 1988 he served
          as Executive Vice President of the Delaware North Company, one of the
          largest privately held food companies in the United States. Mr.
          Stanton has been an attorney since 1962 and a registered lobbyist in 
          Washington, D.C. since 1988, and represented the 20th Congressional
          District of Ohio in the United States House of Representatives from
          1971 to 1977, where he served on the Select Committee on Intelligence,
          the Government Operations Committee, and the Public Works and
          Transportation Committee.

     JONATHAN M. CAPLAN, Q.C., 47, elected a director in December 1997, is
          a barrister-at-law, practicing in the United Kingdom and was appointed
          Queens Counsel in 1991. Mr. Caplan specializes in various areas of
          work, including legal consultation and advisory work pertaining to
          financial regulations, Stock Exchange regulations, international law
          and media law. He practices principally in London and the Far East.
          Mr. Caplan is a director of ACE Editing Ltd., a UK company providing
          technical services to the television industry. He is also a member of
          the Educational Board of the Journal of Criminal Law, a fellow of the
          Royal Society for Arts in London. 

                                       31
<PAGE>

          Mr. Caplan was formerly the Chairman of Public Affairs for the Bar
          Council of England and Wales.

                                Class C Directors

     CHARLES H. STEIN, 70, was the Chairman, President and Chief Executive
          Officer of the Company since its inception in March 1996 through July
          20, 1998, after which he has been Chairman. From June 1994 until March
          1996, Mr. Stein was a private investor and consultant. From October
          1993 until June 1994, Mr. Stein was Chairman of HMI International
          Ltd., a Florida based wholesaler and retailer of resale products. From
          1985 to 1987, he was President and Chief Executive Officer of Night
          Hawk Resources, Ltd. (Vancouver Stock Exchange) which was engaged in
          oil and gas exploration in Texas and Alaska. Prior thereto and from
          1987, Mr. Stein was a private investor. Early in his career, Mr. Stein
          pioneered the concept of packing fresh orange juice in "milk-type"
          cartons, which concept was sold to Kraft Foods, Inc. From December
          1968 to October 1983, Mr. Stein was Chairman and Chief Executive
          Officer of Hardwicke Companies Inc. (Nasdaq), which built, developed,
          or operated more than 50 restaurants (including Tavern on the Green,
          Maxwell's Plum, and Benihana), health spas, theme parks in North
          America, Europe and Asia (including Great Adventure in New Jersey),
          and duty-free shops. Prior to 1968, he was President and Chief
          Executive Officer of Kitchens of Sara Lee, the world's largest bakery,
          as well as a director, member of the Executive Committee, and a Vice
          President of Consolidated Foods Corporation (NYSE), the parent company
          of Sara Lee.

          The Company currently has authorized five directorships, one of which
     is vacant due to Mr. Haft's resignation. In 1997 the Company amended its
     Certificate of Incorporation to provide for a classified Board of
     Directors. The Company's Board of Directors is divided into three classes.
     Class A has two directorships, of which one is held by Mr. Dempster and one
     of which is vacant was held by Mr. Haft, whose terms will expire at the
     Company's annual stockholder meeting for 1998. Mr. Dempster was elected a
     director in July 1998 by the Board of Directors, to replace a director who
     had resigned. Class B has two directorships, now held by Messrs. Stanton
     and Caplan, whose terms expire at the Company's annual stockholder meeting
     for 1999. Mr. Caplan was elected a director on December 2, 1997 by the
     Board of Directors to replace Mr. Brian J. Bryce, who had resigned. Class C
     consists of one directorship, now held by Mr. Stein, whose term expires at
     the Company's annual stockholder meeting for 2000. Except for Messrs.
     Dempster and Caplan, stockholders elected all the directors in 1997 when
     the Company's stockholders first approved a classified board. At each
     annual stockholder meeting beginning with the 1998 annual meeting, the
     successors to directors whose terms will then expire will be elected to
     serve from the time of election and qualification until the third annual
     meeting following election and until their successors have been duly
     elected and qualified. Any additional directorships resulting from an
     increase in the number of directors will be distributed among the three
     classes so that, as nearly as possible, such class will consist of an equal
     number of directors. All stockholders of the Company's Common Stock are
     entitled to vote in elections for the directors of each Class.

     The Company has agreed that, for a period of five years from June 6, 1997,
     Janssen/Meyers Associates, L.P. ("J/M") may designate one person to be
     elected to the Board of Directors of the Company or, in the alternative,
     J/M may designate one person to attend all meetings of the Company's Board
     of Directors and to receive all notices of meetings of the Company's Board
     of Directors and all other correspondence and communications sent by the
     Company to members of its Board of Directors. Such designee may be an
     officer or director of J/M. If J/M's designee is elected to the Board of
     Directors, such designee will sit on the Company's Audit Committee. J/M has
     not designated an individual to serve in such capacity. J/M was the
     Company's underwriter in the June 1997 initial public offering.

     Identification of Executive Officers Who Are Not Directors

                                       32
<PAGE>

     DAVID A. HARTLEY, 51, has been President of the Casino Division since
          October 1997. Mr. Hartley has spent the past 20 years in the casino
          gaming industry. Originally trained as a Clinical Psychologist, he has
          had extensive experience in virtually all aspects of casino
          operations, from the Queen Elizabeth II cruise ship, to six
          London-based casinos. After serving as the Manager of the Ritz Casino
          Club in London, he was appointed Gaming Executive in charge of
          management development and training. He served in several positions at
          London Clubs International Ltd., where he was responsible for that
          company's expansion outside the United Kingdom. This involved
          researching and evaluating prospective markets, acquiring new casino
          licenses, and other related activity. Subsequent to that, he joined
          Regency Casinos Limited in 1992, where, until joining the Company, he
          held several positions, and was most recently Chairman. In this
          employment he negotiated a joint venture with Hyatt International
          Corporation to establish an international casino management company,
          and organized several international casinos. These included Regency
          Casino Thessaloniki, a US$120 million project, including a new hotel,
          which is the largest casino in Europe with gross gaming win
          approaching US$140 million. Also included was a Regency Casino Baku
          Azerbaijan, constructed within the Hyatt Hotel, at a project cost of
          US$15 million, including the hotel, casino, restaurants and business
          facilities, as well as the Mimosa Regency Casino, Philippines, with a
          project cost of US$5 million. Mr. Hartley has also been responsible
          for the establishment and planning and development strategy for
          several other casinos, including projects in Cape Town, South Africa
          and a second operation in Baku. Mr. Hartley is a hands-on manager with
          the background, experience, and knowledge of the casino industry in
          emerging markets.

     KAI W. MICHAELSEN, 50, had been President of Hotel Division since
          January 1998 until operations of that division were terminated in
          November 1998. Mr. Michaelsen began his hotel industry career in
          Germany. A position with Holiday Inn introduced him to main line Food
          and Beverage responsibilities. Recruited by Hyatt International
          Corporation, he spent several years in Asia in various operational
          capacities before being promoted to Corporate Director of Projects for
          Hyatt's rapid worldwide expansion in the late 80's and early 90's. He
          was responsible for the implementation of stringent quality and
          operation standards. He was involved in the development of the
          flagship "Grand Hyatt" hotels in Hong Kong, Taipei, Bangkok, Bali and
          Jakarta. From July 1991 to October 1994 he was a hotel operations
          consultant to P.T. Adhygaya Budaya in Indonesia. Mr. Michaelsen joined
          CDL Hotels International in November 1994 as Director of Technical
          Services where he set up operational guidelines, policies and
          procedures. He was part of the executive team which launched the
          "Millennium Hotel & Resorts" brand and worked on the buy-out of the
          Copthorne Hotels chain. In June 1996 he joined FEC to develop its
          hotel business.

     DOUGLAS C. RICE, 54, was appointed Vice President -- Corporate
          Development upon joining the Company in May 1996 and appointed
          Executive Vice President and Chief Operating Officer of the Food
          Technology Division in April 1997. Prior to joining the Company and
          from 1986, Mr. Rice was an independent food technologies consultant,
          during which time he provided advice and guidance for six years to the
          Charoen Pokphand Group, one of Asia's largest food producers, on the
          operations, financing, management and distribution aspects of business
          specializing in shrimp, fish and chicken products.

     GERALD M. BRESLAUER, 61, had been Vice President-Administration and
          Secretary of the Company since its inception until his employment
          ended in November 1998. From 1991 until he joined the Company in March
          1996, Mr. Breslauer was an agent of The Equitable Life Assurance
          Society of the United States and the Equitable Variable Life Insurance
          Company and was a registered representative of Equico Securities, Inc.
          Mr. Breslauer is licensed to practice law in the State of New York.

     MILES R. GREENBERG, 41, was appointed Vice President and Chief
          Financial Officer upon joining the Company in September 1996 and
          appointed Senior Vice President on January 18, 1997. From 1994 until
          joining the Company, Mr. Greenberg served as Vice President and Chief
          Financial Officer of F3 Software Corporation ("F3"), a developer and
          marketer of electronic forms composition and automation software. From
          1992 until assuming his positions at F3, he served as Controller of
          BLOC Development Corporation (former parent company of F3), a publicly
          held entity primarily engaged in the development, publishing and
          direct marketing of computer software 

                                       33
<PAGE>


          and hardware products. From 1985 to 1992, Mr. Greenberg served as Vice
          President and Chief Financial Officer of The Levenshon Companies, Inc.
          and its affiliates, a diversified financial services company. Mr.
          Greenberg is a Certified Public Accountant formerly with KPMG Peat
          Marwick.

                          Compliance with Section 16(a)
                     of the Securities Exchange Act of 1934

          Section 16(a) of the Securities Exchange Act of 1934 requires the
     Company's directors and executive officers, and persons who own more than
     10 percent of any registered class of the Company's equity securities, to
     file with the Securities and Exchange Commission (the "SEC") and the Nasdaq
     Stock Market reports of ownership of the Common Stock of the Company.
     Reporting persons are required by SEC regulation to furnish the Company
     with copies of all such reports that they file. To the best of the
     Company's knowledge, during the period twelve months ended June 30, 1998,
     the initial reports and any amendments thereto of each of the Company's
     executive officers and directors were timely filed.

     Item 11.  Executive Compensation

          The following table sets forth the compensation awarded to, or paid
     to, or earned by, the Company's Chairman (now former Chief Executive
     Officer and former Chief Operating Officer) and one other ("Named Executive
     Officers") during the period March 1996 to June 30, 1998. No other
     executive officer of the Company serving as an executive officer on June
     30, 1998 received a total salary and bonus of $100,000 for the periods
     specified. Accordingly, no information is reported for such persons.

                           Summary Compensation Table

<TABLE>
<CAPTION>
       -------------------------------------------------------------------------------------------------------------------------
                                                           Annual Compensation     Compensation Long
                                                                                   Term
       -------------------------------------------------------------------------------------------------------------------------
       Name and Principal           Fiscal Year            Salary ($)              Securities              All Other
       Position                                                                    Underlying Options(#)   Compensation
       -------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>                    <C>                     <C>                     <C>
       Charles H. Stein, now        June 30, 1997 to       Note (1)                   ____                  $40,000
       Chairman, then Chief         June 30, 1998
       Executive Officer,           March 6, 1996 to         _____                    ____                  Note (2)
       President and Director       June 30, 1997

       David Hartley, President,    October, 1997 to       $189,000                100,000                  _____
       Casino Division              June 30, 1998
       ============================ ====================== ======================= ====================== =======================

</TABLE>


     (1)  As of June 30, 1998, Mr. Stein had waived merely (not deferred) his
          right to any annual salary and, as of the date of this report, has
          continued to waive this right. The Board of Directors has accepted Mr.
          Stein's waiver, but has reserved the right to award Mr. Stein, in its
          sole discretion, the amounts so waived. During the 12-month period
          ended June 30, 1998 the Company recorded non-cash compensation
          charges of $90,000 for services contributed by Mr. Stein.

     (2)  The Company purchased a life insurance policy for Mr. Stein's benefit,
          paying a premium of about $40,000.

                                       34
<PAGE>

          The Company has no defined benefit plan, actuarial plan, no pension
plan and no long-term incentive plan.

          After the Company acquired a 65% interest in SGTI in December 1997,
     SGTI continued to pay Sovereign Gaming and Leisure Ltd. consulting fees of
     $15,000 per month. Mr. Dempster was paid by Sovereign consulting fees in a
     similar amount for the same services, or other services, during the same
     six-month period.

     Employment Agreement

          Effective as of June 13, 1997 the Company entered into an employment
     agreement with Mr. Charles H. Stein, then President and Chief Executive
     Officer of the Company. The agreement has a three-year term which renews
     for an additional year on each anniversary of the agreement, and provides
     for an annual base compensation of $125,000 together with such additional
     increases as the Company's Board of Directors, in its sole discretion, from
     time to time determines are appropriate. The agreement also provides for
     certain employee benefits including medical insurance, vacation and a car
     allowance, and also contains a non-competition provision covering the term
     of the agreement as well as for 36 months following termination. To date,
     Mr. Stein has waived his salary.

     Option Grants

          The following table provides certain information regarding the stock
     options granted during the 12 month period ended June 30, 1998 to the Named
     Executive Officers named in the Summary Compensation Table.

          Option Grants For the Twelve-Month Period Ended June 30, 1998

<TABLE>
<CAPTION>
       ----------------------------------------------------------------------------------------------------------------------
                               Number of Securities      % of Total Options           Exercise of
                                 Underlying Options      Granted to Employees          Base Price
             Name                  Granted (#)(1)          in Fiscal Period             $/Share              Expiration Date
       ----------------------------------------------------------------------------------------------------------------------
<S>                            <C>                       <C>                          <C>                  <C>
       Charles H. Stein                 0                        0                      -----                 -----
       ----------------------------------------------------------------------------------------------------------------------
       David Hartley                100,000*                    42%                     $6.50              October, 2000
       Note (1)
       ----------------------------------------------------------------------------------------------------------------------
</TABLE>

     * At June 30, 1998, Mr. Hartley had not exercised any options and all
       100,000 remain outstanding.


          (1) In October 1997, Mr. Hartley became an executive officer of the
     Company. The Casino Consulting Agreement with his employer, Star Casinos
     Limited, granted non-Plan options to purchase 100,000 shares of the
     Company's Common Stock at $6.50 per share, with half of the options
     becoming exercisable in October 1998 and half in October 1999. On the date
     of grant the closing bid price for a share of Common Stock was $6.50. Based
     on the Black-Scholes option-pricing model these options would be valued at
     $140,000. The Company believes Mr. Hartley is the principal stockholder in
     Star and may be deemed to beneficially own the options. Consequently, the
     Company has included those options in the above table as being granted to
     Mr. Hartley for purposes of the table. On September 14, 1998 the Board
     approved a reduction of the exercise price to $1.50 as part of a more
     general reduction in exercise prices of options held by officers, directors
     and employees.

          No other option was granted to any of the Named Executive Officers
     under the 1996 Stock Option Plan, or otherwise granted to any such officer
     during the year ended June 30, 1998, and no options were exercised by any
     of them during that period. The unexercised options held by the executive
     officers named had no value at June 30, 1998 as the exercise prices
     exceeded the fair market value closing price of the common stock on such
     date.

                                       35
<PAGE>

          The Company's outstanding options at June 30, 1998 totaled 3,177,500.
     The Company uses the Black-Scholes option pricing model to value options
     issued. See Note 12 to the Consolidated Financial Statements contained
     herein.

          In September 1998 the Board of Directors: (i) reduced the exercise
     price of all Plan and non-Plan Options (and any warrants) previously
     granted any officer, director, or employee to the then market price of
     $1.50, and granted seven persons and entities new Plan and non-Plan options
     to purchase 1,500,000 shares. Those reductions in price and grants are not
     included in the above table because those actions were not taken during the
     year ended June 30, 1998. For that same reason the Company has not included
     the information and explanation provided for in Regulation S-K, Item
     402(i).

          On December 2, 1997 Messrs. Brian Bryce and Jay Haft were granted
     options in consideration of their services in bringing the Sakhalin project
     to the Company. The Company believes such services were not provided by
     them as directors of the Company.

     Directors Compensation

          Non-employee directors receive $2,000 per month during the twelve
     months ended June 30, 1998. Since August 1998 they waived the fee.
     Directors who are employees of the Company receive no additional
     compensation for their services rendered as directors. All directors are
     reimbursed for reasonable expenses incurred in connection with their
     services rendered as directors.

     Item 12.  Security Ownership of Certain Beneficial Owners and Management

          The following table sets forth information as of October 15, 1998, to
     the best of the Company's knowledge, with respect to each person (including
     any "group" as that term is used in Section 13(d)(3) of the Securities
     Exchange Act of 1934, known to the Company to be the beneficial owner of
     more than 5% of the Company's Common Stock. The percentage of shares
     outstanding is based on the Company's shares of Common Stock outstanding as
     of October 15, 1998, as adjusted in each case pursuant to Rule 13-3(d)1
     under the Securities and Exchange Act of 1934.

<TABLE>
<CAPTION>
       -----------------------------------------------------------------------------------------------------------
                                                                 Number of Shares            Percentage of Total
       Name and Address of Stockholder                           Beneficially Owned          Voting Shares *
       -----------------------------------------------------------------------------------------------------------
<S>                                                              <C>                         <C>
       Charles Stein Inter Vivos Trust (1)                         1,100,000                    8.82%
       c/o CCA Companies Incorporated
       -----------------------------------------------------------------------------------------------------------
       James V. Stanton (2)                                          753,644                    6.04%
       c/o CCA Companies Incorporated
       -----------------------------------------------------------------------------------------------------------
       Dallas Dempster                                             1,000,000                    7.48%
       c/o CCA Companies Incorporated (3)
       -----------------------------------------------------------------------------------------------------------
       Far East Consortium International Limited (4)                 950,000                    7.68%
       12th Floor, Menara Multi-Purpose
       No. 8 Jalan Munshi Abdullah
       50100 Kuala Lumpur
       -----------------------------------------------------------------------------------------------------------
       Peter Janssen (5)                                             999,129                    7.59%
       c/o Janssen Meyers Associates LP
       17 State Street
       New York, N.Y.
       -----------------------------------------------------------------------------------------------------------
</TABLE>

                                       36
<PAGE>

<TABLE>
<S>                                                              <C>                         <C>
       -----------------------------------------------------------------------------------------------------------
       Bruce Meyers (6)                                              669,383                    5.09%
       c/o Janssen Meyers Associates LP
       17 State Street
       New York, N.Y.
       -----------------------------------------------------------------------------------------------------------
</TABLE>

     (1)  Represents 1,000,000 shares held by the Charles Stein Inter Vivos
             Trust for the benefit of Mr. Stein's spouse and children. Mr. 
             Stein, Chairman of the Company disclaims voting and investment
             power with respect to those shares. Mr. Stein currently has an
             exercisable option to purchase 100,000 shares of common stock at
             $1.50 per share.

     (2)  Includes 20,000 shares of Common Stock which are held by Mr. Stanton,
             a Director of the Company, as joint tenant with his wife, Margaret
             M. Stanton, currently exercisable warrants to purchase 150,000
             shares of Common Stock at a price equal to $1.50 per share, and
             currently exercisable options to purchase 500,000 shares and 23,644
             shares of Common Stock at $1.50 and $2.00 per share, respectively.

     (3)  Represents currently exercisable non-Plan options granted September
             1998 to purchase 1,000,000 shares at $1.50 in the name of Dabus
             International Limited for the benefit of Mr. Dempster's family.
  
     (4)  Subject to an irrevocable proxy to the Company pursuant to the FEC
             Hotel Management Agreement, and to other restrictions that may
             result in FEC not being the beneficial owner of these shares. FEC
             has neither affirmed nor disclaimed beneficial ownership.

     (5)  Includes currently exercisable warrants to purchase 55,000 shares at
             $8.25; warrants to purchase 178,917 shares at $5.135 and Janssen
             Meyers Associates, LP warrants to purchase 100,100 shares at $8.25
             and warrants to purchase 325,629 shares at $5.135.

     (6)  Includes currently exercisable warrants to purchase 55,000 shares at
             $8.25; warrants to purchase 178,917 shares at $5.135 and Janssen
             Meyers Associates, LP warrants to purchase 100,100 shares at $8.25
             and warrants to purchase 325,629 shares at $5.135.

          The above table sets forth information as of October 15, 1998, which
     is prior to the November 4, 1998 date of the November Settlement Agreement
     under which Far East Consortium International Limited agreed to return to
     the Company for cancellation 700,000 of the 950,000 shares listed above. If
     the table set forth information as of a date after November 4, 1998, FEC
     would have a percentage of total voting shares less than 5%, and thus would
     not appear in the table.

          If the letter of intent between the Company and RNGS, described in
     Item 1 above under the heading "Sakhalin Project" and elsewhere in this
     report, were consummated, then RNGS and its associates might be issued 51%
     of the Company's Common Stock to be then outstanding, and, subject to any
     prior agreement reached with the Company as to management, would be
     entitled initially to name critical members of management and of the Board
     of Directors, and possibly thereafter to elect all or most of the Board of
     Directors by reason of its ownership of Common Stock.

          Pursuant to the Dorsett International Hotel Management Agreement
     terminated November 4, 1998, the Company might have issued to Mr. Chiu or
     his associates up to 800,000 shares of Common Stock upon delivery of
     certain Hotel Operating Contracts, and pursuant to the FEC Hotel Management
     Agreement terminated November 4, 1998 the Company might have issued to FEC
     250,000 more shares for delivery of one Hotel Operating Agreement. Pursuant
     to the Development Services Agreement with Mr. Chiu, the Company might have
     issued to him 1,500,000 shares of Common Stock if and when he procured loan
     financing for the Sakhalin Project.

          In acquiring SGTI the Company issued 2,000,000 shares to the former
     stockholders in SGTI. The Company does not know the ultimate beneficial
     ownership of these shares.

                                       37
<PAGE>

          As described in Item 1 above under the heading "Common Stock and Hotel
     Management Agreements" and elsewhere in this report, the shares held by Far
     East Consortium International Limited, and further shares that might be
     issued pursuant to the two Hotel Management Agreements, are subject to
     contractual restrictions on transfer to an irrevocable proxy, and to a
     "first option."

          The following table sets forth information as of October 30, 1998, to
     the best of the Company's knowledge, with respect to the Company's Common
     Stock, including, (i) the ownership of Common Stock by each then current
     director and nominee, (ii) the ownership of Common Stock by the Named
     Executive Officers named in the "Summary Compensation Table" and (iii) the
     ownership of Common Stock by all then current directors and executive
     officers of the Company as a group. Except as otherwise provided in the
     footnotes to the table, the beneficial owners are believed by the Company
     to have sole voting and investment power as to all securities. The
     percentage of shares outstanding is based on the Company's Common Stock
     shares outstanding as of October 30, 1998 as adjusted in each case pursuant
     to Rule 13-3(d)1 of the Securities and Exchange Act of 1934.

<TABLE>
<CAPTION>
       ----------------------------------------------------------------------------------------------------------------------
                                                                                              Number of         Percentage of
       Name                                                                                   Shares            Total        
                                                                                              Beneficially      Voting       
                                                                                              Owned             Shares       
       ----------------------------------------------------------------------------------------------------------------------
<S>                                                                                           <C>               <C>
       Charles H. Stein - formerly Chairman, President and Chief Executive Officer,             1,100,000          8.8%
       currently Chairman (1)
       ----------------------------------------------------------------------------------------------------------------------
       James V. Stanton - Vice Chairman and Director(2)                                           753,644          6.0%
       ----------------------------------------------------------------------------------------------------------------------
       Dallas Dempster, now  President, Chief Executive Officer, Chief Operating Officer,       1,000,000          7.5%
       Director (3)
       ----------------------------------------------------------------------------------------------------------------------
       Douglas Rice - Vice President-Food Division (4)                                             53,333            *
       ----------------------------------------------------------------------------------------------------------------------
       Miles R. Greenberg - Senior Vice President-Finance, Treasurer and Chief Financial          123,333            *
       Officer(5)
       ----------------------------------------------------------------------------------------------------------------------
       David A. Hartley - President - Casino Division(6)                                           50,000            *
       ----------------------------------------------------------------------------------------------------------------------
       Gerald M. Breslauer - Vice President - Administration and Secretary(7)                      75,000            *
       ----------------------------------------------------------------------------------------------------------------------
       Kai K. Michaelsen - President-Hotel Management Division                                                       *
       ----------------------------------------------------------------------------------------------------------------------
       Jonathan Caplan - Director(8)                                                              100,000            *
       ----------------------------------------------------------------------------------------------------------------------
       Jay M. Haft-Director(9)                                                                    450,000          3.5%
       ----------------------------------------------------------------------------------------------------------------------
       All executive officers and directors as a group (10 persons)                             3,705,310         24.6%
       ----------------------------------------------------------------------------------------------------------------------
</TABLE>

     *    Represents beneficial ownership of less than 1% of the Common Stock.

     (1)  Represents shares held by Charles Stein Inter Vivos Trust for the
             benefit of Mr. Stein's spouse and children. Mr. Stein disclaims
             voting and investment power with respect to the shares. Includes
             currently exercisable options granted September 1998 for 100,000
             shares at $1.50 per share.

     (2)  Includes 20,000 shares of Common Stock which are held by Mr. Stanton
             as joint tenants with Mr. Stanton's wife, Margaret M. Stanton,
             currently exercisable warrants to purchase 150,000 shares of common
             stock at a price equal to $1.50 per share, and currently
             exercisable options to purchase 500,000 shares and 23,644 shares of
             Common Stock at $1.50 and $2.00 per share, respectively. Does not
             include 30,000 shares of Common Stock issued to Mr. Stanton's adult
             children.

     (3)  Represents currently exercisable non-Plan options granted September
             1998 to purchase 1,000,000 shares at $1.50 per 

                                       38
<PAGE>

             share in the name of Dabus International Limited for the benefit of
             Mr. Dempster's family.

     (4)  Represents currently exercisable options to purchase 50,000 shares of
             Common Stock at $0.50 per share and 3,333 at $1.50 per share.

     (5)  Represents currently exercisable options to purchase 123,333 shares of
             Common Stock at $1.50 per share.

     (6)  Represents currently exercisable options to purchase 50,000 shares at
             $1.50 per share. Does not include options for an additional 50,000
             shares becoming exercisable in October 1999.

     (7)  Represents 50,000 shares held by Mr. Breslauer and currently
             exercisable options to purchase 25,000 shares at $1.50 per share.

          If the above table set forth information as of November 15, 1998 it
     would reflect as of November 4, 1998 the return by FEC of 700,000 shares,
     and the respective percentages of Messers Stein, Stanton, Dempster and Haft
     would be 9.25%, 6.04%, 7.82% and 3.69%, and of all then 10 executive
     officers and directors as a group would be 25.88%.

     (8)  Represents a currently exercisable option to purchase 100,000 shares
             at $1.50 per share.

     (9)  Includes warrants to purchase 150,000 shares of Common Stock at a
             price equal to $1.50 per share and options to purchase 300,000
             shares of Common Stock at $1.50 per share. Mr. Haft resigned as
             director in November 1998.

          As used in the tables above "beneficial ownership" means the sole or
     shares power to vote or direct the voting or to dispose, or direct the
     disposition of any security. A person is deemed to have "beneficial
     ownership" of any security that such person has a right to acquire within
     60 days of the date of the above table. Any security that any person named
     above has the right to acquire within 60 days is deemed to be outstanding
     for purposes of calculating the ownership of such person but is not deemed
     to be outstanding for purposed of calculating the ownership percentage of
     any other person. Unless otherwise noted, each person listed is believed by
     the Company to have the sole power to vote, or direct the voting of, and
     power to dispose, or direct the disposition of all such shares. The amount
     of outstanding shares of Common Stock is the amount actually outstanding
     plus shares deemed outstanding pursuant to Rule 13d-3(d)1 under the
     Securities and Exchange Act of 1934.

     Item 13.  Certain Relationships and Related Transactions

          During the year ended June 30, 1998, the Company entered into the
     Dorsett International and FEC Hotel Management Agreements respectively with
     Dorsett International and FEC, and into Hotel Operating Contracts with
     hotel owners, all as described above in Item 1 of this report. The Company
     believes that Mr. Chiu was then the beneficial owner of the stock in
     Dorsett International. These agreements were settled and terminated, as
     described in Item 1 of this report, by the November Settlement Agreement
     dated November 4, 1998. Dorsett International has received $1,000,000 cash
     but no shares of Common Stock under its Hotel Management Agreement and
     would have received 800,000 shares upon delivery of the Hotel Operating
     Contracts, as described above in Item 1. FEC is a publicly held company
     based in Hong Kong. The Company believes that Mr. Chiu is Deputy Chairman
     of FEC, and believes that he with his family and relatives, with their
     associates, own substantial interests in it. FEC has received $1,500,000
     and 950,000 shares of Common Stock under the FEC Hotel Management Agreement
     and, might have received another 250,000 shares upon delivery of Hotel
     Operating Contracts described above in Item 1. FEC paid fees under certain
     Hotel Operating Contracts and made loans as described 

                                       39
<PAGE>

     above in Item 1. Mr. Chiu is also party to the Development Services
     Agreement, described above in Item 1, relating to the Sakhalin Project. The
     Company believes Mr. Chiu was a beneficial owner of stock in Dorsett
     International when the Company acquired it and its subsidiaries for
     $500,000, as described above in Item 1. He was the assignee of certain of
     Dorsett International's rights under that agreement. The Company believes
     FEC, Mr. Chiu, his relatives or their associates may hold interests in
     hotel owners with whom the Company had or might have entered into Hotel
     Operating Contracts.

          Mr. Dallas Dempster was a paid consultant to Sovereign Gaming and
     Leisure Ltd., which assigned to the Company its 1994 Construction
     Management Agreement and 1994 Operation Management Agreement with SCC. The
     Company believes that he held, and currently holds, no beneficial interest 
     in stock in Sovereign. In September 1998 Mr. Dempster's nominee, Dabus
     International Limited, for the benefit of his family, was granted non-Plan
     options to purchase 1,000,000 shares of the Company's common stock at $1.50
     per share. As described above in Item 1, Sovereign was a consultant to
     SGTI. Mr. Dempster was a consultant to Sovereign and received $15,000 per
     month from January through June 1998 as described in Executive Compensation
     in Item 11.

          As described above in Item 1, the Company issued options to purchase
     300,000 and 200,000 shares of Common Stock to, respectively, Mr. Bryce and
     Mr. Haft for services in bringing the Sakhalin Project to the Company.

          During 1998 the Company made payments of $70,000 and $91,000 for two
     properties in New York City and London owned by Mr. Stein which were used
     as offices by the Company. During the fiscal year ended June 30, 1998, the
     Company paid a life insurance premium for the benefit of Mr. Stein in the
     amount of $40,000.

          The Company believes Mr. David Hartley controls Star Casinos Limited
     and holds substantial interests in it. Star is a party with the Company to
     the Casino Consulting Agreement described above in Item 1, and was granted
     options as described above.

          Janssen/Meyers Associates, L.P. ("J/M") was the placement agent in the
     Company's November 1997 Private Offering, and it was the underwriter in the
     Company's June 1997 initial public offering. Messers Janssen and Meyers
     are principals in J/M and received their warrants from J/M. Pursuant to the
     placement agreement relating to the November 1997 Private Offering, the
     Company agreed to pay to J/M as placement agent a fee equal to 10% of the
     "gross proceeds" of that Offering. In addition, the Company agreed to pay
     J/M a non-accountable expense allowance equal to 3% of the "gross proceeds"
     from the sale of shares in that offering and to reimburse certain
     accountable expenses of J/M. The Company also granted J/M, for a period of
     one year after the final Closing Date, a right of first refusal to
     purchase, or to sell for the account of the Company, any securities of the
     Company which the Company may seek to sell through an underwriter,
     placement agent or broker dealer. Certain principal stockholders in the
     Company granted J/M a similar right in any such sought sale by certain
     principal stockholders of the Company, its subsidiaries and successors. In
     June 1997 and from December 1997 through February 1998 the Company issued
     to Janssen/Meyers Associates, L.P. for nominal consideration the
     Underwriter's Warrant and 1997 Placement Agent's Warrants, respectively to
     purchase 220,000 shares at $8.25 and 715,668 shares at various prices based
     on the market price in 1997-1998. These warrants were issued in connection
     with, respectively, the Company's initial public offering completed in June
     1997, and the Company's private offering began in November 1997 and
     completed in February 1998. They are exercisable for a period of four years
     from issue. Sale of shares by the Company at less than the then current
     average market price or less than the exercise price will trigger
     anti-dilution provisions in all the Warrants held by J/M. No anti-dilution
     adjustment is made under any series of such warrants for issuance of
     securities (i) in the same offering as the Warrant series was issued, or
     (ii) upon exercise of Warrants of that series or of any other warrants or
     options outstanding on the date that series of Warrants was issued. In the
     case of the 1997 Placement Agent Warrants, no adjustment is made for
     issuance of securities (i) in contemplated transactions described on the
     related Private Placement Memorandum, but not in excess of 5,500,000
     shares, (ii) under the 1996 Stock Option Plan as it may be amended from
     time to time, or (iii) upon merger or acquisition with unaffiliated third
     parties. The Company has been advised that Mr. Peter Janssen and Mr. Bruce
     Meyers, principals of J/M, purchased an aggregate of 58,422 shares in the
     1997 Private Offering. In connection with the Company's June 6, 1997
     initial public offering the Company also agreed not to, without the prior
     written consent of J/M, issue, sell, agree or offer to sell, grant an
     option for the purchase or sale of, or otherwise transfer or dispose of any
     of its securities prior to June 6, 1998. The Company also agreed to
     indemnify J/M against certain liabilities incurred under 

                                       40
<PAGE>

     the Securities Act in connection with the November 1997 offering in which
     J/M was Placement Agent. In connection with the Company's initial public
     offering the Company entered into an agreement whereby it (i) agreed to
     employ J/M as its investment banker and financial consultant for three
     years for an aggregate fee of $100,000 paid at Closing of the Offering; and
     (ii) for a period of five years, agreed to pay J/M a fee equal to five
     percent of the amount up to $5 million, and 2 1/2% of the excess, if any,
     over $5 million, of the consideration in any transaction consummated by the
     Company with a party J/M introduced to the Company. During the year ended
     June 30, 1998 the Company paid J/M $1,430,000 in fees for services as the
     Company's investment banker.

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

          (a)(1) Financial Statements
<TABLE>
<CAPTION>
                                                                               Page
<S>                                                                            <C>
    Reports of Independent Certified Public Accountants........................F-2

    Consolidated Balance Sheets as of June 30, 1998 and 1997...................F-4

    Consolidated Statements of Operations for the year ended June 30, 1998,
      for the ten month period ended June 30, 1997, and for the period from
      March 6, 1996 (inception) through August 31, 1996........................F-6

    Consolidated Statements of Stockholders' Equity for the year
      ended June 30, 1998, for the ten month period ended June 30,
      1997, and for the period from March 6, 1996
      (inception) through August 31, 1996......................................F-7

    Consolidated Statements of Cash Flows for the year ended June
      30, 1998, for the ten month period ended June 30, 1997, and
      for the period from March 6, 1996 (inception) through
      August 31, 1996..........................................................F-9

    Summary of Significant Accounting Policies.................................F-11

    Notes to Consolidated Financial Statements.................................F-17
</TABLE>

                                       41
<PAGE>


   Exhibit
   Number   Description of Exhibits

     2.   - Contract on the Extension of the Concession Period for the Operation
            of a Casino dated 21 July 1997 issued by the Minister of Finance in
            favour of Roulette; Loan Agreement dated 9 April 1998 between
            Roulette and Dorsett providing for a US $420,000 loan to Roulette;
            Amendment No.1 dated 5 June 1998 to the Agreement dated 3 April
            1998 between CBC, Juste and Dorsett (incorporated by reference to 
            the Company's Form 10-Q for the period ended September 30, 1998).

     3.1  - Certificate of Incorporation and amendments thereto (incorporated
            herein by reference to the Company's Registration Statement on Form
            S-1 (File No. 333-16571)).

     3.2  - Amendment to Company's Certificate of Incorporation (incorporated
            herein by reference to the Company's Registration Statement on Form
            S-1 (File No. 333-16571), Amendment No. 5).

     3.3  - Amendment to Company's Certificate of Incorporation (incorporated
            herein by reference to the Company's Proxy Statement dated November
            27, 1997).

     3.4  - By-law of Company (incorporated herein by reference to the Company's
            Registration Statement on Form S-1 (File No. 333-16571).

     4.2  - Form of certificate evidencing shares of Common Stock (incorporated
            herein by reference to the Company's Registration Statement on Form
            S-1 (File No. 333-16571), Amendment No. 2).

     4.3  - Form of Underwriter's Warrant Agreement between Company and the
            Underwriter Janssen-Meyers Associates L.P. (including form of
            Underwriter's Warrant) (incorporated herein by reference to the
            Company's Registration Statement on Form S-1 (File No. 333-16571),
            Amendment No. 5).

     4.5  - Amendatory Agreement dated November 6, 1996 between the Company and
            the SES  Family Investment and Trading Partnership, L.P.
            (incorporated herein by reference to the Company's Registration
            Statement on Form S-1 (File No. 333-16571)).

     4.6  - Form of 10% Debenture dated September 1996 (incorporated herein by
            reference to the Company's Registration Statement on Form S-1 (File
            No. 333-16571)).

     4.7  - Form of 10% Convertible Debenture dated November 1996 (incorporated
            herein by reference to the Company's Registration Statement on Form
            S-1 (File No. 333-16571)).

     10.1 - 1996 Stock Option Plan, as amended and restated (incorporated herein
            by reference to the Company's Registration Statement on Form S-1
            (File No. 333-16571)).

     10.2 - Form of Stock Option Agreement (incorporated herein by reference to
            the Company's Registration Statement on Form S-1 (File No.
            333-16571)).

     10.3 - Distribution Agreement dated October 9, 1996 between Company and
            Agrotech 2000, S.L. (incorporated herein by reference to the
            Company's Registration Statement on Form S-1 (File No. 333-16571),
            Amendment No. 4).

     10.4 - Employment Agreement between Charles H. Stein and the Company,
            effective as of June 13, 1997.

                                       42
<PAGE>

     10.5 - Form of $5.00 Warrant Agreement dated August 1996 (incorporated
            herein by reference to the Company's Registration Statement on Form
            S-1 (File No. 333-16571)).

     10.6 - Loan Agreement dated October 9, 1996 between Company and Conserver
            Purchasing Corporation ("CPU"), as amended by Letter Agreement dated
            December 31, 1996 between Company and CPC (incorporated herein by
            reference to the Company's Registration Statement on Form S-1 (File
            No. 333-16571), Amendment No. 2).
 
     10.7 - Form of Financial Consulting Agreement between Company and
            Underwriter (incorporated herein by reference to the Company's
            Registration Statement on Form S-1 (File No. 333-16571), Amendment
            No. 5).

     10.8 - Agreement dated as of August 12, 1997 by and among the Company,
            Sakhalin Trading and Investments Limited ("SGTI") and Sovereign
            Gaming and Leisure Limited ("Sovereign") (incorporated herein by
            reference to Exhibit 10.8 to the Company's Form 10-K for the fiscal
            year ended June 30, 1997)

     10.9 - Amendment dated as of August 12, 1997 by and among the Company, SGTI
            and Sovereign (incorporated herein by reference to Exhibit 10.9 to
            the Company's Form 10-K for the fiscal year ended June 30, 1997)
 
     10.10- Development Services Agreement dated as of October 2, 1997 between
            the Company and Dato David Chiu (incorporated herein by reference to
            Exhibit 10.10 to the Company's Form 10-K for the fiscal year ended
            June 30, 1997)

     10.11- Consulting Agreement effective as of August 14, 1997 between the
            Company and Star Casino Limited (incorporated herein by reference to
            Exhibit 10.11 to the Company's Form 10-K for the fiscal year ended
            June 30, 1997)

     10.12- Proposed form Pledge Agreement by and among the Company, Brian J.
            Bryce, Jasmine Trustees, Ltd., Jay M. Haft and James V. Stanton
            (incorporated herein by reference to Exhibit 10.12 to the Company's
            Form 10-K for the fiscal year ended June 30, 1997)
 
     10.13- Hotel Management Agreement dated as of October 2, 1997 between the
            Company and Dorsett Hotels and Resorts international Ltd.
            (incorporated herein by reference to Exhibit 10.13 to the Company's
            Form 10-K for the fiscal year ended June 30, 1997)
 
     10.15- Heads of Agreement dated October 3, 1997 between the Company and
            Parbhoe's Handelmij N.V. (incorporated herein by reference to
            Exhibit 10.15 to the Company's Form 10-K for the fiscal year ended
            June 30, 1997)

     13.2 - Form 10-Q for the Quarterly Period ended March 31, 1998 
            (incorporated herein by reference)

     16.1 - Letter re change in certifying accountant (incorporated herein by
            reference to the Company's Form 8-K dated December 18, 1997 and Form
            8-K dated June 16, 1998)
 
     27.1 - Financial Data Schedules

     (b)  Reports on Form 8-K

     One report on Form 8-K, dated June 16, 1998, was filed during the fourth
     quarter ended June 30, 1998 (incorporated by reference). It related to the
     retention of the Company's current accountants.

                                       43
<PAGE>

                                   SIGNATURES

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

                           CCA COMPANIES INCORPORATED

                         By: /s/ Miles R. Greenberg
                             ----------------------------
                               Miles R. Greenberg
                                December 15, 1998

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

<TABLE>
<CAPTION>
            Signature                                   Title                             Date
<S>                                     <C>                                        <C>

       /s/ Dallas R. Dempster           Chief Executive Officer, Chief Operating   December 15, 1998
       ----------------------           Officer and President (Principal
       Dallas R. Dempster               Executive Officer), Director


       /s/ Miles R. Greenberg           Chief Financial Officer (Principal         December 15, 1998
       ----------------------           Financial Officer and Chief Accounting
       Miles R. Greenberg               Officer)


       /s/ Charles H. Stein             Chairman and Director                      December 15, 1998
       ----------------------           
       Charles H. Stein


       /s/ James V. Stanton             Vice Chairman and Director                 December 15, 1998
       ----------------------           
       James V. Stanton


       /s/ Jonathan M. Caplan           Director                                   December 15, 1998
       ----------------------           
       Jonathan M. Caplan
</TABLE>

                                       44
<PAGE>

                                                      CCA Companies Incorporated

                                                                        Contents

<TABLE>
<CAPTION>
                                                                               Page
<S>                                                                            <C>
    Reports of Independent Certified Public Accountants........................F-2

    Consolidated Balance Sheets as of June 30, 1998 and 1997...................F-4

    Consolidated Statements of Operations for the year ended June 30, 1998,
      for the ten month period ended June 30, 1997, and for the period from
      March 6, 1996 (inception) through August 31, 1996........................F-6

    Consolidated Statements of Stockholders' Equity for the year
      ended June 30, 1998, for the ten month period ended June 30,
      1997, and for the period from March 6, 1996
      (inception) through August 31, 1996......................................F-7

    Consolidated Statements of Cash Flows for the year ended June
      30, 1998, for the ten month period ended June 30, 1997, and
      for the period from March 6, 1996 (inception) through
      August 31, 1996..........................................................F-9

    Summary of Significant Accounting Policies.................................F-11

    Notes to Consolidated Financial Statements.................................F-17
</TABLE>

                                                                             F-1
<PAGE>

Report of Independent Certified Public Accountants

To the Board of Directors and Stockholders of
CCA Companies Incorporated

We have audited the accompanying consolidated balance sheet of CCA Companies
Incorporated and subsidiaries as of June 30, 1998, and the related consolidated
statements of operations, stockholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CCA Companies
Incorporated and subsidiaries as of June 30, 1998, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company's dependence on outside
financing, recurring losses since inception and significant outflows of cash
from operations, raise substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are described in
Note 1. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

Miami, Florida
 
                                                                BDO Seidman, LLP

December 15, 1998

                                                                             F-2
<PAGE>

Report of Independent Auditors

Board of Directors and Stockholders
CCA Companies Incorporated
Coconut Grove, Florida

We have audited the accompanying balance sheet of Conserver Corporation of
America (now known as CCA Companies Incorporated) (a development stage company) 
as of June 30, 1997, and the related statements of operations, changes in
stockholders' equity and cash flows for the period from March 6, 1996 (date of
incorporation) through August 31, 1996 and for the ten months ended June 30,
1997. 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 enumerated above present fairly, in all
material respects, the financial position of Conserver Corporation of America
(now known as CCA Companies Incorporated) at June 30, 1997 and the results of
its operations and its cash flows for the period from March 6, 1996 (date of
incorporation) through August 31, 1996 and for the ten months ended June 30,
1997 in conformity with generally accepted accounting principles.

The Company is currently renegotiating a Distribution Agreement with Agrotech
2000, S.L. to reduce its cost of purchasing the Conserver 21 (Trademark)
packets and to modify the manufacturing arrangements. Should a favorable outcome
of such negotiation not be achieved or the agreement were to terminate as a
result of a material breach, the Company could be without its current line of
business of marketing Conserver 21 (Trademark) and its results of operations
would be adversely affected.

                                                Richard A. Eisner & Company, LLP

New York, New York, August 28, 1997

With respect to Note 6, September 24, 1997

With respect to Note 2, October 2, 1997 and October 3, 1997

                                                                             F-3
<PAGE>

<TABLE>
<CAPTION>
June 30,                                                                        1998         1997
---------------------------------------------------------------------------------------------------
<S>                                                                      <C>           <C>
Assets

Current Assets
     Cash and cash equivalents                                           $ 1,699,028   $7,715,460
     Accounts receivable                                                     342,987            -
     Prepaid and other current assets                                        520,181      213,748
---------------------------------------------------------------------------------------------------

Total current assets                                                       2,562,196    7,929,208
---------------------------------------------------------------------------------------------------

Loans receivable-long term, net of allowance of $2,620,830 and
     $1,000,000 at June 30, 1998 and 1997, respectively
     (Notes 2 and 3)                                                         667,085            -
Deposits on gaming equipment                                                 422,015            -
Excess cost over fair value of assets acquired, net of 
accumulated amortization of $177,874 at June 30,
     1998 (Note 2)                                                        10,366,442            -
Property, equipment and leasehold improvements, net
     (Notes 2 and 5)                                                       7,366,879       21,986
Management contract agreements, net of accumulated
     amortization of $90,020 at June 30, 1998 (Note 2)                     2,228,245            -
Other assets                                                                 344,300            -
---------------------------------------------------------------------------------------------------

                                                                         $23,957,162   $7,951,194
---------------------------------------------------------------------------------------------------
</TABLE>

                                                                             F-4
<PAGE>

                                                      CCA Companies Incorporated

                                                     Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30,                                                                             1998           1997
-----------------------------------------------------------------------------------------------------------
<S>                                                                          <C>             <C>
Liabilities and Stockholders' Equity

Current Liabilities
     Accounts payable                                                        $    346,224    $   292,524
     Accrued expenses and other                                                 1,284,581        239,078
     Convertible debentures (net of $60,328 discount at
         June 30, 1997) (Note 6)                                                        -        689,672
-----------------------------------------------------------------------------------------------------------

Total current liabilities                                                       1,630,805      1,221,274
-----------------------------------------------------------------------------------------------------------

Commitments and contingencies (Note 11)

Stockholders' Equity: (Note 12)
     Preferred stock, par value $.01; 5,000,000 and 5,000
shares authorized in 1998 and 1997, respectively,
     1 junior preferred stock issued and outstanding at
     June 30, 1998, none issued in 1997 (Note 2)                                        -              -
     Common stock, par value $.001; 50,000,000 and
     30,000,000 shares authorized in 1998 and 1997,
     respectively; 11,996,048 and 6,385,404 shares
     issued and outstanding at June 30, 1998 and 1997,
     respectively                                                                  11,997          6,386
     Additional paid-in capital                                                44,806,570     16,672,672
     Accumulated deficit                                                      (22,492,210)    (9,949,138)
-----------------------------------------------------------------------------------------------------------

Total stockholders' equity                                                     22,326,357      6,729,920
-----------------------------------------------------------------------------------------------------------

                                                                             $ 23,957,162    $ 7,951,194
-----------------------------------------------------------------------------------------------------------
</TABLE>

               See accompanying summary of accounting policies
               and notes to consolidated financial statements.

                                                                             F-5
<PAGE>

                                                      CCA Companies Incorporated

                                           Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                                                           Period from
                                                                                         March 6, 1996
                                                                             Ten month     (inception)
                                                             Year ended   period ended        through
                                                               June 30,       June 30,     August 31,
                                                                   1998           1997           1996
--------------------------------------------------------------------------------------------------------
<S>                                                        <C>            <C>            <C>           
Revenues                                                   $    649,620   $         -    $         -
--------------------------------------------------------------------------------------------------------

Operating Expenses:
     Marketing and sales                                        376,589       115,576              -
     General and administrative                               6,287,544     1,739,419        458,611
     Write-down of management
         agreement contracts                                  4,200,000             -              -
     Write-down of inventory                                          -       355,800              -
     Provision for bad debt                                   1,620,830     1,000,000              -
     Compensation charges in connection
         with issuance of stock options and
         warrants                                               921,569     4,995,106        907,201
--------------------------------------------------------------------------------------------------------

Total operating expenses                                    (13,406,532)   (8,205,901)    (1,365,812) 
--------------------------------------------------------------------------------------------------------

Loss From Operations                                        (12,756,912)   (8,205,901)    (1,365,812) 

Other Income (Expense):

     Interest income                                            288,518        51,180          8,741
     Interest expense                                           (74,678)     (407,346)       (30,000) 
--------------------------------------------------------------------------------------------------------

Total other income (expense)                                    213,840      (356,166)       (21,259) 
--------------------------------------------------------------------------------------------------------

Net Loss                                                   $(12,543,072)  $(8,562,067)   $(1,387,071) 
--------------------------------------------------------------------------------------------------------

Net Loss Per Share of Common Stock- Basic and
Diluted                                                    $      (1.37)  $     (1.83)   $      (.32)
--------------------------------------------------------------------------------------------------------

Weighted Average

     Number of common shares 
     outstanding                                              9,175,536     4,667,490      4,390,767
--------------------------------------------------------------------------------------------------------
</TABLE>

               See accompanying summary of accounting policies
               and notes to consolidated financial statements.

                                                                             F-6
<PAGE>

                                                      CCA Companies Incorporated

                                 Consolidated Statements of Stockholders' Equity

<TABLE>
<CAPTION>
                                               Common Stock
                                             Par Value $.001        Subscrip-    Additional      Junior
                                           ---------------------        tions      Paid-in    Preferred    Accumulated
                                              Shares     Amount    Receivable      Capital        Stock        Deficit        Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>          <C>        <C>          <C>           <C>          <C>          <C>
Issuance of common stock for cash of
$2,140 and subscriptions in March 1996     4,880,167    $ 4,881     $(2,741)    $        -      $    -     $      -     $     2,140

Issuance of common stock for cash from
April through August 1996 ($5.00 per         
share)                                       331,400        331                   1,656,679                               1,657,010

Compensation charges in connection with
issuance of options                                                                 450,000                                 450,000

Compensation charges in connection with
issuance of warrants (Note 12)                                                      457,201                                 457,201

Compensation charge in connection with
officer's salary (Note 11)                                                           65,000                                  65,000

Net loss for the period from March 6,
1996 (date of inception) through August
31, 1996                                                                                                   $(1,387,071) $(1,387,071)
                                                                                                                        
------------------------------------------------------------------------------------------------------------------------------------

Balance - August 31, 1996                  5,211,567      5,212      (2,741)      2,628,880                 (1,387,071)   1,244,280

Repurchase and cancellation of shares
originally issued (Note 13)               (1,366,667)    (1,367)      1,367      (1,800,000)                      -      (1,800,000)

Shares issued and treated as debt
discount (Note 6)                             62,504         63                     312,437                                 312,500

Sale of common stock ($5.00 per share)
from September 1 to November 7, 1996         303,000        303                   1,514,697                               1,515,000

Legal services provided by stockholder
without charge (Note 10)                                                             60,000                                  60,000

Collection of subscriptions receivable                                1,374                                                   1,374

Compensation charges in connection with
issuance of options and warrants                                                  4,995,106                               4,995,106

Compensation charges in connection with
officer's salary (Note 11)                                                          105,000                                 105,000

Net proceeds from issuance of common
stock in initial public offering (Notes    
4 and 12)                                  2,200,000      2,200                   8,856,527                               8,858,727

Common stock contributed to treasury and
cancelled including an adjustment of
5,000 shares                                 (25,000)       (25)                         25                                       -

Net loss for the period from September
1, 1996 through June 30, 1997                                                                               (8,562,067)  (8,562,067)
------------------------------------------------------------------------------------------------------------------------------------
Balance - June 30, 1997                    6,385,404    $ 6,386     $     -     $16,672,672     $    -     $(9,949,138) $ 6,729,920
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                             See accompanying summary of accounting policies and
                                     notes to consolidated financial statements.

                                                                             F-7
<PAGE>

                                                      CCA Companies Incorporated

                                 Consolidated Statements of Stockholders' Equity

<TABLE>
<CAPTION>
                                             Common Stock        
                                           Par Value $.001        Subscrip-    Additional      Junior
                                        ---------------------        tions      Paid-in      Preferred   Accumulated
                                          Shares      Amount    Receivable      Capital        Stock       Deficit        Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>           <C>        <C>           <C>            <C>        <C>             <C>
Balance - June 30, 1997                 6,385,404    $ 6,386      $   -       $16,672,672      $   -    $ (9,949,138)   $ 6,729,920

Net proceeds from exercise of over
allotment option (Note 4)                 330,000        330          -         1,447,239          -           -          1,447,569

Conversion of debentures (Note 6)          73,000         73                      364,927                                   365,000

Issuance of common stock in exchange
for professional services                   5,000          5                       26,245                                    26,250

Issuance of common stock in
connection with the Sakhalin
business acquisition                    2,000,000      2,000                   10,398,000                                10,400,000
(Note 2)

Issuance of common stock in
connection with the Sovereign
project management agreement (Note 2)     200,000        200                    1,049,800                                 1,050,000

Issuance of common stock in
connection with the Far East

Consortium Management Agreements          950,000        950                    3,490,300                                 3,491,250
(Note 2)

Sale of common stock ($5.14 per
share) from December 1997 to
February 1998                           2,044,763      2,045          -         8,952,625          -           -          8,954,670
(Note 4)

Exercise of options at $2.00                7,881          8                       15,754                                    15,762

Options issued in connection with
Sakhalin business acquisition (Note                                             1,091,820                                 1,091,820
2)

Compensation and consulting charges
in connection with issuance of                                                    921,569                                   921,569
options and warrants (Notes 2 and 12)

Options issued in exchange for legal
services (Note 10)                                                                285,619                                   285,619

Compensation charges in connection
with officer's salary (Note 11)                                                    90,000                                    90,000

Issuance of junior preferred stock
(1 share outstanding) (Note 2)                                                       -

Net loss for 1998                                                                                       (12,543,072)    (12,543,072)
------------------------------------------------------------------------------------------------------------------------------------

Balance - June 30, 1998                11,996,048    $11,997      $   -       $44,806,570      $   -   $(22,492,210)    $22,326,357
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                             See accompanying summary of accounting policies and
                                     notes to consolidated financial statements.

                                                                             F-8
<PAGE>

                                                      CCA Companies Incorporated

                                           Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                               Ten month            Period from
                                                                                  period          March 6, 1996
                                                               Year ended          ended    (Inception) through
                                                                 June 30,       June 30,             August 31,
                                                                     1998           1997                   1996
-----------------------------------------------------------------------------------------------------------------
<S>                                                          <C>             <C>            <C>
Operating Activities:
   Net loss                                                  $(12,543,072)   $(8,562,067)          $(1,387,071)
   Adjustments to reconcile net loss to net cash used in 
   operating activities, net of effect of acquisition:        
     Compensation expense in connection with issuance
       of stock options and warrants                              921,569      4,995,106               907,201
     Impairment of inventory                                            -        355,800                     -
     Write-down of assets                                       4,200,000              -                     -
     Write-down of property and equipment                         554,262              -                     -
     Provision for bad debt                                     1,620,830      1,000,000                     -
     Depreciation and amortization                                 16,168        253,849                   487
     Compensation expense for officer's salary                     90,000        105,000                65,000
     Legal services provided by shareholder                       171,000         60,000                     -
     Consulting services provided for common stock                 26,250              -                     -
     Amortization of goodwill                                     177,874              -                     -
     Amortization of tradename                                     12,500              -                     -
     Changes in current assets and liabilities:

       Accounts receivable                                       (342,987)             -                     -
       Prepaid expenses and other current assets                 (152,695)      (151,439)              (31,631)
       Accounts payable and accrued expenses                    1,156,463        415,607               105,317
-----------------------------------------------------------------------------------------------------------------

Total adjustments                                               8,451,234      7,033,923             1,046,374
-----------------------------------------------------------------------------------------------------------------

Net cash used in operating activities                          (4,091,838)    (1,528,144)             (340,697)
-----------------------------------------------------------------------------------------------------------------

Investing Activities:

   Property, equipment and leasehold improvements              (2,250,193)       (19,285)               (4,865)
   Deposits on assets                                          (1,722,015)             -                     -
   Funds used for acquisitions and development                 (4,308,637)             -                     -
-  Funds used for loans and notes receivable                   (2,497,915)    (1,375,800)                    -
   Acquisition of tradename and other assets                     (844,300)             -                     -
   Cash from acquisition, net of funds acquired                   544,632              -                     -
   Acquisition of management contracts                         (1,149,495)             -                     -
-----------------------------------------------------------------------------------------------------------------

Net cash used in investing activities                         (12,227,923)    (1,395,085)               (4,865)
-----------------------------------------------------------------------------------------------------------------

Financing Activities:

   Subscriptions receivable                                             -          1,374                     -
   Subscription funds (returned) received                               -        (90,000)               90,000
   Repurchase of shares of common stock                                 -     (1,800,000)                    -
   Net proceeds from initial public offering                    1,447,569      8,858,727                     -
   Proceeds from sale of common stock                           8,970,432      1,515,000             1,659,150
   Proceeds from notes payable                                          -      1,250,000             1,000,000
   Repayments of notes payable                                   (114,672)    (1,500,000)                    -
-----------------------------------------------------------------------------------------------------------------

Net cash provided by financing activities                      10,303,329      8,235,101             2,749,150
-----------------------------------------------------------------------------------------------------------------

Net increase (decrease) in cash and cash equivalents           (6,016,432)     5,311,872             2,403,588
Cash and cash equivalents, beginning of period                  7,715,460      2,403,588                     -
-----------------------------------------------------------------------------------------------------------------

Cash and cash equivalents, end of period                     $  1,699,028    $ 7,715,460           $ 2,403,588
-----------------------------------------------------------------------------------------------------------------
</TABLE>
                                                                            F-9
<PAGE>

                                                      CCA Companies Incorporated

                                           Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                    Ten month           Period from
                                                                                       period         March 6, 1996
                                                                  Year ended            ended   (Inception) through
                                                                    June 30,         June 30,            August 31,
                                                                        1998             1997                  1996
---------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>                   <C>          <C>
Supplemental disclosures of cash flow information:
   Cash paid during the period for interest                      $         -         $129,864         $        -
---------------------------------------------------------------------------------------------------------------------

   Noncash transactions:
       Issuance of common stock in connection with
         convertible debt                                        $   365,000         $312,500         $        -
---------------------------------------------------------------------------------------------------------------------

       Common stock contributed to treasury and cancelled
         (includes a $5 adjustment)                              $         -         $     25         $        -
---------------------------------------------------------------------------------------------------------------------

       Cancellation of loan receivable in exchange for       
          inventory                                              $         -         $375,800         $        -
---------------------------------------------------------------------------------------------------------------------

       Cancellation of subscription receivable in
          exchange for shares of
           common stock                                          $         -         $  1,367         $        -
---------------------------------------------------------------------------------------------------------------------

       Issuance of common stock in connection with the
          Sakhalin Business Acquisition                          $10,400,000         $      -         $        -
---------------------------------------------------------------------------------------------------------------------

       Options issued in connection with the Sakhalin
          Business Acquisition                                   $ 1,091,820         $      -         $        -
---------------------------------------------------------------------------------------------------------------------

       Issuance of common stock in connection with the
          Sovereign Project Management Agreement                 $ 1,050,000         $      -         $        -
---------------------------------------------------------------------------------------------------------------------

       Issuance of common stock in connection with the
          Far East Consortium Management Agreements              $ 3,491,250         $      -         $        -
---------------------------------------------------------------------------------------------------------------------

       Cancellation of convertible debentures against
         loan receivable                                         $   210,000         $      -         $        -
---------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                            F-10
<PAGE>

                                                      CCA Companies Incorporated

                                      Summary of Significant Accounting Policies

The Company                CCA Companies Incorporated, formerly known as
                           Conserver Corporation of America, (the "Company") is
                           a company incorporated under the laws of the State of
                           Delaware on March 6, 1996 and initially adopted a
                           fiscal year ending August 31. Subsequently, the
                           Company elected to change its fiscal year end to June
                           30. During the fiscal year ended June 30, 1998, the
                           Company changed its name to CCA Companies
                           Incorporated. The Company was considered a
                           development stage company until March 1998.

Subsidiaries, Joint        The subsidiaries, Sakhalin General Trading and      
Venture and                Investments, Ltd., Sakhalin City Center, Ltd.,      
Basis of Presentation      Dorsett Hotels and Resort International, (m)Snd. 
                           Bhd., Dorsett Hotel & Resorts, Inc. and Suriname
                           Leisure Company A.V.V. (Joint Venture) are based and
                           operating in Cyprus, Russian Federation, Malaysia,
                           United States and Suriname, respectively. The
                           functional  currency for statutory purposes is the
                           U.S. Dollar, Russian Ruble, Malaysian Ringgit, U.S.
                           Dollar and Suriname Guilder, respectively. The
                           reporting currency is the U.S. Dollar.
                           
                           These financial statements have been translated to
                           United States Dollars (U.S. $) using a methodology
                           consistent with Statement of Financial Accounting
                           Standards (SFAS) No. 52, Foreign Currency
                           Translation. Assets and liabilities are translated to
                           U.S. $ at the rate prevailing on the balance sheet
                           dates and the statements of operations have been
                           translated from the functional currency to U.S. $
                           using an average exchange rate for the applicable
                           period. As of June 30, 1998, the cumulative foreign
                           currency translation adjustment was insignificant and
                           therefore not disclosed as a separate component of
                           stockholders' equity. Exchange gains (losses) of
                           approximately ($79,000) for the period ended June 30,
                           1998, are included in general and administrative
                           expenses in the accompanying consolidated statements
                           of operations. There were no exchange gains and
                           losses for the periods ended June 30, 1997 and August
                           31, 1996.

                                                                            F-11
<PAGE>

                                                      CCA Companies Incorporated

                                      Summary of Significant Accounting Policies

Principles of              The accompanying consolidated financial statements   
Consolidation              include the accounts of CCA, the subsidiaries and the
                           joint venture (collectively, the "Company"). The
                           Company consolidates its 50% joint venture, since it
                           controls the board of directors, is responsible for
                           the management of the casino operations and is
                           required to fund the operations. Intercompany
                           transactions and balances have been eliminated
                           in consolidation.                         
                           
                           Minority interest related to the subsidiaries and the
                           Joint Venture is currently not reflected in the
                           financial statements due to the fact that the
                           minority shareholders are not required to fund losses
                           of the companies or Joint Venture.

Use of Estimates in the    The preparation of financial statements in conformity
Preparation                with generally accepted accounting principles        
of Financial               requires management to make estimates and assumptions
Statements                 that affect the reported amounts of assets and       
                           liabilities and disclosure of contingent assets and  
                           liabilities at the date of the financial statements  
                           and the reported amounts of revenues and expenses    
                           during the reporting period. Actual results could    
                           differ from those estimates.                         
                           
Impairment of Long-Lived   The Company adopted the Statement of Financial       
Assets                     Accounting Standards (SFAS) No. 121, "Accounting for 
                           the Impairment of Long-Lived Assets and for          
                           Long-Lived Assets to be Disposed of" during 1996.    
                           Under the provisions of this statement, the Company  
                           has evaluated its long-lived assets for financial    
                           impairment, and will continue to evaluate them as    
                           events or changes in circumstances indicate that the 
                           carrying amount of such assets may not be fully      
                           recoverable.                                         

                           The Company evaluates the recoverability of
                           long-lived assets by measuring the carrying amount of
                           the assets against the estimated undiscounted future
                           cash flows associated with them. At the time such
                           evaluations indicate that the future undiscounted
                           cash flows of the long-lived assets are not
                           sufficient to recover the carrying value of such
                           assets, the assets are adjusted to their fair values.

                                                                            F-12
<PAGE>

                                                      CCA Companies Incorporated

                                      Summary of Significant Accounting Policies

                           During the year ended June 30, 1998, the Company
                           recorded a charge of $4,200,000 as a result of a
                           financial impairment of several of its long-lived
                           assets (See Note 2).

Cash and Cash Equivalents  The Company considers investments with original
                           maturities of three months or less at the time of
                           purchase to be cash equivalents. At times, cash
                           balances in the Company's account may exceed
                           federally insured limits.

Property,                  Property and equipment is recorded at cost.
Equipment and              Depreciation and amortization is computed by the  
Leasehold                  straight line method based on the estimated useful
Improvements               lives (3-5 years) of the related assets. Leasehold
                           improvements are amortized over the shorter of the
                           life of the asset or the lease.                   
                           
Excess Cost over Fair      The excess of cost over fair value of assets acquired
Value of                   of Sakhalin General Trading and Investments, Ltd.    
Assets Acquired            ("SGTI") is amortized on a straight-line basis, over 
                           the estimated future periods to be benefited (30
                           years). (See Note 2). On an annual basis, the Company
                           reviews the recoverability of the excess cost over
                           the fair value of assets acquired and makes
                           adjustments if required.

Income Taxes               For the purpose of these financial statements the
                           Company has adopted the provisions of SFAS No. 109,
                           "Accounting for Income Taxes," for all periods
                           presented. Under the asset and liability method of
                           SFAS 109, deferred taxes are recognized for
                           differences between financial statement and income
                           tax bases of assets and liabilities.

Preferred Stock            The Company is authorized to issue up to 5,000,000
                           shares of $0.01 par value junior preferred stock with
                           such additional designations, powers, preferences,
                           rights, qualifications, limitations and restrictions
                           as may be designated by the Company's Board of
                           Directors from time to time.

                                                                            F-13
<PAGE>

                                                      CCA Companies Incorporated

                                      Summary of Significant Accounting Policies

Earnings Per Share         Effective December 31, 1997, the Company adopted
                           Financial Accounting Standards (SFAS) No. 128,
                           "Earnings Per Share," which simplifies the
                           computation of earnings per share requiring the
                           restatement of all prior periods.

                           Basic net loss per share of common stock is based on
                           the weighted average number of common shares
                           outstanding during each period. Diluted loss per
                           share of common stock is computed on the basis of the
                           weighted average number of common shares and 
                           common shares equivalent securities outstanding.
                           Dilutive securities having an anti-dilutive effect
                           are excluded from the calculation.

                           The weighted average number of common shares
                           outstanding for all periods presented retroactively
                           reflects the effects of the Company's stock split
                           (Note 12).

                           Options amounting to 3,177,500, 1,970,000 and 135,000
                           and warrants amounting to 2,260,678, 1,225,000 and
                           325,000 for the year ended June 30, 1998, for the ten
                           month period ended June 30, 1997, and for the period
                           from March 6, 1996 (inception) through August 31,
                           1996, respectively, have not been included in the
                           computation of net loss per common stock - diluted
                           because of their anti-dilutive effect.

Stock Based                In October 1995, FASB issued SFAS No. 123,           
Compensation               "Accounting for Stock Based Compensation." SFAS No.  
                           123 establishes a fair value method for accounting   
                           for stock-based compensation plans either through    
                           recognition or disclosure. The Company did not adopt 
                           the fair value based method for employees but instead
                           will disclose the pro forma effects of the           
                           calculation required by the statement.               
                           
Future Accounting          Statement of Financial Accounting Standards (SFAS)
Pronouncements             No. 130, "Reporting Comprehensive Income,"
                           establishes standards for reporting and display of
                           comprehensive income, its components 

                                                                            F-14
<PAGE>

                                                      CCA Companies Incorporated

                                      Summary of Significant Accounting Policies

                           and accumulated balances. Comprehensive income is
                           defined to include all changes in equity except those
                           resulting from investments by owners and
                           distributions to owners. Among other disclosures,
                           SFAS No. 130 requires that all items that are
                           required to be recognized under current accounting
                           standards as components of comprehensive income be
                           reported in a financial statement that is displayed
                           with the same prominence as other financial
                           statements. SFAS No. 130 will not have a material
                           impact on the Company's Financial Statements since
                           its requirements deal mainly with financial 
                           disclosures.

                           Statement of Financial Accounting Standards (SFAS)
                           No. 131, "Disclosures about Segments of an Enterprise
                           and Related Information, supersedes SFAS No. 14,
                           "Financial Reporting for Segments of a Business
                           Enterprise." SFAS 131 establishes standards for the
                           way that public companies report information about
                           operating segments in annual financial statements and
                           requires reporting of selected information about
                           operating segments in interim financial statements
                           issued to the public. It also establishes standards
                           for disclosures regarding products and services,
                           geographic areas and major customers. SFAS 131
                           defines operating segments as components of a company
                           about which separate financial information is
                           available that is evaluated regularly by the chief
                           operating decision maker in deciding how to allocate
                           resources and in assessing performance.

                           This new standard is effective for financial
                           statements for periods beginning after December 15,
                           1997 and require comparative financial information
                           for earlier years to be restated. Due to the recent
                           issuance of this standard, management has been
                           unable to fully evaluate the impact, if any, they may
                           have on future financial statement disclosures.

                           In June 1998, the Financial Accounting Standards
                           Board issued SFAS No. 133, Accounting for Derivative
                           Instruments and Hedging Activities. SFAS No. 133
                           requires companies to recognize all derivatives
                           contracts as either assets or liabilities in 

                                                                            F-15
<PAGE>

                                                      CCA Companies Incorporated

                                      Summary of Significant Accounting Policies

                           the balance sheet and to measure them at fair value.
                           If certain conditions are met, a derivative may be
                           specifically designated as a hedge, the objective of
                           which is to match the timing of gain or loss
                           recognition on the hedging derivative with the
                           recognition of (i) the changes in the fair value of
                           the hedged asset or liability that are attributable
                           to the hedged risk or (ii) the earnings effect of the
                           hedged forecasted transaction. For a derivative not
                           designated as a hedging instrument, the gain or loss
                           is recognized in operations in the period of change.
                           SFAS No. 133 is effective for all fiscal quarters of
                           fiscal years beginning after June 15, 1999.

                           Historically, the Company has not entered into
                           derivatives contracts either to hedge existing risks
                           or for speculative purposes. Accordingly, the Company
                           does not expect adoption of the new standard on July
                           1, 1999 to affect its consolidated financial 
                           statements.

                           Reclassifications

                           Certain prior year balances have been reclassified to
                           conform with the 1998 presentation.

                                                                            F-16
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

1.     Liquidity           The accompanying consolidated financial statements
                           have been prepared assuming the Company will continue
                           as a going concern. This basis of accounting
                           contemplates the recovery of the Company's assets and
                           the satisfaction of its liabilities in the normal
                           course of operations. Since inception, the Company
                           has been developing its food technology product and
                           exploring new lines of business in the hotel and
                           casino industry. The Company's ultimate ability to
                           attain profitable operations is dependent upon
                           obtaining additional financing adequate to complete
                           its construction activities, and to achieve its
                           budgeted level of operations. Through June 30, 1998,
                           the Company incurred losses totaling $22,492,210
                           which raises substantial doubt about its ability
                           to continue as a going concern.

                           The Company is in the process of discussing with
                           various potential investors and/or lenders the
                           possibility of obtaining additional funds of $2 to $3
                           million. The Company is currently seeking capital or
                           debt financing in order to enable it (i) to continue
                           its operation in the casino and hotel business; (ii)
                           to complete the Suriname Casino (Note 2) so as to
                           realize that casino's cash flow potential; and (iii)
                           to pay any material expenses of continuing
                           negotiations for the Sakhalin project (Note 2) and
                           for maintaining its position in that project.
                           However, there can be no assurance that the Company
                           will be successful in consummating its plans, or that
                           such plans, if consummated, will enable the Company
                           to attain profitable operations or continue as a
                           going concern.

2.     New Line of         In August 1997, the Company announced that it was    
       Business and        diversifying beyond its sole line of business of     
       New Business        marketing, distributing and otherwise commercially   
       Opportunities       exploiting its food technology product and was       
                           exploring a new line of business in the hotel and    
                           casino industry (the "New Line of Business"). At a   
                           Special Meeting of Stockholders, which the Company   
                           held on December 2, 1997, the Company's stockholders 
                           voted on and approved various proposals regarding the
                           New Line of Business and New Business

                                                                            F-17
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

                           Opportunities as described herein:

                           A. Sakhalin Agreement. 

                           The Company entered into a stock purchase agreement
                           dated October 24, 1997, (the "Sakhalin Agreement")
                           with SGTI and Sovereign Gaming and Leisure Limited
                           ("Sovereign"), each a limited liability company
                           organized under the laws of Cyprus, pursuant to which
                           the Company would acquire: (i) all of the outstanding
                           shares of SGTI, which includes (a) all of SGTI's
                           rights and interest in a project to develop the
                           Sakhalin Project, and (b) SGTI's ownership interest
                           in 65% of Sakhalin City Centre Ltd. ("SCC"), a closed
                           joint stock company incorporated under the laws of
                           the Russian Federation, which, in turn, holds certain
                           rights, including a guarantee by the city of
                           Yuzhno-Sakhalinsk to issue a gaming license to SCC
                           and (ii) all rights and interest to or in the
                           Sakhalin Project held by Sovereign, including certain
                           operating and project management agreements with
                           respect to the Sakhalin Project (collectively, the
                           "Shares and Rights").

                           On December 12, 1997, the Company, (i) completed the
                           acquisition of 100% of the shares of SGTI, and thus
                           acquired an indirect interest of 65% of SCC, (ii)
                           acquired all rights and interests of Sovereign in
                           certain operating and project management agreements
                           related to the Sakhalin Project, and (iii) issued
                           2,000,000 shares of its Common Stock to the owners of
                           SGTI. In addition, as required by the Sakhalin
                           Agreement and in consideration of the Shares and
                           Rights, the Company made advances of $3,000,000,
                           which have been eliminated as an intercompany to
                           SGTI. The Company's Common Stock was valued at $5.20
                           per share on the date the acquisition was completed
                           and as such, the value attributed to the 2,000,000
                           shares of the Company's Common Stock issued to the
                           owners of SGTI was $10,400,000. In addition, options
                           to purchase 300,000 and 200,000 shares of Common
                           Stock at an exercise price equal to $6.125 per share
                           were issued to two directors. These options were

                                                                            F-18
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

                           valued at $1,091,800 based on the Black-Scholes
                           option pricing model and capitalized as part of the
                           purchase price of SGTI. In connection with the
                           Sovereign project management agreement, the Company
                           issued 200,000 shares of its common stock. The
                           Company's common stock was valued at $5.25 on the
                           date the agreement was entered into. Thus the value
                           attributed to the shares was $1,050,000. Mr. Dallas
                           Dempster, the Company's president, chief operating
                           officer and chief executive officer,  was a paid
                           consultant to Sovereign Gaming and Leisure Ltd.,
                           which assigned to the Company its 1994 Construction
                           Management Agreement and 1994 Operation Management
                           Agreement with SCC. The Company believes that he did
                           not hold and currently holds no beneficial interest
                           in stock in Sovereign. In September 1998 Mr.
                           Dempster's nominee, Dabus International Limited, for
                           the benefit of his family, was granted non-Plan
                           options to purchase 1,000,000 shares of the Company's
                           common stock at $1.50 per share.  

                           The aquisition has been accounted for as a purchase
                           and accordingly the results of operations of 
                           SGTI have been included in the Company's consolidated
                           financial statements since the date of acquisition.
                           The excess of the aggregate purchase price over the
                           fair market value of net assets acquired of
                           $10,544,300 is being amortized on a straight line
                           basis over 30 years.

                           The transaction was recorded as follows:

<TABLE>
<CAPTION>
<S>                                                                               <C> 
                           Common Stock and options issued                        $11,491,819
                           Construction in Progress Acquired                        3,638,957
                           Liabilities Assumed                                     (3,340,925)
                           Other Assets                                               843,356
                           Acquisition Costs                                          193,885
                           Fair value of Net Assets Acquired                       (1,141,388)
                                                                                  -----------
                           Purchase Price                                         $11,685,704
                                                                                  ===========
</TABLE>
                           The following unaudited pro forma summary presents
                           the results of operations of the Company as if the
                           acquisition had occurred on September 1, 1996:

<TABLE>
<CAPTION>
                                                                                           Ten month
                                                                      Year ended        period ended
                                                                   June 30, 1998       June 30, 1997
                        -------------------------------------------------------------------------------
<S>                                                             <C>                 <C>             
                        Revenues                                $        649,620    $            -
                        Net loss                                $    (12,716,676)        (9,180,487)
                                                                                    $
                        Net loss per share                      $          (1.26)   $         (1.38)
                                                                                    $
                       Weighted Average - Number of common
                        shares outstanding                      $     10,074,166    $     6,667,490
</TABLE> 

                           The unaudited pro forma assumes the amortization of
                           goodwill amounting to $10,544,300 over 30 years.

                           The Sakhalin Agreement provides that, upon request of
                           the Company, Sovereign agrees to become project
                           manager during the construction phase of the Sakhalin
                           Project, subject to an agreement on reasonable
                           compensation for such services, which shall not
                           exceed 5% of the construction cost of the Sakhalin
                           Project or $5,000,000, whichever is less.










                           B. Development Services Agreement. 

                           On October 2, 1997, the Company entered into an
                           agreement (the "Development Services Agreement") with
                           David Chiu ("Chiu"), pursuant to which the Company
                           would, as described below, transfer to Chiu 38.46%
                           of 

                                                                            F-19
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

                           the share capital of SGTI and would issue to Chiu one
                           share of convertible junior preferred stock of the
                           Company (the "Convertible Preferred Stock Share")
                           which would convert, under specified conditions and
                           certain circumstances, into 1,500,000 shares of
                           Common Stock of the Company. The Development Services
                           Agreement provides that Chiu will provide certain
                           development services to the Company in connection
                           with the Sakhalin Project, including using his best
                           efforts to procure or secure the necessary debt
                           financing and guarantees for the complete turnkey
                           construction of the Sakhalin Project which financing
                           is to be on mutually acceptable terms. Construction
                           costs for the Sakhalin Project are currently
                           estimated at $100 million. The shares of Common Stock
                           underlying the Convertible Preferred Stock Share and
                           the shares of SGTI to be issued to Chiu in
                           consideration for his services will be issued on the
                           date of mutual execution by the Company or its
                           nominated affiliate of a legally enforceable and
                           binding agreement from a lender, the terms of which
                           are acceptable to the Company, SGTI and SCC, to
                           provide the financing. In the event Chiu is unable to
                           procure or secure the necessary financing and
                           guarantees acceptable to the Company in accordance
                           with the Development Services Agreement, the
                           Convertible Junior Preferred Stock Share issued to
                           Mr. Chiu would not convert into 1,500,000 shares of
                           Common Stock of the Company.

                           Currently, no effect to the 38.46% interest Chiu
                           would receive of the Company has been reflected in
                           the financial statements, since he has not been able
                           to procure the necessary financing.

                           The Company currently does not believe that Chiu will
                           be able to procure the necessary financing and thus
                           is currently exploring other financing options.

                           Furthermore, the Development Services Agreement
                           provides that, in the event that Chiu wishes to sell
                           all or any part of the shares

                                                                            F-20
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

                           after the three year period described above, the
                           Company shall have the first option to purchase all
                           or any part of the shares from Chiu. The Company has
                           a right to purchase said shares at a price equal to
                           the (i) closing price per share as reported on the
                           Nasdaq (as reported in The Wall Street Journal) on
                           the date written notice is given to the Company or
                           (ii) the price offered to Chiu by an unaffiliated
                           third party (not a competitor of the Company) in an
                           irrevocable and unconditional bona fide written offer
                           (the "Bona Fide Offer"), as applicable.

                           The Development Service Agreement expired in August 
                           1998.

                           C. Consummation of Sakhalin Agreement and Development
                              Services Agreement. 

                           Assuming consummation of each of the transactions
                           contemplated above, the Company and Chiu would own
                           through their respective shares in SGTI, a 40% and
                           25% interest in SCC, respectively, and the remaining
                           35% of the interests would continue to be held 20% by
                           the City of Yuzhno-Sakhalinsk and 15% by the Sakhalin
                           Oblast (the regional government).

                           D. Sakhalin Casino Consulting Agreement. 

                           On August 14, 1997, the Company entered into an
                           agreement (the "Casino Consulting Agreement") which
                           commenced December 2, 1997 with Star Casinos Limited,
                           (the "Consultant"), whereby the Consultant has agreed
                           to provide consulting and technical services to the
                           Company and any affiliated entities for a period of
                           two years with respect to the development and ongoing
                           operations of the Sakhalin Project casino. Under the
                           terms of the Casino Consulting Agreement, the
                           Consultant will receive (i) a fee of $21,000 per
                           month plus reimbursement of reasonable expenses for
                           the term of the agreement, adjusted pro rata for any
                           partial month of service and (ii) options to purchase
                           100,000 shares of the Company's Common Stock, at
                           $6.50 per share, with 50% of the options becoming
                           exercisable on each of the first and second
                           anniversary

                                                                            F-21
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

                           dates of the commencement date and expiring on the
                           third anniversary date. Based on the Black-Scholes
                           option pricing model, these options were valued at
                           $140,000. The Company has recorded a consulting
                           charge of $140,000 in connection with the issuance of
                           these options. At the end of the term of the
                           agreement, provided that the Consultant is not in
                           breach of the Casino Consulting Agreement, the
                           Consultant will also be entitled to receive a
                           $250,000 bonus. The Company paid to the consultant
                           $189,000, $42,000 of which was paid prior to entering
                           into the agreement, plus reimbursement of reasonable
                           expenses during the year ended June 30, 1998. The
                           agreement also binds the Consultant to a two-year
                           non-compete, non-solicitation provision. Currently,
                           the Consultant has been appointed as president of the
                           Company's casino division.

                           E. Hotel Management Agreement. 

                           On October 2, 1997, the Company entered into an
                           agreement (the "Hotel Management Agreement") with
                           Dorsett Hotels and Resorts International, Ltd.
                           ("Dorsett"), a company 100 percent controlled by
                           Chiu, pursuant to which the Company acts as exclusive
                           operator and manager of certain hotels owned by
                           Dorsett. The Hotel Management Agreement provides for
                           twenty year exclusive operating agreements with
                           respect to the management of eight hotels.

                           The parties amended the Hotel Management Agreement on
                           January 28, 1998, whereby the consideration for
                           Dorsett entering into the Hotel Management Agreement
                           was amended to (i) the issuance to Dorsett up to an
                           aggregate of 800,000 shares and/or options to
                           purchase shares of the Company's Common Stock, upon
                           specific conditions being satisfied and (ii) pay
                           Dorsett $1,000,000. The Amended Hotel Management
                           Agreement appoints the Company as the exclusive
                           operator of the Dorsett Regency, Bali; Dorsett
                           Resort, Seremban; Dorsett Court, Angkor Wat; and
                           Dorsett Hotel, Phuket. Pursuant to the Amended Hotel
                           Management Agreement, the Company has paid Dorsett
                           $1,000,000 but has not

                                                                            F-22
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

                           granted the shares of the Company's Common Stock
                           since the conditions precedent to such issuance have
                           yet to be satisfied.

                           Subsequent to the execution of the Hotel Management
                           Agreement with Dorsett, the Company was notified by
                           Mr. Chiu that Far East Consortium International, Ltd.
                           ("FEC") is the owner of certain hotels included in
                           the October 2, 1997 agreement and as such, would
                           require a separate agreement with the Company under
                           terms and conditions similar to the Dorsett Hotel
                           Management Agreement. On January 25, 1998, the
                           Company entered into an Amendment to the Hotel
                           Management Agreement and a separate agreement (the
                           "FEC Hotel Management Agreement"), with FEC whereby
                           CCA was appointed as exclusive operator and manager
                           of the Dallas Grand Hotel, Dallas; Rockman's Regency,
                           Melbourne; Dorsett Regency, Kuala Lumpur; and
                           Radisson Plaza, Edmonton, in consideration for FEC
                           receiving upon execution of the FEC Hotel Management
                           Agreement, $1,500,000 and the Company granting FEC
                           the right to receive 1,200,000 shares of common stock
                           of the Company at a price of $3.675. The 1,200,000
                           shares of Common Stock to be granted to FEC are to be
                           granted upon the delivery of a duly executed and
                           legally enforceable hotel management contract
                           relating to the following hotels, 275,000 shares
                           allocated to the Dallas Grand Hotel, 400,000 shares
                           allocated to the Rockman's Regency, 275,000 shares
                           allocated to the Dorsett Regency and 250,000 shares
                           allocated to the Radisson Plaza. Pursuant to the FEC
                           Hotel Management Agreement, the Company has paid FEC
                           $1,500,000 and has issued FEC 950,000 shares of the
                           Company's Common Stock at a price of $3.675. The fair
                           value of the shares granted was $3,491,250.

                           F. Tradename. 

                           On January 30, 1998, the Company entered into an
                           agreement with Chiu to acquire all the outstanding
                           common stock of Dorsett Hotel and Resort
                           International Ltd. Dorsett has the rights to the
                           trademarks, tradenames and license rights of the
                           "Dorsett" tradename as well as provides hotels and
                           resorts

                                                                            F-23
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

                           management services. The purchase price of the stocks
                           was $500,000, which was allocated by the Company to
                           the tradename and is being amortized on a
                           straight-line basis over a 20 year period.
                           Amortization expense related to tradename was $12,500
                           during the year ended June 30, 1998.

                           G. November 1998 Termination and Settlement

                           In connection with problems encountered with the
                           Hotel Management Agreement and the FEC Hotel
                           Management Agreement, the Company had negotiations
                           with the owners of the hotels, Chiu (who was
                           represented to the Company as having been the sole
                           stockholder in Dorsett International) and with
                           representatives of the parties (the "HMA Parties") to
                           the Hotel Management Agreements. A successor to
                           Dorsett Hotels and Resort International Ltd. was that
                           party in the case of the four hotels in Indonesia,
                           (Seremban) Malaysia, Cambodia and Thailand. Far East
                           Consortium International Ltd. was that party in the
                           case of the four hotels in Malaysia (Kuala Lumpur),
                           Australia, Canada and Texas.

                           On November 4,1998 the Company entered into a
                           settlement agreement (the "November Settlement
                           Agreement") with the HMA Parties, Far East Consortium
                           (M) Limited, their subsidiaries and Mr. Chiu.
                           Pursuant to that agreement the Company was paid
                           $450,000 cash, was returned 700,000 shares of Common
                           Stock and retained $1,625,000 theretofore paid the
                           Company as management fees or loans. Various
                           obligations related to the hotel management
                           operations were taken over the other parties. The
                           Company and the other parties to that agreement
                           waived all claims and matters between them and
                           rescinded agreements between them.

                           At June 30, 1998, the carrying value of the related
                           assets was reduced to the fair value based on the
                           terms of the settlement agreement, accordingly, the
                           Company recorded a charge of

                                                                            F-24
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

                           $4,200,000 to write down the carrying amount of the
                           management contract agreements and tradenames.
                           The charge is reflected in the accompanying
                           consolidated statement of operations for the year
                           ended June 30, 1998.

                           Therefore, the remaining balance in the management
                           contract agreements after reflection of the above
                           termination and settlement is as follows:

<TABLE>
<CAPTION>
                           June 30,                                     1998                
                           ----------------------------------------------------
<S>                                                                <C>                         
                           FEC Hotel Management Agreement           $ 4,991,250

                           Dorsett Hotel Management Agreement         1,000,000

                           Tradenames                                   500,000

                           Acquisition Costs and Other                   27,015
                                                                   ------------
                           Total                                      6,518,265

                           Write-off attributed to Hotel

                           Management Termination Agreement          (4,200,000)                  
                           ----------------------------------------------------

                                                                      2,318,265                   
                           Less accumulated amortization                (90,020)                  
                           ----------------------------------------------------

                                                               $      2,228,245   
                           ----------------------------------------------------
</TABLE>

                           H. The Suriname Project. 

                           On April 30, 1998, the Company entered into an
                           agreement with Parbhoe Handelmij NV, a Surinamese
                           limited liability company, to create a 50-50 percent
                           joint venture company to develop a casino project
                           (the "Suriname Project") in Paramaribo, the capital
                           city of Suriname (the former Dutch Guyana). Pursuant
                           to the agreement, the joint venture company entered
                           into a "Casino Management Agreement" with the Company
                           to manage the casino. According to the terms of the
                           agreement, as of June 30, 1998, the Company has
                           invested approximately $2,566,000 for this project,
                           of which approximately $2,399,000 is included in
                           property, equipment and leasehold improvement.
                           Pursuant to the agreement, the Company maintains
                           title to the property and equipment. Once the joint
                           venture reimburses the Company for the costs of the
                           property and equipment, the title will be transferred
                           to the joint venture. Total 

                                                                            F-25
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

                           additional funds which will be required to be
                           advanced by the Company or financing from outside
                           sources to be arranged by the Company is expected to
                           aggregate approximately $3,200,000 including working
                           capital advances to cover initial operating expenses.

                           I. Casino Management Agreement. 

                           On April 30, 1998, the
                           Company entered into an agreement (the "Casino
                           Management Agreement") with Suriname Leisure Company
                           A.V.V. (Joint Venture) related to the operations of
                           the Suriname project. The Casino Management
                           Agreement provides for fifteen years exclusive
                           operating agreements with respect to Suriname Palace
                           Casino. The Company pursuant to the terms of the
                           Casino Management Agreement is entitled to a base fee
                           equal to three percent of revenues, as defined,
                           calculated on an annual basis and payable monthly,
                           plus an incentive fee of ten percent of gross
                           operating profits, as defined.

                           Additionally, pursuant to the terms of the agreement,
                           the Company leased the Casino premises from Parbhoe
                           under a fifteen year period ending on February 28,
                           2013, for a yearly amount of $200,000 subject to
                           increase based on changes in the Suriname Consumer
                           Price Index.

                           J. Budapest Casino Project. 

                           On April 3, 1998, the Company's wholly owned
                           subsidiary, Dorsett Hotels & Resorts Inc. ("CCA
                           Dorsett") entered into an agreement as amended with
                           Casino Bahia De Cadiz S.A. ("Cadiz") and Mrs. Teresa
                           Juste Picon, ("Juste") to purchase (i) their 95%
                           interest in the equity of Roulette Kft. ("Roulette"),
                           a Hungarian limited liability company that owns and
                           operates the Orfeum Casino in Budapest, and (ii)
                           receivables of $1.5 million due to Cadiz and Juste
                           under loan agreements and lease agreements with
                           Roulette (the "Budapest Project"). Pursuant to the
                           agreement, as of June 30, 1998, the Company has paid
                           $100,000, included in prepaid and other current
                           assets and has

                                                                            F-26
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

                           loaned $667,000 to Roulette, included in loans
                           receivable-long term. The agreement provides for CCA
                           Dorsett to manage the Orfeum Casino during the period
                           from April 3, 1998, up to the closing of the
                           acquisition. The purchase is subject to (i) the
                           approval of the Hungarian Gaming Supervisory Board
                           (ii) warranties about the business and operations of
                           Roulette and (iii) other normal legal conditions. At
                           the closing CCA Dorsett is required to deliver to
                           Cadiz and Juste $125,000 of CCA Common Stock
                           calculated at $7.00 per share, which equates to
                           17,857 shares of CCA Common Stock. The sellers are
                           not permitted to sell the Company's common stock for
                           a period of six months following the effective date.
                           On September 16, 1998, the Company completed the
                           acquisition of Roulette.

                           According to the terms of the acquisition agreement,
                           in the case that the average closing market price of
                           the Company's common stock on the last ten (10)
                           trading days preceding March 1, 1999 is less than
                           $7.00 (adjusted market price) per share, the Company
                           shall deliver to the sellers a certain number of
                           additional Company's common stock such that the total
                           market value of (i) the Company's shares delivered to
                           the sellers at the acquisition date plus (ii) those
                           additional Company's shares, calculated using the
                           adjusted market price, shall be equal to $125,000.

                           The acquisition will be accounted for by the purchase
                           method. In addition, the Company paid $45,000 and
                           issued 7,143 of its common stock to a consultant for
                           services performed in connection with the above
                           acquisition.

3.     Description of      In March 1996, the Company entered into a            
       Initial Line of     distribution agreement with certain of the Groupe    
       Business            Conserver entities for the exclusive marketing and   
                           distribution rights to Conserver 21(Trademark)       
                           products in the United States and Canada. Conserver  
                           21(Trademark) products are designed to preserve food 
                           and flowers. Groupe Conserver had obtained such      
                           rights from Conserver XXI (see Note 12) in May 1995. 
                           The

                                                                            F-27
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

                           agreement was amended in October 1996. Upon learning
                           of a dispute between Conserver XXI and Groupe
                           Conserver, which threatened the Company's supply of
                           Conserver 21(Trademark), the Company entered into an
                           agreement with Conserver Purchasing Corporation
                           ("CPC") an unaffiliated Delaware corporation, whereby
                           the Company, through CPC would have been able to
                           acquire substantially identical marketing and
                           distribution rights from Conserver XXI in the event
                           Groupe Conserver could not deliver the product.
                           Pursuant to the agreement between the Company and CPC
                           dated October 9, 1996, and subsequently amended on
                           December 31, 1996, the Company lent CPC up to
                           $375,000 for the purpose of enabling CPC to acquire
                           inventory of Conserver 21(Trademark). These loans,
                           which were payable on demand, bearing interest at a
                           rate of 8% per annum were collateralized by a lien on
                           CPC's inventory of Conserver 21(Trademark). In June
                           1997, the Company accepted inventory as full payment
                           on the loans.
                           
                           Due to the establishment of insolvency proceedings in
                           Brussels regarding Conserver Investments, S.A., the
                           controlling entity of Groupe Conserver and Groupe
                           Conserver's loss of its rights from Conserver XXI,
                           the Company terminated its distribution agreement
                           with Groupe Conserver in March of 1997.

                           In March 1997, the Company entered into a
                           Distribution Agreement with Agrotech 2000, S.L.,
                           ("Agrotech"), a company whose principal shareholder
                           controlled Conserver XXI, establishing the Company as
                           the exclusive licensee of the right to import,
                           promote, distribute, market and otherwise
                           commercially exploit Conserver 21(Trademark) products
                           in the United States and Canada through March 2022,
                           subject to extension. The Company also holds the
                           option and a right of first refusal to exercise such
                           exclusive rights throughout the world. Pursuant to
                           the terms of the Distribution Agreement, if the
                           Company fails to purchase a minimum of $2,000,000 of
                           Conserver 21(Trademark) products between April 1997
                           and April 1998, or fails to meet the minimum annual

                                                                            F-28
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

                           purchase goals, when established, Agrotech may sell
                           Conserver 21(Trademark) to other customers in the
                           United States and Canada. The Company failed to meet
                           the Initial Purchase Commitment or the subsequent
                           purchase commitments under the Distribution
                           Agreement, thus the Company could lose its exclusive
                           rights to sell Conserver 21(Trademark) in the United
                           States and Canada.

                           Pursuant to the Distribution Agreement, Agrotech has
                           the right to borrow up to $1,000,000 from the Company
                           as of May 1, 1997 and up to an additional $500,000
                           commencing ninety days after the initial public
                           offering (Note 4). In connection with such rights, a
                           director of the Company advanced $500,000 to Agrotech
                           on behalf of the Company in May of 1997. The Company
                           repaid the advance to the director and interest
                           thereon at 10%, out of the proceeds from the public
                           offering. An additional $500,000 was advanced from
                           the Company in June 1997, resulting in a $1,000,000
                           loan balance at June 30, 1997. The Company has
                           provided a full reserve against the receivable
                           balance. Under the terms of the Distribution
                           Agreement the Company may be obligated to extend an
                           additional loan of $500,000 to Agrotech.

                           The Company experienced problems with respect to the
                           pricing and packaging of the Conserver 21(Trademark)
                           product and in conjunction with discussions to
                           resolve these issues with Agrotech, the Company
                           commenced efforts to identify alternative sources of
                           products similar to Conserver 21(Trademark). After
                           extensive research, the Company identified one other
                           product that, from independent tests, the Company
                           believes is as efficacious as Conserver
                           21(Trademark). With this product identified and as a
                           result of unsuccessful efforts to negotiate a viable
                           business arrangement with Agrotech, the Company
                           notified Agrotech of its intention to terminate their
                           distribution agreement.

                           Because of the situations experienced with Agrotech,
                           the Company 

                                                                            F-29
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

                           entered into a loan agreement with CPC due to CPC's
                           identification of a similar product.

                           CPC entered into two agreements, each dated December
                           9, 1997, with Sitedev S.a.r.l. ("Sitedev"), the owner
                           of the French company Atmos Concept S.A. ("Atmos"),
                           which manufactures this alternative similar product.
                           The Company believes, although there can be no
                           assurance, that the Atmos product does not infringe
                           upon the patents of Conserver 21(TM) held by
                           Agrotech. While the Company is not a party to either
                           of these agreements with Sitedev, the Company has the
                           option, in its sole discretion, to require CPC to
                           assign all of its rights under these two agreements
                           to the Company and to purchase the Atmos shares from
                           CPC at the same price and on the same terms and
                           conditions as CPC purchased such shares from Sitedev.

                           Under the first agreement, CPC acquired 51% of the
                           shares of Atmos in return for advancing $400,000 to
                           Atmos upon execution of the first agreement on
                           December 9, 1997, and agreed to advance an additional
                           $250,000 to Atmos which it did during fiscal 1998.
                           The agreement requires Atmos to use all such funds to
                           discharge certain of its debts and obligations.

                           The Company advanced $400,000 to CPC under a loan
                           agreement dated December 5, 1997, to fund CPC's
                           initial payment required under the first agreement,
                           (see below) and in February 1998, advanced the
                           additional $250,000 to CPC for the remaining payments
                           required under the first agreement. The Company
                           through June 30, 1998 advanced to CPC an additional
                           $970,000 for inventory purchases, overhead
                           requirements and to discharge additional existing
                           obligations, bringing the total advances to CPC for
                           funding Atmos to an aggregate amount of $1,620,000,
                           included in loans receivable-long term. According to
                           the loan agreement between the Company and CPC, if
                           CPC is unable to repay any of the loans made to it by
                           the Company, the Company has the right to

                                                                            F-30
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

                           exercise the option to acquire Atmos in order to
                           recoup the value of its loans to CPC. Because of the
                           current economic conditions of Atmos, the Company has
                           provided a $1,620,000 reserve against the receivable
                           balance from CPC and currently does not plan to
                           exercise its option to acquire Atmos.

                           The Company's option is to acquire from CPC its 51%
                           stock ownership in Atmos for the same price CPC paid
                           the Atmos stockholders to acquire 51% of the Atmos
                           stock. That price was $1,650,000, payable $650,000 in
                           cash to Atmos to discharge existing obligations and
                           the balance, to the Atmos stockholders, in the
                           Company's Common Stock valued at $1,000,000
                           contingent upon delivery of the patents on the Atmos
                           product. In October 1998, the Company's Common Stock
                           was issued but not delivered to the Atmos
                           stockholders. The Company's Common Stock is being
                           held by the Company to secure CPC and the Company
                           against breach of the same warranties as were made by
                           Atmos and its stockholders to CPC. CPC has asserted
                           that those warranties have been breached because,
                           among other things, the debt and other obligations of
                           Atmos exceed the limits warranted. Consequently, the
                           Company does not currently plan to exercise its
                           option to acquire CPC's 51% interest in Atmos.

                           The Atmos product, like Conserver 21(Trade Mark), 
                           has not been successfully commercialized, and there 
                           can be no assurance that the Atmos product can be 
                           successfully commercialized. Successful 
                           commercialization of the Atmos product is subject 
                           generally to similar difficulties and uncertainties 
                           that commercialization of Conserver 
                           21(Trade Mark) faces.


                                                                         F-31
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

                           Loans receivable long-term is made up of the
                           following at June 30:

                                                     1998             1997
                           -----------------------------------------------------
                           CPC                 $   1,620,830    $           -
                           Roulette (Note 2)         667,085                -

                           Agrotech                1,000,000        1,000,000
                           -----------------------------------------------------

                                                   3,287,915        1,000,000
                                                  (2,620,830)      (1,000,000) 
                           -----------------------------------------------------

                                               $     667,085    $           -
                           -----------------------------------------------------

4.     Initial Public      Since inception through November 1996, the Company   
       Offering            raised capital necessary for its business development
       and Private         through debt and equity private placements.          
       Placements          
                           In June 1997, the Company completed its initial
                           public offering in which it received net proceeds of
                           approximately $8,859,000 from the sale of 2,200,000
                           shares of its common stock, $0.001 par value (the
                           "Common Stock") at a per share price of $5.00. In
                           July 1997, the Company's underwriter exercised its
                           over-allotment option to purchase an aggregate of
                           330,000 shares of Common Stock at $5.00 per share,
                           resulting in the Company receiving additional net
                           proceeds of approximately $1,448,000. Aggregate net
                           proceeds to the Company from the IPO amounted to
                           approximately $10,307,000. Also in connection with
                           the IPO, the underwriters obtained, Underwriters'
                           Warrants to purchase 220,000 shares of Common Stock
                           exercisable for a period of four years at $8.25 per
                           share.

                           During the year ended June 30, 1998, proceeds from
                           the IPO were used to retire the convertible
                           debentures in the amount of $175,000 (Note 6).

                           In November 1997, the Company commenced efforts to
                           raise additional capital to fund its New Line of
                           Business and New Business Opportunities (Note 2). The
                           Company completed its private placement offering in
                           February 1998 and received net proceeds in the
                           aggregate of approximately $8,955,000 from the 

                                                                            F-32
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

                           sale of 2,044,763 shares of its Common Stock at a per
                           share price of $5.14. Also in connection with the
                           offering, the agent obtained warrants to purchase
                           715,678 shares of Common Stock exercisable for a
                           period of four years at $5.14 per share.

                                                                            F-33
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

5.     Property,           At June 30, 1998 and 1997 property, equipment and 
       Equipment and       Leasehold improvements consist of the following:  
       Leasehold               
       Improvements 

<TABLE>
<CAPTION>
                           June 30,                                       1998          1997
                           -------------------------------------------------------------------
<S>                                                              <C>            <C>         
                           Office equipment                      $     243,151  $     24,150
                           Slots equipment                           1,010,644             -
                           Computer equipment                           18,964             -
                           Vehicle                                       6,500             -
                           Leasehold improvements                    1,322,190             -
                           Construction in progress (Note 2)         4,783,333             -
                           -------------------------------------------------------------------

                                                                     7,384,782        24,150
                           Less:  accumulated depreciation             (17,903)       (2,164)
                           -------------------------------------------------------------------

                                                                 $   7,366,879  $     21,986
                           -------------------------------------------------------------------

</TABLE>

6.     Convertible         In September and November 1996, the Company issued   
       Debentures          one-year 10% convertible subordinated debentures in  
                           the aggregate amount of $750,000. The debentures and 
                           accrued interest are convertible into common shares  
                           at $5.00 per share. During the year ended June 30,   
                           1998, the holders of $175,000 of debentures were     
                           repaid, $210,000 of debentures were cancelled against
                           a loan receivable and holders of $365,000 of the     
                           remaining debentures elected to convert their notes  
                           to shares of common stock. In connection with the    
                           sale of the debentures, the Company issued 62,504    
                           shares of its common stock valued at $312,500 which  
                           was accounted for as debt discount and charged to    
                           expense.                                             
                           
7.     Loan to D & M       In August 1997, the Company made a $210,000 loan to
       Investments         D&M Investments, Inc. due September 24,1997 and
                           bearing interest at 10% per annum. This loan was
                           subsequently paid by the cancellation of
                           debentures.

                                                                            F-34
<PAGE>
                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements


8.     Income Taxes        At June 30, 1998, the Company had net operating loss
                           carryforwards (NOL) of approximately $1,601,329 which
                           expire through 2013. In the event of a change in
                           ownership of the Company, the utilization of the NOL
                           carryforward will be subject to limitation under
                           certain provisions of the Internal Revenue Code.
                           Deferred income taxes are comprised of the following
                           at June 30, 1998.

<TABLE>
<CAPTION>
                                                                                      
                           ----------------------------------------------------------------
<S>                                                                         <C>            
                           Start-up expenses capitalized for tax purposes   $    2,693,602
                           Compensation changes in connection with issuance
                            of options and warrants                              2,593,073
                           Bad debt reserve versus write-off method                995,915
                           Write-down of management contracts                      456,000
                           Net operating loss carryforward                         608,505
                           Other                                                    (1,425)
                           ----------------------------------------------------------------
                                                                                           
                           Gross deferred tax asset                              7,345,670
                           Deferred tax asset valuation allowance               (7,345,670)
                           ----------------------------------------------------------------
                                                                                           
                           Net deferred tax asset                           $            - 
                           ----------------------------------------------------------------
</TABLE>

                           Realization of any portion of the Company's deferred
                           tax asset at June 30, 1998 is not considered to be
                           more likely than not and accordingly a $7,345,670
                           valuation allowance has been provided.

                           Until June 30, 1997 the Company, for tax purposes, 
                           does not have any operations, or net operating loss,
                           as its expenses are preoperating and accordingly
                           were capitalized and amortized when operations 
                           commence.

9.     Financial           The carrying amounts of financial instruments
       Instruments         including loans receivable, accounts receivable,
                           accounts payable and debt approximates fair value.

10.    Related Party       The Company incurred approximately $546,000, $149,000
       Transactions        and $75,000, in legal fees to a related party during 
                           the year ended June 30, 1998, during the ten month   
                           period ended June 30, 1997 and from March 6,         
                           (inception) through August 31, 1996, respectively,   
                           including free legal services amounting to $60,000,  
                           in the ten month period ended June 30, 1997 which    
                           amounts were recorded as additional paid-in capital. 
                           No such services were provided for 

                                                                            F-35
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

                           the year ended June 30, 1998.
                           
                           During the year ended June 30, 1998, the Company
                           issued 187,500 options valued at $285,619, based on
                           the Black-Scholes option pricing model to two of its
                           legal counsels in lieu of a cash payment. The value
                           of the options is being amortized as legal expense,
                           $171,000 for the year ended June 30, 1998 as counsel
                           renders services.

                           During 1998 and 1997, the Company made payments of
                           $91,000 and $70,000, respectively, for two properties
                           owned by the Chairman of the Board of Directors which
                           are used as offices by the Company in New York and
                           London.

                           Additionally, during the year ended June 30, 1998,
                           the Company purchased a life insurance policy for the
                           benefit of the Chairman of the Board. The premium of
                           approximately $40,000 has been charged to operations.

11.    Commitments       The Company rents office space and facilities under  
       and               non-cancelable leases through February 2013. The     
       Contingencies     minimum future rental commitment for leases in effect
                         at June 30, 1998 approximates the following:         
                         
                         Years ending June 30,
                         -------------------------------------------------------
                         1999                                $         324,500
                         2000                                          303,200
                         2001                                          300,700
                         2002                                          299,200
                         2003                                          224,800
                         Thereafter                                  1,933,300
                         -------------------------------------------------------
                                                             $       3,385,700
                         -------------------------------------------------------

                           Rent expense for the year ended June 30, 1998, for
                           the ten months ended June 30, 1997 and from March 6
                           (inception), through August 31, 1996 was $238,478,
                           $127,574 and $9,552, respectively.

                           During the year ended June 30, 1998, the Company
                           entered into a

                                                                            F-36
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

                           commitment for the construction of the Suriname
                           Palace Casino (Note 2). The commitment is for
                           leasehold improvements related to the casino. At June
                           30, 1998, the Company has open commitments related to
                           this project for approximately $2,200,000.

                           Employment Contract. The Company entered into a
                           three-year employment contract with Charles H. Stein,
                           President and Chief Executive Officer of the Company
                           which took effect upon the consummation of the
                           Company's initial public offering of securities. Mr.
                           Stein is also a member of the Board of Directors. The
                           contract provides for an annual salary of an amount
                           not less than $125,000 and a three-year noncompete
                           clause upon termination.

                           During the year ended June 30, 1998 and during the
                           periods ended June 30, 1997 and August 31, 1996, Mr.
                           Stein did not receive a salary. Accordingly, the
                           Company recorded compensation charges in those
                           periods for an amount based upon his employment
                           agreement and as contribution to capital. Salary
                           expense recorded for the year ended June 30, 1998,
                           for the ten months ended June 30, 1997 and for the
                           period from March 6 (inception) through August 31,
                           1996 was $90,000, $105,000 and $65,000, respectively.

12.    Stock Options       The Company has a fixed stock option plan and        
       and Warrants        non-plan options which are described below. The      
                           Company applies APB Opinion 25, Accounting for Stock 
                           Issued to Employees, and related interpretations in  
                           accounting for employee stock options. Under APB     
                           Opinion 25, because the exercise price of the        
                           Company's employee stock options equals or exceeds   
                           the market price of the underlying stock on the date 
                           of grant, no compensation cost is recognized.        

                           The Company's 1996 Stock Option Plan (the "Plan") was
                           adopted in November 1996, and amended in December
                           1996, April 1997

                                                                            F-37
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

                           and December 1997. Under the Plan, which authorizes
                           the granting of incentive stock options or
                           nonincentive stock options, the maximum number of
                           shares of common stock for which options may be
                           granted is 5,000,000 shares. As of June 30, 1998,
                           2,272,500 options to purchase shares of common stock
                           had been granted under the Plan.

                           During fiscal 1998, for the ten month period ended
                           June 30, 1997 and for the period from March 6 to
                           August 31, 1996, the Company granted 240,000, 660,000
                           and 25,000 options respectively to consultants  for
                           services rendered or to be rendered. Exercisable
                           price for these options range from $5.19 to $6.50 per
                           share. These options expire four years after their
                           issuance. In connection with these options the
                           Company has recorded a charge to consulting fees with
                           a corresponding credit to additional paid in capital
                           in the amount of $386,000, $513,000 and $112,000,
                           respectively.

                           In connection with the private placements done by the
                           Company during the ten month period ended June 30,
                           1997, the Company issued to investors 500,000 
                           options. The exercise price for these options was 
                           $2.00 and they expire in April 2001.

                           Generally, options granted have maximum terms of not
                           more than four years and are not transferable.
                           Options are exercisable, one-third on the first
                           anniversary of such grant, one-third on the second
                           anniversary and the final one-third on the third
                           anniversary of such grant. However, options granted
                           under the Plan shall become immediately exercisable
                           if the holder of such options is terminated by the
                           Company or is no longer a director of the Company, as
                           the case may be, and subsequent to certain events
                           which are deemed to be a "change in control" of the
                           Company.

                           The Plan provides for adjustments in the number and
                           type of shares covered by the Plan and options
                           granted thereunder in the event of any
                           reorganization, merger, recapitalization or certain
                           other transactions involving the Company.

                           In fiscal 1998 and 1997, the Company granted a total
                           of 350,000

                                                                            F-38
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

                           and 550,000 options to directors, respectively. These
                           options vest one-third upon the date of grant and one
                           third each upon the next two anniversaries of the
                           date of grant and are exercisable from $5.00 to
                           $6.50. These option expire four years after their
                           issuance. In connection with these options the
                           Company has recorded a charge to operations with a
                           corresponding credit to additional paid in capital in
                           the amounts of $386,000 and $700,000 respectively.
                           Additionally, in fiscal 1998, 1997, and for the
                           period from March 6 to August 31, 1996, 140,000,
                           125,000 and 110,000, options were issued to employees
                           respectively. These options vest one-third upon the
                           date of grant and one-third each upon the next two
                           anniversaries of the date of grant, which options are
                           exercisable from $5.19 to $6.13.

                           FASB Statement 123, "Accounting for Stock-Based
                           Compensation," requires the Company to provide pro
                           forma information regarding net income (loss) and net
                           income (loss) per share as if compensation cost for
                           the Company's employee stock options had been
                           determined in accordance with the fair value based
                           method prescribed in FASB Statement 123. The Company
                           estimates the fair value of each stock option at the
                           grant date by using the Black-Scholes option-pricing
                           model with the following weighted-average
                           assumptions:

<TABLE>
<CAPTION>
                                                           June 30,     June 30,    August 31,
                           Period ended                        1998         1997          1996
                           -------------------------------------------------------------------
<S>                                                       <C>          <C>          <C>
                           Risk free interest rate               6%           7%            6%
                           Expected life                  3-4 years    4-6 years       3 years
                           Expected volatility                   .5           .3            .3
                           Dividend yield                       0.0          0.0           0.0
</TABLE>

                           Under the accounting provisions of FASB Statement
                           123, the Company's pro forma net loss and loss per
                           share would have been as follows:

                                                                            F-39
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                                          June 30,        June 30,     August 31,
                           Period Ended                                       1998            1997           1996
                           -----------------------------------------------------------------------------------------
<S>                                                                  <C>             <C>             <C>
                           Pro forma net loss
                               As reported                           $ (12,543,072)  $  (8,562,067)  $ (1,387,071)
                               Pro forma                               (12,770,747)     (8,599,459)    (1,395,993)
                           -----------------------------------------------------------------------------------------

                           Pro forma net loss per common share
                             basic and diluted
                               As reported                           $       (1.37)  $       (1.83)  $       (.32)
                               Pro forma                                     (1.39)          (1.84)          (.32)
                           -----------------------------------------------------------------------------------------
</TABLE>

                           A summary of the status of the Company's fixed stock
                           option plan and non-plan options as of June 30, 1998,
                           1997 and August 31, 1996, and changes during the
                           periods then ended is presented below:

<TABLE>
<CAPTION>
                                                           June 30, 1998         June 30, 1997         August 31, 1996
                                                        --------------------  ---------------------  --------------------
                                                                   Weighted-              Weighted-             Weighted-
                                                                    Average                Average               Average
                                                                   Exercise               Exercise              Exercise
                                                          Shares      Price     Shares       Price     Shares      Price
                           -----------------------------------------------------------------------------------------------
<S>                                                    <C>         <C>       <C>         <C>          <C>      <C>       
                           Outstanding at beginning     1,970,000   $  4.02     135,000  $    1.67          -   $      -
                           of period
                           Granted                      1,217,500      5.85   1,835,000       4.18    135,000       1.67
                           Exercised                       (7,881)     2.00          -           -          -          -
                           Forfeited                       (2,119)     2.00          -           -          -          -
                           -----------------------------------------------------------------------------------------------

                           Outstanding at end of        3,177,500      4.72   1,970,000       4.02    135,000       1.67
                           period

                           -----------------------------------------------------------------------------------------------
                           Options exercisable at
                           end of period                1,803,333      4.18   1,408,333       3.92          -          -
                           Weighted-average fair
                           value of options granted
                           during the period                    -   $  2.08           -   $    3.75         -   $   1.30
                           -----------------------------------------------------------------------------------------------
</TABLE>

                           The following table presents information relating to
                           stock options outstanding at June 30, 1998:

                                                                            F-40
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                           Options Outstanding                Options Exercisable
                                                 -----------------------------------------  ------------------------
                                                                  Weighted-       Average                  Weighted-
                                       Range of                     Average     Remaining                   Average
                                       Exercise                    Exercise       Life in                  Exercise
                                          Price       Shares          Price         Years       Shares        Price
                                   ---------------------------------------------------------------------------------
<S>                                  <C>           <C>        <C>               <C>          <C>         <C>       
                                     $ .50-$2.00     625,000  $        1.70          2.65      575,000   $     1.80
                                     $   5-$6.50   2,552,500           5.45          3.05    1,228,333         5.29
                                   ---------------------------------------------------------------------------------

                                                   3,177,500  $        4.72          2.97    1,803,333   $     4.18
                                   -----------------------------------------------------------------------------------
</TABLE>

                           As of June 30, 1998, 2,727,500 options are available
                           for future grant under the Plan.

                           Subsequent to year end 6,000 options were exercised
                           at a price of $.50.

                           Warrants

                           At June 30, 1998, the Company had warrants amounting
                           to 2,260,678 outstanding. No warrants have been
                           exercised. All warrants are exercisable on the day 
                           of grant.

                           During the year ended June 30, 1998, the Company
                           issued to a consultant four year warrants to purchase
                           100,000 shares of the Company's common stock at $6.50
                           per share. The warrants were valued at $272,500 based
                           on the Black-Scholes option pricing model and were
                           charged to operations for the year ended June 30,
                           1998.

                           In August 1996, the Company issued to Directors and
                           consultants three-year warrants to purchase 325,000
                           shares of the Company's common stock at $5.00 per
                           share. The warrants were valued at $457,201 and were
                           charged to operations for the period ended August 31,
                           1996.

                           In connection with a $1,000,000 note which was
                           subsequently repaid, the Company issued warrants to
                           the debt holder and an affiliate for the purchase of
                           550,000 shares of common stock at $2 per share. The
                           warrants were valued at approximately $2,040,000 and
                           were charged to expense at the completion of the
                           public

                                                                            F-41
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

                           offering. At the time the warrants were issued,
                           20,000 shares of previously issued common stock were
                           surrendered to the Company.

                           During the periods ended June 30, 1998 and 1997, the
                           Company issued 715,678 and 220,000 warrants to
                           purchase shares of the Company's common stock at
                           exercise prices of $5.14 and $8.25 per share, in
                           connection with its public offering and private
                           placement, respectively, (See Note 4).

                           In June 1997, the Company issued to consultants
                           warrants to purchase 350,000 shares of common stock
                           at $5.75 per share. The warrants were valued at
                           approximately $705,000 and were charged to operations
                           for the ten months ended June 30, 1997.

                           Common Stock

                           The Company has reserved 5,438,178 shares of common
                           stock for exercise of options and warrants.

13.    Stockholders'       On December 2, 1997, at a special meeting of the
       Equity              stockholders, an amendment was approved to the 
                           Company's Certificate of Incorporation which increase
                           the number of (1) authorized common stock from
                           30,000,000 shares to 50,000,000 and (2) authorized
                           preferred stock from 5,000 shares to 5,000,000
                           shares.

                           In connection with the organization of the Company,
                           1,666,667 shares of common stock were subscribed to
                           by Conserver Investments, S.A. (Note 3) which
                           together with certain of its affiliates are referred
                           to hereinafter as the "Groupe Conserver."

                           The Company, in a series of negotiated transactions
                           repurchased 1,366,667 shares of such common stock for
                           an aggregate sum of $1,800,000. The remaining 300,000
                           shares of common stock were transferred in November
                           1996 to two persons designated by the Company, each
                           of whom are nonaffiliates of both the Company 

                                                                            F-42
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

                           and Groupe Conserver or any of their directors,
                           officers or employees.

                           In November 1996, the Board of Directors approved a
                           2.128874 for 1 stock split. In December 1996, the
                           Board of Directors approved a 1.066194 for 1 stock
                           split. Subsequently, in April 1997, the Board of
                           Directors approved a reverse stock split to cancel
                           the effect of the aforementioned two stock splits.
                           All of the above splits have been retroactively
                           reflected in the accompanying consolidated financial
                           statements.

14.    Business Segment    The Company's operations have been classified into 
       Information         three business segments:                           

                              Food preservation, hotel and management agreements
                              and casino operations. The food preservation
                              includes the development, selling and marketing of
                              the product. The hotel and management agreements
                              include the management and exclusive operations of
                              certain hotels. The casino operations include the
                              development and management of certain casinos.

                              Operating loss by segment is total operating
                              revenue less expenses which are deemed to be
                              related to the unit's operating revenue.
                              Identifiable assets by segment are those assets
                              that are used in the operation of that unit.
                              Corporate assets consist principally of cash and
                              equivalents, prepaid expense and leasehold
                              improvements related to the corporate unit.

                              As further disclosed in Note 2, the Company
                              diverted its operations during fiscal 1998.
                              Summarized financial information by business
                              segment for the year ended June 30, 1998 are as
                              follows:

                                                                            F-43
<PAGE>
                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                                                          Year ended
                                                                                       June 30, 1998
                           ----------------------------------------------------------------------------
<S>                        <C>                                                     <C>
                           Revenues:
                               Food preservation                                   $           9,900
                               Hotel and management agreements                               639,700
                               Casino operations                                                   -
                               Corporate                                                           -
                           ----------------------------------------------------------------------------
                           Total revenues                                          $         649,600
                           ----------------------------------------------------------------------------
                           Operating Loss:
                               Food preservation                                   $       2,878,800
                               Hotel and management agreements                             5,558,500
                               Casino operations                                           1,374,900
                               Corporate                                                   2,944,700
                           ----------------------------------------------------------------------------
                           Total operating loss                                    $      12,756,900
                           ----------------------------------------------------------------------------
                           Depreciation and Amortization:
                               Food preservation                                   $               -
                               Hotel and management agreements                               225,200
                               Casino operations                                             120,000
                               Corporate                                                      32,800
                           ----------------------------------------------------------------------------
                           Total depreciation and amortization                     $         378,000
                           ----------------------------------------------------------------------------
                           Capital Additions:
                               Food preservation                                   $               -
                               Hotel and management agreements                             2,734,900
                               Casino operations                                           5,111,100
                               Corporate                                                      86,800
                           ----------------------------------------------------------------------------
                           Total capital additions                                 $       7,932,800
                           ----------------------------------------------------------------------------
                           Identifiable Assets:
                               Food preservation                                   $               -
                               Hotel and management agreements                            28,301,400
                               Casino operations                                          26,085,500
                               Corporate                                                   1,578,900
                               Eliminations                                              (32,008,600)
                           ----------------------------------------------------------------------------
                           Total assets                                            $      23,957,200
                           ----------------------------------------------------------------------------
</TABLE>
                           The Company's main operations are located in the
                           following foreign geographic regions: Cyprus,
                           Russian Federation, Suriname and Budapest.

                           At June 30, 1998, Identifiable assets by 
                           geographical region are as follows:
<TABLE>
<S>                                                                         <C>
                              Russian Federation                            $ 16,033,589
                              Suriname                                         2,877,204
                              Other (net of eliminations in the
                               amount of $25,772,554)                          5,046,407
                                                                             -----------
                                                                             $23,957,200
                                                                             ===========
</TABLE>

15.    Schedule of         Valuation accounts during the year ended June 30, 
       Valuation           1998 and for the ten month period ended June 30,
       Accounts            1997 are as follows:

<TABLE>
<CAPTION>
                                                                 Year ended         Ten month period
                           Allowance for Loans Receivable       June 30, 1998      ended June 30, 1997
                           ------------------------------       -------------      -------------------
<S>                                                             <C>               <C>
                          Beginning balance                      $1,000,000          $         -
                          Provision                               1,620,830            1,000,000
                                                                 ----------          -----------
                          Ending balance                         $2,620,830          $ 1,000,000
                                                                 ==========          =========== 
</TABLE>
                                                                            F-44
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

16.    Subsequent          On September 10, 1998, the Company entered into an   
       Events              agreement with Parbhoe's Handelmij N.V. in which the
                           Company borrowed $600,000 from Parbhoe for working  
                           capital purposes. Interest rate on this loan is at 3%
                           per month and the loan shall be payable out of the   
                           net operating income (as defined) of Suriname Leisure
                           Company. In connection with this credit agreement,   
                           the Company issued 250,000 shares of its common stock
                           for cash which were valued at $2.00 per share, having
                           a restricted lock-up period of six months.           
                           Additionally, the Company issued one year warrants   
                           for the purchase of 25,000 shares of common stock at 
                           $2.00 per share. The warrants are exercisable at any 
                           time within the one year period.                    

                           On September 14, 1998, the Company's Board of
                           Directors agreed to reprice the exercise price of
                           1,907,500 stock options and warrants previously
                           granted to directors, officers and employees at
                           prices ranged from $5.00 to $6.50, to $1.50.
                           Additionally, the Board of Directors also approved
                           the issuance of 1,500,000 options to acquire shares
                           of common stock at a price of $1.50 per share. These
                           options will expire four years, from the grant date. 
                           These options will be issued to: 

                           Dallas Dempster, President and 
                            Chief Executive Officer                   $1,000,000
                           Charles Stein, Chairman of the Board          100,000
                           Jay Haft, Director                            100,000
                           Jonathan Caplan, Director                     100,000
                           James Stanton, Director                       100,000
                           Miles Greenberg, Chief Financial Officer       75,000
                           Consultants                                    25,000

                           Also 35,000 options issued to a consultant were
                           repriced from $5.00 to $1.50 and the exercise date
                           was extended from August 16, 1998 to August 16, 1999.

                           On September 23, 1998, the Company entered into a
                           letter of intent with JSC Rosneftegazstroy ("RNGS"),
                           which is a large Russian construction company. The
                           letter of intent may lead to RNGS guaranteeing the
                           financing of the full cost of a turn-key construction
                           contract on the Company's Sakhalin Project, (Note 2)
                           for which RNGS would be the major subcontractor. The
                           letter of intent also contemplated joint development
                           of a hotel management business in the Russian
                           Federation and the Commonwealth of Independent States
                           through a RNGS management subsidiary to be acquired
                           by the Company. The consummation of any of those
                           transactions is still conditional on substantial
                           further negotiations and agreements with RNGS and
                           others as well as the approval of

                                                                           F-45
<PAGE>

                                                      CCA Companies Incorporated

                                      Notes to Consolidated Financial Statements

                           the Company's Board of Directors and stockholders. If
                           fully consummated as described in the letter of
                           intent, the Company would arrange for RNGS to obtain
                           a 51% interest in the Sakhalin Project in
                           consideration of the guarantee, and the Company would
                           issue 3,000,000 shares of its common stock for the
                           acquisition of the hotel management company. The 51%
                           interest in the Sakhalin Project could be exchanged
                           at the option of the Company or RNGS for the
                           Company's issuance of additional shares of its common
                           stock which, together with the three million shares
                           would give RNGS 51% of the common stock of the
                           Company to be thereupon outstanding.

                           On September 30, 1998, 89,000 shares of the Company's
                           Common Stock were issued to Maritime Services
                           Corporation, the building contractor for the Suriname
                           casino currently under construction (Note 2). These
                           shares were issued at a price of $2.25 per share or
                           $200,250, which Maritime agreed to accept as
                           consideration and payment towards its construction
                           contract with the Joint Venture.

                           On December 3, 1998, the Company received $300,000 
                           from two investors for the purchase of 400,000 shares
                           of the Company's Common Stock at market value ($0.75
                           per share). In addition, the Company agreed to issue
                           warrants to purchase 200,000 shares of the Company's
                           Common Stock, at $1.00 per common share. Once issued
                           the warrants are exercisable immediately and will
                           expire four years from the issuance date.


                                                                            F-46