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                                   FORM 10-K
                      SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, D.C.
(Mark One)
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

For the fiscal year ended                 DECEMBER 31, 1997
                         -------------------------------------------------------

                                      OR

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

For the transition period from ______________________ to ______________________

Commission file number          1-6339
                      -------------------------------

                         GREATE BAY CASINO CORPORATION
                         -----------------------------
             (Exact name of registrant as specified in its charter)


             DELAWARE                                  75-1295630
-----------------------------------------    ----------------------------------
   (State or other jurisdiction of                  (I.R.S. Employer
   incorporation or organization)                   Identification No.)

      C/O SANDS HOTEL & CASINO
    INDIANA AVENUE & BRIGHTON PARK
      ATLANTIC CITY, NEW JERSEY                          08401
-----------------------------------------    ----------------------------------
(Address of principal executive offices)               (Zip Code)

(Registrant's telephone number, including area code):     (609) 441-0704
                                                     --------------------------

          Securities registered pursuant to Section 12(b) of the Act:

          COMMON STOCK,
     PAR VALUE $.10 PER SHARE
----------------------------------       --------------------------------------
      Title of each class                Name of exchange on which registered

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

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

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

   The aggregate market value of the voting stock held by non-affiliates of the
registrant, based on the closing price of such stock on March 27, 1998, was
$2,790,944. For the purposes of this computation, all officers, directors and 5%
beneficial owners of the registrant are deemed to be affiliates. Such
determination should not be deemed an admission that such officer, directors and
beneficial owners are, in fact, affiliates of the registrant. As of March 27,
1998, 5,186,627 shares of Common Stock, $.10 par value per share, were
outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

   Portions of the following documents are incorporated by reference into the
indicated part or parts of this report.

                                      None

                                       1
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                                     PART I


ITEM 1.  BUSINESS

GENERAL
-------

   Greate Bay Casino Corporation, a Delaware corporation, and its subsidiaries
("GBCC") are engaged primarily in the ownership, operation and management of the
Sands Hotel and Casino in Atlantic City, New Jersey (the "Sands"); the
management of a riverboat gaming and entertainment  facility located in Aurora,
Illinois (the "Aurora  Casino") and providing consulting services to a gaming
and lodging facility in Tunica County, Mississippi (the "Tunica Casino").  GBCC
has also engaged in the casino gaming business in Puerto Rico and the management
of hotels in the United States.  GBCC's common stock is listed on the OTC
Bulletin Board Service under the trading symbol "GEAA".  Prior to December 31,
1996, Hollywood Casino Corporation ("HCC", a Delaware corporation) owned
approximately 80% of the outstanding common stock of GBCC.  HCC distributed such
stock to its shareholders; as a result, approximately 36% of GBCC's outstanding
stock is owned by certain general partnerships and trusts controlled by Jack E.
Pratt, Edward T. Pratt, Jr. and William D. Pratt and by other family members
(collectively, the "Pratt Family").  The Pratt Family also owns approximately
53% of HCC.  HCC owns the Aurora Casino and the Tunica Casino.

   PPI Corporation is a wholly owned subsidiary of GBCC which owns various
entities related to GBCC's Atlantic City gaming operations.  Included herein as
wholly owned subsidiaries of PPI Corporation are:  GB Property Funding Corp.
("GB Property Funding"), the issuer of $185 million of 10 7/8% First Mortgage
Notes, due 2004 (the "10 7/8% First Mortgage Notes"); PRT Funding Corp., the
issuer of $85 million of 11 5/8% senior notes, due 2004 (the "PRT Funding
Notes"); New Jersey Management, Inc. ("NJMI"), which manages the operations of
the Sands; Pratt Casino Corporation ("PCC"), which earns consulting fees from
the Tunica Casino; Greate Bay Hotel and Casino, Inc. ("GBHC"), which owns the
Sands;  GB Holdings, Inc. ("Holdings"), which owns GBHC; and, for periods prior
to April 1, 1997, Pratt Management, L.P. ("PML"), which manages the operations
of the Aurora Casino.

   On January 5, 1998, GBHC, Holdings, and GB Property Funding, each filed
petitions for relief under Chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the District of New
Jersey (the "Bankruptcy Court").  Each company continues to operate in the
ordinary course of business, as set forth in the Bankruptcy Code, and each
company's officers and directors as of the date of the filing remain in office,
subject to the supervision of the Bankruptcy Court.  The filings of such
petitions constitute a default under the indenture for the PRT Funding Notes;
accordingly, the outstanding principal amount of the PRT Funding Notes has
accelerated and is currently due and payable.

   The principal executive offices of GBCC are located at Indiana Avenue and
Brighton Park, Atlantic City, New Jersey 08401, telephone (609) 441-0704.

THE SANDS MANAGEMENT CONTRACT
-----------------------------

   NJMI manages the Sands for GBHC pursuant to the Sands Management Contract,
which was executed in August 1987 and has an initial term of 99 years.  GBCC
acts as the sole and exclusive agent of GBHC in the supervision, direction and
control of the management of the Sands and any additions or expansions thereof.

                                       2
<PAGE>

   NJMI receives (i) a base services fee of 1.5% of gross revenues (as defined),
which approximates net revenue, and (ii) an incentive fee determined as a
varying percentage of gross operating profit (as defined), less the base service
fee.  The incentive fee equals 5% of gross operating profit and increases in
increments (up to 7.5%) for each $5 million increase in gross operating profit.
Both the base services and incentive fees are paid monthly in arrears.

   The Sands Management Contract can be terminated by either party upon 180 days
written notice in the event of the other party's material breach of the
agreement, inability to pay debts generally as they become due, bankruptcy or
other similar proceedings, action to suspend normal business operations, or
imposition of any materially adverse levy or judgment.  Furthermore, NJMI has
the right to terminate the Sands Management Contract if GBHC fails to furnish
funds required for NJMI to manage the Sands  or fails to compensate or reimburse
NJMI, and NJMI is entitled to liquidated damages in an amount equal to twice the
base services fee and the incentive fee earned by NJMI in the preceding fiscal
year.  As a result of its bankruptcy filing, GBHC can elect to reject the Sands'
Management Contract at any time subject to a damage claim by NJMI.  The amount
of damages, if any, would ultimately require approval of the Bankruptcy Court.

THE SANDS
---------

   For a description of the Sands' facilities, please refer to "Item 2. -
Properties."

   Business Strategy. The Sands' marketing strategy in the highly competitive
Atlantic City market has consisted of seeking higher-value repeat patrons
through its ongoing capital improvements program and its use of sophisticated
casino information technology to monitor and control certain casino operations
and to target marketing efforts toward frequent visitors.  Traditionally, the
Sands has been successful in its marketing efforts toward the high end, frequent
table game and slot patron through its offering of private, limited-access
facilities and related amenities to premium patrons.  While the Sands has
strived to maintain its position in this segment, the completion of the Sands'
expansion in 1994 has allowed the Sands to broaden its appeal to the mass drive-
in patron for continued growth in this market segment.

   Generally, the Sands has three types of patrons: high-end patrons, drive-in
patrons, and bus patrons. High-end patrons have gaming budgets of $5,000 or more
per visit, drive-in patrons typically live within a 200 mile radius of the Sands
and utilize the Sands' parking garage and bus patrons are generally day-
travelers who purchase "ticket coin packages" which include bus transportation
to and from the casino and a specified amount of coins to use in the casino.

   In implementing the Sands' marketing and operating strategy, the Sands uses
proprietary casino information technology of Advanced Casino Systems Corporation
("ACSC"), an affiliate of GBHC.  This technology includes ACSC's table game and
slot machine monitoring systems which enable the Sands to track and rate patron
play through the use of a casino player's card.  These systems provide
management with the key characteristics of patron play as slot machines are
connected with, and information with respect to table games can be input into,
its data base monitoring system.  When patrons use the casino player's card at
slot machines or table games, the information is immediately available to
management and allows management to implement marketing programs to recognize
and reward patrons during their visits to the casino.  Certain of these
marketing programs allow patrons to automatically credit themselves with
complimentaries based on their levels of play.  Such promotions and
complimentaries include free meals, hotel accommodations, retail merchandise,
parking and sweepstakes giveaways based on slot machine patrons' gross wagering.
Management believes that its ability to reward its customers on a "same-visit"
basis is valuable in developing a loyal base of higher value patrons.  ACSC's
systems also allow the Sands to monitor, analyze and control the granting of
gaming credit, promotional expenses and other marketing costs.

                                       3
<PAGE>

   Management uses its data bases to focus its marketing efforts on patrons who
have been identified as higher value patrons.  Management believes that its
process of identifying higher value patrons, encouraging participation in its
casino player's card program and tailoring promotions and special events to
cater to this market segment enhances the profitability of the Sands.

   The Sands also markets to the "mass" casino patron market segment through
various forms of advertising media as well as through group and bus tour
packages.  Once new patrons are introduced to the Sands' gaming facilities and
the casino player's card program, management uses its data base capabilities to
directly market to these patrons in an attempt to convert them into repeat
patrons.

   Competition.  The Sands faces intense competition from the 11 other existing
Atlantic City casinos. According to reports of the New Jersey Casino Control
Commission (the "Casino Commission"), the twelve Atlantic City casinos currently
offer over one million square feet of gaming space.  Several companies have
announced plans to build and operate additional casino/hotels over the next few
years. For example, Mirage Resorts has announced plans for an approximately $1
billion resort complex consisting of a casino, a 4,000 room hotel, several
theaters and an upscale shopping concourse at a site located in the Marina
District. The State of New Jersey has announced a tunnel project connecting the
Atlantic City Expressway with the Marina District.  Sun International acquired
an existing casino in Atlantic City and is proceeding with a significant
expansion and renovation including the addition of hotel rooms and gaming space.
Bally's Park Place is currently constructing a new parking and bus facility and
Caesars' Atlantic City is constructing a new entrance to their facility, both
directly on Pacific Avenue. Other individuals have also submitted applications
and have been qualified in New Jersey to hold casino licenses.  Legislation
enacted during 1996 and 1993 requires the allocation of an aggregate of $175
million of Casino Reinvestment Development Authority ("CRDA") funds and credits
to subsidize the construction of new hotel rooms by casinos in Atlantic City.
The CRDA is a governmental agency which administers the statutorily mandated
investments made by casino licensees.  Competitors of the Sands which have the
financial resources and that can currently access such funds and are capable of
physically expanding their facilities so as to take advantage of such subsidy
may benefit disproportionately from such legislation. Plans have been announced
by other casino operators to complete expansions within the required subsidy
period.  The expansion of existing gaming facilities and the addition of new
casinos could significantly increase the competitiveness of the Atlantic City
market.

   In this highly competitive environment, each property's relative success is
affected by a great many factors that relate to its location and facilities.
These include availability and number of parking spaces, hotel accommodations,
proximity to the Boardwalk, proximity to other casino/hotels, and access to the
main expressway entering into Atlantic City.  GBHC believes that in prior years
its operating strategy enabled the Sands to compete against most other Atlantic
City casino/hotels.  However, many of its competitors have greater sources of
funding for capital improvements and financial resources for marketing and
promotional budgets than GBHC and, as a result, the Sands' facilities and
amenities have fallen behind many of the other casinos.  In addition, the lack
of access to Pacific Avenue has hampered the Sands' efforts to expand its
"drive-in" patron base.

   Management estimates that a significant amount of the Sands' revenues is
derived from patrons living within a 120 mile radius of Atlantic City, New
Jersey, particularly from southeastern Pennsylvania, northern New Jersey and
metropolitan New York City.  Proposals to allow casino gaming in certain areas
of Pennsylvania and New York have been defeated within the past two years.  If
casino gaming were to be legalized in those areas or in other venues that are
more convenient to those areas, it could have a material adverse effect on the
Sands.  Gaming is currently conducted on Indian lands in nearby states,
including the Foxwoods and Mohegan Sun Casinos in Connecticut and the Turning
Stone Casino in Oneida, New York near Syracuse.  Gaming on cruise ships
departing from New York City has recently begun and further expansion of such
activities is uncertain at this time.  In addition, slot machines are now
allowed at race tracks in the State of Delaware.

                                       4
<PAGE>

   Industry Developments.  A number of significant changes to the regulations
governing the casino industry have been approved by New Jersey regulators in
recent years.  Significant deregulation of the industry began in 1995 with the
enactment of legislation amending the New Jersey Casino Control Act (the "Casino
Act") and has continued with additional rule modifications to continue to
stimulate growth.  Partly as a result of such regulatory changes, revenues have
shown small, but steady increases from $3.7 billion in 1995 to $3.8 billion in
1996 to $3.9 billion in 1997.

   Casino/hotel operators have also benefited in recent years from a trend
toward increased slot play as slot machines have increasingly become more
popular than table games with loyal and frequent patrons, as well as with
recreational and other casual visitors.  Casino operators have been catering
increasingly to slot patrons through new forms of promotions and incentives such
as slot machines which are linked between the various casinos to pay out a
pooled jackpot and more attractive gaming machines.  Slot machines generally
produce higher margins and profitability than table games because they require
less labor and have lower operating costs.  As a result, slot machine revenue
growth has significantly outpaced table game revenue growth in recent years to
the point where for 1997 slot win accounted for nearly  70% of total Atlantic
City gaming win.  Table games remain important, however, in catering to the
higher-end segment of gaming patrons as well as in adding to the gaming ambience
and providing a varied gaming experience.

   Casino Credit.  Casino operations are conducted on both a credit and a cash
basis.  Gaming debts arising in Atlantic City in accordance with applicable
regulations are enforceable under New Jersey law. For the year ended December
31, 1997, gaming credit extended to Sands' customers accounted for approximately
26.8% of overall table game wagering, while table game wagering accounted for
approximately 21.5% of overall casino wagering during the period.  At December
31, 1997, gaming receivables amounted to $22 million before allowances for
uncollectible gaming receivables amounting to $14.9 million.  Management of the
Sands believes that the allowances for uncollectible gaming receivables are
adequate.

   License Agreement.  GBCC entered into a 99-year license agreement (the "Sands
License Agreement") during 1987 to use the trade name "Sands" in Atlantic City,
New Jersey .  GBHC pays an annual royalty of 3% of gross room charges, as
defined in the Sands License Agreement.  Such charges amounted to $290,000,
$283,000 and $288,000 during the years ended December 31, 1997, 1996 and 1995,
respectively.

   Employees and Labor Relations.  In Atlantic City, all casino employees,
except certain hotel employees, must be licensed under the Casino Act.  Due to
the seasonality of the operations of the Sands, the number of employees varies
during the course of the year.  At December 31, 1997, there were approximately
3,000 employees at the Sands.  The Sands has collective bargaining agreements
with three unions that represent approximately 1,000 hotel employees,
substantially all of whom are represented by the Hotel, Restaurant Employees and
Bartenders International Union, AFL-CIO, Local 54.  The collective bargaining
agreement with Local 54 expires in September 1999.  Collective bargaining
agreement negotiations with a fourth union are currently underway.  Management
considers its labor relations to be good.

   Casino Regulation.  Casino gaming is strictly regulated in Atlantic City
under the Casino Act and the rules and regulations of the Casino Commission,
which affect virtually all aspects of the operations of the Sands.  The laws,
rules and regulations affecting Atlantic City gaming operations concern
primarily the financial stability, integrity and character of casino operators,
their employees, their debt and equity security holders and others financially
interested in casino operations; the nature of casino/hotel facilities; the
operation methods (including rules of games and credit granting procedures); and
financial and accounting practices used in connection with casino operations.  A
number of these regulations require

                                       5
<PAGE>

practices that are different from those in casinos in Nevada and elsewhere, and
some of these regulations result in casino operating costs greater than those in
comparable facilities in Nevada and elsewhere.

   The Casino Act requires that all casino operations be licensed by the Casino
Commission and that all employees (except for certain non-casino job positions),
major shareholders and other persons or entities financially interested in the
casino operation be either licensed or approved by the Casino Commission. A
license is not transferable and may be revoked or suspended under certain
circumstances by the Casino Commission.  A plenary license authorizes the
operation of a casino with the games authorized in an operation certificate
issued by the Casino Commission, and the operation certificate may be issued
only on a finding that the casino conforms to the requirements of the Casino Act
and applicable regulations and that the casino is prepared to entertain the
public.  Under such determination, GBHC and NJMI have been issued plenary casino
licenses, and GBCC has been approved as a holding company of a casino licensee.

   The plenary licenses issued to GBHC and NJMI to own and operate the Sands
were renewed by the Casino Commission in September 1996 and extended through
September 30, 2000, subject to review of the Sands' financial stability during
1997.  Such review took place and the Sands is scheduled for another review in
1998.  Terms of the current license require GBHC to comply with periodic
financial reporting requirements and to obtain prior Casino Commission approval
of certain cash transactions with affiliates.

   The Casino Act provides for a casino license fee of not less than $200,000
based upon the cost of the investigation and consideration of the license
application, and a renewal fee of not less than $100,000 or $200,000 for a one
year or four year renewal, respectively, based upon the cost of maintaining
control and regulatory activities.  In addition, a licensee must pay annual
taxes of 8% of casino win (as defined in the Casino Act), net of a provision for
uncollectible accounts of up to 4% of casino win.  During the years ended
December 31, 1997, 1996 and 1995, the taxes assessed by, and the license and
other fees incurred by the Sands amounted to $22.4 million, $23.5 million and
$25 million, respectively.

   The Casino Act also requires a casino licensee to make certain approved
investments (including CRDA bonds) in New Jersey of at least 1.25% of its gross
casino revenues (as defined in the Casino Act) or pay an investment alternative
tax of 2.5% of its gross casino revenues.

   GBHC has, from time to time, contributed certain amounts held in escrow to
the CRDA.  In return, the CRDA granted GBHC waivers of certain of its investment
obligations in future periods.  GBHC made such contributions during the years
ended December 31, 1997, 1996 and 1995 totaling $147,000, $1.5 million and
$250,000, respectively, resulting in waivers granted by the CRDA during 1997 and
1995 totaling $75,000 and $128,000, respectively.  No such waivers were granted
during 1996; however, the contributions were designated for projects expected to
benefit the community and the Sands facility.

   The Casino Act also imposes certain restrictions upon the ownership of
securities issued by a corporation that holds a casino license or is a holding
company of a corporate licensee.  Among other restrictions, the sale,
assignment, transfer, pledge or other disposition of any security issued by a
corporate licensee or holding company is subject to the regulation of the Casino
Commission.  In the case of corporate holding companies whose stock is publicly
traded, the Casino Commission may require divestiture of the security held by a
disqualified holder such as an officer, director or controlling stockholder who
is required to be qualified under the Casino Act.

   Note holders are also subject to the qualification provisions of the Casino
Act and may, in the sole discretion of the Casino Commission, be required to
make filings, submit to regulatory proceedings and qualify under the Casino Act.
If an investor is an "Institutional Investor" such as a retirement fund for
governmental employees, a registered investment company or adviser, a collective
investment trust, or an insurance company, then, in the absence of a prima facie
showing by the New Jersey Division of Gaming Enforcement that the "Institutional
Investor" may be found unqualified, the Casino Commission shall grant

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a waiver of this qualification requirement with respect to publicly traded debt
or equity securities if the investor will own (i) less than 10% of the common
stock of the company in question on a fully diluted basis, (ii) less than 20% of
such company's indebtedness or (iii) less than 50% of an outstanding issue of
indebtedness of such company; the Casino Commission, upon a showing of good
cause, may, in its sole discretion, grant a waiver of qualification to an
"Institutional Investor" not satisfying the above criteria. An Institutional
Investor must also purchase securities for investment and have no intent to
influence the management or operations of such company. The Casino Commission
may, in its sole discretion, grant a waiver of the qualification requirement to
investors not qualifying as "Institutional Investors" under the Casino Act if
such investor will own less than 5% of the publicly traded common stock of such
company on a fully diluted basis or less than 15% of the publicly traded
outstanding indebtedness of such company.

PRATT MANAGEMENT, L.P.
----------------------

   Pursuant to the Agreement of Limited Partnership, PML makes distributions to
PCC in an amount equal to 1% of the first $84,000 of net income earned by PML
each month and 99% of any net income earned above such amount, all of which
comes from management fees received from the management of the Aurora Casino
pursuant to the Aurora Casino Management Contract.  For periods prior to April
1, 1997, PPI Corporation was the general partner in PML and received the
remaining partnership distributions; accordingly, PML was included in the
consolidated financial statements of GBCC.  Effective April 1, 1997, the general
partnership interest was acquired by HCC.  For the period from April 1, 1997
through December 31, 1997, distributions received by PCC totaled $4.9 million.

   The Aurora Casino Management Contract.  PML manages the Aurora Casino
pursuant to the Aurora Casino Management Contract, which was executed in June
1991 and has an initial term of 99 years.  PML acts as the sole and exclusive
agent in the supervision, direction and control of the management of the Aurora
Casino and any additions or expansions thereof.

   PML receives a quarterly base management fee generally equal to 5% of
operating revenues (as defined in the agreement).  However, for so long as
certain indebtedness of HCC remains outstanding, payment of the base services
fee is (i) subject to a maximum of $5.5 million in any consecutive 12 month
period; (ii) subordinate to payment of interest on the HCC indebtedness and
certain other indebtedness; and (iii) conditioned upon compliance with
indentures governing such indebtedness.  PML also receives an incentive fee
equal to 10% of gross operating profit (as defined in the agreement).

   The Aurora Casino Management Contract can be terminated by either party upon
45 days prior written notice in the event of the other party's material breach
of the agreement, inability to pay debts generally as they become due,
bankruptcy or other similar proceedings, action to suspend normal business
operations, or imposition of any materially adverse levy or judgment.
Furthermore, PML has the right to terminate if the HCC subsidiary which owns the
Aurora Casino fails to furnish funds required for PML to manage the Aurora
Casino or fails to compensate or reimburse PML.  In such case, PML is entitled
to liquidated damages in an amount equal to 10 times the aggregate base services
fee and incentive fee earned by PML in the preceding fiscal year.

   State Regulation - Supplier's License.  PML is required to maintain a
supplier's license with respect to the management services it provides to the
Aurora Casino.  PML's supplier's license expired in December 1997 and was
renewed by the Illinois Gaming Board through December 1998.  A supplier's
license is eligible for renewal upon payment of the applicable fee and a
determination by the Illinois Gaming Board that the licensee continues to meet
all of the requirements of the Riverboat Act.  The Illinois Gaming Board also
requires that officers, directors and employees of suppliers be licensed.
Licenses issued by the Illinois Gaming Board may not be transferred to another
person or entity.  All licenses must maintain their suitability for licensure
and have a continuing duty to disclose any material changes in information
provided to the Illinois Gaming Board.

                                       7
<PAGE>

   A holder of any license is subject to imposition of penalties and fines,
suspension or revocation of such license, or other action for any act or failure
to act by such holder or his or her agents or employees, that is injurious to
the public health, safety, morals, good order and general welfare of the people
of the State of Illinois, or that would discredit or tend to discredit the
Illinois gaming industry or the State of Illinois.  The Illinois Gaming Board
may revoke or suspend licenses, as the Board may see fit and in compliance with
applicable laws of Illinois regarding administrative procedures.

THE AURORA CASINO
-----------------

   The Aurora Casino commenced operations on June 17, 1993 and is one of only
four casinos in Illinois now operating within 50 miles of downtown Chicago.  The
Aurora Casino currently consists of two multi-level riverboat casinos containing
an aggregate of approximately 32,100 square feet of gaming space with
approximately 975 slot machines and approximately 55 table games.  The Aurora
Casino also includes an approximately 64,000 square foot land-based Pavilion
through which patrons board the facility's two riverboat casinos via enclosed
passenger loading ramps.  The highly-themed Pavilion features a glass-domed,
four-story atrium with two grand staircases, two upscale lounges, a gourmet
restaurant, a large buffet and a diner.  Patrons of the Aurora Casino are
offered valet and self-parking in two multi-level parking garages that
accommodate approximately 1,340 cars, as well as other available surface
parking.

   One parking garage is located directly across the street and is connected to
the Pavilion through a climate controlled tunnel.  The structure also contains
approximately 1,500 square feet of retail space, the "Hollywood Casino(R) Studio
Store," a highly-themed store selling logo items licensed from motion picture
studios as well as first-run movies on videocassette.  See "Properties - The
Aurora Casino".

   In 1995, the Company completed a 10,000 square foot expansion of one of the
Aurora Casino's riverboats.  The casino expansion increased the Aurora Casino's
gaming space by approximately 45% to the current 32,100 square feet, allowed the
facility to offer patrons the maximum number of gaming positions permitted by
Illinois gaming regulations in a spacious, highly-themed setting.  The Company
also completed a renovation of the Aurora Casino's second riverboat casino in
September 1995 which included the installation of new interior decor more
extensively utilizing the Company's Hollywood Theme and the reconfiguration of
gaming areas to provide a more spacious and comfortable setting.

   Business Strategy.  The Aurora facility's primary market is the affluent
suburbs north and west of Chicago.  Based on a sampling of its patrons, the
Company believes that the casino drew approximately 36% of its patrons from such
suburbs during 1997.  Approximately 7.1 million people live within a 40-mile
radius and approximately 11.6 million people live within a 100-mile radius of
the Aurora Casino.  The facility is easily accessible from major highways, can
be reached from downtown Chicago in approximately 50 minutes by trains which
average 20 trips a day, and is approximately 30 miles from O'Hare International
Airport.  The four operating Chicago-area casinos, including the Aurora Casino,
have approximately 135,000 square feet of combined gaming space.  No additional
casinos may be licensed in Illinois without the passage of new state
legislation; however, one existing license is currently available for reissue.
There are also five riverboat casino operations in northwestern Indiana which
compete within the Chicago-area market.

   The Aurora Casino's riverboats currently depart from their landings for as
many as 14 daily cruises on weekdays and 17 cruises on weekends, commencing at
various times from 9:00 a.m. until 4:30 a.m. This schedule may be varied, based
on experience and seasonal factors.  The use of a staggered cruise schedule with
two vessels significantly reduces the waiting time until the next gaming session
for patrons who miss a cruise departure.  Once passengers board, they are
permitted to game during the half hour prior to the time the riverboat departs.
After the excursion, passengers are permitted to game for another half hour
before new passengers board, for a total of two to three hours of gaming per
cruise, depending on the cruising schedule.  In addition, Illinois regulations
permit dockside gaming if the riverboat captain

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<PAGE>

reasonably determines that it is unsafe to cruise due to inclement weather,
mechanical or structural problems or river icing. During dockside gaming, the
Aurora riverboats operate on their normal schedules and passengers may leave the
vessels at any time but may board only during the half hour prior to the
regularly scheduled start of the cruise.

   The Aurora Casino employs a marketing strategy designed to take advantage of
its proximity to the affluent northern and western suburbs of Chicago and the
large population base of the Chicago metropolitan area.  Management uses a
patron data base developed through ACSC's systems to focus its marketing efforts
on patrons who have been identified through the system as having the
characteristics of a higher value patron.  Given the limited number of gaming
positions available on each daily casino excursion,  management believes that
its process of identifying the premium patron, encouraging participation in its
various casino players' card programs and tailoring promotions and special
events to cater to this market segment will enhance profitability.

   The Aurora Casino also markets to the "mass" casino patron market segment
through various forms of advertising media as well as through group and bus tour
packages.  Once new patrons are introduced to the Company's gaming facility and
its casino players' card programs, management uses its data base capabilities to
direct market to these patrons in an attempt to convert them into higher value
patrons.

   Management believes that the Aurora Casino's facilities, in particular its
highly-themed dockside Pavilion and its close proximity to the Paramount
Theatre, an 1,800-seat art deco theatre in which the Company features headliner
entertainment, are appealing to both the premium and mass casino patron markets.
Entertainers who have appeared include Frank Sinatra, Tom Jones, Ann-Margaret,
the Temptations, Howie Mandel, Willie Nelson and the Bolshoi Ballet.

   Competition.  The gaming industry is highly fragmented and characterized by a
high degree of competition among a large number of participants, some of which
have greater financial and other resources than HCC.  Competitive gaming
activities include land-based casinos, dockside casinos, riverboat casinos,
video lottery terminals, Indian gaming and other forms of legalized gaming in
the United States and other jurisdictions.  Casino gaming is currently permitted
in a number of states, including Colorado, Illinois, Indiana, Iowa, Louisiana,
Michigan, Mississippi, Missouri, Montana, Nevada, New Jersey and South Dakota,
and in Windsor, Ontario, Canada, as well as on Native American Indian lands in
certain states.  Other jurisdictions may legalize gaming in the near future
through the introduction of proposals to legalize gaming in their state
legislatures.  In addition, established gaming jurisdictions could award
additional gaming licenses or permit the expansion of existing gaming
operations.  New or expanded operations by other persons can be expected to
increase competition and could have a material adverse impact on the Aurora
Casino.

   The Illinois Riverboat Gambling Act and the rules promulgated by the Illinois
Gaming Board thereunder (the "Riverboat Act") authorizes only ten owner's
licenses for riverboat gaming operations in Illinois and permits a maximum of
1,200 gaming positions (as defined by the Illinois Gaming Board) at any time for
each of the ten licensed sites.  All authorized owner's licenses have been
granted and no additional licenses or gaming positions can be permitted without
further state legislation; however, one licensed site ceased gaming operations
in July 1997.  Four riverboat sites, including the Aurora Casino, are currently
licensed in Illinois within 50 miles of downtown Chicago.  Two of these
riverboat sites are in Joliet, approximately 42 miles southwest of downtown
Chicago, and a third is in Elgin, Illinois, approximately 20 miles from Aurora,
45 miles from downtown Chicago and amid the affluent northern and western
suburbs.  The Aurora Casino also competes directly with five riverboat
operations opened since 1996 in northwestern Indiana within 25 miles of downtown
Chicago.  Increased competition from casinos in Indiana has resulted in greater
competition for patrons from the downtown Chicago market and from the suburban
Chicago market.  The next closest operating casinos are in Milwaukee, Wisconsin,
approximately 90 miles from downtown Chicago, and in Peoria, and Rock Island,
Illinois, approximately 160 miles from

                                       9
<PAGE>

downtown Chicago. Legislation could also be introduced in the Illinois
legislature to authorize one or more land-based and/or riverboat casinos in
downtown Chicago and/or the granting of additional casino licenses elsewhere in
Illinois including within the Company's principal market. In addition, three
groups have been chosen to operate casinos in the Detroit, Michigan market;
however, the establishment of a regulatory system and subsequent licensing have
yet to be accomplished. Accordingly, it is not anticipated that any Detroit
casino will be operational until 2001. Native American Indian tribes are seeking
to open casino facilities in northwestern Indiana and Michigan under the Indian
Gaming Regulatory Act. The opening of additional casinos proximate to Chicago
could have a material adverse impact on the Aurora Casino.

   Casino Credit.  Casino operations are conducted on both a credit and a cash
basis.  Gaming debts arising in Aurora in accordance with applicable regulations
are enforceable under Illinois law.  For the year ended December 31, 1997,
gaming credit extended to customers accounted for approximately 14% of overall
table game wagering, while table game wagering accounted for approximately 13%
of overall casino wagering during the period.  At December 31, 1997, gaming
receivables amounted to $2.1 million before allowances for uncollectible gaming
receivables which amounted to $483,000.  Management of the Aurora Casino
believes that the allowances for uncollectible gaming receivables are adequate.

   Employees and Labor Relations.  In Aurora, all casino employees must be
licensed by the Illinois Gaming Board.  At December 31, 1997 there were
approximately 1,500  employees at the Aurora Casino, none of whom are
represented under collective bargaining agreements.  Management considers its
labor relations to be good.

   Casino Regulation.  The Riverboat Act authorizes riverboat gaming on
navigable streams within or forming a boundary of the State of Illinois except
for Lake Michigan and any waterway in Cook County, which includes Chicago.  The
Riverboat Act strictly regulates the facilities, persons, associations  and
practices related to gaming operations pursuant to the police powers of the
State of Illinois, including comprehensive law enforcement supervision.  The
Riverboat Act grants the Illinois Gaming Board specific powers and duties, and
all other powers necessary and proper to fully and effectively execute the
Riverboat Act for the purpose of administering, regulating and enforcing the
system of riverboat gaming.  The Illinois Gaming Board's jurisdiction extends to
every person, association, corporation, partnership and trust involved in
riverboat gaming operations in the State of Illinois.

   The Riverboat Act does not limit the maximum bet or per patron loss and
licensees may set any maximum or minimum limits on wagering. Vessels must have
the capacity to hold a minimum of 500 persons if operating on the Mississippi
River or the Illinois River south of Marshall County, and a minimum of 400
persons on any other waterway.  The number of gaming positions is limited to a
maximum of 1,200 per license.  Gaming sessions are limited to a four hour
duration; however, special event extended cruises may be authorized by the
Illinois Gaming Board.

   If a riverboat captain reasonably determines for reasons of safety that
although seaworthy, the riverboat should not leave the dock or should return
immediately thereto, due to inclement weather, river icing, or  mechanical or
structural difficulties, a gaming excursion may commence or continue while the
gangplank or its equivalent is raised and remains raised, in which event the
riverboat is not considered docked.  Recently, the Illinois Gaming Board amended
its rules to clarify the circumstances under which dockside gaming will be
permitted and to require the imposition of a fine for violations of the cruising
requirements.

   A $2 per person admission tax is imposed on the owner of a riverboat
operation.  Such admission tax for the Aurora Casino amounted to $7.2 million,
$6.4  million and $5.4 million , respectively, during 1997, 1996 and 1995.
Additionally, a wagering tax is imposed on the adjusted gross receipts, as
defined in the Riverboat Act, of a riverboat operation at the rate of 20%.  The
licensee is required to wire transfer all such gaming tax payments to the
Illinois Gaming Board.  The wagering tax for the Aurora Casino

                                       10
<PAGE>

amounted to $30.7 million, $31.3 million and $29.3 million, respectively, for
the years 1997, 1996 and 1995. Effective January 1, 1998 the wagering tax rate
was revised to a graduated tax at rates ranging from 15% to 35% based on total
adjusted gross receipts. Had the new rates been in effect for the year ended
December 31, 1997, the Aurora Casino's wagering tax would have increased to
$41.3 million, which in turn would have reduced PML's management fee by
approximately $1 million.

   The Illinois Gaming Board is authorized to conduct investigations into the
conduct of gaming employees and into alleged violations of the Riverboat Act and
to take such disciplinary and enforcement action as it may deem necessary and
proper.  Employees and agents of the Illinois Gaming Board have access to and
may inspect any facilities relating to the riverboat gaming operations at all
times.

   Any riverboat operation not conducted in compliance with the Riverboat Act
may constitute an illegal gaming place and consequently may be subject to
criminal penalties, which penalties include possible seizure, confiscation and
destruction of illegal gaming devices and seizure and sale of riverboats and
dock facilities to pay any unsatisfied judgment that may be recovered and any
unsatisfied fine that may be levied. The Riverboat Act also provides for civil
penalties equal to the amount of gross receipts derived from wagering on the
gaming, whether unauthorized  or authorized, conducted on the day of any
violation.

   The Illinois Gaming Board may waive any licensing requirement or procedure
provided by rule if it determines that such waiver is in the best interests of
the public and the gaming industry.

THE TUNICA CASINO CONSULTING AGREEMENT
--------------------------------------

   PCC, by virtue of its ownership and management of the Sands and its
management of the Aurora Casino, had certain casino management experience and
expertise which, at the time of its opening, the Tunica Casino did not have.  In
order to utilize PCC's experience and expertise, the Tunica Casino entered into
a consulting agreement with PCC as of January 1, 1994.  The agreement has a term
of 10 years and provides, among other things, for PCC to advise and consult the
Tunica Casino on any matters relating to business and for monthly payments of
$100,000 to PCC for its performance thereunder.  The  Tunica Casino is also
obligated to reimburse PCC for its direct costs and expenses incurred under the
agreement.

OTHER OPERATIONS
----------------

   ACSC, a wholly owned subsidiary of PPI Corporation, provides information
technology systems to the Sands, to HCC's casinos and to third party casinos.
Such systems include table game and slot machine monitoring and marketing
systems enabling the user to track and rate patron play.

   ACSC has recently begun marketing its slot system, previously restricted to
use by its affiliates, to unaffiliated gaming companies.  To date, ACSC has
secured contracts to implement such systems in three unaffiliated casinos.

   During 1996 and early 1997, GBCC disposed of its remaining non-casino hotel
operations.  GBCC managed and had an ownership interest (but no obligation to
fund future losses) in the hotel operations of the Sands Hotel and Casino in San
Juan, Puerto Rico.  GBCC also managed two non-casino hotels and had an ownership
interest in one of the hotels.  For the year ended December 31, 1997, earnings
before interest, taxes, depreciation and amortization attributable to such
operations amounted to $3.3 million consisting primarily of management
termination fees and liquidating distributions.  At December 31, 1997, GBCC has
no remaining non-casino hotel related indebtedness and all activities pertaining
to such operations have ceased.

                                       11
<PAGE>

ITEM 2.   PROPERTIES

   The Sands is located in Atlantic City, New Jersey on approximately 4.8 acres
of land one-half block from the boardwalk at Brighton Park between Indiana
Avenue and Dr. Martin Luther King, Jr. Boulevard. The Sands facility currently
consists of a casino and simulcasting facility with approximately 76,000 square
feet of gaming space containing approximately 2,025 slot machines and
approximately 105 table games; a hotel with 532 rooms (including 59 suites); six
restaurants; two cocktail lounges; two private lounges for invited guests (the
Plaza Club and the Island Club); an 800-seat cabaret theater; retail space; an
adjacent nine-story executive office building with approximately 77,000 square
feet of office space for its executive, financial and administrative personnel;
the "People Mover", an elevated, enclosed, one-way moving sidewalk connecting
the Sands to the Boardwalk; and parking for approximately 1,750 vehicles.  In
addition, a nearby warehouse and a building in Atlantic City that houses an auto
shop facility also support the Sands' operations.

   On February 17, 1994, GB Property Funding issued $185 million of non-recourse
first mortgage notes due January 15, 2004 (the "10 7/8% First Mortgage Notes")
collateralized by a first mortgage on the Sands.  Interest on the notes accrues
at the rate of 10 7/8% per annum, payable semiannually commencing July 15, 1994.
Interest only was  payable during the first three years.  Commencing on July 15,
1997, semiannual principal payments of $2.5 million became due on each interest
payment date with the balance due at maturity.  Such semiannual payments may be
made in cash or by tendering to the trustee 10 7/8% First Mortgage Notes
previously purchased or otherwise acquired by GB Property Funding.  During May
1997, GB Property Funding acquired $2,500,000 face amount of 10 7/8% First
Mortgage Notes which were used on June 4, 1997 to make the July 15, 1997
required principal payment.

   On January 5, 1998, GB Property Funding, Holdings, and GBHC filed petitions
for relief under Chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court for the District of New Jersey. Each company continues to
operate in the ordinary course of business, as set forth in the Bankruptcy Code,
and each company's officers and directors as of the date of the filing remain in
office, subject to the supervision of the Bankruptcy Court.  As a consequence of
the filing, the principal and interest payment due on January 15, 1998 was not
made and the accrual of additional interest on the 10 7/8% First Mortgage Notes
has been suspended.

   On February 17, 1994, PRT Funding issued the PRT Funding Notes.  Interest on
the PRT Funding Notes accrues at the rate of 11 5/8% per annum, payable
semiannually commencing October 15, 1994. The PRT Funding Notes are redeemable
at the option of the issuer, in whole or in part, on or after April 15, 1999 at
stated redemption prices ranging up to 104.36% of par plus accrued interest.
The indenture for the PRT Funding Notes contains various provisions which, among
other things, restrict the ability of certain subsidiaries of PCC to pay
dividends to GBCC, to merge, consolidate or sell substantially all of their
assets or to incur additional indebtedness beyond certain limitations.  The
indenture also contains certain cross default provisions with the indenture to
the 10 7/8% First Mortgage Notes described above.  As a result of the Chapter 11
filings discussed in the previous paragraph, a default under the Indenture for
the PRT Funding Notes has occurred.  As a consequence, the outstanding principal
balance of the PRT Funding Notes has accelerated and is currently due and
payable.

   Although it has no ownership interest in the Aurora Casino, PCC manages the
facility under the Aurora Casino Management Contract.  For a description of the
facility, see "Business - The Aurora Casino" above.

                                       12
<PAGE>

OTHER OPERATIONS
----------------

   ACSC, GBCC's computer services subsidiary, leases approximately 10,000 square
feet of office space for its operating and administrative needs in Egg Harbor
Township, New Jersey.  The lease is for a period of sixty-two months commencing
in May 1997.

   GBCC had a 46% interest in Southmark San Juan, Inc., a subsidiary of
Southmark Corporation which owned the 420-room Sands Hotel and Casino located in
San Juan, Puerto Rico prior to its sale in February 1997.  GBCC operated this
facility under a management agreement with Southmark San Juan, Inc. and earned
management fees of $292,000 during the year ended December 31, 1997.  GBCC
received a termination fee of approximately $1.5 million in connection with the
sale and provided management services on a month to month basis through October
1997.

ITEM 3.  LEGAL PROCEEDINGS

   CHAPTER 11 FILINGS AND RELATED DEFAULTS
   ---------------------------------------

   On January 5, 1998, Holdings, GB Property Funding and GBHC filed petitions
for relief under Chapter 11 of the Bankruptcy Code.  Each company continues to
operate in the ordinary course of business, as set forth in the Bankruptcy Code,
and each company's officers and directors as of the date of the filing remain in
office, subject to the supervision of the Bankruptcy Court.

   As a result of the default and automatic acceleration under the indenture for
the PRT Funding Notes, the holders of the PRT Funding Notes could initiate
judicial proceedings to enforce their claims for payment.  No such proceedings
have been initiated and negotiations with PRT Funding's creditors are currently
underway for a possible restructuring of the debt obligations.

   PLANET HOLLYWOOD LITIGATION
   ---------------------------

   Planet Hollywood International, inc., a Delaware corporation, and Planet
Hollywood (Region IV), Inc., a Minnesota corporation (collectively, "PHII"),
filed a complaint in the United States District Court for the Northern District
of Illinois, Eastern Division on July 29, 1996 against HCC, Hollywood Casino  -
Aurora, Inc. ("HCA"), the wholly owned subsidiary of HCC which owns and operates
the Aurora Casino, and a member of the Pratt Family (collectively, the "Original
Hollywood Defendants").  The Original Hollywood Defendants filed with the Court
on September 18, 1996 an answer to PHII's lawsuit, along with numerous
counterclaims against PHII, Robert Earl and Keith Barish (collectively, the
"PHII Defendants"). PHII filed with the Court on January 21, 1997, an amendment
to their complaint which, among other things, added HWCC-Tunica, Inc. ("HCT"),
the HCC subsidiary which owns and operates the Tunica Casino (together with the
Original Hollywood Defendants, the "Hollywood Defendants"), and GBCC as
defendants.  The Original Hollywood Defendants filed with the Court on February
4, 1997, and GBCC and HCT filed with the Court on February 20, 1997, answers and
counterclaims to such amended complaint.

   In its lawsuit, PHII alleges, among other things, that the Hollywood
Defendants and GBCC have, in opening and operating the Hollywood Casino concept,
infringed on PHII's trademark, service mark and trade dress and have engaged in
unfair competition and deceptive trade practices.  In their counterclaims, the
Hollywood Defendants and GBCC allege, among other things, that the PHII
Defendants have, through their planned use of their mark in connection with
casino services, infringed on certain of HCC's service marks and trade dress and
have engaged in unfair competition.

   Given the uncertainties inherent in litigation, no assurance can be given
that the Hollywood Defendants and GBCC will prevail in this litigation; however,
the Hollywood Defendants and GBCC

                                       13
<PAGE>

believe that PHII's claims are without merit and intend to defend their position
and pursue their counterclaims vigorously. The accompanying consolidated
financial statements do not include any adjustments that might result from the
outcome of the uncertainties described above.

OTHER LITIGATION
----------------

   GBHC is also a party in various other legal proceedings with respect to the
conduct of casino and hotel operations.  Although a possible range of loss
cannot be estimated, in the opinion of management, based upon the advice of
counsel, settlement or resolution of these proceedings should not have a
material adverse impact on the consolidated financial position or results of
operations of GBCC and its subsidiaries.

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

   During the fourth quarter of 1997, no matter was submitted to a vote of
security holders through the solicitation of proxies or otherwise.

                                    PART II

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

   GBCC's common stock traded on the American Stock Exchange under the symbol
"GBY" until January 8, 1998.  The common stock of GBCC is now traded on the OTC
Bulletin Board Service under the trading symbol "GEAA".  The prices set forth in
the following table represent actual transactions.
<TABLE>
<CAPTION>

          Period                        High    Low
          ------                        -----  -----
          <S>                           <C>    <C>
          1997
                First Quarter           $2.00  $1.25
                Second Quarter           1.63   1.25
                Third Quarter            1.88   1.19
                Fourth Quarter           1.63   0.63


          1996
                First Quarter           $2.69  $1.94
                Second Quarter           9.63   2.88
                Third Quarter            8.94   3.25
                Fourth Quarter           6.38   1.56
</TABLE>

    At March 27, 1998, there were approximately 3,900 holders of record of
GBCC's common stock.

    No dividends have been paid on GBCC's common stock in the past and GBCC has
no plans to pay dividends in the foreseeable future.  See Note 4 of "Notes to
Consolidated Financial Statements" for a description of certain agreements that
impose certain restrictions upon the ability of certain subsidiaries to transfer
funds to GBCC.

                                       14
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

    The following tables present selected financial data for GBCC and are
qualified in their entirety by the consolidated financial statements, including
the notes thereto, appearing elsewhere herein.  The data as of December 31, 1997
and 1996, and for the years ended December 31, 1997, 1996 and 1995, have been
derived from the audited consolidated financial statements of GBCC contained
elsewhere in Item 8.
<TABLE>
<CAPTION>

STATEMENT OF OPERATIONS DATA:                                           YEAR ENDED DECEMBER 31,
                                                     ------------------------------------------------------------
                                                         1997         1996        1995        1994        1993
                                                     ------------  ----------  ----------  ----------  ----------
                                                               (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                  <C>           <C>         <C>         <C>         <C>
Net revenues.......................................  $ 263,366     $ 283,640   $ 304,337   $ 295,917   $ 277,338
                                                     ---------     ---------   ---------   ---------   ---------
Expenses:
 Departmental......................................    215,922       240,021     229,666     220,752     207,391
 General and administrative........................     16,192        19,363      21,983      22,916      21,810
 Depreciation and amortization.....................     14,464        19,868      20,553      19,547      20,837
                                                     ---------     ---------   ---------   ---------   ---------
  Total expenses...................................    246,578       279,252     272,202     263,215     250,038
                                                     ---------     ---------   ---------   ---------   ---------
Income from operations.............................     16,788         4,388      32,135      32,702      27,300
                                                     ---------     ---------   ---------   ---------   ---------
Non-operating income (expenses):
 Interest income...................................      1,486         1,852       2,397       3,101       1,450
 Interest expense..................................    (38,246)      (39,851)    (38,975)    (39,292)    (39,304)
 Equity in earnings of limited partnership.........      5,012           -           -           -           -
 Gain (loss) on disposal of assets.................      2,120        (1,795)         56          73         -
                                                     ---------     ---------   ---------   ---------   ---------
  Total non-operating expenses, net................    (29,628)      (39,794)    (36,522)    (36,118)    (37,854)
                                                     ---------     ---------   ---------   ---------   ---------
Loss before income taxes, extraordinary and
 other items.......................................    (12,840)      (35,406)     (4,387)     (3,416)    (10,554)
Write off deferred financing costs.................     (6,515)          -           -           -           -
Reorganization costs...............................       (505)          -           -           -           -
                                                     ---------     ---------   ---------   ---------   ---------

Loss before income taxes and extraordinary item....    (19,860)      (35,406)     (4,387)     (3,416)    (10,554)
Income tax (provision) benefit.....................     (1,014)         (160)        100      (1,080)       (754)
                                                     ---------     ---------   ---------   ---------   ---------

Loss before extraordinary item.....................    (20,874)      (35,566)     (4,287)     (4,496)    (11,308)
Extraordinary item:
 Gain (loss) on early extinguishment of debt, net
  of related tax benefit...........................        310           -           -           -       (14,814)
                                                     ---------     ---------   ---------   ---------   ---------
  Net loss.........................................  $ (20,564)    $ (35,566)  $  (4,287)  $  (4,496)  $ (26,122)
                                                     =========     =========   =========   =========   =========

Basic and diluted loss per common share (1):
 Loss before extraordinary item....................     $(4.02)       $(6.86)      $(.83)      $(.87)     $(2.19)
 Extraordinary item................................        .06           -           -           -         (2.87)
                                                     ---------     ---------   ---------   ---------   ---------
  Net loss.........................................     $(3.96)       $(6.86)      $(.83)      $(.87)     $(5.06)
                                                     =========     =========   =========   =========   =========
</TABLE>

<TABLE>
<CAPTION>

BALANCE SHEET DATA:                                                          DECEMBER 31,
                                                     -----------------------------------------------------------
                                                      1997(2)         1996       1995        1994        1993
                                                     ---------     ---------   ---------   ---------   ---------
                                                                              (IN THOUSANDS)
<S>                                                  <C>           <C>         <C>         <C>         <C>
Total assets.......................................  $  15,752     $ 221,345   $ 250,116   $ 249,673   $ 223,898
Total debt.........................................  $ 115,949     $ 326,024   $ 329,123   $ 328,400   $ 288,122
Shareholders' deficit..............................  $(143,116)    $(159,207)  $(138,415)  $(134,073)  $(137,835)
</TABLE>

(1) During 1997, GBCC adopted the provisions of Financial Accounting Standards
    No. 128, "Earnings per Share." The earnings per share calculations have been
    restated for all prior periods presented.

(2) As a result of the Chapter 11 filings by Holdings, GB Property Funding and
    GBHC, GBCC's control over these subsidiaries is subject to supervision of
    the Bankruptcy Court and GBCC does not expect to be in control of such
    subsidiaries after reorganization. Accordingly, these subsidiaries are
    excluded from the consolidated balance sheet of GBCC at December 31, 1997.

                                       15
<PAGE>

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 about
the business, financial condition and prospects of GBCC.  The actual results
could differ materially from those indicated by the forward-looking statements
because of various risks and uncertainties including, among other things,
changes in competition, economic conditions, tax regulations, state regulations
applicable to the gaming industry in general or GBCC in particular, and other
risks indicated in GBCC's filing with the Securities and Exchange Commission.
Such risks and uncertainties are beyond management's ability to control and, in
many cases, can not be predicted by management.  When used in this Annual Report
on Form 10-K, the words "believes", "estimates", "anticipates" and similar
expressions as they relate to GBCC or its management are intended to identify
forward-looking statements.

LIQUIDITY AND CAPITAL RESOURCES

     OPERATING ACTIVITIES

     GBCC and its subsidiaries conduct three major business activities.  These
activities may be grouped by company as follows:  (i) GBCC, PPI Corporation and
their direct, wholly owned subsidiaries, (ii) PCC and NJMI and (iii) Holdings
and GBHC.

     GBCC, PPI Corporation and their direct subsidiaries have provided
management personnel for GBCC's non-casino hotel operations, including its joint
ventures, in the United States and Puerto Rico. GBCC completed its planned exit
from these operations in 1997.  ACSC, a PPI Corporation subsidiary, licenses
casino information technology systems to the Sands, to HCC's casino facilities
and to non-affiliated casino companies.

     PCC and NJMI provide management and consulting services or invest in
entities which provide such services to affiliates which own hotel and casino
properties.  Cash flow from such activities, specifically the PML limited
partnership interest held by PCC, the Tunica Consulting Contract and the Sands
Management Contract have historically been sufficient to meet debt service
obligations on the PRT Funding Notes ($9.9 million annually) and, when permitted
by the PRT Funding Note indenture, on the Junior Subordinated Notes.

     As a consequence of the Chapter 11 filing by Holdings, GB Property Funding
and GBHC, PRT Funding is in default on the $85 million principal amount of PRT
Funding Notes which accelerated and became immediately due and payable together
with accrued interest.  The bankruptcy filing of GBHC also permits it to reject
the Sands Management Contract which is an important source of funds for debt
service on the PRT Funding Notes.  PCC does not have the financial resources or
the capacity to borrow sufficient cash to satisfy the $85 million principal
amount of the PRT Funding Notes which have accelerated. Consequently, PCC, as
guarantor of the PRT Funding Notes, is presently in negotiations with the PRT
Funding noteholders seeking to restructure its obligations.  There can be no
assurance at this time that such negotiations will result in restructuring of
its obligations.  Accordingly, there is substantial doubt about the ability of
GBCC to continue as a going concern.

     Holdings and GBHC own the Sands Hotel and Casino in Atlantic City.  Prior
to 1996, the Sands' cash flow was sufficient to meet debt service obligations
and fund a substantial portion of annual capital expenditures.  The Sands also
used short-term borrowings to fund seasonal cash needs for certain capital
projects.  Beginning in early 1996 and continuing through 1997, due to declines
in operating cash flow discussed in "Results of Operations," the Sands required
periodic financial assistance from PCC and GBCC in order to meet debt service
obligations and would have required substantial additional financial assistance
to make the January 15, 1998 principal and interest payments due on the 10 7/8%
First Mortgage Notes.

                                       16
<PAGE>

     GBHC was unable to obtain additional borrowings from affiliates or other
sources and, accordingly, on January 5, 1998, Holdings, GB Property Funding and
GBHC filed petitions seeking protection under Chapter 11 of the Bankruptcy Code.

     As a result of the filings, the Sands has sufficient cash flow to continue
normal operations while it develops a plan of reorganization for submission to
its creditors and the Bankruptcy Court.  Capital expenditures, other than normal
recurring capital expenditures in the ordinary course of business, will require
prior approval of the Bankruptcy Court.  There can be no assurance at this time
that GBHC's plan of reorganization, when submitted, will be accepted by its
creditors or the Bankruptcy Court.  In any event, it is not anticipated that PCC
will retain a substantial equity position in Holdings as a result of a
reorganization and, accordingly, it is not anticipated that the Holdings group
will contribute significantly to the future cash flows of the GBCC consolidated
group.

     FINANCING ACTIVITIES

     During 1994, HCC loaned $15 million on a junior subordinated basis to a
subsidiary of PCC at 14 5/8% interest (the "Junior Subordinated Notes") of which
$10 million was loaned to GBHC on the same terms.  As of December 31, 1996, HCC
had assigned the entire principal amount of the Junior Subordinated Notes
together with accrued interest thereon to GBCC.  Interest on the subordinated
affiliate debt is payable semiannually subject to meeting certain financial
coverage and other payment restriction tests.  Because such tests have not been
met, no interest was paid in 1997.

     Also in 1994, GBCC issued $40.5 million discounted principal amount of
deferred interest notes (the "PPI Funding Notes") to HCC in exchange for $38.8
million principal amount of 15 1/2% notes issued by another GBCC subsidiary and
held by HCC.  Effective as of April 1, 1997, HCC acquired from PPI Corporation
the general partnership interest in the limited partnership which holds the
Aurora Management contract.  The acquisition price for the general partnership
interest included a note in the amount of $3.8 million and the assignment of
$7.6 million discounted amount of the PPI Funding Notes to PPI Corporation.
Annual principal and interest payments by HCC on the $3.8 million note
approximate the general partner's share of annual partnership distributions
which are now being made to HCC.  During 1997, HCC forgave $23.6 million
discounted principal amount of the PPI Funding Notes.

     During the third quarter of 1996, GBCC borrowed $6.5 million from HCC which
accrues interest at the rate of 13 3/4% per annum payable quarterly commencing
October 1, 1996.  GBCC loaned such funds to GBHC on similar terms.

     GBHC repaid its $2 million bank line of credit during January 1997 and the
line of credit was cancelled.

     CAPITAL EXPENDITURES AND OTHER INVESTMENTS

     Property and equipment additions during 1997 totaled $3.9 million, of which
capital expenditures at the Sands amounted to approximately $3.5 million.

     The Sands is required by the New Jersey Casino Control Act to make certain
investments with the Casino Reinvestment Development Authority, a governmental
agency which administers the statutorily mandated investments made by casino
licensees.  Deposit requirements for 1997 totaled $2.9 million.

     During the fourth quarter of 1996, an unconsolidated partnership in which a
GBCC subsidiary holds a 46% interest entered into a contract for the sale of a
casino/hotel in San Juan, Puerto Rico owned by the partnership and managed by
the GBCC subsidiary.  The sale was completed in February 1997; the GBCC
subsidiary received a fee of approximately $1.5 million with respect to the
termination of its

                                       17
<PAGE>

management agreement and provided management services on a month to month basis
through October 1997 subject to cancellation by the new owners.

RESULTS OF OPERATIONS

     GENERAL

     GBCC's consolidated net revenues have declined to $263.4 million during
1997 from $283.6 million for 1996 and $304.3 million for 1995. Consolidated
income from operations increased to $16.8 million in 1997 from $4.4 million in
1996 following a large decline from $32.1 million in 1995. A portion of the 1997
revenue and operating expense decreases is attributable to the April 1, 1997
acquisition by HCC of the general partnership interest in PML. As a consequence
of such acquisition, PML's revenues and operating expenses are no longer
consolidated with those of GBCC and GBCC's remaining limited partnership
interest in PML is accounted for as an equity investment. However, the
fluctuations in operating results are primarily attributable to operations at
the Sands as discussed below.

     The Sands earned income from operations, exclusive of management fees paid
to NJMI, of $14.3 million for the year ended December 31, 1997 compared to a
loss from operations of $3.7 million sustained during 1996 and income from
operations earned of $24.2 million in 1995. Operating results during the first
nine months of 1997 were favorably impacted by operating efficiencies and by
management's decision to discontinue certain aggressive marketing programs.
Operating results were adversely affected in 1996 by the advent of unprecedented
and highly aggressive marketing programs instituted by certain other Atlantic
City casinos seeking to increase their market share and to a lesser degree by
severe winter snowstorms in January and February. Although net revenues at the
Sands declined to $256.3 million in 1997 from $264.8 million in 1996 and $284
million in 1995, operating expenses decreased significantly in 1997 by $25.7
million (9.4%) from 1996. This decrease is due to reductions in marketing and
advertising costs of $11.1 million (15.1%) and salaries and related benefits
costs of $5.9 million (6%) as a result of management's efforts to control costs
while maintaining positive gross operating profit. Operating expenses increased
by $6.5 million (2.4%) during 1996 compared to 1995 primarily due to a $10.9
million (17.3%) increase in advertising and marketing costs due to the
aggressive marketing programs discussed above.

                                       18
<PAGE>

   GAMING OPERATIONS

     The following table sets forth certain unaudited financial and operating
data relating to the Sands' operations:
<TABLE>
<CAPTION>

                                    YEAR ENDED DECEMBER 31,
                             -------------------------------------
                                1997         1996         1995
                             -----------  -----------  -----------
                              (IN THOUSANDS, EXCEPT PERCENTAGES)
<S>                          <C>          <C>          <C>
REVENUES:
 Table games                 $   74,083   $   79,127   $   95,835
 Slot machines                  157,312      159,972      163,821
 Other (1)                        3,082        3,790        4,392
                             ----------   ----------   ----------
  Total                      $  234,477   $  242,889   $  264,048
                             ==========   ==========   ==========

TABLE GAMES:
 Gross Wagering
  (Drop) (2)                 $  524,040   $  576,577   $  606,283
                             ==========   ==========   ==========

 Hold Percentages: (3, 4)
  Sands                            14.1%        13.7%        15.8%
  Atlantic City                    15.0%        15.5%        15.9%

SLOT MACHINES:
 Gross Wagering
  (Handle) (2)               $1,916,350   $1,954,612   $1,892,159
                             ==========   ==========   ==========

 Hold Percentages: (3, 4)
  Sands                             8.2%         8.2%         8.7%
  Atlantic City                     8.4%         8.3%         8.5%
</TABLE>
____________________________

(1)  Consists of revenues from poker and simulcast horse racing wagering.

(2)  Gross wagering consists of the total value of chips purchased for table
     games (excluding poker) and keno wagering (collectively, the "drop") and
     coins wagered in slot machines ("handle").

(3)  Casino revenues consist of the portion of gross wagering that a casino
     retains and, as a percentage of gross wagering, is referred to as the "hold
     percentage".

(4)  The Sands' hold percentages are reflected on an accrual basis.  Comparable
     data for the Atlantic City gaming industry is not available; consequently,
     industry percentages have been calculated based on information available
     from the New Jersey Casino Control Commission.

     Table games drop at the Sands declined $52.5 million (9.1%) during 1997
compared with 1996 and $29.7 million (4.9%) during 1996 compared with 1995.  The
Sands' decreases compare with increases of 4% and 5%, respectively, in table
drop for all other Atlantic City casinos during the same periods.  As a result,
the Sands' table game market share (expressed as a percentage of the Atlantic
City industry aggregate table game drop) decreased to 6.8% during 1997 from 7.7%
during 1996 and from 8.5% during 1995.  The Sands' 1997 table game drop decrease
is attributable to declines in patron volume from both

                                       19
<PAGE>

the rated and unrated segments. Expansions of other Atlantic City casinos
resulted in an increase of approximately 92,000 square feet of gaming space and
73 tables at December 31, 1997 compared to December 31, 1996. Such expansions
typically result in intense marketing campaigns which lure the "mass" segment to
the new facility. Gaming space at the Sands has remained virtually unchanged
since mid-1996 and the number of table games has decreased by 3.1%. The decline
in table game drop during 1997 also reflects management's decision to
discontinue certain promotional activities, including the use of "special odds"
offered at table games, which has caused a decline in the rated table market
segment. Table game drop throughout 1996 was adversely impacted by the increase
in competitive pressures in the rated table market segment, of which a
significant portion was in the "high end" and mid-market segments. The last six
months of 1996 also saw a decline in the unrated table market segment as
expansions at competing properties, construction on roadways into the city and
other factors all served to reduce unrated table play at the Sands.

     Slot machine handle decreased $38.3 million (2%) during 1997 compared with
1996 after increasing $62.5 million (3.3%) during 1996 compared with 1995.  The
Sands' changes compare with increases in slot machine handle of 2.2% and 4.9%
for all other Atlantic City casinos during the same periods.  As a result, the
Sands' market share of slot machine play declined to 5.9% in 1997 from 6.1% in
1996 and 6.2% in 1995.  The Sands' average number of slot machines remained
virtually unchanged during 1997 compared to an increase of 7.8% for all other
Atlantic City casinos.  The below industry-wide performance in handle
experienced by the Sands during 1997 is a result of the same competitive
pressures resulting from casino expansions and related marketing campaigns at
other properties as discussed above with respect to table games.  The 1996
increase in slot machine handle is largely attributable to increases in
marketing programs, such as coin incentive and direct marketing programs, which
resulted in significant increases in the number of bus patrons for 1996 compared
to 1995.  The Sands' average number of slot machines increased by less than 1%
during 1996 compared to an increase of 11.3% for all other Atlantic City
casinos.  The greater percentage increase in the number of slot machines for
other Atlantic City casinos reflects, in part, expansions of certain facilities
during 1996 which resulted in an overall increase of approximately 121,000
square feet of casino space and further contributed to the Sands' decline in
market share.

     REVENUES

     Casino revenues at the Sands decreased by $8.4 million (3.5%) during 1997
compared with 1996 and by $21.2 million (8%) during 1996 compared with 1995.
Decreases in both slot machine and table game wagering during 1997 were
partially offset by improvements in the table game hold percentage. Most of the
decline in casino revenues during 1996 is attributable to table games which were
impacted by both a decline in gross wagering as discussed previously and by a
significant and unusual decrease in the table games hold percentage at the Sands
to 13.7% during 1996 compared to 15.8% during 1995.  The 3.3% increase in slot
machine wagering at the Sands during 1996 compared to 1995 was more than offset
by a decline in the slot machine hold percentage to 8.2% from 8.7%.

     Rooms revenue decreased $3.8 million (28.2%) during 1997 compared with 1996
and $1.3 million (8.5%) during 1996 compared with 1995 due to the sale in
September 1996 of a hotel property operated by GBCC under a joint operating
agreement.  Food and beverage revenues decreased $2.9 million (8%) during 1997
compared with 1996 after increasing $1 million (2.9%) during 1996 compared with
1995. Decreases in both years resulting from the sale of the hotel property were
compounded during 1997 by the decline in patron volume at the Sands, but were
more than offset during 1996 by increases resulting from the opening of the Epic
Buffet during the third quarter of 1995.  Other revenues decreased $8.1 million
(41.9%) during 1997 compared to 1996.  Decreases resulting from the
deconsolidation of PML's revenues ($6.6 million), from the hotel sale and from
replacing ongoing "review show" type entertainment with less frequent "star
show" entertainment were partially offset by the receipt of a $1.5 million
termination fee with respect to the 1997 sale of a casino/hotel property managed
by GBCC.  Other revenues increased

                                       20
<PAGE>

$1.6 million (8.8%) during 1996 compared with 1995 primarily as a result of an
increase in theater entertainment revenue at the Sands.

     Promotional allowances represent the estimated value of goods and services
provided free of charge to casino customers under various marketing programs.
As a percentage of rooms, food and beverage and other revenues at the Sands,
these allowances decreased to 53.4% during 1997 from 56.1% during 1996 and 57.6%
during 1995.  Such decreases are primarily attributable to reductions in certain
marketing programs and other promotional activities.

     DEPARTMENTAL EXPENSES

     Casino expenses at the Sands decreased $19.2 million (8.8%) during 1997
compared to 1996 after having increased by $9.7 million (4.6%) during 1996
compared to 1995.  During 1996, an unprecedented and highly aggressive industry-
wide attempt to increase market share resulted in significantly higher costs
with respect to coin incentive packages.  The abatement of these competitive
pressures during 1997 together with management's ongoing efforts to create
operating efficiencies, have significantly reduced expenses.  Such factors have
also resulted in a reduction in the allocation of rooms, food and beverage and
other expenses to casino expense.  The 1996 increase was primarily due to the
expansion of various marketing programs in response to competitive pressures.
The additional costs of marketing programs in 1996 resulted in greater
allocation of rooms, food and beverage and other expenses to casino expense.
Such increases were partially offset by a $1.6 million reduction in gaming taxes
during 1996 compared with 1995.

     Rooms expense decreased $1.9 million  (41.9%) during 1997 compared to 1996
and $529,000 (10.6%) during 1996 compared to 1995.  The decreases result
primarily from the sale of a non-casino hotel property in September 1996.  Food
and beverage expense decreased $1.2 million (10.1%) during 1997 compared to 1996
following an increase of $368,000 (3.2%) during 1996 compared to 1995.  The 1997
decrease reflects the aforementioned hotel sale whereas the 1996 increase
reflects increased costs associated with the opening of the Epic Buffet at the
Sands partially offset by increases in marketing programs, the costs of which
are allocated to the casino department.  Other expenses decreased $1.8 million
(39%) in 1997 from 1996 after increasing $808,000 (21.6%) in 1996 from 1995.
The 1997 decrease is primarily due to the hotel sale and cost savings with
respect to theater entertainment while the 1996 increase results from higher
theater entertainment costs partially offset by increased allocations to the
casino department.

     GENERAL AND ADMINISTRATIVE

     General and administrative expenses decreased $3.2 million (16.4%) during
1997 compared to 1996 primarily due to the deconsolidation of PML's operating
expenses, the disposal of GBCC's remaining non-casino hotel property and reduced
overhead allocations from HCC.  General and administrative expenses decreased by
$2.6 million (11.9%) during 1996 compared with 1995 primarily due to decreases
in equipment rental at the Sands and, to a lesser extent, reductions in payroll
costs associated with NJMI's management of the Sands.  In addition, cost
containment measures implemented by management contributed to a reduction in
administrative costs at the Sands during the second half of 1996.

     DEPRECIATION AND AMORTIZATION

     As a result of a revision in the estimated useful life of the Sands'
buildings effective October 1, 1996 and the completion of amortization with
respect to certain of its long lived assets, GBCC's depreciation and
amortization expense for the year ended December 31, 1997 decreased by $5.4
million (27.2%) compared to 1996.  Depreciation and amortization expense did not
change significantly in 1996 compared to 1995.

                                       21
<PAGE>

     INTEREST

     Interest income decreased $366,000 (19.8%) during 1997 compared to 1996 and
$545,000 (22.7%) during 1996 compared to 1995.  The 1997 decrease reflects the
loss of interest income from a note receivable associated with the hotel sold in
September 1996.  The 1996 decrease is attributable to a decline in the amount of
cash available for temporary cash investments.  Interest expense did not change
significantly during either 1997 or 1996 from prior years.

     EQUITY IN EARNINGS OF LIMITED PARTNERSHIP

     Effective as of April 1, 1997, HCC acquired the general partnership
interest in PML from PPI Corporation. The Agreement of Limited Partnership of
PML provides for distributions to PCC of 1% of the first $84,000 of net income
earned by PML each month and 99% of any net income earned above such amount,
with all remaining income distributed to the general partner. GBCC's equity in
the earnings of PML amounted to $5 million during 1997.

     GAIN (LOSS) ON DISPOSAL OF ASSETS

     GBCC recognized gains during 1997 from liquidating distributions received
from a joint venture with respect to the sale of a managed hotel property in
Orlando, Florida and from the early termination of a leasehold arrangement.
GBCC experienced a loss on disposal of assets amounting to $1.8 million during
1996 resulting from the write off of deferred option costs with respect to the
planned purchase of a site for future expansion.

     NONRECURRING ITEMS

     At December 31, 1997, remaining deferred financing costs associated with
the 10 7/8% First Mortgage Notes ($4.3 million) and the PRT Funding Notes ($2.2
million) were written off. In addition, professional fees with respect to GBHC's
Chapter 11 filing ($505,000) were expensed during 1997.

     INCOME TAX (PROVISION) BENEFIT

     GBCC and its subsidiaries have tax net operating loss carryforwards
("NOL's") totaling approximately $24 million for federal income tax purposes,
most of which do not begin to expire until the year 2006.  Additionally, GBCC
and its subsidiaries have various tax credits available totaling approximately
$3.6 million, many of which expire by the year 2004.  Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes"  requires that the
tax benefit of such NOL's and credit carryforwards be recorded as an asset and,
to the extent that management can not assess that utilization of such NOL's is
more likely than not, a valuation allowance should be recorded.  Due to losses
sustained for both financial and tax reporting by GBCC and its subsidiaries
through 1997, management was unable to determine that realization of that asset
was more likely than not and, thus, provided valuation allowances for the entire
deferred tax asset for all periods presented.

     EXTRAORDINARY ITEM

     A subsidiary of Holdings acquired $2.5 million of 10 7/8% First Mortgage
notes at a discount of $375,000 with which to make its scheduled July 1997
principal payment.  Such gain was partially offset by the write off of
associated financing costs, resulting in a net gain from early extinguishment of
debt amounting to $310,000.

                                       22
<PAGE>

     YEAR 2000 COMPLIANCE

     Management believes that its information systems are Year 2000 compliant.

     INFLATION

     Management believes that in the near term, modest inflation, together with
increasing competition within the gaming industry for qualified and experienced
personnel, will continue to cause increases in operating expenses, particularly
labor and employee benefits costs.

     SEASONALITY

     Historically, the Sands' operations have been highly seasonal in nature,
with the peak activity occurring from May to September.  Consequently, the
results of GBCC's operations for the first and fourth quarters are traditionally
less profitable than the other quarters of the fiscal year.  Furthermore, the
Aurora Casino has also experienced seasonality, but to a lesser degree than the
Sands, and, as a result, the management fees earned have fluctuated with such
seasonality.  In addition, the Sands' and the Aurora Casino's operations may
fluctuate significantly due to a number of factors, including chance.  Such
seasonality and fluctuations may materially affect GBCC's casino revenues and
profitability.

                                       23
<PAGE>

ITEM 8.  INDEX TO FINANCIAL STATEMENTS

                                                            PAGE
                                                            ----
GREATE BAY CASINO CORPORATION AND SUBSIDIARIES:

   Report of Independent Public Accountants.................  25

   Consolidated Balance Sheets as of December 31, 1997
    and 1996................................................  26

   Consolidated Statements of Operations for the Years
    Ended December 31, 1997, 1996 and 1995..................  28

   Consolidated Statement of Changes in Shareholders'
    Deficit for the Three Years Ended December 31, 1997.....  29

   Consolidated Statements of Cash Flows for the Years
    Ended December 31, 1997, 1996 and 1995..................  30

   Notes to Consolidated Financial Statements...............  31


                                       24
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                    ----------------------------------------

To Greate Bay Casino Corporation:

   We have audited the accompanying consolidated balance sheets of Greate Bay
Casino Corporation (the Company and a Delaware corporation) and subsidiaries as
of December 31, 1997 and 1996, and the related consolidated statements of
operations, changes in shareholders' deficit and cash flows for each of the
three years in the period ended December 31, 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 referred to above present fairly, in
all material respects, the financial position of Greate Bay Casino Corporation
and subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.

   The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern.  As discussed more
fully in Note 1 to the consolidated financial statements, the Company is in
violation of certain indenture covenants, which has resulted in the acceleration
of the due date of the Company's debt obligations.  The default under the
indenture for the Company's debt obligations raises substantial doubt about the
Company's ability to continue as a going concern.  Management's plans in regard
to these matters are also described in Note 1 to the consolidated financial
statements.  The accompanying consolidated financial statements do not include
any adjustments that might result from the outcome of these uncertainties.



                                       ARTHUR ANDERSEN LLP


Roseland, New Jersey
March 23, 1998

                                       25
<PAGE>

                GREATE BAY CASINO CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS (NOTE 1)

                                    ASSETS
<TABLE>
<CAPTION>

                                                       DECEMBER 31,
                                               ---------------------------
                                                   1997           1996
                                               -----------   -------------
<S>                                            <C>           <C>
Current Assets:
 Cash and cash equivalents                     $ 6,555,000   $  22,991,000
 Short-term investment                                 -         2,000,000
 Accounts receivable, net of allowances
  of $213,000 and $15,524,000, respectively         61,000      10,656,000
 Inventories                                       164,000       4,016,000
 Due from affiliates                               723,000       2,525,000
 Deferred income taxes                              36,000       1,627,000
 Option payment                                  1,000,000             -
 Refundable deposits and other
  current assets                                   842,000       2,388,000
                                               -----------   -------------

  Total current assets                           9,381,000      46,203,000
                                               -----------   -------------

Investment in Limited Partnership                2,256,000             -
                                               -----------   -------------

Property and Equipment:
 Land                                              864,000      38,957,000
 Buildings and improvements                            -       185,508,000
 Operating equipment                             1,317,000      92,769,000
 Construction in progress                              -         1,535,000
                                               -----------   -------------

                                                 2,181,000     318,769,000
 Less - accumulated depreciation
  and amortization                                (971,000)   (161,882,000)
                                               -----------   -------------

  Net property and equipment                     1,210,000     156,887,000
                                               -----------   -------------

Other Assets:
 Obligatory investments                                -         6,382,000
 Deferred financing costs                              -         7,653,000
 Due from affiliates                             2,897,000             -
 Other assets                                        8,000       4,220,000
                                               -----------   -------------

  Total other assets                             2,905,000      18,255,000
                                               -----------   -------------

                                               $15,752,000   $ 221,345,000
                                               ===========   =============
</TABLE>

          The accompanying notes to consolidated financial statements
           are an integral part of these consolidated balance sheets.

                                       26
<PAGE>

                GREATE BAY CASINO CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS (NOTE 1)

                     LIABILITIES AND SHAREHOLDERS' DEFICIT
<TABLE>
<CAPTION>


                                                            DECEMBER 31,
                                                   -----------------------------
                                                        1997            1996
                                                   -------------   -------------
<S>                                                <C>             <C>
Current Liabilities:
 Current maturities of long-term debt              $  85,055,000   $   3,127,000
 Short-term credit facilities                                -         2,000,000
 Borrowings from affiliates                           12,422,000       6,750,000
 Accounts payable                                        967,000       8,981,000
 Accrued liabilities -
  Salaries and wages                                     133,000       5,090,000
  Interest                                             6,875,000      11,673,000
  Insurance                                              128,000       3,276,000
  Other                                                   62,000       6,687,000
 Other current liabilities                               730,000       5,479,000
                                                   -------------   -------------
  Total current liabilities                          106,372,000      53,063,000
                                                   -------------   -------------
Investment in and Advances to GB Holdings, Inc.       20,996,000             -
                                                   -------------   -------------
Long-Term Debt                                        30,894,000     322,897,000
                                                   -------------   -------------
Other Noncurrent Liabilities                             606,000       3,592,000
                                                   -------------   -------------
Due to Affiliate                                             -         1,000,000
                                                   -------------   -------------

Commitments and Contingencies

Shareholders' Deficit:
 Common stock, $.10 par value per
  share; 10,000,000 shares authorized;
  5,186,627 shares issued and outstanding                519,000         519,000
 Additional paid-in capital                           75,212,000      38,557,000
 Accumulated deficit                                (218,847,000)   (198,283,000)
                                                   -------------   -------------
  Total shareholders' deficit                       (143,116,000)   (159,207,000)
                                                   -------------   -------------
                                                   $  15,752,000   $ 221,345,000
                                                   =============   =============
</TABLE>

               The accompanying notes to consolidated financial
     statements are an integral part of these consolidated balance sheets.

                                       27
<PAGE>

                 GREATE BAY CASINO CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF OPERATIONS (NOTE 1)
<TABLE>
<CAPTION>

                                                                     YEAR ENDED DECEMBER 31,
                                                           ------------------------------------------
                                                               1997           1996           1995
                                                           ------------   ------------   ------------
<S>                                                        <C>            <C>            <C>
Revenues:
 Casino                                                    $234,477,000   $242,889,000   $264,048,000
 Rooms                                                        9,691,000     13,505,000     14,763,000
 Food and beverage                                           32,968,000     35,853,000     34,856,000
 Other                                                       11,234,000     19,322,000     17,753,000
                                                           ------------   ------------   ------------
                                                            288,370,000    311,569,000    331,420,000
 Less - Promotional allowances                              (25,004,000)   (27,929,000)   (27,083,000)
                                                           ------------   ------------   ------------
  Net revenues                                              263,366,000    283,640,000    304,337,000
                                                           ------------   ------------   ------------

Expenses:
 Casino                                                     199,746,000    218,990,000    209,282,000
 Rooms                                                        2,590,000      4,456,000      4,985,000
 Food and beverage                                           10,815,000     12,030,000     11,662,000
 Other                                                        2,771,000      4,545,000      3,737,000
 General and administrative                                  16,192,000     19,363,000     21,983,000
 Depreciation and amortization                               14,464,000     19,868,000     20,553,000
                                                           ------------   ------------   ------------
  Total expenses                                            246,578,000    279,252,000    272,202,000
                                                           ------------   ------------   ------------
  Income from operations                                     16,788,000      4,388,000     32,135,000
                                                           ------------   ------------   ------------

Non-operating income (expenses):
 Interest income                                              1,486,000      1,852,000      2,397,000
 Interest expense                                           (38,246,000)   (39,851,000)   (38,975,000)
 Equity in earnings of limited partnership                    5,012,000            -              -
 Gain (loss) on disposal of assets                            2,120,000     (1,795,000)        56,000
                                                           ------------   ------------   ------------
  Total non-operating expense, net                          (29,628,000)   (39,794,000)   (36,522,000)
                                                           ------------   ------------   ------------

Loss before income taxes,
  extraordinary and other items                             (12,840,000)   (35,406,000)    (4,387,000)
Write off deferred financing costs                           (6,515,000)           -              -
Reorganization costs                                           (505,000)           -              -
                                                           ------------   ------------   ------------
Loss before income taxes and
 extraordinary item                                         (19,860,000)   (35,406,000)    (4,387,000)

Income tax (provision) benefit                               (1,014,000)      (160,000)       100,000
                                                           ------------   ------------   ------------
Loss before extraordinary item                              (20,874,000)   (35,566,000)    (4,287,000)

Extraordinary item:
 Gain on early extinguishment of debt                           310,000            -              -
                                                           ------------   ------------   ------------
Net loss                                                   $(20,564,000)  $(35,566,000)  $ (4,287,000)
                                                           ============   ============   ============

Basic and diluted net loss per common share:
 Loss before extraordinary item                            $      (4.02)  $      (6.86)  $       (.83)
 Extraordinary item                                                 .06            -              -
                                                           ------------   ------------   ------------
 Net loss                                                  $      (3.96)  $      (6.86)  $       (.83)
                                                           ============   ============   ============
</TABLE>
          The accompanying notes to consolidated financial statements
             are an integral part of these consolidated statements.

                                       28
<PAGE>

                GREATE BAY CASINO CORPORATION AND SUBSIDIARIES
      CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT (NOTE 1)
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>



                                               COMMON STOCK        ADDITIONAL
                                             -------------------    PAID-IN       ACCUMULATED
                                               SHARES    AMOUNT     CAPITAL        DEFICIT
                                             ---------  --------  -----------   -------------
<S>                                          <C>        <C>       <C>           <C>
BALANCE, JANUARY 1, 1995                     5,186,627  $519,000  $23,838,000   $(158,430,000)
 Adjustment to prior year capital
  contribution                                     -         -        (55,000)            -
 Net loss                                          -         -            -        (4,287,000)
                                             ---------  --------  -----------   -------------

BALANCE, DECEMBER 31, 1995                   5,186,627   519,000   23,783,000    (162,717,000)
  Capital contribution                             -         -     14,774,000             -
  Net loss                                         -         -            -       (35,566,000)
                                             ---------  --------  -----------   -------------

BALANCE, DECEMBER 31, 1996                   5,186,627   519,000   38,557,000    (198,283,000)
  Sale of general partnership interest             -         -     13,024,000             -
  Forgiveness of affiliate debt                    -         -     23,631,000             -
  Net loss                                         -         -            -       (20,564,000)
                                             ---------  --------  -----------   -------------

BALANCE, DECEMBER 31, 1997                   5,186,627  $519,000  $75,212,000   $(218,847,000)
                                             =========  ========  ===========   =============
</TABLE>

          The accompanying notes to consolidated financial statements
             are an integral part of this consolidated statement.

                                       29
<PAGE>

                GREATE BAY CASINO CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (NOTE 1)
<TABLE>
<CAPTION>

                                                                          YEAR ENDED DECEMBER 31,
                                                                ------------------------------------------
                                                                    1997           1996           1995
                                                                ------------   ------------   ------------
<S>                                                             <C>            <C>            <C>
OPERATING ACTIVITIES:
 Net loss                                                       $(20,564,000)  $(35,566,000)  $ (4,287,000)
 Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
  Extraordinary item                                                (310,000)           -              -
  Write off deferred financing costs                               6,515,000
  Depreciation and amortization, including
   accretion of debt discount                                     21,952,000     27,163,000     27,219,000
  (Gain) loss on disposal of assets                               (2,120,000)     1,795,000        (56,000)
  Provision for doubtful accounts                                  3,408,000      2,167,000      2,988,000
  Equity in earnings of limited partnership                       (5,012,000)           -              -
  Dividends received from limited partnership                      4,856,000            -              -
  Deferred income tax (benefit) provision                            (36,000)        51,000       (480,000)
  Increase in accounts receivable                                   (607,000)      (972,000)      (744,000)
  (Decrease) increase in accounts payable and
   other accrued liabilities                                        (902,000)     2,108,000      3,967,000
  Net change in other current assets and liabilities               3,247,000        388,000      1,050,000
  Net change in other noncurrent assets and liabilities            1,922,000       (161,000)      (468,000)
                                                                ------------   ------------   ------------
     Net cash provided by (used in) operating activities          12,349,000     (3,027,000)    29,189,000
                                                                ------------   ------------   ------------

INVESTING ACTIVITIES:
 Purchases of property and equipment                              (3,915,000)    (8,085,000)   (19,911,000)
 Deconsolidation of GB Holdings, Inc.                            (13,871,000)           -              -
 Decrease in cash from sale of limited partnership                  (451,000)           -              -
 Proceeds from disposition of assets                                  59,000      2,594,000         56,000
 Collections on notes receivable                                     353,000      9,361,000        103,000
 Obligatory investments                                           (2,876,000)    (3,062,000)    (2,967,000)
 Short-term investments                                            2,000,000     (2,000,000)           -
 Investments in and advances to unconsolidated affiliates         (6,500,000)    (2,946,000)    (1,675,000)
 Distributions from unconsolidated affiliate                         750,000            -              -
                                                                ------------   ------------   ------------
   Net cash used in investing activities                         (24,451,000)    (4,138,000)   (24,394,000)
                                                                ------------   ------------   ------------

FINANCING ACTIVITIES:
 Issuance of long-term debt                                              -          700,000            -
 Net (repayments) borrowings on short-term credit facilities      (2,000,000)     2,000,000            -
 Net borrowings from affiliate                                           -        1,750,000            -
 Deferred financing costs                                                -          (10,000)       (32,000)
 Repayments of long-term debt                                     (2,334,000)    (2,351,000)    (5,998,000)
                                                                ------------   ------------   ------------
  Net cash (used in) provided by financing activities             (4,334,000)     2,089,000     (6,030,000)
                                                                ------------   ------------   ------------
  Net decrease in cash and cash equivalents                      (16,436,000)    (5,076,000)    (1,235,000)
  Cash and cash equivalents at beginning of year                  22,991,000     28,067,000     29,302,000
                                                                ------------   ------------   ------------
  Cash and cash equivalents at end of year                      $  6,555,000   $ 22,991,000   $ 28,067,000
                                                                ============   ============   ============
</TABLE>

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

                                       30
<PAGE>

                GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)  ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION

   Greate Bay Casino Corporation, a Delaware corporation, and its subsidiaries
("GBCC"), are engaged in the operation and management of casino properties.
GBCC's principal operations consist of the Sands Hotel and Casino located in
Atlantic City, New Jersey (the "Sands") and management and consulting contracts
with gaming facilities located in Aurora, Illinois (the "Aurora Casino") and
Tunica, Mississippi (the "Tunica Casino") (see Note 7).  GBCC, through its
subsidiaries and various joint ventures, has also engaged to a lesser extent in
other hotel and casino operations in the United States and the Caribbean.

   Prior to December 31, 1996, Hollywood Casino Corporation ("HCC") owned
approximately 80% of the outstanding common stock of GBCC.  HCC distributed such
stock to its shareholders; as a result, approximately 36% of GBCC's outstanding
stock is owned by certain general partnerships and trusts controlled by Jack E.
Pratt, Edward T. Pratt, Jr. and William D. Pratt and by other family members
(collectively, the "Pratt Family").  The Pratt Family also owns approximately
53% of HCC.  HCC owns the Aurora Casino and the Tunica Casino.

   GBCC estimates that a significant amount of the Sands' revenues is derived
from patrons living in southeastern Pennsylvania, northern New Jersey and
metropolitan New York City.  Competition in the Atlantic City gaming market is
intense and management believes that this competition will continue or intensify
in the future.

   PPI Corporation is a wholly owned subsidiary of GBCC which owns various
entities related to GBCC's Atlantic City gaming operations.  Included herein as
wholly owned subsidiaries of PPI Corporation are:  GB Property Funding Corp.
("GB Property Funding"), the issuer of $185,000,000 original principal amount of
10 7/8% First Mortgage Notes, due 2004 (the "10 7/8% First Mortgage Notes"); PRT
Funding Corp., the issuer of $85,000,000 original principal amount of 11 5/8%
senior notes, due 2004 (the "PRT Funding Notes"); New Jersey Management, Inc.
("NJMI"), which manages the operations of the Sands; Pratt Casino Corporation
("PCC"), which earns consulting fees from the Tunica Casino; Greate Bay Hotel
and Casino, Inc. ("GBHC"), which owns the Sands;  GB Holdings, Inc.
("Holdings"), the parent of GBHC; and, for periods prior to April 1, 1997, Pratt
Management, L.P. ("PML"), which manages the operations of the Aurora Casino.

   Effective as of April 1, 1997, HCC acquired the general partnership interest
in PML which holds the management contract on the Aurora Casino from PPI
Corporation.  As a result, GBCC's investment in PML is now being presented under
the equity method of accounting (see Note 8).  For all periods through March 31,
1997, PML was wholly owned by subsidiaries of GBCC; accordingly, the operating
results of PML, together with its assets and liabilities, were consolidated with
GBCC for financial statement purposes.

   On January 5, 1998, Holdings, GB Property Funding and GBHC filed petitions
for relief under Chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the District of New
Jersey (the "Bankruptcy Court").  Each company continues to operate in the
ordinary course of business, as set forth in the Bankruptcy Code, and each
company's officers and directors as of the date of the filing remain in office,
subject to the supervision of the Bankruptcy Court.  The filings of such
petitions constitute a default under the indenture for the PRT Funding Notes;
accordingly, the outstanding principal amount of the PRT Funding Notes has
accelerated and is currently due and payable.

                                       31
<PAGE>

                GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


   The accompanying consolidated financial statements have been prepared
assuming that GBCC will continue as a going concern.  As discussed above,
certain affiliates of GBCC filed for Chapter 11 bankruptcy protection on January
5, 1998.  The affiliate filings under Chapter 11 have resulted in a default
under the indenture for the PRT Funding Notes; accordingly, the outstanding
principal amount of the PRT Funding Notes has accelerated and is currently due
and payable.  As a result of the Chapter 11 filings, GBHC can reject the Sands'
management contract with NJMI, which would eliminate this source of cash to
GBCC.  PCC, which is liable as guarantor under the PRT Funding Notes, does not
have sufficient assets to satisfy the outstanding amounts and has entered into
negotiations with the PRT Funding bondholders to restructure the obligations.
No assurance can be given that GBCC will be able to restructure its obligations.
The default under the indenture for the PRT Funding Notes raises substantial
doubt about GBCC's ability to continue as a going concern.  The consolidated
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   The significant accounting policies followed in the preparation of the
accompanying consolidated financial statements are discussed below.  The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and 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.

 PRINCIPLES OF CONSOLIDATION -

   The consolidated financial statements include the accounts of GBCC and all of
its wholly owned subsidiaries prior to December 31, 1997.  As a result of the
Chapter 11 filings discussed in Note 1, GBCC's control over the filing
subsidiaries is subject to supervision of the Bankruptcy Court and GBCC does not
expect to be in control of such subsidiaries after reorganization.  Accordingly,
Holdings, GB Property Funding and GBHC are no longer included on the
accompanying consolidated balance sheet at December 31, 1997 (see Note 13).
GBCC's negative investment in Holdings and its subsidiaries on the accompanying
consolidated balance sheet at December 31, 1997 reflects GBCC's investment under
the equity method of accounting.  The accompanying consolidated financial
statements include Holdings and its subsidiaries' operations and cash flows
through December 31, 1997.  All significant intercompany balances and
transactions have been eliminated.  Investments in unconsolidated affiliates,
including joint ventures, that are 50% or less owned are accounted for by the
equity method.

 CASINO REVENUES, PROMOTIONAL ALLOWANCES AND DEPARTMENTAL EXPENSES -

   The Sands recognizes the net win from gaming activities (the difference
between gaming wins and losses) as casino revenues.  Casino revenues are net of
accruals for anticipated payouts of progressive and certain other slot machine
jackpots and certain progressive table game payouts.  Such anticipated jackpots
and payouts are reflected as current liabilities on the accompanying
consolidated balance sheet at December 31, 1996.

                                       32
<PAGE>

             GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


   The estimated value of rooms, food and beverage and other items which were
provided to customers without charge has been included in revenues and a
corresponding amount has been deducted as promotional allowances.  The costs of
such complimentaries have been included as casino expenses on the accompanying
consolidated statements of operations.  Costs of complimentaries allocated from
the rooms, food and beverage and other operating departments to the casino
department during the years ended December 31, 1997, 1996 and 1995  are as
follows:
<TABLE>
<CAPTION>

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

Rooms                $ 5,617,000  $ 6,170,000  $ 6,023,000
Food and beverage     28,144,000   29,357,000   28,259,000
Other                  2,991,000    4,435,000    3,631,000
                     -----------  -----------  -----------

                     $36,752,000  $39,962,000  $37,913,000
                     ===========  ===========  ===========
</TABLE>

 CASH AND CASH EQUIVALENTS -

   Cash and cash equivalents are generally comprised of cash and investments
with original maturities of three months or less, such as commercial paper,
certificates of deposit and fixed repurchase agreements.

 ALLOWANCE FOR DOUBTFUL ACCOUNTS -

   The allowance for doubtful accounts is maintained at a level considered
adequate to provide for possible future losses.  Provisions for doubtful
accounts amounting to $3,408,000, $2,167,000 and $2,988,000 were made during the
years ended December 31, 1997, 1996 and 1995, respectively.

 INVENTORIES -

   Inventories are stated at the lower of cost (on a first-in, first-out basis)
or market.

 PROPERTY AND EQUIPMENT -

   Property and equipment have been recorded at cost and are being depreciated
utilizing the straight-line method over their estimated useful lives as follows:

   Buildings and improvements            10-40 years
   Operating equipment                    3-15 years

   On October 1, 1996, GBCC revised the estimated useful life of its buildings
from 25 years to 40 years.  Management believes the change in estimated life
more appropriately reflects the timing of the economic benefit to be received
from these assets.  The effect of this change reduced depreciation and
amortization expense and net loss by approximately $2,880,000 and $761,000, for
the years ended December 31, 1997 and 1996, respectively.

                                       33
<PAGE>

             GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


   Interest costs related to property and equipment acquisitions were
capitalized during the acquisition period and are being amortized over the
useful lives of the related assets.

 DEFERRED FINANCING COSTS -

   The costs of issuing long-term debt, including all underwriting, legal and
accounting fees, have been capitalized and were being amortized over the term of
the related debt issue.  As a result of the filings under Chapter 11 on January
5, 1998, the remaining deferred financing costs in the amount of $6,515,000 were
determined to be unrealizable and were written off on the accompanying
consolidated statement of operations for the year ended December 31, 1997.  The
unamortized balance of deferred financing costs amounted to $7,653,000 at
December 31, 1996.  Amortization of such costs was $1,072,000, $1,087,000 and
$1,113,000 for the years ended December 31, 1997, 1996 and 1995, respectively.

 LONG-LIVED ASSETS -

   Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
requires, among other things, that an entity review its long-lived assets and
certain related intangibles for impairment whenever changes in circumstances
indicate that the carrying amount of an asset may not be fully recoverable.  As
a result of its review, GBCC does not believe that any such changes have
occurred.

 ACCRUED INSURANCE -

   GBCC is self insured for a portion of its general liability, certain health
care and other liability exposures.  Accrued insurance includes estimates of
such accrued liabilities based on an evaluation of the merits of individual
claims and historical claims experience; accordingly, GBCC's ultimate liability
may differ from the amounts accrued.

 EMPLOYEE STOCK OPTIONS -

   During 1996, GBCC adopted the provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123").  SFAS
123 requires that an entity account for employee stock compensation under a fair
value based method.  However, SFAS 123 also allows an entity to continue to
measure compensation cost for employee stock-based compensation plans using the
intrinsic value based method of accounting prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("Opinion 25").
Entities electing to remain with the accounting under Opinion 25 are required to
make pro forma disclosures of net income and earnings per share as if the fair
value based method of accounting under SFAS 123 had been applied.  GBCC has
elected to continue to account for employee stock-based compensation under
Opinion 25.  As there were no grants of options during 1997, 1996 or 1995 (see
Note 6), no additional disclosures are required.

                                       34
<PAGE>

             GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


 INCOME TAXES -

   From May 1992 through December 31, 1996, GBCC's results of operations were
included in HCC's consolidated federal income tax return.  Pursuant to
agreements between HCC and GBCC,  GBCC's provision for federal income taxes was
based on the amount of tax which would have been provided if a separate federal
income tax return had been filed.

 INTEREST EXPENSE -

   Interest expense includes the accretion of debt discount amounting to
$7,488,000, $7,295,000 and $6,666,000, respectively, during the years ended
December 31, 1997, 1996 and 1995.

 NET LOSS PER COMMON SHARE -

   During 1997, GBCC adopted the provisions of Financial Accounting Standards
No. 128, "Earnings per Share" ("SFAS 128").  SFAS 128 requires the calculation
and disclosure of earnings per common share assuming no dilution (basic earnings
per share) and earnings per common share assuming full dilution (diluted
earnings per share).  SFAS 128 became effective on December 15, 1997 and
requires the restatement of earnings per share for all prior years presented.

   Under SFAS 128, basic earnings per common share is calculated by dividing the
net (loss) income by the weighted average number of shares of common stock
outstanding.  Diluted earnings per common share is calculated for periods in
which income from continuing operations was earned by dividing the components of
net income by the weighted average number of shares of common stock and common
stock equivalents outstanding.  All common stock equivalents are excluded from
the calculation of diluted net loss per share for periods during which a loss
was incurred because the effect of their inclusion would be antidilutive.

   For each of the years ended December 31, 1997, 1996, and 1995, basic and
diluted loss per share were the same.  The weighted average number of shares of
common stock used in the calculation of both basic and diluted loss per share
was 5,186,627 for each of the years ended December 31, 1997, 1996, and 1995.  No
common stock equivalents were outstanding during the years ended December 31,
1997 and 1996.  The calculation of diluted loss per share for the year ended
December 31, 1995 excluded 8,030 weighted average common stock equivalents, as
the inclusion of such equivalents would have been antidilutive due to the net
loss incurred that year.

 RECLASSIFICATIONS

   Certain reclassifications have been made to the prior years' financial
statements to conform to the 1997 consolidated financial statement presentation.

                                       35
<PAGE>

             GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


(3)  SHORT-TERM CREDIT FACILITIES AND BORROWINGS FROM AFFILIATES

   During June 1994, a subsidiary of GBCC entered into an agreement for a bank
line of credit in the amount of $5,000,000.  The agreement, which was renewed in
April 1995, provided for interest on borrowings at the bank's prime lending rate
plus 3/4% per annum.  As of April 30, 1996, the subsidiary extended $2,000,000
of the line of credit until April 30, 1997.  As of December 31, 1996, $2,000,000
was outstanding under the line of credit.  The line of credit was repaid during
January 1997 and the line of credit was cancelled.

   GBCC and its subsidiaries had outstanding affiliate borrowings from HCC of
$6,750,000 and $7,750,000, respectively, as of December 31, 1997 and 1996.
During the third quarter of 1996, GBCC borrowed $6,500,000 from HCC on a demand
basis with interest at the rate of 13 3/4% per annum payable quarterly
commencing October 1, 1996; such funds were loaned by GBCC to GBHC for working
capital purposes on the same terms.  In addition, $250,000 is due on demand, or
if no demand is made, on April 8, 1998.  Such borrowing from HCC bears interest
at the rate of 14% per annum, payable semiannually.  Also included in the
balance at December 31, 1996 was a $1,000,000, 14% note which was assumed by HCC
in connection with its acquisition of the general partnership interest in PML.

   An advance to a GBCC subsidiary from GBHC in the amount of $5,672,000 was
outstanding at December 31, 1996.  Such advance, together with related interest
payable of $3,042,000, eliminated in consolidation at December 31, 1996.  The
GBCC subsidiary which received the advance is insolvent and GBCC has no
obligation with respect to the advance.  At December 31, 1997, such advance,
together with accrued interest in the amount of $3,978,000, has been reflected
as an adjustment to GBCC's negative investment in Holdings on the accompanying
consolidated balance sheet.

(4)  LONG-TERM DEBT AND PLEDGE OF ASSETS

   Substantially all of GBCC's assets are pledged in connection with its long-
term indebtedness.  On January 5, 1998, Holdings, GB Property Funding and GBHC
filed petitions for relief under Chapter 11 of the Bankruptcy Code.  Each
company continues to operate in the ordinary course of business, as set forth in
the Bankruptcy Code, and each company's officers and directors as of the date of
the filing remain in office, subject to the supervision of the Bankruptcy Court.
The filings of such petitions constitute a default under the indenture for the
PRT Funding Notes; accordingly, the outstanding principal amount of the PRT
Funding Notes has accelerated, is currently due and payable and has been
classified as current on the accompanying consolidated balance sheet at
December 31, 1997.

                                       36
<PAGE>

             GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                                        DECEMBER 31,
                                                                ---------------------------
                                                                    1997           1996
                                                                ------------   ------------
<S>                                                             <C>            <C>
 10 7/8% first mortgage notes, due 2004 (a)                     $       -      $185,000,000
 11 5/8% senior notes, due 2004 (b)                               85,000,000     85,000,000
 14 7/8% secured promissory note, due 2006, net of
   discount of $17,281,000 and $44,015,000, respectively (c)      30,321,000     54,338,000
 Other                                                               628,000      1,686,000
                                                                ------------   ------------
     Total indebtedness                                          115,949,000    326,024,000
   Less - current maturities                                     (85,055,000)    (3,127,000)
                                                                ------------   ------------
     Total long-term debt                                       $ 30,894,000   $322,897,000
                                                                ============   ============
</TABLE>
--------------------------

(a)  On February 17, 1994, GB Property Funding issued the 10 7/8% First Mortgage
     Notes which are due January 15, 2004 and which are collateralized by a
     first mortgage on the Sands.  Interest on the notes accrues at the rate of
     10 7/8% per annum, payable semiannually commencing July 15, 1994.  Interest
     only was payable during the first three years.  Commencing on July 15,
     1997, semiannual principal payments of $2,500,000 became due on each
     interest payment date with the balance due at maturity.  Such semiannual
     payments may be made in cash or by tendering 10 7/8% First Mortgage Notes
     previously purchased or otherwise acquired by GB Property Funding.  GB
     Property Funding acquired $2,500,000 face amount of 10 7/8% First Mortgage
     Notes at a discount during May 1997 which it used during June to make its
     July 15, 1997 required principal payment.

     As a result of the aforementioned filings of petitions under Chapter 11 of
     the Bankruptcy Code, the 10 7/8% First Mortgage Notes are in default.

(b)  On February 17, 1994, PRT Funding Corp. issued the PRT Funding Notes.
     Interest on the PRT Funding Notes accrues at the rate of 11 5/8% per annum,
     payable semiannually commencing October 15, 1994.  The PRT Funding Notes
     are redeemable at the option of the issuer, in whole or in part, on or
     after April 15, 1999 at stated redemption prices ranging up to 104.36% of
     par plus accrued interest.  The indenture for the PRT Funding Notes
     contains various provisions which, among other things, restrict the ability
     of certain subsidiaries of GBCC to pay dividends to GBCC, to merge,
     consolidate or sell substantially all of their assets or to incur
     additional indebtedness beyond certain limitations.  The indenture also
     contains certain cross default provisions with respect to the 10 7/8% First
     Mortgage Notes described in (a) above.

                                       37
<PAGE>

             GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


(c)  On February 17, 1994, PPI Funding Corp., a newly formed subsidiary of GBCC,
     issued $40,524,000 discounted principal amount of new deferred interest
     notes (the "PPI Funding Notes") to HCC in exchange for the $38,779,000
     principal amount of 15 1/2% unsecured notes (the "PCPI Notes") held by HCC
     and issued by PCPI Funding Corp., a subsidiary of GBCC.  The PPI Funding
     Notes were discounted to yield interest at the rate of 14 7/8% per annum
     and had a face value of $110,636,000.  Subsequent principal payment by PPI
     Funding Corp. reduced the maturity value of the notes to $98,353,000 at
     December 31, 1996.  During the second quarter of 1997, HCC assigned
     $13,750,000 undiscounted principal amount of the PPI Funding Notes to PPI
     Corporation as consideration, in part, for HCC's acquisition of the general
     partnership interest in PML (see Note 7).  Such assignment reduced the
     maturity value of the notes to $84,603,000.  At December 31, 1997, an
     additional $37,000,000 undiscounted face value ($23,631,000 discounted
     value) of the PPI Funding Notes was forgiven by HCC, further reducing the
     maturity value to $47,603,000.  Because of the continued affiliation of HCC
     and GBCC, the forgiveness of debt has been reflected by GBCC as a credit to
     paid-in capital on the accompanying consolidated balance sheet at December
     31, 1997.  Payment of interest is deferred through February 17, 2001 at
     which time interest will become payable semiannually, with the unpaid
     principal balance due on February 17, 2006.  The PPI Funding Notes are
     collateralized by a pledge of all of the common stock of a subsidiary of
     GBCC.

     Scheduled payments of long-term debt as of December 31, 1997, exclusive of
the PRT Funding Notes which are currently in default and accelerated, are set
forth below:

<TABLE>
<CAPTION>

          <S>                  <C>
                 1998          $    55,000
                 1999               59,000
                 2000               64,000
                 2001              450,000
                 2002                  -
                 Thereafter     47,602,000
                               -----------
                  Total        $48,230,000
                               -----------
</TABLE>
     Interest paid, net of amounts capitalized, amounted to $30,102,000,
$31,206,000 and $32,058,000, respectively, during the years ended December 31,
1997, 1996 and 1995.

                                       38
<PAGE>

             GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


(5)  INCOME TAXES

     Components of GBCC's (provision) benefit for income taxes consist of the
following:
<TABLE>
<CAPTION>

                                                   YEAR ENDED DECEMBER 31,
                                           --------------------------------------
                                               1997           1996         1995
                                           ------------   -----------   ---------
<S>                                        <C>            <C>           <C>
Federal income tax (provision) benefit:
 Current                                   $(17,319,000)  $ 5,667,000   $ 206,000
 Deferred                                     9,997,000        90,000     490,000
State income tax (provision) benefit:
 Current                                       (794,000)     (109,000)   (380,000)
 Deferred                                       (36,000)      (51,000)    480,000
 Valuation allowance                          7,138,000    (5,757,000)   (696,000)
                                           ------------   -----------   ---------
                                           $ (1,014,000)  $  (160,000)  $ 100,000
                                           ============   ===========   =========
</TABLE>

   For periods prior to December 31, 1996, GBCC was included in the consolidated
federal income tax return of HCC, GBCC's parent prior to that date.  Pursuant to
agreements between HCC and GBCC, GBCC's provision for federal income taxes was
based on the amount of tax which would have been provided if a separate federal
income tax return were filed.  In addition, HCC compensated GBCC for the use by
HCC and its subsidiaries (exclusive of GBCC and its subsidiaries) of GBCC's
available tax net operating loss carryforwards ("NOL's").  There was no such
utilization of GBCC's NOL's for the years ended December 31, 1996 and 1995.
Total state income taxes paid by GBCC for the years ended December 31, 1997,
1996 and 1995 amounted to $193,000, $123,000 and $171,000, respectively.

                                       39
<PAGE>

             GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


   A reconciliation between the calculated tax benefit based on the statutory
rates in effect and the effective tax rates follows:
<TABLE>
<CAPTION>

                                                   YEAR ENDED DECEMBER 31,
                                          ----------------------------------------
                                              1997           1996          1995
                                          ------------   ------------   ----------
<S>                                       <C>            <C>            <C>

Calculated income tax benefit
 at 34%                                   $  6,647,000   $ 12,038,000   $1,492,000
Tax benefit of operating
 losses not recognized                             -      (11,098,000)    (297,000)
Forgiveness of debt by affiliate             8,035,000            -            -
Adjustment to prior year taxes                 928,000            -            -
Amortization of excess
 purchase price                                    -         (601,000)    (803,000)
Disallowance of meals and
 entertainment                                (145,000)      (338,000)    (354,000)
State income taxes                            (548,000)      (106,000)      66,000
Other                                          271,000        (55,000)      (4,000)
Valuation allowance change                   7,138,000            -            -
Deconsolidation of Holdings                (23,340,000)           -            -
                                          ------------   ------------   ----------
Tax benefit (provision) as shown on
 consolidated statements of operations    $ (1,014,000)  $   (160,000)  $  100,000
                                          ============   ============   ==========
</TABLE>

   As a result of the distribution of GBCC's stock by HCC to its shareholders,
GBCC is no longer included in HCC's consolidated federal income tax return.  As
of December 31, 1997, GBCC and its subsidiaries have NOL's totaling
approximately $24,000,000 for federal income tax purposes, most of which do not
begin to expire until the year 2006.  Additionally, GBCC and its subsidiaries
have various tax credits available totaling approximately $3,650,000 most of
which expire by the year 2004.  Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes"  ("SFAS 109") requires that the tax benefit
of such NOL's and credit carryforwards be recorded as an asset and, to the
extent that management can not assess that the utilization of all or a portion
of such NOL's is more likely than not, a valuation allowance should be recorded.
Due to losses sustained for both financial and tax reporting by GBCC and its
subsidiaries through 1997, management was unable to determine that realization
of such asset was more likely than not and, thus, has provided valuation
allowances for the entire deferred tax asset for all periods presented.

   Sales or purchases of GBCC common stock by certain five percent stockholders,
as defined in the Internal Revenue Code of 1986, as amended (the "Code"), can
cause a "change of control", as defined in Section 382 of the Code, which would
limit the ability of GBCC to utilize these loss carryforwards in later tax
periods.  Should such a change of control occur, the amount of annual loss
carryforwards available for use would most likely be substantially reduced.
Future treasury regulations, administrative rulings or court decisions may also
effect GBCC's future utilization of its loss carryforwards.

                                       40
<PAGE>

             GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


   The components of the net deferred tax asset were as follows:
<TABLE>
<CAPTION>

                                                  DECEMBER 31,
                                          ---------------------------
                                              1997           1996
                                          ------------   ------------
<S>                                       <C>            <C>

Deferred tax assets:
 Net operating loss carryforwards         $  9,388,000   $ 26,335,000
 Forgiveness of affiliate debt               9,438,000            -
 Allowance for doubtful accounts                85,000      6,428,000
 Alternative minimum tax credit                270,000            -
 Investment and jobs tax credits             3,378,000      3,223,000
 Investment in consolidated subsidiary       4,428,000            -
 Equity losses of unconsolidated
  subsidiaries and joint ventures               85,000      3,293,000
 Other liabilities and accruals                298,000      3,034,000
 Deferred financing costs                      899,000            -
 Other                                          12,000      2,037,000
                                          ------------   ------------
  Total deferred tax assets                 28,281,000     44,350,000
                                          ------------   ------------

Deferred tax liabilities:
 Depreciation and amortization                     -       (8,334,000)
 Other                                             -         (597,000)
                                          ------------   ------------
  Total deferred tax liabilities                   -       (8,931,000)
                                          ------------   ------------

Net deferred tax asset                      28,281,000     35,419,000
Valuation allowance                        (28,281,000)   (35,419,000)
                                          ------------   ------------
                                          $        -     $        -
                                          ============   ============
</TABLE>

(6)  STOCK OPTIONS AND COMPENSATION PLANS

INCENTIVE STOCK OPTION PLAN
---------------------------

   During 1990, GBCC adopted the 1990 Incentive Stock Option Plan (the "Plan").
The 1990 Plan provides for the granting of incentive stock options intended to
qualify for special tax treatment under the Internal Revenue Code, as amended.
The shares offered under  the 1990 Plan consist of shares of GBCC common stock.
Options for no more than 102,092 shares of common stock may be granted under the
1990 Plan.

   The 1990 Plan is administered by the Board of Directors of GBCC through its
compensation committee.  Options granted under the 1990 Plan are exercisable for
a term ending five years from the date of grant and are subject to limitations
on the quantity exercised in a calendar year and to certain repurchase

                                       41
<PAGE>

             GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


provisions.  No options to purchase shares were outstanding at any time during
the years ended December 31, 1997 and 1996.  Options outstanding for the issue
of 8,030 shares at an exercise price of $2.50 per share were available at
January 1, 1995 and expired during 1995 without exercise.  As of December 31,
1997 options to purchase 57,772 shares are available for grant.

COMPENSATION PLAN
-----------------

   During October 1995, HCC assumed the outstanding unfunded obligations of GBCC
under existing agreements with certain of GBCC's principal shareholders and key
executive officers providing for (1) lifetime pension benefits upon the
expiration of existing employment contracts and subsequent consulting agreements
and (2) death benefits to be paid for a period of ten years.  The obligation
assumed by HCC was based on the net present value of the obligation at that date
of $4,283,000.  GBCC issued a non-interest bearing note payable to HCC for a
like amount in exchange for the assumption; such note was contributed to GBCC on
December 31, 1996 (see Note 13).  Amounts charged to expense by GBCC under the
compensation agreements for the years ended December 31, 1997, 1996 and 1995
were approximately $9,000, $330,000 and $158,000, respectively.

(7)  TRANSACTIONS WITH RELATED PARTIES

   As a result of the Chapter 11 filings discussed in Notes 1 and 2, the assets
and liabilities of Holdings and its subsidiaries are not included on the
accompanying consolidated balance sheet at December 31, 1997.  Accordingly,
intercompany receivables and payables which previously eliminated in
consolidation are now considered balances outstanding with affiliates.

   Prior to sale of the property in September 1996, GBCC operated the Holiday
Inn located at the north entrance of the Dallas/Fort Worth Airport ("DFW North")
which was owned by Metroplex Hotel Limited ("Metroplex"), a partnership
controlled by certain members of the Pratt Family.  During 1996 and 1995, GBCC
made capital expenditures under the hotel operating agreement totaling
$2,581,000 toward property improvements.  GBCC was also obligated by the hotel
operating agreement to make minimum rental payments equal to Metroplex's
principal and interest payments on the underlying indebtedness of this hotel.
During February 1994, GBCC utilized funds borrowed from HCC to purchase such
underlying indebtedness with a principal balance of $13,756,000 from third
parties at a cost of $6,750,000 and subject to third party indebtedness
amounting to $2,706,000.  The required minimum rental payments (net of debt
service receipts) amounted to $397,000 and $530,000, respectively, during the
years ended December 31, 1996 and 1995.  Upon the sale of the hotel by
Metroplex, GBCC received proceeds sufficient to repay third party indebtedness
of $1,873,000, recover its $6,750,000 acquisition cost of the underlying
indebtedness, recover $2,581,000 of its total investment in property
improvements and receive additional cash of approximately $770,000.

   PML, a limited partnership wholly owned through March 31, 1997 by GBCC, earns
management fees pursuant to a management agreement with Hollywood Casino -
Aurora, Inc. ("HCA"), an HCC subsidiary.  Such fees include a base management
fee equal to 5% of the Aurora Casino's operating revenues (as defined in the
agreement) subject to a maximum of $5.5 million annually, and an incentive fee
equal to 10% of gross operating profit (as defined in the agreement to generally
include all revenues,

                                       42
<PAGE>

             GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


less expenses other than depreciation, interest, amortization and taxes).
Effective as of April 1, 1997, HCC acquired the general partnership interest in
PML from PPI Corporation. Management fees earned by GBCC prior to the April 1,
1997 sale of the general partnership interest amounted to $2,727,000. Such fees
amounted to $9,360,000 and $9,432,000, respectively, during the years ended
December 31, 1996 and 1995. Unpaid fees totaling $2,096,000 are included in
amounts due from affiliates on the accompanying consolidated balance sheet at
December 31, 1996.

   PPI Corporation received a five-year note in the original amount of
$3,800,000 together with the assignment of $13,750,000 undiscounted principal
amount ($7,597,000 discounted value) of PPI Funding Notes (see Note 4) and
$350,000 of accrued interest due from GBCC from HCC in exchange for the general
partnership interest in PML.  The difference between the historical cost of PPI
Corporation's investment in PML and the selling price ($13,024,000) was recorded
as a credit to paid-in capital (see Note 13).   The $3,800,000 note is payable
in monthly installments of $83,000, including interest at the rate of 14% per
annum, commencing on May 1, 1997, with additional quarterly variable principal
payments commencing on July 1, 1997 in an amount equal to the general partner's
share of quarterly cash distributions, as defined, from PML.  The remaining note
balance at December 31, 1997 of $3,447,000 is included in current ($552,000) and
noncurrent ($2,895,000) amounts due from affiliates on the accompanying
consolidated balance sheet.  Interest income on the note from HCC amounted to
$383,000 during the year ended December 31, 1997.  Accrued interest receivable
of $41,000 is included in amounts due from affiliates on the accompanying
consolidated balance sheet at December 31, 1997.

   NJMI, is responsible for the supervision, direction and control of the day-
to-day operations of the Sands under a management agreement.  NJMI is entitled
to receive annually (i) a basic consulting fee of 1.5% of "adjusted gross
revenues," as defined, and (ii) incentive compensation of between 5% and 7.5% of
gross operating profits in excess of certain stated amounts should annual "gross
operating profits," as defined, exceed $5,000,000.  Management fees receivable
from the Sands at December 31, 1997 amounted to $34,000.

   Pursuant to a ten-year consulting agreement with Hollywood Casino - Tunica,
Inc. ("HCT"), the HCC subsidiary which owns and operates the Tunica Casino, PCC
receives monthly consulting fees of $100,000.  Total fees earned for each of the
years ended December 31, 1997, 1996 and 1995 amounted to $1,200,000.

   GBCC and its subsidiaries share certain general and administrative costs with
HCC.  During 1996 and 1995, HCC was obligated under the terms of an
administrative services agreement to pay GBCC $50,000 per month.  Net allocated
costs and fees charged to GBCC and its subsidiaries by HCC amounted to
$1,843,000, $2,486,000 and $5,000, respectively, during the years ended December
31, 1997, 1996 and 1995.  In connection with such allocated costs and fees,
payables in the amount of $156,000 and $203,000 are included in accounts payable
on the accompanying consolidated balance sheets at December 31, 1997 and 1996,
respectively.

   HCT and Advanced Casino Systems Corporation ("ACSC"), a GBCC subsidiary,
entered into a Computer Services Agreement dated as of January 1, 1994 and
renewed through December 31, 1999.  The agreement provides, among other things,
that ACSC will sell HCT computer hardware and information

                                       43
<PAGE>

             GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


systems equipment and will license or sublicense to HCT computer software
necessary to operate HCT's casino, hotel and related facilities and business
operations. HCT pays ACSC for such equipment and licenses such software at
amounts and on terms and conditions that ACSC provides to unrelated third
parties. HCT also pays ACSC a fixed license fee of $33,600 per month ($30,000
prior to January 1, 1997). In addition, HCT reimburses ACSC for its direct costs
and expenses incurred under this agreement. Total charges incurred under such
agreement amounted to $547,000, $511,000 and $532,000, respectively, for the
years ended December 31, 1997, 1996 and 1995. HCA also receives certain
computer-related services from ACSC including hardware, software, and operator
support. HCA reimburses ACSC for its direct costs and any expenses incurred.
Such costs totaled $117,000, $229,000 and $602,000, respectively, during the
years ended December 31, 1997, 1996 and 1995. Unpaid fees and charges from HCT
and HCA at December 31, 1997 and 1996 amounted to $55,000 and $82,000,
respectively, and are included in amounts due from affiliates on the
accompanying consolidated balance sheets.

   GBHC and ACSC also perform certain administrative and marketing services on
behalf of HCA, HCT and PML.  During the years ended December 31, 1997, 1996 and
1995, fees charged by GBHC and ACSC for such services totaled $827,000,
$1,344,000 and $729,000, respectively.  Unpaid fees amounting to $16,000 and
$128,000 are included in amounts due from affiliates on the accompanying
consolidated balance sheets at December 31, 1997 and 1996, respectively.

   On February 17, 1994, PRT Funding Corp., a subsidiary of GBCC, issued
$15,000,000 of 14 5/8% junior subordinated notes (the "Junior Subordinated
Notes") to HCC.  Principal totaling $6,262,000 with respect to the Junior
Subordinated Notes was subsequently assigned to GBCC by HCC in recognition of
tax net operating losses of GBCC used by HCC.  The remaining $8,738,000 of
Junior Subordinated Notes, together with interest accrued thereon, was assigned
to GBCC by HCC in connection with the distribution of its stock in GBCC to HCC's
shareholders on December 31, 1996.

   Interest expense with respect to borrowings from HCC is set forth below:
<TABLE>
<CAPTION>

                                       FOR THE YEARS ENDED DECEMBER 31,
                                      ----------------------------------
                                         1997        1996        1995
                                      ----------  ----------  ----------
<S>                                   <C>         <C>         <C>

PPI Funding Notes (Note 4)            $7,488,000  $7,295,000  $6,666,000
Junior Subordinated Notes (Note 4)           -     1,277,000   1,278,000
Short-term borrowings (Note 3)           977,000   1,050,000     853,000
</TABLE>

   Interest accrued on short-term borrowings at December 31, 1997 and 1996,
which amounted to $839,000 and $323,000, respectively, is included in interest
payable on the accompanying consolidated balance sheets.

   During 1994, a GBCC subsidiary issued $40,524,000 discounted principal amount
of PPI Funding Notes in exchange for the PCPI Notes held by HCC (see Note 4).
Accretion of interest on the PPI Funding Notes is included in the outstanding
note payable balance at December 31, 1997 and 1996.

                                       44
<PAGE>

             GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


   GBHC issued a promissory note in the amount of $10,000,000 on February 17,
1994 to PRT Funding.  Such note accrues interest at the rate of 14 5/8% per
annum and is payable semiannually commencing on August 17, 1994.  The principal
amount of the note is due on February 17, 2005.  During the first quarter of
1997, GBHC also borrowed $5,000,000 from PCC for working capital purposes.  Such
borrowing accrues interest at the rate of 14 5/8% per annum payable semiannually
commencing July 15, 1997.  Prior to December 31, 1997, such note and related
interest were eliminated in consolidation.  As a result of (i) GBHC no longer
being included as a consolidated subsidiary and (ii) GBHC's filing under Chapter
11 making prospects for ultimate collection doubtful, the notes, together with
accrued interest receivable aggregating $3,458,000, have been reflected as an
adjustment to GBCC's negative investment in Holdings on the accompanying
consolidated balance sheet at December 31, 1997.

   During the third quarter of 1996, GBCC loaned $6,500,000 to GBHC for working
capital purposes. Such advance accrues interest at the rate of 13 3/4% per
annum, payable quarterly commencing October 1, 1996.   An additional $1,500,000
was loaned to GBHC during the first quarter of 1997 on the same terms. Repayment
of such advances and the payment of the related interest are subject to approval
by the Bankruptcy Court and the New Jersey Casino Control Commission (the
"Casino Commission").  Prior to December 31, 1997, such notes and the related
interest were eliminated in consolidation.  For the same reasons cited in the
previous paragraph, the advances to GBHC of $8,000,000, together with the
related interest receivable of $1,496,000, have been reflected as an adjustment
to GBCC's negative investment in Holdings on the accompanying consolidated
balance sheet at December 31, 1997.

(8)  INVESTMENT IN PRATT MANAGEMENT, L.P.

   Effective as of April 1, 1997, HCC acquired the general partnership interest
in PML (see Notes 1 and 7) from PPI Corporation.  PML earns management fees from
the Aurora Casino and incurs operating and other expenses with respect to its
management thereof.  The general partner receives 99% of the first $84,000 of
net income earned by the partnership each month and 1% of any income earned
above such amount.   PML earned management fees amounting to $6,882,000 during
the period from April 1, 1997 through December 31, 1997.  PML also incurred
operating and other expenses amounting to $1,070,000 during the same period.

(9)  NEW JERSEY REGULATIONS AND OBLIGATORY INVESTMENTS

   GBHC and NJMI conduct gaming operations in Atlantic City, New Jersey and
operate a hotel and several restaurants, as well as related support facilities.
The operation of an Atlantic City casino/hotel is subject to significant
regulatory control.  Under the New Jersey Casino Control Act (the "Casino Act"),
GBHC was required to obtain and is required to periodically renew its operating
license.  A casino license is not transferable and, after the initial licensing
and two one-year renewal periods, is issued for a term of up to four years.
However, the Casino Commission still has the authority to reopen license
hearings at any time.  During 1996, the Casino Commission renewed GBHC's license
to operate the Sands through September 30, 2000 (subject to review of the Sands'
financial stability during 1997) and renewed NJMI's license to manage the Sands
through September 30, 2000.  The review of the Sands' financial stability took
place and another review is scheduled in 1998.  Terms of the current license
require GBHC to comply with periodic financial reporting requirements as well as
obtain prior Casino Commission approval of certain

                                       45
<PAGE>

             GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


cash transactions with affiliates. If it were determined that gaming laws were
violated by a licensee, the gaming license held by each licensee could be
conditioned, suspended or revoked. In addition, the licensees and other persons
involved could be subject to substantial fines.

   The Casino Act requires casino licensees to make certain approved investments
in New Jersey or to pay an investment alternative tax.  Casino licensees may
obtain investment credits, which amount to 1.25% of casino revenues, by
purchasing bonds at below-market interest rates from the Casino Reinvestment
Development Authority (the "CRDA") or by making qualified investments approved
by the CRDA.  This governmental agency administers the statutorily mandated
investments made by casino licensees and is required to expend the monies
received by it for eligible projects defined in the statute.  The investment
alternative tax amounts to 2.5% of casino revenues.  Payments of the investment
obligations must be made quarterly.  The Sands has elected to comply with the
requirements by obtaining investment credits or by making qualified investments.

   As of December 31, 1996, the Sands had purchased bonds totaling $5,237,000.
The Sands had remaining funds on deposit and held in escrow by the CRDA at
December 31, 1996 of $5,546,000.  The bonds purchased and the amounts on deposit
and held in escrow are collectively referred to as "obligatory investments" on
the accompanying consolidated financial statements.

   Obligatory investments at December 31, 1996 are net of an accumulated
valuation allowance of $4,401,000 based upon the estimated realizable value of
the investments.  Provisions for valuation allowances during the years ended
December 31, 1997, 1996 and 1995 amounted to $1,241,000, $1,344,000 and
$1,457,000, respectively.

   The Sands has, from time to time, contributed certain amounts held in escrow
to the CRDA.  In consideration thereof, the CRDA has granted the Sands waivers
of certain of its investment obligations in future periods.  GBHC made such
contributions obligatory investments during the years ended December 31, 1997,
1996 and 1995 totaling $147,000, $1,500,000 and $250,000, respectively,
resulting in waivers granted by the CRDA during 1997 and 1995 totaling $75,000
and $128,000, respectively.  No such waivers were granted during 1996; however,
the contributions were designated for projects expected to benefit the community
and the Sands facility. Accordingly, intangible assets aggregating $2,433,000
are included in other assets on the accompanying consolidated balance sheet at
December 31, 1996. Amortization of waivers granted totaled $200,000 and $128,000
during the years ended December 31, 1997 and 1995, respectively.

(10)  ILLINOIS REGULATORY MATTERS

   Riverboat gaming operations in Illinois are subject to regulatory control by
the Illinois Gaming Board.  Under the provisions of the Illinois gaming
regulations, PML is required to maintain its supplier's license,  which was
renewed in 1997 until December 1998.  Management intends to file for renewal of
PML's supplier's license and anticipates that such renewal will be approved by
the Illinois Gaming Board during 1998.  If it were determined that gaming laws
were violated by a licensee, the license held could be limited, conditioned,
suspended or revoked.  In addition, the licensee and other persons involved
could be subject to substantial fines.

                                       46
<PAGE>

             GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


(11) SUMMARIZED COMBINED FINANCIAL INFORMATION OF AND TRANSACTIONS WITH
     UNCONSOLIDATED AFFILIATES

   As a result of Holdings, GB Property Funding and GBHC filing for protection
under Chapter 11 of the Bankruptcy Code, such subsidiaries are considered
unconsolidated affiliates of GBCC at December 31, 1997.  Accordingly, certain
summarized financial information concerning the assets and liabilities of
Holdings and its subsidiaries has been combined with the financial information
of GBCC's other unconsolidated affiliates (which include joint ventures) in the
presentation below.  Information concerning Holdings and its subsidiaries'
revenues and expenses is not included on the schedule below, as such revenues
and expenses are included on the accompanying consolidated statements of
operations for all periods presented.
<TABLE>
<CAPTION>

                                   YEAR ENDED DECEMBER 31,
                          -----------------------------------------
                              1997          1996           1995
                          -----------   ------------   ------------
<S>                       <C>           <C>            <C>

Net revenues              $ 3,114,000   $ 39,314,000   $ 40,005,000
Expenses                   (2,936,000)   (41,524,000)   (43,144,000)
Gain on sale of assets     10,356,000            -              -
                          -----------   ------------   ------------
Net income (loss)         $10,534,000   $ (2,210,000)  $ (3,139,000)
                          ===========   ============   ============

                                                DECEMBER 31,
                                        ---------------------------
                                            1997           1996
                                        ------------   ------------

Current assets                          $ 29,191,000   $  4,549,000
                                        ============   ============
Noncurrent assets                       $169,365,000   $ 29,104,000
                                        ============   ============
Current liabilities                     $ 24,988,000   $  5,385,000
                                        ============   ============
Noncurrent liabilities                  $221,211,000   $ 38,808,000
                                        ============   ============
</TABLE>

   Income and losses of GBCC's unconsolidated affiliates as set forth above have
not been reflected on the accompanying consolidated statements of operations for
the years ended December 31, 1997, 1996 and 1995 as GBCC's investments in such
affiliates were previously eliminated through the recognition of prior years'
losses.

   Prior to sale of the property in November 1996, GBCC had an ongoing
commitment to fund its proportionate share of operating cash deficits with
respect to its 50% ownership interest in the Sheraton Plaza located in Orlando,
Florida; GBCC was not required to make any such payments during either 1996 or
1995.  GBCC also agreed to contribute up to $3,900,000 as an additional
investment in the Sheraton Plaza hotel partnership to refurbish the hotel
facility.  No such commitments were required during 1996; GBCC contributed
$1,675,000 during 1995 toward such commitment.  Such contributions were agreed
to

                                       47
<PAGE>

             GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


in recognition of GBCC's partner having agreed to make $5,000,000 in
principal reductions on the underlying mortgage note on the facility.  GBCC was
required to pay approximately $2,946,000 to retire its share of the underlying
indebtedness on the property in connection with the sale.  During 1997, GBCC
received $750,000 in distributions as part of the liquidation of the
partnership.

   GBCC earned management and project fees from unconsolidated affiliates for
the management and project supervision of certain hotel facilities.  During the
years ended December 31, 1997, 1996 and 1995, such fees amounted to $292,000,
$1,167,000 and $1,139,000, respectively.

   During the fourth quarter of 1996, an unconsolidated partnership in which a
GBCC subsidiary held a 46% interest entered into an agreement for the sale of a
casino/hotel in San Juan, Puerto Rico owned by the partnership and managed by
the GBCC subsidiary.  The sale was completed in February 1997 and GBCC received
a fee of $1,475,000 with respect to the termination of its management agreement.

(12)  LITIGATION

   SUBSIDIARY CHAPTER 11 FILINGS
   -----------------------------

   On January 5, 1998, Holdings, GB Property Funding and GBHC filed petitions
for relief under Chapter 11 of the Bankruptcy Code.  Each company continues to
operate in the ordinary course of business, as set forth in the Bankruptcy Code,
and each company's officers and directors as of the date of the filing remain in
office, subject to the supervision of the Bankruptcy Court.

   As a result of the default and automatic acceleration under the indenture for
the PRT Funding Notes, the holders of the PRT Funding Notes could initiate
judicial proceedings to enforce their claims for payment.  No such proceedings
have been initiated and negotiations with PRT Funding's creditors are currently
underway for a possible restructuring of the debt obligations.

   PLANET HOLLYWOOD LITIGATION
   ---------------------------

   Planet Hollywood International, Inc., a Delaware corporation, and Planet
Hollywood (Region IV), Inc., a Minnesota corporation (collectively, "PHII"),
filed a complaint in the United States District Court for the Northern District
of Illinois, Eastern Division on July 29, 1996 against HCC, HCA and a member of
the Pratt Family (collectively, the "Original Hollywood Defendants").  The
Original Hollywood Defendants filed with the Court on September 18, 1996 an
answer to PHII's lawsuit, along with numerous counterclaims against PHII, Robert
Earl and Keith Barish (collectively, the "PHII Defendants").  PHII filed with
the Court on January 21, 1997, an amendment to their complaint which, among
other things, added HCT (together with the Original Hollywood Defendants, the
"Hollywood Defendants") and GBCC as defendants.  The Original Hollywood
Defendants filed with the Court on February 4, 1997, and GBCC and HCT filed with
the Court on February 20, 1997, answers and counterclaims to such amended
complaint.

   In its lawsuit, PHII alleges, among other things, that the Hollywood
Defendants and GBCC have, in opening and operating the Hollywood Casino concept,
infringed on PHII's trademark, service mark and

                                       48
<PAGE>

             GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


trade dress and have engaged in unfair competition and deceptive trade
practices. In their counterclaims, the Hollywood Defendants and GBCC allege,
among other things, that the PHII Defendants have, through their planned use of
their mark in connection with casino services, infringed on certain of HCC's
service marks and trade dress and have engaged in unfair competition.

   Given the uncertainties inherent in litigation, no assurance can be given
that the Hollywood Defendants and GBCC will prevail in this litigation; however,
the Hollywood Defendants and GBCC believe that PHII's claims are without merit
and intend to defend their position and pursue their counterclaims vigorously.
The accompanying consolidated financial statements do not include any
adjustments that might result from the outcome of the uncertainties described
above.

   OTHER LITIGATION
   ----------------

   GBCC and its subsidiaries are also parties in various legal proceedings with
respect to the conduct of casino and hotel operations.  Although a possible
range of loss cannot be estimated, in the opinion of management, based upon the
advice of counsel, settlement or resolution of these proceedings should not have
a material adverse impact upon the consolidated financial position or results of
operations of GBCC and its subsidiaries.  The accompanying consolidated
financial statements do not include any adjustments that might result from the
outcome of the uncertainties described above.

(13)  SUPPLEMENTAL CASH FLOW INFORMATION

   As a result of Holdings, GB Property Funding and GBHC filing for protection
under Chapter 11 of the Bankruptcy Code, Holdings and its subsidiaries are no
longer included on the consolidated balance sheet of GBCC at December 31, 1997.
GBCC now reflects its investment in Holdings under the equity method of
accounting.  As a result of this change, the following non-cash assets and
liabilities were eliminated from GBCC's consolidated balance sheet at December
31, 1997:
<TABLE>
<CAPTION>

<S>                                                <C>
   Accounts receivable, net                        $   7,794,000
   Other current assets                                6,423,000
   Net property and equipment                        147,716,000
   Other noncurrent assets                            11,924,000
   Long-term debt, including current maturities     (192,932,000)
   Other current liabilities                         (25,103,000)
   Other noncurrent liabilities                      (28,293,000)
                                                   -------------

    Net non-cash liabilities                       $ (72,471,000)
                                                   =============
</TABLE>

                                       49
<PAGE>

             GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


   During the second quarter of 1997, HCC acquired the general partnership
interest in PML (see Notes 1 and 7).  The purchase price included the assignment
of certain receivables from GBCC and the issuance of a note to PPI Corporation.
In connection with the acquisition, certain liabilities of PPI Corporation were
assumed as follows:
<TABLE>
<CAPTION>

<S>                                         <C>
   Assignment of PPI Funding Notes          $(7,597,000)
   Assignment of interest receivable           (350,000)
   Note issued                               (3,800,000)
   Interest reserve on PPI Funding Notes       (277,000)
   Charge to paid-in capital                 13,024,000
                                            -----------
   Liabilities assumed                      $ 1,000,000
                                            ===========
</TABLE>

   At December 31, 1996, HCC contributed certain receivables from GBCC and its
subsidiaries to GBCC.  Notes receivable amounting to $8,738,000 together with
accrued interest thereon totaling $1,753,000 and other receivables of $4,283,000
with respect to pension obligations assumed during 1995 (see Note 6) were
contributed to GBCC.

(14) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

   The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:

   CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS  - The carrying amounts
approximate fair value because of the short maturity of these instruments.

   OBLIGATORY INVESTMENTS - The carrying amount of obligatory investments
approximates its fair value as a result of an allowance reflecting the below
market interest rate associated with such investments.

   INTEREST PAYABLE - The carrying amount of interest payable approximates fair
value because of the short maturity of the obligation.

    LONG-TERM DEBT - The fair value of GBCC's long-term debt is estimated based
on either the quoted market prices of the underlying debt issue or on the
discounted cash flow of future payments utilizing current rates available to
GBCC for debt of similar remaining maturities.  Borrowings from affiliates are
valued at the carrying amount.

                                       50
<PAGE>

                GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


    The estimated carrying amounts and fair values of GBCC's financial
instruments are as follows:
<TABLE>
<CAPTION>

                                    DECEMBER 31, 1997          DECEMBER 31, 1996
                                 ------------------------  ------------------------------
                                  CARRYING                   CARRYING
                                   AMOUNT     FAIR VALUE      AMOUNT        FAIR VALUE
                                 -----------  -----------  ------------  -----------------
<S>                              <C>          <C>          <C>           <C>
Financial Assets
 Cash and cash equivalents       $ 6,555,000  $ 6,555,000  $ 22,991,000       $ 22,991,000
 Short-term investment                     -            -     2,000,000          2,000,000
 Obligatory investments                    -            -     6,382,000          6,382,000

Financial Liabilities
 Interest payable                $ 6,875,000  $ 6,875,000  $ 11,673,000       $ 11,673,000
 Borrowings from affiliates       12,422,000   12,422,000     7,750,000          7,750,000
 10 7/8% First Mortgage Notes              -            -   185,000,000        154,475,000
 11 5/8% PRT Funding Notes        85,000,000   64,600,000    85,000,000         69,700,000
 14 7/8% PPI Funding Notes        30,321,000   30,321,000    54,338,000         54,338,000
 Other notes payable                 628,000      580,000     1,686,000          1,590,000

</TABLE>
(15) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>

                                                 QUARTER
                        -------------------------------------------------------
                           FIRST         SECOND        THIRD         FOURTH
                        ------------  ------------  ------------  -------------
<S>                     <C>           <C>           <C>           <C>
YEAR ENDED
  DECEMBER 31, 1997:
Net revenues            $68,196,000   $68,097,000   $69,700,000   $ 57,373,000
                        ===========   ===========   ===========   ============
Net loss                $(2,423,000)  $(3,052,000)  $(2,275,000)  $(12,814,000)
                        ===========   ===========   ===========   ============
Net loss per
  common share          $      (.47)  $      (.59)  $      (.43)  $      (2.47)
                        ===========   ===========   ===========   ============
YEAR ENDED
  DECEMBER 31, 1996:
Net revenues            $68,558,000   $75,217,000   $76,397,000   $ 63,468,000
                        ===========   ===========   ===========   ============
Net loss                $(9,796,000)  $(8,327,000)  $(7,671,000)  $ (9,772,000)
                        ===========   ===========   ===========   ============
Net loss per
  common share          $     (1.89)  $     (1.60)  $     (1.48)  $      (1.89)
                        ===========   ===========   ===========   ============
</TABLE>

                                       51
<PAGE>

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

   GBCC had no disagreements with its independent accountants to report under
this item.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

       Certain information is set forth below concerning the executive officers,
directors and certain key employees of Greate Bay Casino Corporation (the
"Company").
<TABLE>
<CAPTION>

                 Name                   Age                  Position
                 ----                   ---                  --------
<S>                                     <C>      <C>

John C. Hull..........................   59      Chairman of the Board, Chief
                                                 Executive Officer and Director

Edward T. Pratt, Jr...................   74      Vice Chairman of the Board, Treasurer
                                                 and Director

William D. Pratt......................   69      Executive Vice President, General
                                                 Counsel, Secretary and Director

Edward T. Pratt III...................   42      President and Chief Operating Officer

Lawrence C. Cole......................   51      Vice President for Management
                                                 Information Systems

Charles F. LaFrano III................   43      Vice President

Arthur Lewis..........................   68      Vice President of Corporate Security and
                                                 Governmental Relations

Richard D. Knight.....................   50      President and Chief Executive Officer of
                                                 Greate Bay Hotel and Casino, Inc.
                                                ("GBHC"), a wholly owned subsidiary
                                                 of the Company.

Jack E. Pratt.........................   70      Director and formerly Chief Executive
                                                 Officer of the Company

Bernard A. Capaldi, CPA...............   55      Director

Edward D. Muir........................   87      Director

Michael J. Chesser....................   49      Director
</TABLE>

                                       52
<PAGE>

   BUSINESS EXPERIENCE FOR PAST FIVE YEARS

   John C. Hull was elected to the positions set forth above on January 2, 1998.
He previously served as Corporate Controller of the Company since November 1994.
Mr. Hull also served from April 1994 until January 1998 as Corporate Controller
for Hollywood Casino Corporation ("HCC") which, prior to December 31,1996 owned
approximately 80% of the outstanding common stock of the Company, and served as
a financial consultant to both the Company and HCC from 1990 until April 1994.
Mr. Hull also served as Principal Accounting Officer for GB Holdings, Inc.
("Holdings") and GB Property Funding Corp. from November 1994 until January
1998.  On January 5, 1998, these GBCC subsidiaries filed petitions for relief
under Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the District of New Jersey.

   Mr. Edward T. Pratt, Jr. has served as Vice Chairman of the Board and a
director and executive officer of the Company for more than five years.  He also
serves as Vice Chairman of the Board, President and Treasurer of HCC.  Mr. Pratt
also served until January 2, 1998 as Vice Chairman of the Board of Directors of
Holdings and of GB Property Funding Corp. and as a Director of GBHC.  On January
5, 1998, these three GBCC subsidiaries filed petitions for relief under Chapter
11 of the United States Bankruptcy Code in the United States Bankruptcy Court
for the District of New Jersey.

   Mr. William D. Pratt has served as Executive Vice President, Secretary and a
director of the Company for more than five years.  He currently serves as
General Counsel and, prior to May 1995, served as General Counsel of the Company
for more than five years.  He also serves as Executive Vice President, Secretary
and General Counsel of HCC.  Mr. Pratt also served until January 2, 1998 as
Executive Vice President, General Counsel and Secretary of Holdings and of GB
Property Funding Corp. and as a director of GBHC.  On January 5, 1998, these
three GBCC subsidiaries filed petitions for relief under Chapter 11 of the
United States Bankruptcy Code.

   Mr. Edward T. Pratt III was elected President and Chief Operating Officer of
the Company in November 1995.  From May 1987 until November 1995, he served the
Company as Executive Vice President -- Development and Corporate Affairs.  He
also serves as President, Chief Operating Officer and as a director of HCC.  Mr.
Pratt served until January 2, 1998 as President, Chief Operating Officer and a
director of Holdings; as Executive Vice President and a director of GB Property
Funding Corp.; and as a director of GBHC.  On January 5, 1998, these three GBCC
subsidiaries filed petitions for relief under Chapter 11 of the United States
Bankruptcy Code.

   Mr. Lawrence C. Cole has served as Vice President of Management Information
Systems of the Company since December 1987.  Mr. Cole also serves as Chief
Executive Officer and President of Advanced Casino Systems Corporation ("ACSC"),
a subsidiary of the Company, which licenses software for automated casino
accounting and control systems.

   Mr. Charles F. LaFrano III is a certified public accountant and has served as
Vice President of the Company since September 1988.  He also served as Corporate
Controller (Principal Accounting Officer) of the Company from September 1988
until November 1994.  He also serves as Vice President of Finance for HCC.  Mr.
LaFrano served until January 2, 1998 as Vice President and Assistant Secretary
of Holdings and GB Property Funding Corp.  On January 5, 1998, these GBCC
subsidiaries filed petitions for relief under Chapter 11 of the United States
Bankruptcy Code.

   Mr. Arthur Lewis has served as Vice President of Corporate Security and
Governmental Relations of the Company since December 1987 and of GBHC since
November 1982.  On January 5, 1998, GBHC filed a petition for relief under
Chapter 11 of the United States Bankruptcy Code.

                                       53
<PAGE>

   Mr. Richard D. Knight was elected President and Chief Executive Officer of
GBHC on January 2, 1998.  Mr. Knight has also served as Executive Vice President
of Operations of HCC since May 1995. Mr. Knight has over 20 years of casino
operating experience and was previously employed as a senior operating officer
within the Bally organization, serving most recently as Senior Vice President of
Bally's Park Place, Inc. in Atlantic City, New Jersey from 1991 to 1992.

   Mr. Jack E. Pratt served as Chairman of the Board and Chief Executive Officer
of the Company for more than five years until January 2, 1998.  He is Chairman
of the Board and Chief Executive Officer of HCC.  Mr. Pratt served as Chairman
of the Board of Directors and Chief Executive Officer of Holdings and GBHC and
as Chairman of the Board of Directors, President and Chief Executive Officer of
GB Property Funding Corp. until January 2, 1998.  On January 5, 1998, these
three GBCC subsidiaries filed petitions for relief under Chapter 11 of the
United States Bankruptcy Code.

   Mr. Bernard A. Capaldi is a certified public accountant and is a principal of
Capaldi, Reynolds & Associates, P.A., C.P.A.'s in New Jersey, and has held such
position since 1965.  He is also the Chairman of the Board of Shore Memorial
Hospital's parent holding company.

   Mr. Edward D. Muir is currently retired.  He is a former Senior Vice
President of Rauscher Pierce Refsnes of San Antonio, Texas, an investment
banking firm, and was associated with Rauscher Pierce Refsnes in numerous
executive capacities for more than five years.  Mr. Muir also served until
January 2, 1998 as a director of GBHC.  On January 5, 1998, GBHC filed a
petition for relief under Chapter 11 of the United States Bankruptcy Code.

   Mr. Michael J. Chesser was elected to the Board of Directors of the Company
on September 9, 1997. He has served as President and Chief Operating Officer of
Atlantic Energy Corporation since 1994 and served as a director for such company
from 1996 until 1997.  From 1987 until 1994, Mr. Chesser was Vice President of
Baltimore Gas & Electric Company.

   FAMILY RELATIONSHIPS

   Messrs. Jack E. Pratt, Edward T. Pratt, Jr. and William D. Pratt are brothers
(the "Pratt Brothers"). Mr. Edward T. Pratt III, President of the Company, is
the son of Mr. Edward T. Pratt, Jr.  There is no other family relationship
between any of the directors and any executive officers of the Company or its
subsidiaries or affiliates.

ITEM 11.  EXECUTIVE COMPENSATION

   SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

   The following table provides certain summary information concerning
compensation paid or accrued by the Company, its subsidiaries and affiliates to
or on behalf of (i) the Company's Chief Executive Officer; (ii) each of the four
other most highly compensated executive officers of the Company (determined as
of the end of the last fiscal year; and (iii) additional individuals who would
have qualified as among the four other most highly compensated executive
officers of the Company but for the fact that the individual

                                       54
<PAGE>

was not serving as an executive officer of the Company at the end of the last
fiscal year (hereafter referred to as the named executive officers) for the
fiscal years ended December 31, 1997, 1996 and 1995.

<TABLE>
<CAPTION>

                                                          ANNUAL COMPENSATION              LONG-TERM
                                                ----------------------------------------  COMPENSATION
                                                                       OTHER ANNUAL         AWARDS/       ALL OTHER
     NAME AND PRINCIPAL POSITION        YEAR     SALARY     BONUS     COMPENSATION (1)      OPTIONS     COMPENSATION (2)
-------------------------------------  -------  ---------  -------  --------------------  ------------  ----------------
<S>                                    <C>      <C>        <C>      <C>                   <C>           <C>

John C. Hull (3)                        1997     $105,419  $     -              $     -              -         $  1,750
 Chief Executive Officer and            1996       96,210        -                    -              -              957
 Chairman of the Board of Directors     1995       61,228        -                    -              -                -
 of the Company

Jack E. Pratt (3)                       1997      208,526        -               14,000              -           16,960
 Formerly Chief Executive Officer       1996      259,947        -               14,000              -          139,992
 of the Company                         1995      111,068   71,750               14,000              -          105,886


Edward T. Pratt III(3)                  1997      192,113        -                    -              -            1,750
 President and Chief Operating          1996      141,588        -                    -              -              990
 Officer of the Company                 1995       51,866   17,700                    -              -              990

Leonard M. DeAngelo                     1997      510,543        -                    -              -            1,750
 Formerly President of GBHC             1996      482,258        -                    -              -            1,980
                                        1995      284,772   75,000                    -              -            1,980

Robert J. DeSalvio                      1997      248,871        -                    -              -            1,750
 Formerly Executive Vice President      1996      339,400        -                    -              -            1,980
 of Marketing of GBHC                   1995      289,400   50,000                    -              -            1,980

Lawrence C. Cole                        1997      283,250   15,098                    -              -            1,750
 Vice President of Management           1996      298,607   28,559                    -              -            1,980
 Information Systems of the Company     1995      270,085        -                    -              -            1,980

Edward T. Pratt, Jr. (3)                1997      138,473        -               17,375              -            1,750
 Vice Chairman of the Board and         1996      134,474        -               18,500              -           85,574
 Treasurer of the Company               1995       81,060   31,000               18,500              -           21,698

William D. Pratt (3)
 Executive Vice President, General      1997      143,927        -               14,000              -            5,775
 Counsel and Secretary of the           1996      123,623        -               14,000              -          107,605
 Company                                1995       40,707   26,500               13,000              -           33,255
</TABLE>

 __________________________

(1) Represents directors' fees for service as a director to a subsidiary of the
   Company.

(2) Includes matching contributions by the Company to The Hollywood Casino
    Corporation and Subsidiaries Retirement Savings Plan on behalf of the named
    executive officer.  See also "Employee Retirement Savings Plan" below.
    Amounts set forth for Jack E. Pratt, Edward T. Pratt, Jr. and William D.
    Pratt also include pension benefit accruals on their behalf.  See also
    "Employment Contracts" below.

                                       55
<PAGE>

(3) Amounts shown for John C. Hull, Jack E. Pratt, Edward T. Pratt III, Edward
    T. Pratt, Jr. and William D. Pratt represent payments by the Company and its
    subsidiaries for services on their behalf. The aforementioned individuals
    concurrently held positions during the three year period ended December 31,
    1997 as officers of HCC.  Prior to December 31, 1996, HCC owned
    approximately 80% of the outstanding common stock of the Company; such stock
    was distributed to HCC's shareholders on December 31, 1996.  For periods
    through December 31, 1996, HCC reimbursed the Company for services provided
    by the Pratt Brothers to HCC pursuant to intercompany allocation agreements
    ratified by the respective Boards of Directors  of the Company and HCC.  The
    Company reimburses HCC for services provided to the Company by HCC employees
    pursuant to intercompany allocation agreements ratified by their respective
    Board of Directors.  Additional compensation amounts earned by such
    individuals for their services provided to HCC and paid by HCC are set forth
    in the following tabulation:

<TABLE>
<CAPTION>
                                                 All Other
                            Salary     Bonus    Compensation
                           ---------  --------  ------------
<S>                        <C>        <C>       <C>

   John C. Hull
      1997                  $ 49,156  $ 60,927      $  1,750
      1996                    59,214         -           957
      1995                    83,772    26,000             -

   Jack E. Pratt
      1997                  $434,709  $228,476      $ 16,960
      1996                   386,823         -       139,992
      1995                   454,930   133,250       105,886

   Edward T. Pratt III
      1997                  $230,927  $228,476      $  1,750
      1996                   284,579         -           990
      1995                   274,031   100,300           990

   Edward T. Pratt, Jr.
      1997                  $185,839  $101,545      $  1,750
      1996                   191,417         -        85,574
      1995                   202,941    31,000        21,698

   William D. Pratt
      1997                  $150,268  $101,545      $  5,775
      1996                   172,188         -       107,605
      1995                   201,792    26,500        33,255
</TABLE>

   No grants of stock options under the Pratt Hotel Corporation 1990 Incentive
Stock Option Plan (the "Plan") were made to the named executive officers during
the most recent fiscal year.

   OPTION EXERCISES AND HOLDINGS

   No options were exercised by the named executive officers under the Plan
during the last fiscal year and no unexercised options were held by the named
executive officers as of the end of the fiscal year.

                                       56
<PAGE>

   EMPLOYMENT CONTRACTS

   Jack E. Pratt, formerly Chairman of the Board and Chief Executive Officer of
the Company and currently a Director, Edward T. Pratt, Jr., Vice Chairman of the
Board and Treasurer of the Company, and William D. Pratt, Executive Vice
President, Secretary and General Counsel of the Company, are under employment
contracts with HCC and have provided services to the Company pursuant to
intercompany allocation agreements ratified by the respective Boards of
Directors of the Company and HCC.  Their employment contracts were executed
during October 1989 and originally expired on December 31, 1994, but have
subsequently been extended by amendment through December 31, 2001 with respect
to Jack E. Pratt and to December 31, 2000 with respect to Edward T. Pratt, Jr.
and William D. Pratt.  Services to the Company will continue to be provided
pursuant to intercompany allocation agreements so long as the Pratt Brothers
remain officers of the Company.  The terms of the contracts may be extended
again by mutual agreement of the parties and the extended term, or any further
extension thereof, will be followed immediately by a four-year period as
consultants to HCC.  Upon expiration of the consulting term, each of the Pratt
Brothers will be entitled to receive a lifetime pension benefit and his
designated beneficiary is entitled to receive a death benefit, throughout the
term of the employment, consulting and pension benefit periods.

   The terms of the employment contracts provide for an annual base salary in
the first year for Jack E. Pratt, Edward T. Pratt, Jr. and William D. Pratt of
$350,000, $223,000 and $191,000, respectively, subject to annual review and
increase by the Compensation Committee of the Board of Directors. Compensation
under the consulting and pension benefit provisions of the employment contracts
of each of the Pratt Brothers will be 75% of the average of his three highest
annual salaries during the employment term of the contract.  The death benefit
is derived by multiplying a Pratt Brother's highest annual salary during his
employment term by 50% and such benefit will be paid annually to his designated
beneficiary for a period of ten years after his death.  The estimated annual
pension benefit payable to Jack E. Pratt, Edward T. Pratt, Jr. and William D.
Pratt by HCC is currently $484,000, $244,000 and $221,000, respectively.

   Edward T. Pratt III, President and Chief Operating Officer of the Company, is
under an employment contract with HCC dated as of May 1, 1996 and has provided
services to the Company pursuant to intercompany allocation agreements ratified
by the respective Boards of Directors of the Company and HCC.  The employment
contract is for a term expiring on April 30, 2000 unless sooner terminated by
either party.  The terms of Mr. Pratt's agreement provide for a minimum annual
base salary effective January 1, 1996 of $425,000, subject to annual review and
increase by the Compensation Committee of the Board of Directors of HCC.

   John C. Hull, Chief Executive Officer of the Company, is under an employment
agreement dated as of January 1, 1998 and continuing until the sooner of
December 31, 1999 or the consummation of the restructure of debt of certain of
the Company's subsidiaries or unless sooner terminated by either party. The
terms of Mr. Hull's agreement provide for an annual base salary of $300,000 and
incentive bonuses based on the successful consummation of specified debt
restructurings.

   Richard D. Knight, Chief Executive Officer and President of GBHC, is under an
employment contract with HCC, amended as of December 31, 1997, and continuing
through December 31, 2000 unless sooner terminated by either party.  The terms
of Mr. Knight's agreement provide for an annual base salary of $456,000, subject
to annual review and adjustment.  In accordance with the employment contract,
for such period of time as Mr. Knight serves as President of GBHC, HCC will be
obligated to pay Mr. Knight any portion of his compensation not paid by GBHC.

   Lawrence C. Cole, Vice President of Management Information Systems of the
Company serves under an employment contract, as amended on January 1, 1996, with
a wholly owned subsidiary of the Company

                                       57
<PAGE>

in such capacity continuing through December 31, 1998 unless sooner terminated
by one of the respective parties. The terms of Mr. Cole's amended contract
provides for a minimum annual base salary of $275,000 subject to annual
increases based on changes in the Consumer Price Index, as defined in the
employment contract, together with incentive bonuses based on operating results.
Obligations of the subsidiary under the employment contract are guaranteed by
GBHC.

   INCENTIVE STOCK OPTION PLAN

   THE 1990 INCENTIVE STOCK OPTION PLAN.  On March 22, 1990, the Company adopted
the Pratt Hotel Corporation 1990 Incentive Stock Option Plan (the "Plan").  The
Plan provides for the granting of incentive stock options that are intended to
qualify for special tax treatment under the Internal Revenue Code (the "Code").
The shares to be offered under the Plan consist of shares (whether authorized
and unissued or issued and reacquired) of the Common Stock.  Options for no more
than 102,092 shares of the Common Stock may be granted under the Plan.

   The Plan is administered by the Compensation Committee of the Board of
Directors (the "Board") of the Company.  Subject to the terms of the Plan, the
Compensation Committee may from time to time determine those key employees who
shall be granted stock options under the Plan, the number of shares to be
subject to such options and interpret and establish and amend rules and
regulations relating to the Plan.  Only key employees of the Company or any of
its subsidiaries are eligible to participate in the  Plan. Incentive stock
options granted under the Plan are exercisable for a term ending five years from
the date of grant.

   The exercise of options is subject to a $100,000 calendar-year limit for each
option holder based on the fair market value of the Common Stock at the time the
option was granted.  Options not exercised in earlier periods shall be
accumulated and available for exercise in later periods.  Options may be
exercised only as to full shares of Common Stock.  Upon termination of an
optionee's employment with the Company for any reason, including death or
disability, his or her options will immediately expire.

   The Compensation Committee may provide for the exercise of options
immediately or in installments, and upon such other terms, conditions and
restrictions as it may determine, including granting the Company the right to
repurchase shares issued upon the exercise of options.  The Plan provides that
if any person or group (other than Pratt Brothers) becomes the beneficial owner
of more than 51% of the Common Stock (other than by merger, consolidation or
purchase from the Company), the Company's right to repurchase a former
employee's shares shall terminate.

   EMPLOYEE RETIREMENT SAVINGS PLAN

   On January 1, 1989, the Company adopted GBHC's qualified defined contribution
plan for the benefit of all of the Company's employees who satisfy certain
eligibility requirements.  GBHC had adopted this plan for the benefit of its
eligible employees in November 1984.  Upon adoption by the Company, the former
plan changed its name to The Hollywood Casino Corporation and Subsidiaries
Retirement Savings Plan (the "Savings Plan").  The Savings Plan is qualified
under the requirements of section 401(k) of the Code allowing participating
employees to benefit from the tax deferral opportunities provided therein.  All
employees of the Company who have completed one year of service, as defined, and
who have attained the age of 21, are eligible to participate in the Savings
Plan.

   The Savings Plan provides for a matching contribution by the Company based
upon certain criteria, including levels of participation by the Company's
employees.  The Company accrued matching contributions totaling approximately
$1.3 million for the year ended December 31, 1997.

                                       58
<PAGE>

   COMPENSATION OF DIRECTORS

   Nonemployee directors of the Company received an annual fee of $25,000 for
service on the Board of Directors and $1,000 for each Board meeting attended
during 1997.  The Board of Directors of the Company held four regularly
scheduled meetings during the year ended December 31, 1997.  The Board of
Directors of the Company has Audit and Compensation Committees, but does not
have a standing nominating committee.  Nonemployee members of the Audit
Committee receive an annual fee of $2,500 for service on the committee and $500
for each committee meeting attended.  No additional compensation or fees are
paid to directors for attending Compensation Committee meetings.

   COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

   The Compensation Committee of the Board of Directors of the Company is
comprised of Messrs. Edward D. Muir, Bernard A. Capaldi and Jack E. Pratt.
Neither Mr. Muir nor Mr. Capaldi is a former or current officer or employee of
the Company or any of its subsidiaries.  Jack E. Pratt served as an executive
officer and director of the Company until January 2, 1998 and continues to serve
as an executive officer and director of HCC.  He also serves on the Compensation
Committee of HCC.

                                       59
<PAGE>

                      REPORT OF THE COMPENSATION COMMITTEE

   As members of the Compensation Committee, it is our duty to administer the
Company's various incentive plans, including its incentive stock option plan,
and to review compensation levels of members of management, to evaluate the
performance of management and to consider management succession and related
matters.  The Compensation Committee reviews with the Board in detail all
aspects of compensation for all executive officers.

   The compensation policy of the Company, which is endorsed by the Compensation
Committee, is that the annual compensation of each officer has been established
to reward long-term strategic management and the enhancement of stockholder
value, as well as to attract and retain key executives critical to the long-term
success of the Company.  Such compensation relates to and must be contingent
upon the contributions, responsibilities and relative position in the Company of
each individual officer, as well as the relative performance of the Company.
The Compensation Committee has also taken into consideration competition within
the rapidly expanding gaming industry for experienced personnel as well as other
subjective considerations in its deliberations regarding executive compensation.

   Prior to his resignation on January 2, 1998, Mr. Jack E. Pratt served as
Chairman of the Board and Chief Executive Officer of the Company.  In addition,
Mr. Pratt served as Chairman of the Board and Chief Executive Officer of
Hollywood Casino Corporation ("HCC") which, prior to December 31, 1996 owned
approximately 80% of the outstanding commons stock of the Company.  Pursuant to
an employment agreement with the Company dated as of September 21, 1989, as
amended (the "Pratt Employment Agreement") which HCC assumed effective as of
January 1, 1996 and which is described in the Company's Form 10-K for the fiscal
year ended December 31, 1997, and certain services agreements between HCC and
subsidiaries of the Company (the "Services Agreements") described in the
Company's Form 10-K for the fiscal year ended December 31, 1997, Mr. Pratt
performed services for HCC and the Company which allocated the cost of such
services as provided in the Services Agreements.  Effective as of January 1,
1998, HCC extended the expiration date of the Pratt Employment Agreement from
December 31, 2000 to December 31, 2001.

   In light of previous decisions of the Board of Directors of HCC and its
Compensation Committee, the annual base salary of Mr. Pratt under the Pratt
Employment Agreement was set at $645,000 effective as of January 1, 1996.  In
accordance with the terms of the Services Agreements, the Company's portion of
such annual base salary during 1997 was $208,526.  There were no adjustments to
the annual base salary of Mr. Pratt or bonuses paid by the Company to Mr. Pratt
in the fiscal years 1996 and 1997 and there have been no adjustments or bonuses
paid by the Company to date in the fiscal year 1998.

   This report and the accompanying stock price performance graph are provided
for general informational purposes only pursuant to regulations under the
Securities Exchange Act of 1934.  No information contained in this report or the
accompanying graph shall be deemed to be filed in whole or in part for purposes
under the Securities Act of 1933 or the Securities Exchange Act of 1934, or
incorporated by reference into any filing made thereunder.

                                  Compensation Committee


                                  Jack E. Pratt
                                  Bernard A. Capaldi
                                  Edward D. Muir

                                       60
<PAGE>

                            STOCK PRICE PERFORMANCE

   The graph set forth below compares the stock price performance of the Company
with those of the Dow Jones Equity Market Index and the Dow Jones Index for the
Casino Industry for the previous five years.  The Company has not paid dividends
over such period of time; however, the comparative equity market and industry
data assumes reinvestment of dividends.  The stock price performance shown below
may not be indicative of future stock price performance.  (Table substituted for
graph).


                         Greate Bay Casino Corporation
                            Stock Price Performance
                            (January 1, 1993 = 100)

<TABLE>
<CAPTION>


                                          Greate Bay
                         Equity  Casino     Casino
         Date            Index   Index   Corporation
-----------------------  ------  ------  -----------
<S>                      <C>     <C>     <C>

   January 1, 1993        100.0   100.0     100.0
   March 31, 1993         104.5   106.1     368.8
   June 30, 1993          105.0   129.3     543.8
   September 30, 1993     107.9   168.0     231.3
   December 31, 1993      110.0   152.6     293.8
   March 31, 1994         105.8   132.3     212.5
   June 30, 1994          106.0   101.2     200.0
   September 30, 1994     111.0   113.6     306.3
   December 30, 1994      110.8   117.2     206.3
   March 31, 1995         121.5   151.6     206.3
   June 30, 1995          133.3   169.5     206.3
   September 29, 1995     144.3   163.4     237.5
   December 29, 1995      152.5   155.4     112.5
   March 29, 1996         161.1   189.5     143.8
   June 28, 1996          168.0   220.7     393.8
   September 30, 1996     173.6   183.4     181.3
   December 31, 1996      187.6   169.5      87.5
   March 31, 1997         192.0   145.7      75.0
   June 30, 1997          224.7   160.0      68.8
   September 30, 1997     243.4   186.4      68.8
   December 31, 1997      251.3   149.1      62.5

</TABLE>

                                       61
<PAGE>

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

   Based on filings with the Securities and Exchange Commission, no persons,
other than certain directors of the Company, are known who beneficially owned
more than 5% of the outstanding Common Stock as of the Record Date.

   SECURITY OWNERSHIP OF MANAGEMENT

   The following information pertains to the Common Stock beneficially owned by
each director, nominee for director, each executive officer and former executive
officer named under Item 11. "Executive Compensation" and by all current
directors and officers of the Company as a group as of March 27, 1998:

<TABLE>
<CAPTION>
                                 Shares of         Percentage of
                                Common Stock        Outstanding
                                Beneficially           Common
Beneficial Owner                    Owned (a)          Stock
----------------               ----------------    --------------
<S>                              <C>               <C>

Jack E. Pratt..................    464,905(b)           9.0%
Edward T. Pratt, Jr............    154,091(c)           3.0%
William D. Pratt...............    791,128(d)          15.3%
Edward T. Pratt III............    341,495(e)           6.6%
John C. Hull...................         --               --
Edward D. Muir.................         --               --
Bernard A. Capaldi, CPA........         --               --
Michael J. Chesser.............         --               --
Lawrence C. Cole...............         --               --
Leonard M. DeAngelo............     10,071                *
All directors and officers as
  a group (11 individuals).....  1,751,619             33.8%
</TABLE>

____________________________

*   Less than 1%

(a) Except as otherwise described, each individual has the sole power to vote
    and dispose of the Common Stock beneficially owned by him.

(b) Beneficial ownership is attributable to the following:  (i) J. E. Pratt Co.
    I, a Texas general partnership of which Mr. Pratt is the Managing General
    Partner, owns 290,530 shares (5.6%) of the outstanding stock of the Company
    and (ii) the W.D. Pratt Family Trust, for which Mr. Pratt is the managing
    trustee, owns 168,501 shares (3.2%) of the outstanding stock of the Company.

(c) Beneficial ownership is attributable to E.T. Pratt Co. I, a Texas general
    partnership of which Mr. Pratt is the Managing General Partner, which owns
    149,056 shares (2.9%) of the outstanding stock of the Company.

(d) Beneficial ownership is attributable to the following:  (i) W.D. Pratt Co.
    I, a Texas general partnership of which Mr. Pratt is the Managing General
    Partner, owns 34,200 shares, less than 1%

                                       62
<PAGE>

    of the outstanding stock of the Company and (ii) the J.E. Pratt Family
    Trust, for which Mr. Pratt is the managing trustee, owns 755,250 shares
    (14.6%) of the outstanding stock of the Company.

(e) Beneficial ownership is attributable to the E. Pratt Family Trust, for which
    Mr. Pratt is the Managing Trustee, which owns 335,962 (6.5%) of the
    outstanding stock of the Company.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    HOLLYWOOD CASINO CORPORATION.  During 1990, HCC, which was then wholly owned
by the Pratt Family, acquired approximately $38.8 million of unsecured notes
(the "PCPI Notes") issued by PCPI Funding Corp., a subsidiary of the Company.
As part of a refinancing in February 1994 of virtually all of the Company's
casino-related outstanding debt, a newly formed subsidiary of the Company issued
approximately $40.5 million discounted principal amount of new deferred interest
notes (the "PPI Funding Notes") in exchange for the $38.8 million principal
amount of PCPI Notes held by HCC.  Interest expense accreted with respect to the
PPI Funding Notes for the year ended December 31, 1997 amounted to $7.5
million.  The PPI Funding Notes were discounted to yield 14 7/8% interest per
annum and had an original face value of $110.6 million.  Subsequent principal
payments and the assignment of a portion of the PPI Funding Notes in 1997, as
discussed below, reduced the maturity value to $84.6 million.  At December 31,
1997, an additional $37 million undiscounted face value of the PPI Funding Notes
was forgiven by HCC further reducing the maturity value to $47.6 million.

    Since May 1992, the Company and its subsidiaries have borrowed funds from
HCC for various purposes.  As of December 31, 1997, the outstanding balance on
such borrowings was $6.8 million and, under certain conditions, the Company and
its subsidiaries may obtain additional loans from HCC.  Of the amounts borrowed,
$250,000 is due on demand, or if no demand is made, on April 1, 1998.  Such
borrowing from HCC bears interest at the rate of 14% per annum, payable
semiannually.  The remaining $6.5 million was borrowed from HCC during 1996 on a
demand basis with interest at the rate of 13 3/4% per annum payable quarterly
commencing October 1, 1996.  Payment of interest on borrowings from HCC is
subject to the approval of New Jersey gaming authorities.  Interest expense on
the borrowings from HCC amounted to $977,000 for the year ended December 31,
1997.  Interest payable to HCC with respect to such borrowings amounted to
$839,000 at December 31, 1997.

    Hollywood Casino - Aurora, Inc. ("HCA"), a wholly owned subsidiary of HCC,
was organized for the purpose of developing and owning a riverboat gaming
facility in Aurora, Illinois, (the "Aurora Casino") which commenced operations
on June 17, 1993.  Prior to April 1, 1997, a wholly owned subsidiary of the
Company received, pursuant to a services agreement, a base services fee equal to
5% of operating revenues (as defined in the agreement) subject to a maximum of
$5.5 million annually, and an incentive fee equal to 10% of gross operating
profit (as defined in the agreement to generally include all revenues, less
expenses other than depreciation, interest, amortization and taxes).  Such fees
totaled approximately $2.7 million during 1997.

    Effective as of April 1, 1997, the subsidiary of the Company sold its
general partnership interest in the limited partnership which holds the
management contract on the Aurora Casino to a subsidiary of HCC. The general
partner receives 99% of the first $84,000 of net income earned by the
partnership each month and 1% of any income earned above such amount.  The
subsidiary of the Company received from HCC a five-year note in the original
amount of $3.8 million,  $7.6 million discounted principal amount of PPI Funding
Notes (see above) and the assignment of certain accrued interest receivable in
exchange for the general partnership interest.  The $3.8 million note is payable
in monthly installments of $83,000, including interest at the rate of 14% per
annum, commencing on May 1, 1997, with additional quarterly variable principal
payments commencing on July 1, 1997 in an amount equal to the general partner's
share of quarterly cash distributions, as defined, from the limited partnership.
The outstanding principal balance

                                       63
<PAGE>

of the note receivable was $3.4 million at December 31, 1997. Interest earned on
the note amounted to $383,000 during the year ended December 31, 1997.

    HWCC - Tunica, Inc. ("HCT"), a wholly owned subsidiary of HCC, completed
construction of a dockside gaming facility in Tunica County, Mississippi (the
"Tunica Casino").  Pursuant to a ten-year consulting agreement with HCT which
expires on December 31, 2003, a subsidiary of the Company receives monthly
consulting fees of $100,000; such fees amounted to $1.2 million for the year
ended December 31, 1997.

    The Company and its subsidiaries share certain general and administrative
costs with HCC.  Net allocated costs and fees charged to HCC by the Company
amounted to $1.8 million during the year ended December 31, 1997.  A payable in
the amount of $156,000 in connection with such allocated costs and fees was due
to HCC at December 31, 1997.

    Various subsidiaries of the Company provide certain marketing and other
administrative services to casino facilities owned by HCC.  The HCC facilities
are billed for such services at either the direct or allocated cost of providing
the services.  Such charges amounted to approximately $827,000 for the year
ended December 31, 1996.

    A subsidiary of the Company also provides computer-related services to the
HCC-owned casino facilities.  The subsidiary has an agreement with one casino
facility which expired on December 31, 1996 and has been renewed through
December 31, 1999; such agreement provides for the sale of computer hardware and
information systems equipment and the licensing of software necessary to operate
the facility. The casino pays prices and fees in amounts and on terms and
conditions that the subsidiary provides to unrelated third parties as well as a
fixed license and consulting fee of $33,600 per month.  The subsidiary is also
reimbursed for its direct costs and expenses incurred under this agreement.
Total charges under the agreement amounted to $547,000 for the year ended
December 31, 1997.  The GBCC subsidiary also provides similar services and
hardware to another HCC-owned casino facility which it charges for direct costs
and expenses.  Such charges amounted to $117,000 for the year ended December 31,
1996.

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

(a)  The following documents are filed as a part of this report:

   1.  FINANCIAL STATEMENTS

        The financial statements filed as part of this report are listed on the
   Index to Financial Statements on page 24.

   2.  FINANCIAL STATEMENT SCHEDULES

   --  Report of Independent Public Accountants
   --  Schedule I; Condensed Financial Information of Registrant, Greate Bay
       Casino Corporation (Parent Company):
       --  Balance Sheets
       --  Statements of Operations
       --  Statements of Cash Flows
       --  Note to Parent Company Financial Statements
   --  Schedule II; Valuation and Qualifying Accounts

                                       64
<PAGE>

   All other schedules for which provision is made in the applicable accounting
   regulation of the Securities and Exchange Commission are not required under
   the related instructions or are inapplicable and therefore have been omitted.

   3. EXHIBITS
<TABLE>
<CAPTION>

<C>           <S>       <C>
   @3.1       --        Certificate of Incorporation of Pratt Hotel Corporation ("PHC", now
                        known as GBCC) as amended. (Exhibit 3.1)
   #3.2       --        Amendment to Certificate of Incorporation of PHC. (Exhibit 3.2)
   @3.3       --        Amended Bylaws of PHC.  (Exhibit 3.2)
   +4.1       --        Form of Indenture among PCPI Funding Corp., Pratt Casino Properties
                        and PHC and First Interstate Bank of Dallas as Trustee (including
                        form of Security). (Exhibit 10.4)
   +4.2       --        First Supplemental Indenture, dated as of February 27,1989, among
                        PCPI Funding Corp., First Interstate Bank of Texas, N.A., PHC and
                        Pratt Casino Properties. (Exhibit 10.11)
  **4.3       --        Indenture dated as of February 15, 1994 between GB Property Funding
                        Corp. as Issuer, GB Holdings, Inc. and GBHC as Guarantors, and
                        Shawmut Bank Connecticut, N.A. as Trustee. (Exhibit 10.50)
  **4.4       --        Mortgage, Fixture Filing and Security Agreement dated February 17,
                        1994, by GBHC in favor of Shawmut Bank Connecticut, National
                        Association, as Mortgagee. (Exhibit 10.51)
  **4.5       --        Security Agreement dated February 17, 1994 made by GB Property
                        Funding Corp., GBHC, GB Holdings, Inc., Advanced Casino Systems
                        International, Inc. Computerized Management Systems International,
                        Inc. and any Additional Collateral Grantor to Shawmut Bank
                        Connecticut, National Association, as Trustee. (Exhibit 10.52)
  **4.6       --        Collateral Assignment of Leases dated as of February 17, 1994, by
                        GBHC, in favor of Shawmut Bank Connecticut, National Association, as
                        Assignee.(Exhibit 10.53)
  **4.7       --        Indenture dated as of February 15, 1994 between PRT Funding Corp. as
                        Issuer, Pratt Casino Corporation as Guarantor and Shawmut Bank, N.A.
                        as Trustee.(Exhibit 10.54)
  ++9.1       --        Voting Interest Trust Agreement dated as of November 9, 1987 between
                        the partners of J.E. Pratt Co. I and William D. Pratt. (Exhibit 9.2)
  +10.1       --        Management Services Agreement dated August 19, 1987, between Pratt
                        Hotel Management, Inc. ("PHMI") and GBHC. (Exhibit 10.1)
  +10.2       --        Overhead Allocation Agreement, effective as of January 1, 1988,
                        between PHC and PHMI. (Exhibit 10.2)
  +10.3       --        Amended License Agreement by and between Hughes Properties, Inc. and
                        PHC dated May 19, 1987. (Exhibit 10.3)
  +10.4       --        Tax Allocation Agreement by and among PHC, PPI Corporation, Greate
                        Bay Hotel Corporation, Pratt Casino Properties, Pacsa No. 2, Inc.,
                        Pacsa No. 3, Inc., Pratt Hotel Funding, Inc. and Greate Bay Property
                        Funding Corp., effective as of January 1, 1987. (Exhibit 10.17)
  +10.5       --        Tax Allocation Agreement by and among Pratt Casino Properties, BPHC
                        Acquisition, Inc., PHMI, Greate Bay Casino Corporation, PCPI Funding
                        Corp. and GBHC effective as of January 1, 1987. (Exhibit 10.18)
   10.6       --        Sixth Amendment to Employment Agreement dated January 1, 1998,
                        between HCC and Edward T. Pratt, Jr.
   10.7       --        Sixth Amendment to Employment Agreement dated January 1, 1998,
                        between HCC and William D. Pratt.

                                       65
<PAGE>


</TABLE>
<TABLE>
<S>                     <C>
@@@10.8       --        Employment Agreement dated May 1, 1996 by and between HCC and Edward
                        T. Pratt III. (Exhibit 10.4)
 @@10.9       --        Employment Agreement, as amended, dated November 17, 1995 between
                        GBHC and Leonard M. DeAngelo. (Exhibit 10.15)
 @@10.10      --        Employment Agreement dated January 1, 1996, between ACSC and Lawrence
                        C. Cole. (Exhibit 10.16)
  *10.11      --        Management Services Agreement dated as of June 21, 1991, between HCA
                        and Greate Bay Casino Corporation (the "Management Services
                        Agreement").(Exhibit 10.34)
  *10.12      --        First Amendment to the Management Services
                        Agreement dated as of May 14, 1992.  (Exhibit 10.35)
  *10.13      --        Technical Services Agreement dated February 21, 1992, between HCA and
                        PHC (the "Technical Services Agreement"). (Exhibit 10.42)
  *10.14      --        First Amendment to the Technical Services
                        Agreement dated May 14, 1992.(Exhibit 10.43)
 **10.15      --        Agreement of Limited Partnership of Pratt
                        Management, L.P.  (Exhibit 10.55)
***10.16      --        Consulting Agreement dated as of January 1, 1994 between PCC, as the
                        Consultant, and HWCC - Tunica, Inc.
***10.17      --        Computer Services Agreement dated as of January 1, 1994 between
                        Summit Tunica Partnership and Advanced Casino Systems Corporation.
   10.18      --        Employment Agreement dated as of January 1, 1998 between GBCC and
                        John C. Hull.
   21.1       --        Subsidiaries of GBCC.
   23.1       --        Consent of Arthur Andersen LLP
 ##99.1       --        Voluntary petition for bankruptcy pursuant to Chapter 11 of the
                        Bankruptcy Code for Greate Bay Hotel and Casino, Inc. dated January
                        5, 1998. (Exhibit 99.2)
 ##99.2       --        Voluntary petition for bankruptcy pursuant to Chapter 11 of the
                        Bankruptcy Code for GB Holdings, Inc. dated January 5, 1998 (Exhibit
                        99.3)
 ##99.3       --        Voluntary petition for bankruptcy pursuant to Chapter 11 of the
                        Bankruptcy Code for GB Property Funding Corp. dated January 5, 1998
                        (Exhibit 99.4)
-----------------------
</TABLE>

   @  Incorporated by reference from the exhibit shown in parenthesis to GBCC's
      Annual Report on Form 10-K for the fiscal year ended December 31, 1992.

  @@  Incorporated by reference from the exhibit shown in parenthesis to
      Hollywood Casino Corporation's Annual Report on Form 10-K for the fiscal
      year ended December 31, 1995.

 @@@  Incorporated by reference from the exhibit shown in parenthesis to
      Hollywood Casino Corporation's Annual Report on Form 10-K for the fiscal
      year ended December 31, 1996.

   +  Incorporated by reference from the exhibit shown in parenthesis to Form S-
      1 Registration Statement (Registration No. 33-58732) for Hollywood Casino
      Corporation as filed with the SEC on May 27, 1993.

  ++  Incorporated by reference from the exhibit shown in parenthesis filed in
      GBCC's Annual Report on Form 10-K for the fiscal year ended December 31,
      1990.

                                       66
<PAGE>

   *  Incorporated by reference from the exhibit shown in parenthesis to that
      Registration Statement on Form 10 filed with the SEC on May 28, 1992 by
      PRT Corporation (now known as HCC).

  **  Incorporated by reference from the exhibit shown in parenthesis to Form S-
      1 Registration Statement (Registration No. 33-77502) for Hollywood Casino
      Corporation as filed with the SEC on April 8, 1994.

 ***  Incorporated by reference from the exhibit shown in parenthesis to Form S-
      1 Registration Statement (Registration No. 33-82182) for HWCC -Tunica,
      Inc. as filed with the SEC on September 29, 1994.

   #  Incorporated by reference from the exhibit shown in parenthesis to GBCC's
      Annual Report on Form 10-K for the fiscal year ended December 31, 1996.

  ##  Incorporated by reference from the exhibit shown in parenthesis to Form 8-
      K for GB Property Funding Corp., GB Holdings, Inc. and Greate Bay Hotel
      and Casino, Inc. as filed with the SEC on January 9, 1998.


(B)   REPORTS ON FORM 8-K.

   GBCC did not file any reports on Form 8-K during the quarter ended December
   31, 1997.

                                       67
<PAGE>

                                  SIGNATURES

   Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Atlantic City, State of New Jersey on March 27, 1998.

                                 GREATE BAY CASINO CORPORATION
                                 By:  /s/  John C. Hull
                                      ---------------------------
                                            John C. Hull
                                       Chief Executive Officer

   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/       John C. Hull               Chief Executive Officer         March 27 , 1998
--------------------------------        and Director                 ---------------
          John C. Hull

/s/      Edward T. Pratt, Jr.        Treasurer, Principal            March 27 , 1998
--------------------------------        Financial and Accounting     ---------------
          Edward T. Pratt, Jr.          Officer and Director

/s/      Edward T. Pratt III         President and Chief             March 27, 1998
--------------------------------        Operating Officer            ---------------
         Edward T. Pratt III

/s/      William D. Pratt            Executive Vice                  March 27, 1998
--------------------------------        President, General           ---------------
         William D. Pratt               Counsel, Secretary
                                        and Director

/s/      Jack E. Pratt               Director                        March 27, 1998
--------------------------------                                     ---------------
         Jack E. Pratt

/s/    Bernard A. Capaldi            Director                        March 27, 1998
--------------------------------                                     ---------------
       Bernard A. Capaldi

/s/      Edward D. Muir              Director                        March 27, 1998
--------------------------------                                     ---------------
         Edward D. Muir

/s/    Michael J. Chesser            Director                        March 27, 1998
--------------------------------                                     ---------------
       Michael J. Chesser
</TABLE>

                                       68
<PAGE>

                     INDEX TO FINANCIAL STATEMENT SCHEDULES



GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

     --  Report of Independent Public Accountants

     --  Schedule I; Condensed Financial Information of Registrant:
         --  Balance Sheets
         --  Statements of Operations
         --  Statements of Cash Flows
         --  Note to Parent Company Financial Statements

     --  Schedule II; Valuation and Qualifying Accounts
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                    ----------------------------------------

To Greate Bay Casino Corporation:

We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Greate Bay Casino Corporation and
subsidiaries included in this Form 10-K and have issued our report thereon dated
March 23, 1998.  Our audit was made for the purpose of forming an opinion on the
basic financial statements taken as a whole.  The schedules listed in the index
to financial statement schedules are the responsibility of the Company's
management and are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial statements.
These schedules have been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

                              ARTHUR ANDERSEN LLP



Roseland, New Jersey
March 23, 1998
<PAGE>

                                                            SCHEDULE I
                                                            PAGE 1

                 GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

                 CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                 GREATE BAY CASINO CORPORATION (PARENT COMPANY)

                                 BALANCE SHEETS
                                     ASSETS
<TABLE>
<CAPTION>
                                                      DECEMBER 31,
                                             -----------------------------
                                                  1997            1996
                                             -------------   -------------
<S>                                          <C>             <C>
Cash and cash equivalents                    $   1,973,000   $   2,246,000
Due from affiliates                                325,000         825,000
Other current assets                               117,000          13,000
                                             -------------   -------------

                                             $   2,415,000   $   3,084,000
                                             =============   =============

                     LIABILITIES AND SHAREHOLDERS' DEFICIT

Current maturities of long-term debt         $  33,595,000   $         -
Accounts payable and accrued liabilities           658,000         460,000
Due to affiliates                               28,338,000      10,252,000
                                             -------------   -------------

 Total current liabilities                      62,591,000      10,712,000
                                             -------------   -------------

Long-term debt                                         -        34,016,000
                                             -------------   -------------

Other noncurrent liabilities                           -           894,000
                                             -------------   -------------

Due to affiliates                                      -        10,505,000
                                             -------------   -------------

Investment in and advances to affiliates        82,940,000     106,164,000
                                             -------------   -------------

Shareholders' deficit:
 Common stock, $.10 par value per share,
  10,000,000 shares authorized, 5,186,627
  shares issued and outstanding                    519,000         519,000
 Additional paid-in capital                     75,212,000      38,557,000
 Accumulated deficit                          (218,847,000)   (198,283,000)
                                             -------------   -------------

                                              (143,116,000)   (159,207,000)
                                             -------------   -------------

                                             $   2,415,000   $   3,084,000
                                             =============   =============
</TABLE>
          The accompanying notes to consolidated financial statements
                     are an integral part of this schedule.
<PAGE>

                                                                      SCHEDULE I
                                                                      PAGE 2

                 GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

                 CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                 GREATE BAY CASINO CORPORATION (PARENT COMPANY)

                            STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>


                                                          YEAR ENDED DECEMBER 31,
                                                 ------------------------------------------
                                                     1997           1996           1995
                                                 -------------  -------------  ------------
<S>                                              <C>            <C>            <C>

REVENUES
Overhead allocation fees                         $        -     $    600,000   $   600,000
                                                 ------------   ------------   -----------

EXPENSES
General and administrative
 expense                                              447,000        415,000       291,000
                                                 ------------   ------------   -----------

 (Loss) income from operations                       (447,000)       185,000       309,000
                                                 ------------   ------------   -----------

Non-operating income (expense):
 Interest income                                    3,396,000      2,281,000     2,239,000
 Interest expense                                  (6,523,000)    (6,674,000)   (6,621,000)
 Gain (loss) on sale of assets                      1,644,000       (625,000)          -
                                                 ------------   ------------   -----------

  Total non-operating expense, net                 (1,483,000)    (5,018,000)   (4,382,000)
                                                 ------------   ------------   -----------

Loss before income tax benefit
 and other items                                   (1,930,000)    (4,833,000)   (4,073,000)
Income tax provision                                 (270,000)           -             -
                                                 ------------   ------------   -----------

 Loss before other items                           (2,200,000)    (4,833,000)   (4,073,000)
Equity in losses of consolidated subsidiaries     (18,364,000)   (30,733,000)     (214,000)
                                                 ------------   ------------   -----------

Net loss                                         $(20,564,000)  $(35,566,000)  $(4,287,000)
                                                 ============   ============   ===========

</TABLE>
          The accompanying notes to consolidated financial statements
                     are an integral part of this schedule.
<PAGE>

                                                                      SCHEDULE I
                                                                      PAGE 3

                 GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

                 CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                 GREATE BAY CASINO CORPORATION (PARENT COMPANY)

                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>


                                                                      YEAR ENDED DECEMBER 31,
                                                              ----------------------------------------
                                                                  1997          1996          1995
                                                              ------------  ------------  ------------
<S>                                                           <C>           <C>           <C>

NET CASH USED IN OPERATING ACTIVITIES                         $(5,921,000)  $(1,577,000)  $(2,023,000)
                                                              -----------   -----------   -----------

INVESTING ACTIVITIES:
 Collections on notes receivable                                      -       9,361,000       103,000
 Proceeds from disposition of assets                                  -       2,581,000           -
 Investments in and advances to unconsolidated affiliates             -      (2,946,000)   (1,675,000)
 Distributions from unconsolidated affiliates                     750,000           -             -
 Investments in consolidated subsidiaries                             -          (3,000)          -
 Net (advances to) repayments from consolidated affiliates     (2,539,000)   (9,366,000)    1,158,000
                                                              -----------   -----------   -----------

 Net cash used in investing activities                         (1,789,000)     (373,000)     (414,000)
                                                              -----------   -----------   -----------

FINANCING ACTIVITIES:
 Net borrowings from affiliates                                 7,858,000     6,015,000     2,050,000
 Repayments of long-term debt                                    (421,000)   (2,138,000)     (317,000)
                                                              -----------   -----------   -----------

  Net cash provided by financing activities                     7,437,000     3,877,000     1,733,000
                                                              -----------   -----------   -----------

  Net (decrease) increase in cash and cash equivalents           (273,000)    1,927,000      (704,000)
    Cash and cash equivalents at beginning of year              2,246,000       319,000     1,023,000
                                                              -----------   -----------   -----------

    Cash and cash equivalents at end of year                  $ 1,973,000   $ 2,246,000   $   319,000
                                                              ===========   ===========   ===========

</TABLE>
          The accompanying notes to consolidated financial statements
                     are an integral part of this schedule.
<PAGE>

                                                                      SCHEDULE I
                                                                      PAGE 4

                 GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

                 CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                 GREATE BAY CASINO CORPORATION (PARENT COMPANY)

                  NOTES TO PARENT COMPANY FINANCIAL STATEMENTS


(1)   BASIS OF PRESENTATION

      The accompanying condensed parent company financial statements have been
prepared assuming that Greate Bay Casino Corporation ("GBCC") will continue as a
going concern.  Certain affiliates of GBCC filed for Chapter 11 bankruptcy
protection on January 5, 1998.  The affiliate filings under Chapter 11 have
created a default under the indenture for the $85,000,000 Senior Note
obligations (the "PRT Funding Notes") of PRT Funding Corp., a wholly owned
subsidiary of GBCC.  Accordingly, the outstanding principal amount of the PRT
Funding Notes has accelerated and is currently due and payable. Pratt Casino
Corporation ("PCC"), a wholly owned subsidiary of GBCC, which is liable as
guarantor under the PRT Funding Notes, does not have sufficient assets to
satisfy the outstanding amounts and has entered into negotiations with the PRT
Funding bondholders to restructure the obligations.  No assurance can be given
that PCC will be able to restructure its obligations.  The default under the
indenture for the PRT Funding Notes raises substantial doubt about GBCC's
ability to continue as a going concern.  The condensed parent company financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.

(2)  SCHEDULED PAYMENT OF LONG-TERM DEBT

      All of Greate Bay Casino Corporation's ("GBCC") long-term debt is due in
April 1998.

      GBCC paid interest of $5,596,000, $6,476,000 and $6,635,000, respectively,
during the years ended December 31, 1997, 1996 and 1995.

(3)   RECLASSIFICATIONS

      Certain reclassifications have been made to the prior years' parent
company financial statements to conform to the 1997 financial statement
presentation.



          The accompanying notes to consolidated financial statements
                     are an integral part of this schedule.
<PAGE>

                                                                     SCHEDULE II

                 GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

                       VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>


                                                AMOUNTS
                                  BALANCE AT   CHARGED TO                                        BALANCE
                                  BEGINNING    COSTS AND                         OTHER           AT END
                                  OF PERIOD     EXPENSES     DEDUCTIONS         CHARGES         OF PERIOD
                                 -----------  -----------  ----------------  -----------------  -----------
<S>                              <C>            <C>         <C>               <C>                <C>
DESCRIPTION
-----------

YEAR ENDED DECEMBER 31, 1997:
 Allowance for doubtful
  accounts receivable            $15,524,000   $3,408,000  $(3,764,000)(1)   $(14,955,000)(3)   $   213,000
 Allowance for obligatory
  investments                      4,401,000    1,241,000      (71,000)(2)    (5,571,000)(3)            -
                                 -----------   ----------  -----------       -----------        -----------

                                 $19,925,000   $4,649,000  $(3,835,000)      $(20,526,000)      $   213,000
                                 ===========   ==========  ===========       ============       ===========

YEAR ENDED DECEMBER 31, 1996:
 Allowance for doubtful
  accounts receivable            $16,496,000   $2,167,000  $(3,139,000)(1)   $        -         $15,524,000
 Allowance for obligatory
  investments                      3,792,000    1,344,000     (735,000)(2)            -           4,401,000
                                 -----------   ----------  -----------       ------------       -----------

                                 $20,288,000   $3,511,000  $(3,874,000)      $        -         $19,925,000
                                 ===========   ==========  ===========       ============       ===========

YEAR ENDED DECEMBER 31, 1995:
 Allowance for doubtful
  accounts receivable            $15,297,000   $2,988,000  $(1,789,000)(1)    $       -         $16,496,000
 Allowance for obligatory
  investments                      2,458,000    1,457,000     (123,000)(2)            -           3,792,000
                                 -----------   ----------  -----------       ------------       -----------

                                 $17,755,000   $4,445,000  $(1,912,000)       $       -         $20,288,000
                                 ===========   ==========  ===============   ============       ===========
</TABLE>
______________________________

(1) Represents net write-offs of uncollectible accounts.

(2) Represents write-offs of obligatory investments in connection with the
    contribution of certain obligatory investments to the Casino Reinvestment
    Development Authority.

(3) Represents write-off of allowances resulting from GB Holdings, Inc. and its
    subsidiaries no longer being included on the consolidated financial
    statements of Greate Bay Casino Corporation.



          The accompanying notes to consolidated financial statements
                     are an integral part of this schedule.
<PAGE>

                               INDEX TO EXHIBITS


                                                                    SEQUENTIALLY
EXHIBIT                                                               NUMBERED
NUMBER                                                                  PAGE
------                                                              ------------
      @3.1   --   Certificate of Incorporation of Pratt Hotel
                  Corporation ("PHC", now known as GBCC)
                  as amended. (Exhibit 3.1)
      #3.2   --   Amendment to Certificate of Incorporation of PHC.
                  (Exhibit 3.2)
      @3.3   --   Amended Bylaws of PHC.  (Exhibit 3.2)
      +4.1   --   Form of Indenture among PCPI Funding Corp., Pratt
                  Casino Properties and PHC and First Interstate
                  Bank of Dallas as Trustee (including form of
                  Security). (Exhibit 10.4)
      +4.2   --   First Supplemental Indenture, dated as of
                  February 27, 1989, among PCPI Funding Corp.,
                  First Interstate Bank of Texas, N.A., PHC and
                  Pratt Casino Properties.  (Exhibit 10.11)
     **4.3   --   Indenture dated as of February 15, 1994 between GB
                  Property Funding Corp. as Issuer, GB Holdings, Inc.
                  and GBHC as Guarantors, and Shawmut Bank
                  Connecticut, N.A. as Trustee.  (Exhibit 10.50)
     **4.4   --   Mortgage, Fixture Filing and Security Agreement dated
                  February 17, 1994, by GBHC in favor of Shawmut
                  Bank Connecticut, National Association, as
                  Mortgagee. (Exhibit 10.51)
     **4.5   --   Security Agreement dated February 17, 1994 made by
                  GB Property Funding Corp., GBHC, GB Holdings,
                  Inc., Advanced Casino Systems International, Inc.
                  Computerized Management Systems International, Inc.
                  and any Additional Collateral Grantor to Shawmut
                  Bank Connecticut, National Association, as Trustee.
                  (Exhibit 10.52)
     **4.6   --   Collateral Assignment of Leases dated as of
                  February 17, 1994, by GBHC, in favor of Shawmut
                  Bank Connecticut, National Association, as
                  Assignee. (Exhibit 10.53)
     **4.7   --   Indenture dated as of February 15, 1994 between PRT
                  Funding Corp. as Issuer, Pratt Casino Corporation
                  as Guarantor and Shawmut Bank, N.A. as Trustee.
                  (Exhibit 10.54)
     ++9.1   --   Voting Interest Trust Agreement dated as of
                  November 9, 1987 between the partners of J.E. Pratt
                  Co. I and William D. Pratt.  (Exhibit 9.2)
     +10.1   --   Management Services Agreement dated August 19,
                  1987, between Pratt Hotel Management, Inc. ("PHMI")
                  and GBHC.  (Exhibit 10.1)
     +10.2   --   Overhead Allocation Agreement, effective as of
                  January 1, 1988, between PHC and PHMI.
                  (Exhibit 10.2)
<PAGE>

                                                                    SEQUENTIALLY
EXHIBIT                                                               NUMBERED
NUMBER                                                                  PAGE
------                                                              ------------

     +10.3   --   Amended License Agreement by and between Hughes
                  Properties, Inc. and PHC dated May 19, 1987.
                  (Exhibit 10.3)
     +10.4   --   Tax Allocation Agreement by and among PHC, PPI
                  Corporation, Greate Bay Hotel Corporation, Pratt
                  Casino Properties, Pacsa No. 2, Inc., Pacsa No. 3,
                  Inc., Pratt Hotel Funding, Inc. and Greate Bay
                  Property Funding Corp., effective as of January 1,
                  1987.  (Exhibit 10.17)
     +10.5   --   Tax Allocation Agreement by and among Pratt
                  Casino Properties, BPHC Acquisition, Inc., PHMI,
                  Greate Bay Casino Corporation, PCPI Funding Corp.
                  and GBHC effective as of January 1, 1987.
                  (Exhibit 10.18)
      10.6   --   Sixth Amendment to Employment Agreement dated
                  January 1, 1998, between HCC and Edward T. Pratt, Jr.
      10.7   --   Sixth Amendment to Employment Agreement dated
                  January 1, 1998, between HCC and William D. Pratt.
   @@@10.8   --   Employment Agreement dated May 1,1996 by and
                  between HCC and Edward T. Pratt III. (Exhibit 10.4)
    @@10.9   --   Employment Agreement, as amended, dated
                  November 17, 1995 between GBHC and Leonard M. DeAngelo.
                  (Exhibit 10.15)
    @@10.10  --   Employment Agreement dated January 1, 1996,
                  between ACSC and Lawrence C. Cole. (Exhibit 10.16)
     *10.11  --   Management Services Agreement dated as of June 21,
                  1991, between HCA and Greate Bay Casino Corporation
                  (the "Management Services Agreement"). (Exhibit 10.34)
     *10.12  --   First Amendment to the Management Services
                  Agreement dated as of May 14, 1992.  (Exhibit 10.35)
     *10.13  --   Technical Services Agreement dated February 21,
                  1992, between HCA and PHC the "Technical Services
                  Agreement").  (Exhibit 10.42)
     *10.14  --   First Amendment to the Technical Services Agreement
                  dated May 14, 1992.  (Exhibit 10.43)
    **10.15  --   Agreement of Limited Partnership of Pratt
                  Management, L.P.  (Exhibit 10.55)
   ***10.16  --   Consulting Agreement dated as of January 1, 1994
                  between PCC, as the Consultant, and HWCC - Tunica,
                  Inc.
   ***10.17  --   Computer Services Agreement dated as of January 1,
                  1994 between Summit Tunica Partnership and
                  Advanced Casino Systems Corporation.
      10.18  --   Employment Agreement dated as of January 1, 1998
                  between GBCC and John C. Hull.
      21.1   --   Subsidiaries of GBCC.
<PAGE>

                                                                    SEQUENTIALLY
EXHIBIT                                                               NUMBERED
NUMBER                                                                  PAGE
------                                                             -------------

      23.1   --   Consent of Arthur Andersen LLP
    ##99.1   --   Voluntary petition for bankruptcy pursuant to
                  Chapter 11 of the Bankruptcy Code for Greate Bay
                  Hotel and Casino, Inc. dated January 5, 1998.
                  (Exhibit 99.2)
    ##99.2   --   Voluntary petition for bankruptcy pursuant to
                  Chapter 11 of the Bankruptcy Code for GB Holdings,
                  Inc. dated January 5, 1998 (Exhibit 99.3)
    ##99.3   --   Voluntary petition for bankruptcy pursuant to
                  Chapter 11 of the Bankruptcy Code for GB Property
                  Funding Corp. dated January 5, 1998 (Exhibit 99.4)

_______________________

          @       Incorporated by reference from the exhibit shown in
                  parenthesis to GBCC's Annual Report on Form 10-K for
                  the fiscal year ended December 31, 1992.

         @@       Incorporated by reference from the exhibit shown in
                  parenthesis to Hollywood Casino Corporation's Annual
                  Report on Form 10-K for the fiscal year ended
                  December 31, 1995.

        @@@       Incorporated by reference from the exhibit shown in
                  parenthesis to HCC's Annual Report on Form 10-K for
                  the fiscal year ended December 31, 1996.

          +       Incorporated by reference from the exhibit shown in
                  parenthesis to Form S-1 Registration Statement
                  (Registration No. 33-58732) for Hollywood Casino
                  Corporation as filed with the SEC on May 27, 1993.

         ++       Incorporated by reference from the exhibit shown in
                  parenthesis filed in GBCC's Annual Report on Form
                  10-K for the fiscal year ended December 31, 1990.

          *       Incorporated by reference from the exhibit shown in
                  parenthesis to that Registration Statement on Form 10
                  filed with the SEC on May 28, 1992 by PRT Corporation
                  (now known as HCC).

         **       Incorporated by reference from the exhibit shown in
                  parenthesis to Form S-1 Registration Statement
                  (Registration No. 33-77502) for Hollywood Casino
                  Corporation as filed with the SEC on April 8, 1994.
<PAGE>

                                                                    SEQUENTIALLY
EXHIBIT                                                               NUMBERED
NUMBER                                                                  PAGE
------                                                              ------------

        ***       Incorporated by reference from the exhibit shown in
                  parenthesis to Form S-1 Registration Statement
                  (Registration No. 33-82182) for HWCC -Tunica, Inc.
                  as filed with the SEC on September 29, 1994.

          #       Incorporated by reference from the exhibit shown in
                  parenthesis to GBCC's Annual Report on Form 10-K for
                  the fiscal year ended December 31, 1996.

         ##       Incorporated by reference from the exhibit shown in
                  parenthesis to Form 8-K for GB Property funding Corp.,
                  GB Holdings, Inc. and Greate Bay Hotel and Casino,
                  Inc. as filed with the SEC on January 9, 1998.