<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                  FORM 10-KSB

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

For the fiscal year ended                                Commission File No.
September 30, 1996                                             0-8698
                  


                           CONCORDE GAMING CORPORATION            
                 ----------------------------------------------
                 (Name of small business issuer in its charter)


         Colorado                                               84-0716683      
-------------------------------                            -------------------  
(State or other jurisdiction of                              (I.R.S. Employer   
 incorporation or organization)                            Identification No.)  
                                                                             
                3290 Lien Street, Rapid City, South Dakota 57702
                ------------------------------------------------
                    (Address of principal executive offices)

Issuer's telephone number: (605) 341-7738
Securities registered under Section 12(b) of the Exchange Act:  None
Securities registered under Section 12(g) of the Exchange Act:

                    Common Stock, $0.01 par value per share
                    ---------------------------------------
                                (Title of Class)

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.

                               YES  X      NO 
                                   ---        ---

         Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB.   [X]

         State issuer's revenues for the most recent fiscal year.  $11,242,586
<PAGE>   2
         The aggregate market value of the voting stock held by non-affiliates
of the registrant as of December 16, 1996 was $608,116.  This calculation is
based upon the average of the bid ($.0625) and asked ($.28125) price of the
voting stock on December 16, 1996.

         The number of shares issued of the issuer's $.01 par value common
stock was 26,755,193 as of December 16, 1996.  A subsidiary of the issuer owns
4,825,400 shares of the issuer resulting, for financial statement reporting
purposes only, in a total of 21,929,793 shares outstanding.
<PAGE>   3
                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

GENERAL

         Concorde Gaming Corporation (the "Company" or the "Registrant") owns,
installs, operates and services video lottery machines located in video lottery
licensed bars and restaurants in South Dakota.  The machines generally offer
variations of poker, blackjack, keno and bingo.  In addition, the Company owns
and operates bars in South Dakota which feature video lottery machines.

         The Company also manages a casino and lodge (collectively, the
"Casino") under a management agreement (the "Management Agreement") between
Bruce H. Lien Company, a wholly-owned subsidiary of the Company ("BHL"), and
the Three Affiliated Tribes ("TAT") in New Town, North Dakota.  See "Certain
Recent Developments" and "Organization and History of Operations--4 Bears
Casino & Lodge Management Agreement/FBILLC."  The Company does not have an
ownership interest in these facilities.  The Casino has approximately 420 slot
machines, 20 table games (blackjack, poker, craps), and a 300-seat bingo hall.

CERTAIN RECENT DEVELOPMENTS

         Settlement Agreement.  BHL and TAT have entered into a settlement
agreement (the "Settlement Agreement") to resolve disputes arising out of the
Management Agreement.  The Settlement Agreement provides for the termination of
the Management Agreement, the discharge of all amounts owing to BHL from TAT,
and the dismissal of all litigation between the parties upon TAT's payment of
$8.65 million (the "Termination Payment").  If the parties fail to close by
February 24, 1997, TAT must pay BHL interest on the Termination Payment equal to
BHL's blended cost of funds, not to exceed 18%, until closing or April 30, 1997,
whichever occurs sooner.  Until the closing, BHL will remain as manager of the
Casino and will assist TAT in training its designated personnel for its future
management of the Casino.  Monthly distribution amounts earned by BHL from
October 1, 1996 until closing will offset the Termination Payment.  The closing
of the transactions contemplated by the Settlement Agreement is contingent upon
TAT's ability to obtain financing and may be subject to approval by the National
Indian Gaming Commission (the "NIGC") and/or the Secretary of the Interior of
the United States.  In the event the parties fail to close by April 30, 1997, or
the Settlement Agreement is declared to be void by the NIGC, the Secretary of
the Interior or his designee or by the final judgment of any court of competent
jurisdiction, the Management Agreement shall be deemed to have been unaffected
by the Settlement Agreement and the parties' rights and claims asserted with
respect to the Management Agreement shall be deemed to have been preserved.  See
"Legal Proceedings."

         NIGC Review.  In June 1995, the NIGC requested that BHL submit the
Management Agreement and certain related documents to the NIGC for review.  The
NIGC reviews





                                       1
<PAGE>   4
management agreements to determine whether they comply with the Indian Gaming
Regulatory Act ("IGRA").  The Management Agreement was previously found by the
Bureau of Indian Affairs ("BIA") to be in compliance with IGRA.  On May 17,
1996, the NIGC notified BHL and TAT that modifications to the Management
Agreement were necessary and provided the parties with a list of deficiencies.
The notice gave the parties 120 days from receipt to modify the Management
Agreement.  The NIGC also notified the parties that the current operation of
the Casino without proper licensing and background investigations violated NIGC
regulations.  The NIGC threatened closure and/or civil penalties within 30 days
if the parties failed to make progress towards regulatory compliance.

         Pursuant to the Settlement Agreement, TAT has subsequently temporarily
licensed the Company and the Casino for Class II and Class III gaming activity
on the Fort Berthold Reservation through the term of the Settlement Agreement.
TAT has also commenced background investigations of gaming personnel, as
required by the NIGC.  Because of these actions and the parties entering into
the Settlement Agreement, the NIGC has found it unnecessary to initiate any
enforcement action to bring the Casino into compliance with NIGC regulations.
In addition, the NIGC's review of the Management Agreement will be held in
abeyance pending the closing of the Settlement Agreement.  See "GAMING
REGULATION--Indian Gaming Regulatory Act."

         Sale of Bayou Gaming, Inc. Common Stock.  On September 29, 1995, the
Company entered into a stock purchase agreement ("Stock Purchase Agreement") to
sell all of its shares of common stock of Bayou Gaming, Inc. ("Bayou") for
$330,000 payable as follows: (a) $100,000 in cash, which was paid at closing;
(b) issuance of a promissory note in the principal amount of $50,000, plus
accrued interest at the rate of 10%, payable in full on December 28, 1995,
which due date was subsequently extended by the parties until January 31, 1996;
(c) issuance of a promissory note in the principal amount of $50,000, plus
accrued interest at the rate of 10% per annum, payable in full on March 27,
1996 ("Note A"); and (d) issuance of a promissory note in the principal amount
of $130,000, plus accrued interest at an annual rate equal to 5% above the
variable prime rate established by Norwest Bank South Dakota, N.A., payable in
full on September 29, 1996 ("Note B").  On April 1, 1996 the Stock Purchase
Agreement was modified and the Company repurchased 40 shares of Bayou common
stock in consideration for the cancellation of Note A and Note B.  As a result
of the modification of the Stock Purchase Agreement, the Company now owns 38.5%
of the outstanding shares of Bayou.  Bayou owns and operates video poker
machines located in the State of Louisiana.

ORGANIZATION AND HISTORY OF OPERATIONS

  The Company was incorporated as a Colorado corporation on September 1, 1976.





                                       2
<PAGE>   5
         Bruce H. Lien Company Merger

         On September 30, 1993 the Company, Concorde New Acquisition
Corporation ("CNAC"), a Colorado corporation and a wholly-owned subsidiary of
the Company, BHL and Mr. Lien, as the sole shareholder of BHL, entered into an
Agreement and Plan of Merger (the "Merger Agreement") whereby the Company
acquired all the outstanding capital stock of BHL through a reverse subsidiary
merger (the "Merger") of CNAC with and into BHL.  At the time of the Merger,
the assets of BHL were: 4,825,400 shares of Common Stock; approximately $66,000
in assets net of liabilities and the Management Agreement.  As consideration,
the Company issued 4,892,000 shares of Common Stock to Mr. Lien and 2,349,800
shares of Common Stock were placed in escrow to be released to Mr. Lien in
proportion to a "lookback" valuation based upon the income generated by the
Management Agreement.  The "lookback" provision required that the shares of
Common Stock in escrow be reduced by 1.5 shares for each dollar that income
(after tax) from the Management Agreement was less than $1,566,533 during the
year ended September 30, 1994.  Based on the Management Agreement operating
results, the escrow agent returned 153,400 shares to the Company for
cancellation and the rest were distributed to Mr. Lien.

         4 Bears Casino & Lodge Management Agreement/FBILLC

         On December 7, 1992, BHL entered into the Management Agreement with
TAT to finance, renovate, construct, manage and operate a casino and motor
lodge located on the Fort Berthold Reservation, New Town, North Dakota.  See
"--Products and Services" and "--Recent Developments".

         In conjunction with the financing for the Casino, BHL entered into an
agreement with Four Bears Investment Limited Liability Company ("FBILLC").  The
agreement provided that FBILLC would provide funding for the Casino and, in
consideration, the Management Agreement between BHL and TAT would be assigned
to FBILLC, subject to approval by TAT and the NIGC, if ever.  On September 30,
1994, the Company, BHL and FBILLC entered into a settlement agreement (the
"FBILLC Settlement Agreement") to resolve disputes which had arisen between
such parties.  Pursuant to the FBILLC Settlement Agreement, BHL, in
consideration of no longer being required to assign the Management Agreement,
is required to pay a promissory note dated April 15, 1993 in the principal
amount of $2,550,000, plus accrued interest and to purchase FBILLC's interest,
real or contingent, in the Management Agreement for $2,000,000, subject to
adjustment.  See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS--Liquidity
and Capital Resources" and Note 5 to Notes to Consolidated Financial
Statements.

         Development Agreement.  On September 26, 1995, Concorde Gaming of
Missouri, Inc., a wholly-owned subsidiary of the Company, and the Company
entered into a development agreement (the "Development Agreement") with the
City of Lexington, Missouri ("Lexington") whereby the Company will develop and
operate a riverboat gaming facility within the corporate limits of Lexington.
The Company's obligations under the Development Agreement, other than





                                       3
<PAGE>   6
those which must be performed irrespective of any conditions, are subject to
the existence or fulfillment of numerous conditions, including, but not limited
to the following:  (i) issuance of a permit or license from the Missouri Gaming
Commission authorizing the Company to conduct gaming activities on the
riverboat development site; and (ii) written verification that the riverboat
development site is zoned in a manner consistent with the Company's intended
use.  Therefore, there can be no assurance that the Company will be able to
construct and operate the riverboat gaming facility.

         The Company has submitted preliminary development plans to Lexington.
It was required to submit its final development plans to Lexington by April 13,
1996; however, the submission date has been extended because of delays in the
licensing process.  The revised schedule has yet to be set.  Once the
development plans have been approved by Lexington, the Company is required to
submit them for any additional required governmental approvals.  Within 30 days
of approval of licensing by the Missouri Gaming Commission and approval of the
development plans by Lexington, whichever comes later, the Company is required
to commence site preparation.  The construction of the riverboat gaming
facility is required to commence within 30 days after the Company receives a
license from the Missouri Gaming Commission and site preparation is completed,
whichever comes later, provided:  (i) Lexington has issued all appropriate
permits and other necessary zoning approvals to the extent permissible under
Missouri law; and (ii) Lexington has provided written verification that a valid
building permit may be issued by Lexington or Lexington has issued a valid
building permit to the extent permissible under Missouri law.  The Company
believes the total costs for the project will be approximately $17 million.
See "Liquidity and Capital Resources."

         The Company acquired the exclusive right to submit a proposal for the
development and operation of a riverboat gaming facility from Federalist
Municipal Development Company ("Federalist") pursuant to an Assignment
Agreement (the "Assignment Agreement") dated April 6, 1995.  Pursuant to the
Assignment Agreement, Federalist is entitled to receive 2% of adjusted gross
receipts of the riverboat gaming facility for the first five years of its
operations and 1% of adjusted gross receipts for the sixth through tenth years
of operations.

PRODUCTS AND SERVICES

         Route Operations.  The Company owns, installs, operates and services
video lottery machines in business establishments in South Dakota.  The Company
currently owns and operates 366 video lottery machines in approximately 52
locations in South Dakota.  The Company enters into agreements with owners of
business establishments to install video lottery machines at their places of
business.  The agreements typically provide for revenue sharing with the
location owner based upon a percentage of the net revenues generated by the
Company's video lottery machines.  The agreements generally require the Company
to install, maintain and service the video lottery machines.

         Company-Owned Bars.  The Company operates bars, also referred to as
video lottery casinos, in South Dakota that feature video lottery machines.
The Company currently owns and





                                       4
<PAGE>   7
operates three video lottery casinos each of which feature video lottery
machines.  The Company  presently subleases two other video lottery casinos to
restaurateurs.  As part of these subleases, the restaurateurs provide space for
the Company's operation of video lottery machines.

         Terms of the Management Agreement.  The Management Agreement had an
initial term of five years and commenced upon the opening of the Casino in July
1993.  In October 1994, BHL exercised its option to extend the Management
Agreement for an additional two years.  TAT has the option to purchase BHL's
interest in the Management Agreement after July of 1996.  The option price is
equal to BHL's share of Net Profits (as defined below) during the 12 months
preceding the date of purchase, multiplied by the number of months remaining
under the term of the Management Agreement, plus the remaining construction and
development costs payable by TAT to BHL.

         Under the terms of the Management Agreement, BHL earns fees based on
net profits, which are defined as the gross revenues from the Casino, including
but not limited to, Indian gaming activity less amounts paid out as, or paid
for, prizes and total operating expenses, excluding management fees and less
repayment of construction and other capital costs incurred by the Company ("Net
Profits").  BHL is entitled to receive 40% of the Net Profits from the Casino
for the initial term of the Management Agreement and 30% during the two-year
option period.  Either party may terminate the Management Agreement if the
other party commits a material breach and the material breach is not cured
within 30 days of written notice thereof.  The nonbreaching party may initiate
arbitration proceedings.

         In February 1995, the Company initiated arbitration seeking
reimbursement of $2,280,021 of costs, in excess of budgeted amounts, which were
expended for the renovation and construction of the Casino.  In addition, the
Company claims that TAT materially breached the Management Agreement by
amending its gaming ordinance to impose increased license fees on the Company.
The Company and TAT have agreed to stay these proceedings and all other legal
proceedings between the parties pending the closing of the Settlement
Agreement.  See "Certain Recent Developments" and "Legal Proceedings."

MARKETING AND SALES

         The Company attempts to acquire additional locations for the placement
of video lottery machines through a marketing strategy that emphasizes the
Company's premium service and top-of-the-line video lottery equipment.  The
Company's primary supplier of video lottery machines is Video Lottery
Consultants Inc. ("VLC").  VLC machines are programmed to constantly process
self-checks and diagnostics to ensure accurate financial data and proper
working order of all subassemblies.

         The Company attracts customers to the Casino through a variety of
media marketing techniques, including print and electronic media advertising
and billboard advertising.  In addition, the Company focuses on providing a
quality experience for its Casino customers to encourage repeat visits and
referrals.





                                       5
<PAGE>   8
COMPETITION

         The Company's gaming operations are in competition with a significant
number of existing and proposed gaming operations in North Dakota, South Dakota
and Canada, some of which are, or may be, owned or operated by organizations
which may be significantly better capitalized than the Company, which have or
may have significantly larger facilities, and which may employ personnel who
have more experience in the gaming industry than those currently employed, or
proposed to be employed, by the Company.  In addition, the Company is in
competition with other businesses which provide opportunities for gambling,
such as racetracks and lotteries, or which provide entertainment which may
divert the spending of discretionary income from gaming activities.
Furthermore, the gaming industry is expanding rapidly, with more establishments
competing for a customer base which may not be expanding as rapidly, if at all.

         The Company's video lottery operations are also in competition with
establishments throughout South Dakota holding malt beverage, wine or liquor
licenses which establishments may operate up to 10 video lottery machines per
establishment.  The video lottery machines allow customers to play electronic
versions of blackjack, poker, keno and bingo.  The Company believes that there
are approximately 8,000 such video lottery machines installed in South Dakota.
The video lottery industry is highly competitive.  There can be no assurance
that competitors with greater financial resources and/or superior technology,
including competitors with similar products, will not elect to enter the
Company's market.

GAMING REGULATION

         General.  The ownership and operation of a gaming business by the
Company, including the operations of video lottery businesses, are subject to
extensive federal, state and/or local laws and regulations, including stringent
licensing requirements.  The regulatory authorities in a jurisdiction in which
the Company is subject to licensing may do the following:  (a) impose certain
corporate structure requirements on the Company; (b) require the officers,
directors, key employees and affiliates of the Company and/or any of the
Company's subsidiaries to be licensed or found suitable; (c) require some or
all of the shareholders of the Company or any subsidiary to be licensed or be
found suitable, or to divest their holdings of the Company's or such
subsidiary's securities; (d) require background investigation of the Company's
suppliers, subcontractors and certain of their personnel; and (e) subject the
Company, any subsidiary, or the officers, directors, key employees, affiliates,
or shareholders of the Company or any subsidiary to any other restriction that
is deemed reasonable by the regulatory authority.  Generally, regulatory
authorities also have authority to disapprove a change in a licensed position,
which change must be reported to the issuing agency.  In the event a regulatory
authority were to find an officer, director, key employee or affiliate of the
Company or any subsidiary, or any other person, including a shareholder,
unsuitable to act in such capacity or to continue to have a relationship with
the Company, the Company would be required to terminate all relationships with
such person or entity.  Generally, regulatory authorities have





                                       6
<PAGE>   9
broad discretion when granting such approvals.  No assurance can be given that
such approvals will be obtained or retained in the future.

         The commencement of video lottery and other gaming activities in new
jurisdictions requires authorizing legislation and implementing regulation at
the state or other jurisdictional level.  The Company cannot predict the nature
of the regulatory scheme in any jurisdiction which may authorize such equipment
to be used in such jurisdiction in the future.  Any such regulatory scheme may
be burdensome to the Company, or its key personnel and shareholders, and could
include requirements that the Company would be unable to satisfy.
Additionally, no assurance can be given that there will not be an adverse
change in the gaming laws of any jurisdiction in which the Company does
business.

         Indian Gaming Regulatory Act.  Gaming on Native American lands is
extensively regulated under federal law, tribal-state compacts and tribal law.
IGRA was passed by the United States Congress in 1988 and provides the
framework for federal and state control over all gaming on Native American
lands.  IGRA is administered by the NIGC, a three- person quasi-independent
agency administratively located within the Department of the Interior.  The
NIGC is the only federal agency with regulatory responsibility over gambling.
Its primary role is to monitor and regulate tribal gaming operations throughout
the United States.  While the NIGC has broad enforcement authority, IGRA
clearly recognizes that Indian tribes, as governments, are the primary
regulatory authority over gaming on Indian lands.  Thus, the NIGC will afford
tribes the opportunity to address identified violations in the first instance.

         Since the Company's current operations under the Management Agreement
involve Class II and Class III Indian gaming, such operations come under the
auspices of IGRA.  IGRA defines Class III gaming as including all forms of
gaming that are not Class I or Class II gaming, including banking card games,
casino games, slot machines, electronic or electromechanical facsimiles of
games of chance and parimutuel wagering.  Class II gaming includes bingo.
Certain terms and conditions of the Management Agreement may be subject to the
provisions of statutes relating to contracts with Indian tribes which are
administered by the Secretary of the Interior (the "Secretary") through the BIA
and NIGC.  The regulations and guidelines under which the NIGC administers IGRA
are incomplete and evolving.  IGRA is subject to interpretation by the
Secretary and the NIGC and may be subject to judicial and legislative
clarification or amendment.

         Class III gaming may lawfully be conducted by an Indian tribe if:  (a)
the state in which the tribe is located permits such gaming for any purpose by
any person, organization or entity; (b) the tribe and the state have negotiated
a compact which has been approved by the Secretary; and (c) the tribe has
adopted a gaming ordinance which has been approved by the Chairman of the NIGC.

         IGRA requires the NIGC to approve management contracts and certain
collateral agreements.  The BIA approved management contracts prior to the NIGC
assuming the responsibility for approval of management contracts.  The
Management Agreement and collateral





                                       7
<PAGE>   10
agreements were approved by the BIA on February 19, 1993; however, the Company
has submitted the Management Agreement and certain collateral agreements to the
NIGC upon its request for a review of its compliance with IGRA.  See "--Recent
Developments."  The Chairman may approve a management contract if it provides:
(a) adequate accounting procedures; (b) access by tribal officials to the
gaming operations in order to verify the daily gross revenues and income; (c) a
minimum guaranteed payment to the tribe that has preference over the retirement
of development and construction costs; (d) a ceiling for the repayment of such
costs; (e) a maximum term of five years, or upon tribal request, seven years;
and (f) grounds and procedures for terminating the contract.

         The Chairman may approve a management contract which authorizes a
management fee based upon net revenues if the Chairman believes the fee is
reasonable.  As a general rule, the management fee cannot exceed 30 percent of
net revenues.  Upon request of a tribe, however, the Chairman may approve a
contract authorizing a management fee greater than 30 percent of net revenues,
but not to exceed 40 percent, if the Chairman is satisfied that the capital
investment and income projections of the project require the higher percentage.
The Management Agreement has a seven-year term and the Company's management fee
is 40% of Net Profits for the first five years and 30% thereafter.  While the
Company believes that the Management Agreement meets all the requirements of
IGRA, the NIGC is responsible for making such determination.  If the Settlement
Agreement is not consummated and the NIGC determines that the Management
Agreement does not comply with IGRA, it may require the parties to modify the
Management Agreement, including but not limited to reducing the management fee
and the term.

         GAMING COMPACT.  A tribal-state compact for Class III gaming may
include provisions concerning:  (a) the application of tribal or state criminal
and civil laws directly related to gaming; (b) the allocation of jurisdiction
between the state and the tribe; (c) an assessment to the state to defray the
cost of regulating the gaming activity; (d) taxation by the tribe in amounts
comparable to state taxation; (e) remedies for breach of the compact; (f)
standards for the operation and maintenance of the gaming facility; and (g) any
other subjects related to gaming activity.  The Secretary is authorized to
approve tribal-state compacts.

         The Gaming Compact ("Compact") between TAT and the State of North
Dakota was entered into on October 7, 1992.  It provides that TAT shall have
the right to operate the following types of Class III Gaming:  (a) electronic
and electromechanical facsimile games of chance; (b) blackjack; (c) poker,
including Pai Gai and Caribbean stud poker; (d) parimutuel and simulcast
betting; (e) pull-tabs; (f) raffles; (g) keno; (h) punchboards and jars; (i)
paddlewheels; and (j) craps and Indian dice.

         The Compact also provides for the following limits on maximum wagers:
(a) wagers on blackjack shall not exceed $50 per individual hand; (b) wagers on
poker shall not exceed $10 per individual bet per round, with a three raise
maximum per round; (c) individual bets on paddlewheels shall not exceed $25 for
either single bet or overall multiple bets by an individual player per spin of
the wheel; (d) individual bets placed during the play of craps and Indian dice





                                       8
<PAGE>   11
shall not exceed $25 per bet; and (e) electronic games of chance shall not
process individual bets in excess of $5 per bet (however, play may be conducted
upon individual machines which process simultaneously, up to three bets, each
not exceeding $5).

         The Compact states there shall be no limit on the number of machines,
tables or other gaming devices which TAT may operate pursuant to the Compact,
nor shall there be a limit as to the number of sites on trust lands within the
exterior boundaries of the Fort Berthold Reservation upon which gaming may be
offered.  However, the Management Agreement provides that neither party will
participate in any other gaming management contract in the State of North
Dakota.

         TRIBAL GAMING ORDINANCE.  Indian tribes wishing to engage in Class II
or Class III gaming must adopt a gaming ordinance which is approved by the
Chairman of the NIGC.  The Chairman is required to approve a tribal ordinance
if the ordinance provides that:  (a) the tribe will have the sole proprietary
interests in the gaming operation (with some exceptions); (b) net revenues from
tribal gaming operations will be used to fund tribal government operations, to
provide for the general welfare of tribal members, to promote economic
development, to donate to charitable organizations, or to help fund local
government agencies; (c) annual outside audits of the gaming operations will be
submitted to the NIGC; and (d) there is an adequate system for conducting
background investigations on key employees and primary management officials,
issuing licenses to such persons, and notifying the NIGC of the results of
background investigations before issuing tribal gaming licenses.

         TAT enacted its enabling gaming ordinance (the "Gaming Ordinance") in
July 1991 which requires primary management officials, key employees and
management companies to apply for annual tribal gaming licenses.  The Gaming
Ordinance also requires the establishment to obtain a yearly permit.  The
Gaming Ordinance established the Gaming Commission which has the authority and
responsibility to, among other things, issue and renew gaming licenses and
permits, revoke licenses and permits, collect fees, levy and collect penalties,
and review gaming books and records.  The Gaming Commission is the licensing
authority for Class I, Class II and Class III gaming on the Fort Berthold
Reservation.  Each license issued by the Gaming Commission is valid for one
year following issuance.  The Gaming Commission must also forward license
applications and gaming reports to the NIGC for its review.  Furthermore, it is
responsible for enforcing the provisions of the Compact and the Gaming
Ordinance's specified use of gaming revenues.

         Enforcement actions that the Gaming Commission may take include
suspension, revocation or conditioning of a license, and/or the imposition of
civil penalties not to exceed $500 for each violation of the Gaming Ordinance.
Upon a suspension, revocation or conditioning of a license, the Gaming
Commission may bring an action in the Tribal District Court for the seizure of
any gaming apparatus, proceeds or other property of a licensee, expel the
licensee from Indian lands, if the licensee is a nonmember of TAT, or seek
other relief as it deems necessary to enforce its decision.





                                       9
<PAGE>   12
         On April 12, 1994 the NIGC notified TAT that the Gaming Ordinance had
certain deficiencies.  TAT amended its Gaming Ordinance on October 14, 1994 to
cure these deficiencies.  The Chairman of the NIGC approved TAT's amended
Gaming Ordinance (the "Amended Gaming Ordinance") on November 17, 1994 as being
in compliance with IGRA.  Pursuant to Section 8.1 of the Amended Gaming
Ordinance, the Gaming Commission established a new fee schedule for gaming
licenses and background investigations.

         BHL received a notice of the Amended Gaming Ordinance and new fee
schedule on December 30, 1994.  On behalf of the Casino, BHL had previously
submitted an application and permit fee of $250 to the Gaming Commission for
the renewal of the Casino's establishment permit.  This application and permit
fee was submitted in accordance with the Gaming Ordinance.  The new fee
schedule, if imposed on BHL, would require BHL to pay approximately $700,000 in
additional fees and deposits which are prohibited under the Management
Agreement.  The Gaming Commission refused to accept the Casino's application
because it was not in conformance with the Amended Gaming Ordinance.  As a
result, the establishment permit for the Casino was not renewed in 1995 or 1996.
However, the Gaming Commission has issued temporary licensing to the Company
and the Casino pursuant to the terms of the Settlement Agreement.  These
licenses shall be valid through the term of the Settlement Agreement.  See
"Certain Recent Developments."

         In the event the Settlement Agreement is not consummated, the Company
cannot predict the consequences of operating the Casino without an
establishment permit.  In addition to the enforcement actions which may be
taken by the Gaming Commission described above, under the terms of the
Management Agreement, loss of a gaming license for cause would constitute a
material breach.  The Gaming Commission has not taken any enforcement actions
and TAT has not alleged a material breach of the Management Agreement by BHL of
the Management Agreement.  BHL contends that the Amended Gaming Ordinance
materially reduces the value of the Management Agreement and constitutes a
material breach of such agreement.  In February 1995, BHL initiated arbitration
proceedings to resolve this dispute and a dispute over the reimbursement of
certain expenses related to the Casino.  See "LEGAL PROCEEDINGS--TAT Gaming
Commission Petitions and Arbitration."

         SOUTH DAKOTA VIDEO LOTTERY REGULATION.  The manufacture, distribution
and operation of video lottery equipment is subject to extensive regulation by
federal and state authorities.  Federal law requires registration of the
Company's video lottery equipment as gaming devices.  In addition, provisions
under South Dakota laws govern all aspects of the Company's video lottery
business as it is operated in South Dakota.  The executive director of the
South Dakota Lottery Commission ("Lottery Commission") administers the state
lottery, including video lottery.  The Lottery Commission as an independent
state agency has authority for the overall management of the state lottery and
control over the operation of its games.

         The Lottery Commission has promulgated rules and regulations
concerning the licensing procedures for video lottery operators, setting the
mechanical and electronic specifications for video lottery, and the accounting
procedures for net machine income.  Additionally, only retail





                                       10
<PAGE>   13
establishments licensed to sell alcoholic beverages are permitted to offer
video lottery machines.  No more than ten video lottery machines may be placed
in a licensed establishment.  Persons under the age of twenty-one may only
enter the premises where video lottery machines are located provided they are
accompanied by a parent, guardian or spouse of twenty-one years or older.
Video lottery operators must pay an annual fee of $100 per machine.  In
addition, South Dakota's percentage of net machine income is 50%.  There can be
no assurance that license fees and/or South Dakota's percentage will not
increase, and any such increase would have an adverse effect on the Company and
its South Dakota video lottery operations.

         The statutes and regulations governing gaming in South Dakota and
elsewhere may limit the ability of individuals and entities to acquire and own
Common Stock.  Such provisions are designed to regulate ownership and control
of gaming establishments within those jurisdictions.  In South Dakota, for a
corporation to be selected as a video lottery operator, the corporation must
have sufficient financial resources to support the activities required to
service video lottery machines, be greater than fifty percent owned by South
Dakota resident(s) and be current in payment of all taxes.  Existing statutes
in South Dakota require that each officer, director or shareholder owning in
excess of five percent of any corporation engaged as a video lottery operator
must successfully complete background investigations regarding financial
history, criminal record and character.  Such provisions may affect acquisition
of large blocks of the Common Stock and could depress the price of the Common
Stock.

EMPLOYEES

         As of September 30, 1996, the Company employed 21 employees on a
full-time basis and 15 on a part-time basis.  None of the Company's employees
are represented by a union or collective bargaining unit and management
considers relations with employees to be good.

ADDITIONAL INFORMATION

         Compliance with federal, state and local law regarding the discharge
of materials into the environment or otherwise relating to the protection of
the environment has not had, and is not expected by the Company to have, any
adverse effect upon capital expenditures, earnings or the competitive position
of the Company.  The Company is not presently a party to any litigation or
administrative proceeding with respect to its compliance with such
environmental standards.  In addition, the Company does not anticipate being
required to expend any funds in the near future for environmental protection in
connection with its operations.

ITEM 2.  DESCRIPTION OF PROPERTY.

         The Company leases approximately 4,500 square feet of office space
located in Rapid City, South Dakota under a lease that expires in September
1997 from an affiliated company controlled by Mr. Lien.  See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS."





                                       11
<PAGE>   14
         The Company owns real property and a building located in North Sioux
City, South Dakota.  The building has approximately 4,000 square feet of floor
space and houses two video lottery casinos operated by the Company.  The
Company leases the remainder of the building, approximately 1,300 square feet,
to a fast food franchise.

         The Company believes that its facilities and equipment are well
maintained and in good operating condition and will satisfy its current needs.

ITEM 3.  LEGAL PROCEEDINGS.

MANAGEMENT AGREEMENT

         Since July 1994, TAT and the Company have been engaged in numerous
legal disputes over the terms of the Management Agreement as previously
disclosed.  All legal actions have been stayed pending the closing of the
Settlement Agreement.  Included is the matter of Bruce H. Lien Company v. Three
Affiliated Tribes and Russell D. Mason, Sr., Mark Fox, Daylon Spotted Bear,
Ivan Johnson, Austin Gillette, George Fast Dog, and Ed Hall, as Members of the
Three Affiliated Tribes Tribal Business Council.  BHL brought this claim
against TAT seeking a temporary restraining order and/or preliminary injunction
and a motion to compel arbitration proceedings.  BHL brought the action in the
United States District Court for the District of North Dakota, Northwestern
Division.  BHL initiated arbitration on January 31, 1995 to resolve disputes
that have risen out of the Management Agreement.  These proceedings were
scheduled for hearings on October 9, 10, and 11, 1995.  However, a Tribal
District Court judge enjoined the BHL and the American Arbitration Association
("AAA") from going forth, pending the review of the Management Agreement by the
NIGC or the Tribal judge's determination on the validity of the agreement,
whichever occurs earlier.  As a result of BHL's action in federal court, U.S.
District Judge Patrick A. Conmy issued an order on October 13, 1995 for TAT
defendants to show cause as to why a restraining order should not be issued
restraining them and their agents from interfering with the arbitration now
pending before the AAA.  A hearing was held October 25, 1995 in Minot, North
Dakota on the Order to Show Cause as to why the injunction should not be
granted.  The federal court on November 10, 1995 held that, although it had
federal question jurisdiction, the NIGC had initial jurisdiction to decide the
validity of the Management Agreement.  Additionally, because the court found no
irreparable harm, it refused to issue an injunction against TAT defendants.

         On August 28, 1996, the Eighth Circuit Court of Appeals affirmed the
District Court's ruling on its federal question jurisdiction but reversed its
decision not to defer this matter to the Tribal Court.  On September 27, 1996,
BHL and TAT entered into the Settlement Agreement.  Among other things, the
agreement provides for the resolution of disputes arising out of the Management
Agreement and will terminate the Management Agreement upon the Company's
receipt of $8.65 million on or before April 30, 1997.  TAT and BHL filed a
joint motion with the Court of Appeals to stay these proceedings pending the
final disposition of their settlement negotiations.  Upon the closing of the
Settlement Agreement, the following actions and claims would be dismissed:





                                       12
<PAGE>   15
                          (a)     A Federal District Court action entitled
                 Bruce H. Lien Company v. Three Affiliated Tribes, et al. I
                 Civ. No. A4-95-135 (D. North Dakota);

                          (b)     A Tribal Court action entitled Three
                 Affiliated Tribes v. Bruce H. Lien Co., Case No.  96-C-000 I
                 (Fort Berthold District Court);

                          (c)     A Tribal Court action entitled Bruce H. Lien
                 Co. v. Three Affiliated Tribes Tribal Gaming Commission, Case
                 No. 95-C-00096 (Fort Berthold District Court);

                          (d)     A Tribal Court action, as it relates to Lien
                 and its officers or employees, entitled Bruce H. Lien Co.,
                 Jerry Baum and Thomas K. Schoppert  v. Three Affiliated Tribal
                 Gaming Commission, Case No. 95-C-00154 (Fort Berthold
                 District);

                          (e)     An Arbitration action entitled Bruce H. Lien
                 Co. v. Three Affiliated Tribes, Case No.  53 133 00057 95 (AAA
                 Arbitration Association);

                          (f)     A Tribal Court action entitled Gene
                 Christensen, et al. v. Marcus Wells, Jr. et al., (Jerry Long
                 case);

                          (g)     A Tribal Employment Rights Office case
                 entitled Marcus Wells, Jr. v. Gene Christensen, et al., (Jerry
                 Long case);

                          (h)     A Tribal Court action entitled Marcus Wells,
                 Jr. v. Jerry Baum, et al., Civ. No.  (Devon Gordon case);

                          (i)     A Tribal Employment Rights Office case
                 entitled Marcus Wells, Jr. v. Jerry Baum, et al., (Devon
                 Gordon case);

                          (j)     A Tribal Court action entitled Marcus Wells,
                 Jr. v. Jerry Baum, et al., Civ. No.  (Brenda Keller case);
                 and,

                          (k)     A Tribal Employment Rights Office case
                 entitled Marcus Wells, Jr. v. Jerry Baum, et al., (Brenda
                 Keller case).

         In the event the Settlement Agreement does not close, the Company will
proceed with petitioning the Eighth Circuit Court of Appeals for a rehearing,
with suggestion for rehearing en banc.  The Company may renegotiate with TAT or
exhaust its legal remedies, which may include Tribal Court.





                                       13
<PAGE>   16
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         None.


                                    PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         There is no established public trading market for the Common Stock.
The following market information is based upon the bid and asked price of the
stock as reported by the OTC Bulletin Board.  Such quotations reflect
interdealer prices, without retail mark-up, mark-down or commission, and may
not necessarily represent actual transactions.

<TABLE>
<CAPTION>
                                                                                   High Bid        Low Bid
                                                                                   --------        -------
             <S>                                                                    <C>              <C>
             Fiscal Year ended September 30, 1996
                      First Quarter                                                 $.375            $.125
                      Second Quarter                                                 .25              .125
                      Third Quarter                                                  .375             .25
                      Fourth Quarter                                                 .375             .0625


             Fiscal Year ended September 30, 1995
                      First Quarter                                                  .875             .25
                      Second Quarter                                                 .5625            .25
                      Third Quarter                                                  .25              .125
                      Fourth Quarter                                                 .1875            .125
</TABLE>


         As of December 16, 1996, there were approximately 320 holders of
record of Common Stock.

DIVIDENDS

         The Board of Directors of the Company currently anticipates that it
will retain all available funds for use in the operation of the business and
does not anticipate paying any cash dividends in the foreseeable future.  The
payment of cash dividends is restricted by the Company's loan agreements with
the bank.

ITEM  6.  MANAGEMENT'S DISCUSSION AND ANALYSIS

         The following discussion should be read in conjunction with the
selected financial data and the financial statements and notes thereto filed
herewith.

         The statements contained in this report, if not historical, are
forward looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, and involve risks and uncertainties that could
cause actual results to differ materially from the financial results described
in such forward looking statements.  These risks and uncertainties include,
among





                                       14
<PAGE>   17
others, the level and rate of growth in the Company's operations, the outcome
of the arbitration and settlement negotiations with TAT and the outcome of the
NIGC review of the Management Agreement.  The success of the Company's business
operations is in turn dependent on factors such as the effectiveness of the
Company's marketing strategies to grow its customer base and improve customer
response rates, retention of video lottery space lease agreements, general
competitive conditions within the gaming industry and general economic
conditions.  Further, any forward looking statement or statements speak only as
of the date on which such statement was made, and the Company undertakes no
obligation to update any forward looking statement or statements to reflect
events or circumstances after the date on which such statement is made or to
reflect the occurrence of unanticipated events.  Therefore, forward-looking
statements should not be relied upon as a prediction of actual future results.

INTRODUCTION

         On June 22, 1994, the South Dakota Supreme Court issued a decision
holding that a video lottery was not a lottery, and therefore, was
unconstitutional.  The court's decision became effective on August 13, 1994,
and resulted in the shutdown of all video lottery machines in South Dakota.
During a special legislative session held on July 11 and 12, the legislature
approved language for a constitutional amendment legalizing video lottery as it
had been operated in the State.  The proposed constitutional amendment was
approved by South Dakota voters in the November 8, 1994 general election.  The
Company reinstated its video lottery operations in South Dakota on November 22,
1994, the effective date of the constitutional amendments.

         The 100-day shutdown of video lottery operations in South Dakota, from
August 14, 1994 to November 22, 1994, resulted in a significant decline in the
Company's revenues, operating income and cash flow.  The shutdown affected 52
days of the year ended September 30, 1995 ("Fiscal 1995").  For Fiscal 1995,
the Company estimates revenues were reduced by approximately $1,650,000 and
that operating income and cash flow was reduced by approximately $240,000.  The
Company calculated lost revenues based on historical operations.

RESULTS OF OPERATION

         Year Ended September 30, 1996 ("Fiscal 1996") Compared to Year Ended
September 30, 1995

         Revenues.  Total revenues increased 0.9% to $11,242,586 for Fiscal
1996, compared to $11,140,773 for Fiscal 1995.  Video lottery revenues
increased 10.4% to $8,985,467 for Fiscal 1996, compared to $8,136,160 for
Fiscal 1995.  The increase in video lottery revenues was attributable to the
operation of video lottery during the entire twelve months of Fiscal 1996,
compared to less than ten and one-half months during Fiscal 1995.  The revenue
generated by each video lottery machine in Fiscal 1996 decreased approximately
9% during the comparable period in Fiscal 1995.  This decrease is a result of
some of the Company's higher revenue-per-machine locations not renewing their
lease agreements, and the Company placing its machines





                                       15
<PAGE>   18
in lower revenue-per-machine locations.  Revenues from the Management Agreement
decreased 30.8% to $2,064,649 for Fiscal 1996, compared to $2,984,271 for
Fiscal 1995, as a result of the decreased profitability of the Casino.  The
earnings of the Casino were impacted during Fiscal 1996 by numerous factors
including, inclement weather, increased competition in the Regina, Canada area,
road construction on the main highway leading to the Casino, and a reduction in
tourism.

         Costs and Expenses.  Total costs and expenses increased 18.0% to
$10,290,570 for Fiscal 1996, compared to $8,723,534 for Fiscal 1995.  The
increase was attributable to increases in the video lottery state share,
compensation expenses and operating expenses.  Video lottery state share
increased 35.6% to $4,471,432 for Fiscal 1996, compared to $3,298,701 for
Fiscal 1995 due to an increase in the percentage of the video lottery revenues
paid to the State of South Dakota from 37% to 50% effective July 1, 1995.
Compensation expenses increased 40.8% to $981,536 for Fiscal 1996, compared to
$696,863 for Fiscal 1995, due primarily to an increase in the number of
employees in the Company's video lottery operations.  Operating expenses
increased 56.9% to $1,234,633 for Fiscal 1996, compared to $786,727 for Fiscal
1995.  The increase in operating expenses was primarily related to the
following: an increase of approximately $145,000 in legal costs related to the
arbitration and disputes with TAT and an increase of $113,000 in advertising
and marketing expenses associated with the video lottery operations.  The
increase in total costs and expenses was offset, in part, by decreases in video
lottery location share, business development costs and depreciation and
amortization.  Video lottery location share decreased 8.6% to $2,891,852 for
Fiscal 1996, compared to $3,164,046 for Fiscal 1995.  Video lottery location
share, as a percentage of video lottery revenues, decreased to 32.2% for Fiscal
1996, compared to 38.9% for Fiscal 1995.  This decrease is directly related to
the increase in the video lottery state share, as the location share is
computed on video lottery revenues after the state share.

         Other Income and Expense.  Interest expense and financing costs
decreased 40.8% to $794,054 for Fiscal 1996, compared to $1,341,088 for Fiscal
1995.  This decrease was the result of (i) the Company having reduced its notes
payable to $4,534,755 at September 30, 1996, compared to $7,599,714 at
September 30, 1995, and (ii) no one-time fees and penalties (reported as
interest expense) incurred during Fiscal 1996, compared to $320,863 of one-time
fees and penalties during Fiscal 1995.  The decrease in interest expense and
financing costs was offset, in part, by an increase in the effective interest
rate on a $2.4 million note payable.  Interest income increased 13.1% to
$683,444 for Fiscal 1996, compared to $604,202 for Fiscal 1995, due primarily
to an increase in the interest rate on the long-term receivable related to the
Casino.

         Federal and State Income Taxes.  The Company recorded Federal and
State income tax expense of $339,000 for Fiscal 1996, compared to an income tax
benefit of $623,000 for Fiscal 1995, a decrease of $284,000.  The Company
records income tax expense using the estimated effective tax rate for the
fiscal year.





                                       16
<PAGE>   19
LIQUIDITY AND CAPITAL RESOURCES

         The Company had cash and cash equivalents of $120,572 at September 30,
1996, compared to $520,438 at September 30, 1995, a decrease of $399,866.  The
decrease was primarily attributable to cash used for principal payments on
long- term debt and the purchase of property and equipment.  During Fiscal
1996, the Company generated $1,468,814 of cash flow from operating activities,
compared to $1,923,559 in Fiscal 1995.  The decrease in cash flow from
operating activities is due to the decrease in revenues from the management of
the Casino.

         Investing activities provided cash of $1,306,952 in Fiscal 1996
compared to $1,448,593 in Fiscal 1995.  Principal payments received on
long-term receivables provided cash of $1,902,787 in Fiscal 1996 compared to
$1,511,696 in Fiscal 1995.  Capital expenditures of $423,015 for Fiscal 1996
were primarily related to the Company's video lottery casino operations.  In
addition, the Company incurred $182,884 in casino development costs associated
with the proposed Lexington, Missouri riverboat gaming project in Fiscal 1996.

         Financing activities used cash of $3,175,632 in Fiscal year 1996
compared to $2,999,001 in Fiscal 1995.  Principal payments on long-term debt
was $4,647,951 in Fiscal 1996 compared to $3,175,300 in Fiscal 1995.  Proceeds
from long-term borrowings were $812,992 in Fiscal 1996 compared to $276,971 in
Fiscal 1995.  Short-term borrowings provided cash of $580,000 in Fiscal 1996
compared to a $180,000 reduction of short-term borrowings in Fiscal 1995.

         The Company has a working capital deficit of $1,849,222 at September
30, 1996 compared to $1,969,771 at September 30, 1995.  The working capital
deficits are primarily a result of the Company's long-term borrowings having
maturities of three years or less.

         Pursuant to the terms of the FBILLC Settlement Agreement, BHL is
required to purchase FBILLC's interest, real or contingent, in the Management
Agreement for $2,000,000, subject to certain adjustments (the "FBILLC
Obligation") the FBILLC Obligation was payable in full on December 31, 1996, at
which time the balance was $534,306.49.  On January 7, 1997, BHL and FBILLC
entered into an amendment to the FBILLC Settlement Agreement (the "Amendment")
whereby the balance is payable as follows (a) $50,000 per month commencing
January 25, 1997 through June 25, 1997, and (b) $75,000 per month thereafter
beginning July 25, 1997, until the FBILLC Obligation is paid in full.  Interest
is payable on the unpaid amount at a rate of 15% per annum for the period
January 1, 1997 through June 30, 1997, and at 18% per annum thereafter.  If BHL
fails to make any payments, FBILLC can, at its sole option, declare all amounts
then due and owing from BHL to FBILLC to be immediately due and payable.  In the
event of default under the FBILLC Settlement Agreement, FBILLC would be able to
exercise its rights under the Security Agreement and Guaranty, including without
limitation, the right of FBILLC to receive the payments due BHL under the
Management Agreement until such amounts have satisfied the FBILLC Obligation.





                                       17
<PAGE>   20
         On December 30, 1993, the Company issued a promissory note (the
"Promissory Note") payable to the order of an individual in an amount of up to
$2,400,000 due November 1994.  Interest on the Promissory Note was payable at
an annual rate equal to the prime rate established by Norwest Bank South
Dakota, N.A. plus 0.5%.  In addition, the Company issued a warrant to such
individual for the purchase of 480,000 shares of Common Stock with an exercise
price of $1.00 per share.  Pursuant to a Loan Extension Agreement dated
September 30, 1994, the due date of the Promissory Note was extended to
November 30, 1995.  In consideration for the extension (i) the interest rate
was increased from prime plus 0.5% to prime plus 2%, (ii) the Company paid
$100,000 in cash, and (iii) the Company issued warrants to purchase 480,000
shares of Common Stock with an exercise price of $.75 per share.

         On December 21, 1995, the Company and such individual entered into a
Second Loan Extension Agreement whereby the due date on the Promissory Note was
extended to August 27, 1997.  Pursuant to the terms of the Second Loan
Extension Agreement the Company is required to pay each month (i) $142,800 to
be applied to principal and interest on the Promissory Note computed using the
prime rate established by Norwest Bank South Dakota, N.A., (ii) interest equal
to 2% per annum on the outstanding balance, and (iii) a fee of $7,500 per month
for each month that an outstanding balance exists on the Promissory Note.  In
addition, the Company is required to accrue an additional fee (the "Accrued
Fee") of $12,500 per month that an outstanding balance exists on the Promissory
Note.  The Accrued Fee is due in monthly payments of $25,000, commencing 30
days after the Promissory Note is paid in full.  Any unpaid Accrued Fee shall
be paid in full 180 days after the Promissory Note is paid in full.  The
Accrued Fee shall bear interest equal to the prime rate established by Norwest
Bank South Dakota, N.A. plus 2% beginning at such time as the Promissory Note
is paid in full.  The Promissory Note is secured by the personal guaranty of
Mr. Lien.  See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."  As of
September 30, 1996, the outstanding principal balance on the Promissory Note
was $1,497,892 and the Accrued Fee was $112,500.

         In June 1995, the Company renegotiated a promissory note payable to
Mr. Lien.  The prior note, a $690,000 demand note payable to Mr. Lien, was
cancelled and a new note in the principal amount of $690,000, due January 1997,
was issued to Mr. Lien. During Fiscal 1996, this note was assigned by Mr. Lien
to an affiliated company controlled by Mr.  Lien.  In September 1996 this
promissory note was cancelled and a new note in the principal amount of
$690,000, due December 31, 1997, was issued to the affiliated company.  These
promissory notes provide for interest equal to the prime rate established by
Norwest Bank South Dakota, N.A. plus 2%.  The interest rate as of September 30,
1996 was 10.25%.  See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."

         In June 1996, the Company, and one of its subsidiaries entered into a
loan agreement (the "Loan Agreement") with a bank, which provides for a
revolving note and a term note.  The revolving note allows for advances to the
Company of up to $500,000, with interest paid monthly at a rate equal to the
bank's prime rate plus 2%.  The balance of the revolving note, if any, is due
on June 21, 1997.  The term note in the principal amount of $800,000 requires





                                       18
<PAGE>   21
monthly payments of $22,222 commencing July 31, 1996 plus interest at a rate
equal to the bank's prime rate plus 2%.  The proceeds from the term note were
used to payoff a note to a bank of approximately $750,000.  The balance of the
term note is due on June 30, 1998.  The revolving note and term note are
secured by substantially all of the Company's video lottery machines and the
personal guaranty of Mr. Lien.  In December 1996, the Company obtained an
additional loan from the bank in the principal amount of $300,000.  The loan is
due April 11, 1997, with interest payable monthly at a rate equal to the bank's
prime rate plus 2%.  The Company utilized the proceeds from the additional loan
for working capital.

         As a result of the increased costs associated with video lottery
operations and decreased revenue from the Casino, the Company has had to seek
additional short term financing from the Bank and to renegotiate the FBILLC
Settlement Agreement to extend and restructure the payment terms. The Company
has also received an additional loan in the amount of $100,000 from Mr. Lien in
order to meet working capital needs.

         In addition, because of seasonal fluctuations the Casino retains
revenue during December through March for working capital purposes. As a
result, sometimes during this period the Casino does not have sufficient
revenue to timely pay the distributions due BHL under the Management Agreement.
In order to accommodate the Casino's working capital requirements, the Company
has sought to renegotiate the FBILLC Settlement Agreement and has sought to
obtain additional lines of credit to meet its working capital requirements.

         If the Company is successful in obtaining a riverboat gaming license
in Missouri, the Company will seek to raise approximately $17 million of equity
or debt in the private and/or public markets to fund the construction and
development of the riverboat gaming vessel and related facilities.  There is no
assurance that the Company will be able to obtain the gaming license or to
raise the financing, or that if financing is available it will be on terms
satisfactory to the Company.

         The Company will continue to evaluate and investigate expanding or
acquiring additional interests in the video lottery and gaming industries in
states likely to legalize or expand in these industries in the future, the
acquisition or expansion of which may result in increased profitability and
cash flow.  There is no assurance that the Company will be successful in such
an acquisition or expansion, be able to obtain additional financing, or that
increased profitability and cash flow would result.  The Company anticipates
incurring additional expenses in order to investigate these possible future
business opportunities.

MATERIAL COMMITMENTS

         The Company's long-term capital expenditure requirements will depend
on numerous factors, including the status of various agreements the Company has
entered into, the time required to file and process regulatory approval
applications for additional video lottery routes and development of the
Company's gaming business.  The Company currently does not have any commitment
for long-term capital expenditures.

SEASONALITY/QUARTERLY FLUCTUATIONS

         On a historic basis, the revenues and cash flow of the Casino have
been higher during the Company's third and fourth quarters due to better
weather and travel conditions and increased tourism.

FUTURE OPERATIONS

         If the Settlement Agreement closes, the Company intends to use the
proceeds to pay off the majority of its existing debt and to fund future
projects, including the Development Agreement.  In addition, the Company's
revenues from the Management Agreement will be





                                       19
<PAGE>   22
eliminated, and as a result the Company's only revenues will be from its video
lottery operations.

         The Company's video lottery space lease agreements with establishments
are for limited terms.  There is no assurance that the Company will be able to
renew the space lease agreements with existing establishments, or if the
agreements are renewed, that the terms will be as favorable to the Company as
the current agreements.  If the agreements are not renewed, or renewed with
terms less favorable to the Company, the Company's revenues, net income and
cash flow would be adversely impacted.  In addition, the trend in current years
has been a decrease in video lottery profits due to increased state share,
higher percentages paid to location owners and a decrease in
revenues-per-machine due to video lottery machines being placed in lower
revenue-per-machine locations.

         A substantial portion of the Company's revenues are derived from the 
Management Agreement.  The Company also has a significant portion of its assets
in the form of notes receivable and a significant portion of its short-term and
long-term notes payable that are related to the Management Agreement.  The
realization of the notes receivable and the Company's ability to meet its
short-term and long-term debt obligations are highly dependent upon the future
earnings and cash flows from the Management Agreement.  Any adverse change in
the operations of the Casino, the Company's relationship with TAT, an adverse
ruling in the arbitration proceeding, an adverse ruling in Tribal district
court, compliance with TAT's gaming compact with the State of North Dakota or a
determination by the NIGC that the terms of the Management Agreement are not in
compliance with IGRA could be detrimental to the Company.  As of September 30,
1996, the Company has recorded $5,752,004 of costs (of which $3,471,983 is
pursuant to the commitment under the Management Agreement and $2,280,021 is in
excess of budgeted amounts and is subject to arbitration) as a note receivable
related to the Management Agreement that remain subject to approval by TAT, and
subsequently could be disapproved by TAT. Any costs not approved by TAT, or
future arbitration proceedings, will be reclassified as a casino development
cost and amortized over the remaining term of the Management Agreement, and
would result in a decrease in future earnings and cash flow of the Company.

ITEM 7.  FINANCIAL STATEMENTS.

         The financial statements of the Company required by Regulation S-B are
attached to this Report.  Reference is made to Item 13 below for an index to
the financial statements and financial statement schedules.





                                       20
<PAGE>   23
ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

         None.


                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

         The directors and executive officers of the Company and their ages are
as follows:

<TABLE>
<CAPTION>
                     Name                   Age                         Position
                     ----                   ---                         --------
      <S>                                   <C>    <C>
      Jerry L. Baum(2)                       47    President, Chief Operating Officer and Director
      David L. Crabb                         38    Chief Financial Officer and Treasurer
      Brustuen "Bruce" H. Lien(1)(2)(3)      69    Chairman of the Board of Directors and Chief Executive Officer
      Deanna B. Lien(1)(2)(3)                53    Director
      George J. Nelson                       35    Vice President, Corporate Counsel and Secretary
</TABLE>

      _______________
      (1) Member of the Compensation Committee.
      (2) Member of the Executive Committee.
      (3) Member of the Stock Option Committee.

         At each annual meeting of shareholders, each director is elected to
hold office for a one year term expiring at the next succeeding annual meeting
or until their successor is duly elected and qualified.  Two of the directors,
Brustuen "Bruce" H. Lien and Deanna B. Lien are husband and wife.  None of the
other directors or officers of the Company bears any family relationship to any
other director or officer.  Each executive officer of the Company is elected
for a term of one year and serves until a successor is elected and qualified.

         Jerry L. Baum.  President since June 1995 and Chief Operating Officer
since April 1995.  Mr. Baum was appointed as a director in November 1995.  From
October 1, 1993 to February 1995, Mr. Baum served as Project Director of the
Casino.  From March to October 1993, Mr. Baum was manager of operations at the
Royal River Casino, a Class III Indian gaming casino owned by the Frandreau
Santee Tribe and from February 1987 to 1991 was Director of Criminal
Investigation, State of South Dakota.

         David L. Crabb.  Chief Financial Officer since May 1993 and Treasurer
since August 1993.  From March 1986 through May 1993, Mr. Crabb was a CPA for
Northwestern Engineering Company and Hills Materials Company.





                                       21
<PAGE>   24
         Brustuen "Bruce" H. Lien.  Chief Executive Officer since April 1995
and Chairman of the Board of Directors since August 10, 1990.  From October
1991 through June 1993, Mr. Lien served as the President and Chief Executive
Officer of the Company.  Mr. Lien is a director of Pete Lien & Sons, Inc.

         Deanna B. Lien.  Director since August 10, 1990.  Vice President and
Treasurer from August 10, 1990 to June 29, 1993.  Ms. Lien has been a Vice
President and Secretary of Diggers Auto Salvage, Inc. since 1986.

         George J. Nelson.  Vice President and Corporate Counsel since
September 1993 and Secretary since September 1995.  From March 1, 1990 to
August 31, 1993 Mr. Nelson was the General Manager of First Gold, Inc.

SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE

         Section 16(a) of the Securities Exchange Act of 1934 and the rules
thereunder require the Company's officers and directors, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file reports of ownership and changes in ownership with the Securities and
Exchange Commission and to furnish the Company with copies.

         Based on its review of the copies of the Section 16(a) forms received
by it, or written representations from certain reporting persons, the Company
believes that, during the last fiscal year, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten-percent
beneficial owners were complied with, except that Mr.  Baum, Mr. Crabb and Mr.
Nelson each reported one transaction late on a Form 5.

ITEM 10.  EXECUTIVE COMPENSATION.

CASH COMPENSATION

         The following table sets forth certain information concerning
compensation paid by the Company to the Chief Executive Officer and any
executive officer whose total annual salary and bonus exceeded $100,000 for the
last fiscal year.





                                       22
<PAGE>   25
                          SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                              LONG-TERM        ALL OTHER
                                                        ANNUAL               COMPENSATION     COMPENSATION
                                                      COMPENSATION              AWARDS             ($)    
                                                 ----------------------      ------------     ------------
                                                                              Securities
                                                                              Underlying
                                                                             Options/SARs
                                                                                 (#)
 Name and Principal Position        Year       Salary ($)     Bonus ($)       Options (#)
 ---------------------------        ----       ----------     ---------       -----------
 <S>                                <C>         <C>                <C>        <C>                    <C>
 Bruce H. Lien(1)                   1996            -0-            -0-              -0-              -0-
   Chief Executive Officer and      1995            -0-            -0-              -0-              -0-
   Chairman of the Board            1994            -0-            -0-        2,000,000              -0-

 Jerry L. Baum(2)(3)                1996        120,000            -0-          300,000              -0-
                                    1995        111,667            -0-           59,740              -0-
                                    1994         95,833            -0-          140,260              -0-
</TABLE>


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

 (1) Chief Executive Officer since April 1995.
 (2) Chief Operating Officer since April 1995 and President since June 1995.
 (3) Represents amounts paid to him as Project Director for BHL.  No salary was
 paid by the Company to Mr. Baum during 1994.

         The foregoing compensation tables do not include certain fringe
benefits made available on a nondiscriminatory basis to all company employees
such as group health insurance, dental insurance, long-term disability
insurance, vacation and sick leave.  In addition, some benefits which are made
available only to certain of the Company's officers, such as the use of a
Company vehicle, are not described, as the monetary value of such benefits is
believed to be below 10 percent of each of the named executive officer's annual
salary and bonus.

                       OPTION GRANTS IN LAST FISCAL YEAR

                              (INDIVIDUAL GRANTS)

<TABLE>
<CAPTION>
                                                      % of Total Options
                           Number of Securities      Granted to Employees
                            Underlying Options                in            Exercise or Base
         Name                   Granted (#)               Fiscal Year         Price ($/Sh)      Expiration Date
         ----                   -----------               -----------         ------------      ---------------
     <S>                         <C>                         <C>                  <C>            <C>
     Jerry L. Baum               300,000                     49%                  $.40           March 28, 2006
</TABLE>





                                       23
<PAGE>   26
           AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
                             YEAR-END OPTION VALUES



<TABLE>
<CAPTION>
                                               Number of Securities                Value of Unexercised
                                              Underlying Unexercised                   In-the-Money
                                                    Options at                          Options at
                                                    FY-End (#)                         FY-End ($)(1)
                Name                        Exercisable/Unexercisable            Exercisable/Unexercisable
                ----                        -------------------------            -------------------------
            <S>                                   <C>                                      <C>
            Jerry L. Baum                         96,104/403,896                           $0/$0
</TABLE>

(1)      Based on the average of the high and low bid price of the Common Stock
         on September 30, 1996.


COMPENSATION PURSUANT TO PLANS

         The Company has adopted a Performance Stock Option Plan (the "Plan"),
approved by the Shareholders, for the benefit of certain employees, officers
and directors of the Company.  The Stock Option Committee of the Board of
Directors selects the optionees and determines the terms and conditions of the
stock options granted pursuant to the Plan.  Options to purchase 610,000 shares
of Common Stock were granted pursuant to the Plan during Fiscal 1996.  As of
September 30, 1996, options to purchase 1,110,000 shares of Common Stock were
outstanding pursuant to the Plan, 225,612 of which were vested at September 30,
1996.

COMPENSATION OF DIRECTORS

         The Company does not compensate its directors for their services as
directors or pursuant to any other arrangements.  The Company reimburses its
directors for expenses incurred related to their services as directors.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The following table sets forth certain information regarding
beneficial ownership of outstanding shares of Common Stock as of December 16,
1996 by (i) each person who is known by the Company to own beneficially 5% or
more of the outstanding shares of Common Stock; (ii) the Company's directors;
(iii) all named executive officers; and (iv) all directors and executive
officers as a group.





                                       24
<PAGE>   27
<TABLE>
<CAPTION>
                                                                      Shares    
                                                                   Beneficially                 Percent of
                    Name                                             Owned(1)                      Class
                    ----                                             --------                      -----
 <S>                                                             <C>                               <C>
 Brustuen "Bruce" H. Lien  . . . . . . . .                       20,387,500(2)(4)                  70.9%
 3290 Lien Street
 Rapid City, SD  57702


 Deanna B. Lien(2) . . . . . . . . . . . .                       20,387,500(3)(4)                  70.9%
 3290 Lien Street
 Rapid City, SD  57702

 Jerry L. Baum . . . . . . . . . . . . . .                           96,104(5)                       .4%
 3290 Lien Street
 Rapid City, SD  57702

 All executive officers and directors as
 a group (5 persons) . . . . . . . . . . .                       20,603,279(4)(6)                  70.2%
</TABLE>

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

(1) Shares are considered beneficially owned, for purposes of this table, only
if held by the person indicated, or if such person, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise has
or shares the power to vote, to direct the voting of and/or to dispose of or to
direct the disposition of, such securities, or if the person has the right to
acquire the beneficial ownership within sixty days, unless otherwise indicated.
(2) This number includes the shares of Common Stock which are beneficially
owned, or which may be deemed to be beneficially owned, by Brustuen "Bruce" H.
Lien.  For purposes of this table, the same shares may be deemed to be
beneficially owned by Mr. Lien's wife, Deanna B. Lien.
(3) For purposes of this table, Deanna B. Lien is deemed to be the beneficial
owner of the shares of Common Stock which may be deemed to be beneficially owned
by her husband, Brustuen "Bruce" H. Lien. 
(4) This number includes 2,000,000 shares of Common Stock which may be acquired
pursuant to a currently exercisable warrant. 
(5) This number represents shares of Common Stock which may be acquired pursuant
to currently exercisable stock options.  
(6) This number includes 211,612 shares of Common Stock which may be acquired
pursuant to currently exercisable stock options.

         Except as stated herein, there are no arrangements known to the
Company which may result in a change in control of the Company, and each
shareholder has sole voting and investment power with respect to Common Stock
included in the above table.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         During 1996 and 1995, Mr. Lien, and an affiliated company controlled
by Mr. Lien, loaned money to the Company under various promissory notes.  These
amounts loaned varied





                                       25
<PAGE>   28
by month to month and carried an interest rate not in excess of 2% over prime
rate.  The Company currently has a promissory note in the principal amount of
$690,000 payable to a company controlled by Mr. Lien which is due on December
31, 1997 and provides for interest equal to the prime rate established by
Norwest Bank South Dakota, N.A. plus 2%.  The interest rate at September 30,
1996 was 10.25%.  The Company incurred interest expense relating to these notes
payable of $74,318 and $67,238, for Fiscal 1996 and Fiscal 1995, respectively.

         Mr. Lien has pledged assets and/or personally guaranteed loans in
order for the Company to obtain financing which otherwise may not have been
available to the Company, as follows:

                 (a)      Personal guarantee of a note payable to an unrelated
         third party, dated July 1993, for $1,867,130 for gaming equipment
         placed in service at the Casino.  The balance on the note at September
         30, 1996 was $0.

                 (b)      Pledge of assets to secure a note payable to an
         unrelated third party, dated July 1993, for $500,000 for working
         capital for the construction of the Casino.  The balance on the note
         at September 30, 1996 was $0.

                 (c)      Personal guarantee and pledge of assets to secure the
         payment of a note payable to a bank, dated September 1994, for
         $1,296,124 for video lottery machines.  The balance on the note at
         September 30, 1996 was $0.

                 (d)      Personal guarantee of a note payable to an unrelated
         third party, dated December 1993, for $2,400,000 for construction of
         the Casino.  The balance on the note at September 30, 1996 was
         $1,497,892.

                 (e)      Personal guarantee of a note payable to a bank, dated
         January 1994, for $66,589 for acquisition of stock in Bayou Gaming,
         Inc.  The balance on the note at September 30, 1996 was $10,208.

                 (f)      Personal guarantee of a note payable to a bank, dated
         June 1996, for $800,000 for video lottery machines.  The balance on
         the note at September 30, 1996 was $733,334.

                 (g)      Personal guarantee of a short-term revolving note
         payable to a bank, dated June 1996, for $500,000.  The balance on the
         note at September 30, 1996 was $500,000.

                 (h)      Personal guarantee of a conditional credit line to a
         bank, dated April 1996, for $100,000.  The balance on the note at
         September 30, 1996 was $95,000.

         In consideration for such pledges and guarantees, on January 26, 1994
the Company issued a warrant to Mr. Lien for 2,000,000 shares of Common Stock
at an exercise price of $1.00 per share.  This warrant expires in January 2004.
In addition, the Company entered into an indemnification agreement with Mr.
Lien whereby the Company has agreed to indemnify him





                                       26
<PAGE>   29
from all losses, claims, damages and expenses relating to any guarantees and/or
pledges of collateral made by Mr. Lien on behalf of the Company.

         The Company leases approximately 4,500 square feet of office space
located in Rapid City, South Dakota from a company controlled by Mr. Lien under
a lease that expires September 30, 1997.  The monthly lease payment, including
real estate taxes and utilities, is $2,862.

         The Company also leases an airplane, on an as needed basis, from a
company controlled by Mr. Lien.  The Company incurred lease payments to this
affiliate of $43,966 and $43,101 during Fiscal 1996 and Fiscal 1995,
respectively.





                                       27
<PAGE>   30
                                    PART IV

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

         The following documents of the Company are filed as part of this
Report:

                          Financial Statements

                          Independent Auditors' Report (KPMG Peat Marwick LLP)
                          Consolidated Balance Sheets at September 30, 1996
                            and 1995
                          Consolidated Statements of Income for the Years Ended 
                            September 30, 1996 and 1995
                          Consolidated Statements of Stockholders' Equity for
                            the Years Ended September 30, 1996 and 1995
                          Consolidated Statements of Cash Flows for the Years
                            Ended September 30, 1996 and 1995
                          Notes to Consolidated Financial Statements





                                       28
<PAGE>   31
                 (a)      Exhibits

<TABLE>
<CAPTION>
Exhibit No.       Description
-----------       -----------
<S>            <C>
3.1            Amended and Restated Articles of Incorporation.(1)

3.2            Third Amended and Restated Bylaws.(1)

4              Form of Common Stock Certificate.(2)

10.2           1992 Performance Stock Option Plan.(3)

10.3           Management Agreement By and Between the Three Affiliated Tribes and Bruce H. Lien Company, dated as of
               December 7, 1992, and amended as of February 19, 1993.(4)

10.6           Agreement to sublease dated June 2, 1993 between the Registrant and Jon Yi Company.(5)

10.7           Settlement Agreement dated September 30, 1994 between the Registrant, Bruce H. Lien Company, Brustuen
               "Bruce" H. Lien and Four Bears Investment Limited Liability Company.(6)

10.8           Stock Purchase Agreement between the Company and Yvonne R. Scott dated September 29, 1995.(1)

10.9           Development Agreement among the Company, Concorde Gaming of Missouri, Inc. and the City of Lexington,
               Missouri dated September 26, 1995.(1)

10.10          Indemnification Agreement between the Company and Bruce H. Lien.(1)

10.11          Second Renewal Promissory Note in the principal amount of $2,400,000 dated December 21, 1995 issued by
               the Company to Roland Gentner.(1)

10.12          Second Loan Extension Agreement dated December 21, 1995 between the Company and Roland Gentner.(1)

10.13          Promissory Note in the amount of $690,000 dated September 30, 1996 issued by the Company to BHL 
               Capital Corporation.(+)


10.14          Assignment Agreement dated April 6, 1995 between the Company and Federalist Municipal Development
               Corporation.(1)
</TABLE>





                                       29
<PAGE>   32
<TABLE>
<S>            <C>
10.15          Contract for Purchase of Assets dated November 10, 1995 between the Company and J & U, Inc.(1)

10.16          Settlement Agreement between The Three Affiliated Tribes of the Fort Berthold Reservation and Bruce H.
               Lien Company dated September 27, 1996.(7)

10.17          Loan Agreement between the Company and BNC National Bank of Minnesota dated June 20, 1996.(+)

10.18          Term Note in the amount of $800,000 dated June 20, 1996 issued by BNC National Bank to the Company.(+)

10.19          Sort-Term Revolving Note in the amount of $500,000 dated June 20, 1996 issued by BNC National Bank to the Company.(+)

10.20          Supplemental Revolving Note in the amount of $300,000 dated December 13, 1996 issued by BNC National Bank 
               to the Company.(+)

10.21          Amendment No. 1 to Settlement Agreement dated January 7, 1997 between BHL and FBILLC.(+)

11             Computation of Per Share Earnings.(+)

21             Subsidiaries of the Registrant.(1)

23             Consent of Independent Accountants.(+)

27             Financial Data Schedule(+)
</TABLE>


_________________


(1) Previously filed with the Securities and Exchange Commission as an exhibit
to the Company's Annual Report on Form 10-KSB for the year ended September 30,
1995.
(2) Previously filed with the Securities and Exchange Commission on May 6,
1991, as an Exhibit to the Annual Report on Form 10-K of the Company for the
fiscal year ended September 30, 1990 and incorporated herein by this reference.
(3) Previously filed with the Securities and Exchange Commission by the Company
on September 24, 1992 as Exhibit 10 to the Registration Statement on Form S-8,
file number 33-52388 and incorporated herein by this reference.
(4) Previously filed with the Securities and Exchange Commission on October 15,
1993, as an Exhibit to the Current Report of the Company on Form 8-K and
incorporated herein by this reference.
(5) Previously filed with the Securities and Exchange Commission by the Company
on July 30, 1993 as an Exhibit to the Current Report on Form 8-K and
incorporated herein by this reference.
(6) Previously filed with the Securities and Exchange Commission as an exhibit
to the Company's Annual Report on Form 10-KSB for the year ended September 30,
1994.
(7) Previously filed with the Securities and Exchange Commission by the Company
as an exhibit to its Current Report on Form 8-K dated September 27, 1996.  
(+) Filed herewith.

                 (b)      Reports on Form 8-K:

                 The Company filed a Current Report on Form 8-K dated September
                 27, 1996 under Item 5.





                                       30
<PAGE>   33





                          CONCORDE GAMING CORPORATION

                               -----------------
                               TABLE OF CONTENTS
                               -----------------

<TABLE>
<CAPTION>
                                                                                                                     Page
                                                                                                                     ----
<S>                                                                                                                  <C>
INDEPENDENT AUDITORS' REPORT (KPMG Peat Marwick LLP)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
CONSOLIDATED FINANCIAL STATEMENTS:
   Balance Sheets - September 30, 1996 and 1995   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
   Statements of Income - Years Ended . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
     September 30, 1996 and 1995
   Statements of Stockholders' Equity - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
      Years Ended September 30, 1996 and 1995
   Statements of Cash Flows - Years Ended . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
      September 30, 1996 and 1995

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-9 to F-23
</TABLE>



                                     F-1
<PAGE>   34
                          INDEPENDENT AUDITORS' REPORT




The Board of Directors and Stockholders
Concorde Gaming Corporation:


We have audited the accompanying consolidated balance sheets of Concorde Gaming
Corporation and subsidiaries as of September 30, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for the
years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Concorde Gaming
Corporation and subsidiaries as of September 30, 1996 and 1995, and the results
of their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.





                                           KPMG Peat Marwick LLP



Minneapolis, Minnesota
November 8, 1996, except as to Note 9 which 
is as of January 7, 1997.




                                     F-2
<PAGE>   35
                CONCORDE GAMING CORPORATION AND SUBSIDIARIES

                         Consolidated Balance Sheets

                         September 30, 1996 and 1995


<TABLE>
<CAPTION>
                               Assets                                      1996           1995
------------------------------------------------------------------------------------------------
<S>                                                              <C>                  <C>
Current assets:
  Cash                                                           $        120,572        520,438
  Receivables:
    Trade                                                                  13,156          5,687
    Management agreement                                                  230,442        343,715
    Interest                                                               37,120         35,872
    Current maturities of long-term receivables:
      The Three Affiliated Tribes (note 5)                              1,675,800      1,486,600
      Notes receivable (note 4)                                            30,584        426,846
  Prepaid expenses                                                         47,385         53,398
  Refundable federal income taxes                                               0         73,000
  Other current                                                            33,828         19,582
------------------------------------------------------------------------------------------------
          Total current assets                                          2,188,887      2,965,138
------------------------------------------------------------------------------------------------

Investments and long-term receivables:
  Long-term receivables from the Three Affiliated
    Tribes (note 5)                                                     4,076,204      5,755,415
  Notes receivable, less current maturities (note 4)                        8,509        224,135
  Investment in unconsolidated affiliate (note 6)                         236,364              0
  Other                                                                     3,250         16,750
------------------------------------------------------------------------------------------------
                                                                        4,324,327      5,996,300
------------------------------------------------------------------------------------------------
Property and equipment, at cost:
  Land                                                                     50,000              0
  Building                                                                205,511              0
  Video lottery equipment                                               2,487,101      2,553,152
  Furniture and equipment                                                 269,104        179,149
  Vehicles                                                                120,825        118,133
  Leasehold improvements                                                  301,447         53,346
------------------------------------------------------------------------------------------------
                                                                        3,433,988      2,903,780
  Less accumulated depreciation                                        (1,491,883)    (1,094,426)
------------------------------------------------------------------------------------------------
                                                                        1,942,105      1,809,354
------------------------------------------------------------------------------------------------

Intangibles:
  Noncompetition agreements, net                                           34,782         74,766
  Other, principally goodwill, net                                        402,799        424,242
  Casino development and financing costs, net (note 7)                    523,741        410,207
------------------------------------------------------------------------------------------------
                                                                          961,322        909,215

------------------------------------------------------------------------------------------------
                                                                 $      9,416,641     11,680,007
================================================================================================
</TABLE>

The accompanying notes are an integral part of these statements.





                                      F-3



<PAGE>   36
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity                                         1996            1995
---------------------------------------------------------------------------------------------------
<S>                                                                <C>                   <C>
Current liabilities:
  Notes payable (note 8)                                           $        595,000          15,000
  Current maturities of long-term debt (note 9)                           2,631,981       4,293,388
  Accounts payable:
    Trade                                                                   121,926         108,564
    Construction related                                                    199,855         199,855
  Accrued expenses:
    Lottery state share                                                     150,473         196,275
    Payroll and payroll taxes                                                36,669          14,719
    Accrued interest                                                        131,335          74,171
    Other                                                                    44,270           1,249
  Income taxes payable                                                      126,600          31,688
---------------------------------------------------------------------------------------------------
        Total current liabilities                                         4,038,109       4,934,909
---------------------------------------------------------------------------------------------------

Long-term debt, less current maturities (note 9)                            617,774       2,601,326

Note payable to related party (note 8)                                      690,000         690,000

Deferred income taxes (note 11)                                              46,600          68,200
---------------------------------------------------------------------------------------------------
        Total liabilities                                                 5,392,483       8,294,435
---------------------------------------------------------------------------------------------------

Stockholders' equity (notes 9, 12, and 14):
  Common stock,  par value $.01 per share, authorized
    500,000,000 shares; issued and outstanding 26,755,193
    at September 30, 1996 and 1995                                          267,552         267,552
  Preferred stock, par value $.01 per share, authorized
    10,000,000 shares; no shares issued and out-
    standing at September 30, 1996 and 1995                                       0               0
  Additional paid-in capital                                              3,907,547       3,868,775
  Retained earnings (accumulated deficit)                                   350,538        (207,121)
---------------------------------------------------------------------------------------------------
                                                                          4,525,637       3,929,206

  Less stock subscription in the form of a note and
    related accrued interest receivable (note 10)                          (183,877)       (226,032)
  Less cost of treasury stock, 4,825,400 shares at
    September 30, 1996 and 1995, respectively                              (317,602)       (317,602)
---------------------------------------------------------------------------------------------------
        Total stockholders' equity                                        4,024,158       3,385,572


Commitments and contingencies (notes 3, 9, 12, 14, 15, and 16)
---------------------------------------------------------------------------------------------------
                                                                   $      9,416,641      11,680,007
===================================================================================================
</TABLE>





                                       F4





<PAGE>   37
                  CONCORDE GAMING CORPORATION AND SUBSIDIARIES

                       Consolidated Statements of Income

                For the years ended September 30, 1996 and 1995


<TABLE>
<CAPTION>
                                                      1996         1995
--------------------------------------------------------------------------
<S>                                             <C>             <C>
Revenues:
  Video lottery                                 $   8,985,467    8,136,160
  Management Agreement (note 3)                     2,064,649    2,984,271
  Other                                               192,470       20,342
--------------------------------------------------------------------------
      Total revenue                                11,242,586   11,140,773
--------------------------------------------------------------------------

Costs and expenses:
  Video lottery state share                         4,471,432    3,298,701
  Video lottery location share                      2,891,852    3,164,046
  Compensation expenses                               981,536      696,863
  Business development costs                           74,786      109,940
  Depreciation and amortization                       636,331      667,257
  Operating expenses                                1,234,633      786,727
--------------------------------------------------------------------------
      Total costs and expenses                     10,290,570    8,723,534
--------------------------------------------------------------------------

Operating income                                      952,016    2,417,239
--------------------------------------------------------------------------

Other income (expense):
  Interest income                                     683,444      604,202
  Loss on sale of equipment                            (6,882)     (48,304)
  Other income                                          8,435            0
  Interest expense and financing costs               (794,054)  (1,341,088)
  Equity in earnings of unconsolidated
    affiliate (note 6)                                 53,700       50,824
--------------------------------------------------------------------------
                                                      (55,357)    (734,366)
--------------------------------------------------------------------------

Income before taxes                                   896,659    1,682,873

Federal and state income taxes (note 11)              339,000      623,000
--------------------------------------------------------------------------
Net income                                      $     557,659    1,059,873
==========================================================================

Net income per common and common
  equivalent share                              $        0.03         0.05
==========================================================================
Weighted average number of common and
  common equivalent shares outstanding             22,175,415   21,983,378
==========================================================================
</TABLE>


The accompanying notes are an integral part of these statements.




                                     F-5

<PAGE>   38
                  CONCORDE GAMING CORPORATION AND SUBSIDIARIES

                 Consolidated Statements of Stockholders' Equity

                For the years ended September 30, 1996 and 1995


<TABLE>
<CAPTION>
                                                                                                     Stock
                                                                                                  subscription
                                                                                                  in the form
                                                                                                   of a note
                                                                                      Retained    and related
                                                                        Additional    earnings      accrued
                                               Number        Common       paid-in   (accumulated   interest     Treasury
                                              of shares      stock        capital     deficit)    receivable     stock       Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>        <C>             <C>         <C>            <C>         <C>        <C>
Balance September 30, 1994                    26,987,593  $  269,876     3,898,745   (1,266,994)    (261,181)   (402,075)  2,238,371

  Net income                                           0           0             0    1,059,873            0           0   1,059,873
  Cancellation of 153,400 shares of common
    stock relating to merger with Bruce H.
    Lien Company (note 2)                       (153,400)     (1,534)        1,534            0            0           0           0
  Cancellation of 79,000 shares of common
    stock held in treasury                       (79,000)       (790)      (83,683)           0            0      84,473           0
  Issuance of warrant for 400,000 shares
    of common stock in connection with
    note payable (note 9)                              0           0         8,000            0            0           0       8,000
  Interest earned on note receivable (note 1           0           0        44,179            0          355           0      44,534
  Principal payments received on note
    receivable (note 10)                               0           0             0            0       34,794           0      34,794
------------------------------------------------------------------------------------------------------------------------------------

Balance September 30, 1995                    26,755,193     267,552     3,868,775     (207,121)    (226,032)   (317,602)  3,385,572

  Net income                                           0           0             0      557,659            0           0     557,659
  Issuance of warrant for 80,000 shares of
    common stock in connection with note
    payable (note 9)                                   0           0         1,600            0            0           0       1,600
  Interest earned on note receivable (note 1           0           0        37,172            0          424           0      37,596
  Principal payments received on note
    receivable (note 10)                               0           0             0            0       41,731           0      41,731
------------------------------------------------------------------------------------------------------------------------------------

Balance September 30, 1996                    26,755,193  $  267,552     3,907,547      350,538     (183,877)   (317,602)  4,024,158
====================================================================================================================================
</TABLE>

The accompanying notes are an integral part of these statements.





                                     F-6
<PAGE>   39
                  CONCORDE GAMING CORPORATION AND SUBSIDIARIES

                     Consolidated Statements of Cash Flows

                For the years ended September 30, 1996 and 1995


<TABLE>
<CAPTION>
                                                                      1996           1995
--------------------------------------------------------------------------------------------
<S>                                                                               <C>
Cash flows from operating activities:
  Net income                                                    $    557,659       1,059,873
  Adjustments to reconcile net income to net cash flows
    provided by operating activities:
      Depreciation and amortization                                  636,331         667,257
      Warrants issued                                                  1,600          15,000
      Deferred income taxes                                          (21,600)        513,700
      Equity in earnings of unconsolidated affiliate                 (53,700)        (50,824)
      Loss on disposal of property and equipment                       6,882          48,304
      Change in assets and liabilities:
        Receivables--trade, management agreement, and interest        92,270        (119,169)
        Prepaid expenses                                               6,013         (39,632)
        Accounts payable and accrued expenses                         89,693        (150,417)
        Refundable federal income taxes and income taxes payable
          current and other                                          167,912          31,688
        Other                                                        (14,246)        (52,221)
--------------------------------------------------------------------------------------------
            Net cash provided by operating activities              1,468,814       1,923,559
--------------------------------------------------------------------------------------------

Cash flows from investing activities:
  Advances on long-term receivables                                 (101,000)        (29,734)
  Principal payments received on long-term receivables             1,902,787       1,511,696
  Purchase of property and equipment                                (423,015)        (52,417)
  Purchase of intangibles                                            (61,839)              0
  Proceeds from sale of property and equipment                        40,304          37,250
  Payments for casino development costs                             (182,884)        (97,504)
  Investment in and advances to unconsolidated affiliate             120,110          (6,000)
  Proceeds from sale of Bayou Gaming, Inc. stock                           0         100,000
  Other                                                               12,489         (14,698)
--------------------------------------------------------------------------------------------
            Net cash provided by investing activities              1,306,952       1,448,593
--------------------------------------------------------------------------------------------

Cash flows from financing activities:
  Proceeds from long-term borrowing                                  812,992         276,971
  Principal payments on long-term debt                            (4,647,951)     (3,175,300)
  Net change in short-term borrowings                                580,000        (180,000)
  Payments received on stock subscription in the form of a note
    and related accrued interest receivable                           79,327          79,328
--------------------------------------------------------------------------------------------
            Net cash flows used in financing activities           (3,175,632)     (2,999,001)
--------------------------------------------------------------------------------------------

Net (decrease) increase in cash                                     (399,866)        373,151
--------------------------------------------------------------------------------------------

Cash, beginning of year                                              520,438         147,287
--------------------------------------------------------------------------------------------

Cash, end of year                                               $    120,572         520,438
============================================================================================
</TABLE>
                                                                     (Continued)

                                       F-7

<PAGE>   40
                  CONCORDE GAMING CORPORATION AND SUBSIDIARIES

                Consolidated Statements of Cash Flows, Continued


<TABLE>
<CAPTION>
                                                                                  1996            1995            
<S>                                                                                             <C>          
---------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:                                                           
  Cash payments for:                                                                                         
    Interest                                                                $       736,890     1,323,570    
=========================================================================================================
                                                                                                             
    Income taxes                                                            $       190,764       134,000    
=========================================================================================================
Supplemental schedule of noncash investing and financing activities:                                 
  Issuance of note payable for acquisition of property and equipment        $       190,000             0    
=========================================================================================================
  Purchase of 40 shares of Bayou Gaming, Inc. common stock                  $       192,287             0    
=========================================================================================================
  Long-term note receivable received for sale of Video Lottery                                               
    Casino assets                                                           $             0       145,304    
=========================================================================================================
  Long-term note receivable received for sale of Bayou Gaming,                                               
    Inc. common stock                                                       $             0       230,000    
=========================================================================================================
</TABLE>                                                                 
                                                                         
                                                                         
The accompanying notes are an integral part of these statements.         


                                     F-8
<PAGE>   41


                  CONCORDE GAMING CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          September 30, 1996 and 1995


   (1)   NATURE OF BUSINESS, PRINCIPLES OF CONSOLIDATION, AND SUMMARY OF
         SIGNIFICANT ACCOUNTING POLICIES

         NATURE OF BUSINESS

          The Company owns and operates video lottery route operations in the
             state of South Dakota. In connection therewith, the Company
             acquires video lottery machines and facilities or leases space
             from food and beverage establishments in exchange for an
             agreed-upon share of the video lottery net revenue after the
             state's share of the proceeds. The lottery operations are
             regulated by the South Dakota Lottery Commission.

          In addition, the Company developed the 4 Bears Casino and Lodge
             (Casino), a casino, bingo hall, lodge, and restaurant facility for
             the Three Affiliated Tribes (TAT) on Indian land in North Dakota
             that it manages for an agreed-upon fee based on results of
             operations, in accordance with the Management Agreement
             (Management Agreement).

         PRINCIPLES OF CONSOLIDATION

          The consolidated financial statements include the accounts of
             Concorde Gaming Corporation and its majority-owned subsidiaries.
             All significant intercompany accounts and transactions have been
             eliminated in consolidation. Concorde Gaming Corporation and its
             subsidiaries are herein referred to as the Company.

         USE OF ESTIMATES

          The preparation of consolidated financial statements in accordance
             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. Actual results could
             differ from those estimates.

         SIGNIFICANT ACCOUNTING POLICIES

             REVENUE RECOGNITION

             Revenue from video lottery is the net win, which is the difference
                between coins in and winnings paid to customers. Location share
                and state share are recorded as expenses based upon the
                recorded net win.

             Revenue from the management of the casino is recognized when
                earned according to terms of the Management Agreement.

                                                                     (Continued)





                                      F-9
<PAGE>   42


                  CONCORDE GAMING CORPORATION AND SUBSIDIARIES


             RECEIVABLE FROM THE THREE AFFILIATED TRIBES

             It is the Company's policy to report all costs incurred for the
                construction and development of the Casino as a long-term
                receivable, pursuant to the terms of the Management Agreement
                with the Three Affiliated Tribes (the TAT) (see notes 3, 5, and
                16). Such costs are reimbursed to the Company over the term of
                the Management Agreement and are subject to the approval of the
                TAT. Any construction and development costs not approved by the
                TAT will be reclassified as casino development costs and
                amortized over the remaining term of the Management Agreement.
                As of September 30, 1996, no costs have been reclassified as
                casino development costs.

             As of September 30, 1996, $4,285,271 of costs remain subject to
                approval by the TAT, and could subsequently be disapproved by
                the TAT (see note 5). However, the Company believes the
                approval process will not be necessary due to the Settlement
                Agreement with the TAT (see note 3). In the event the
                Settlement Agreement fails to close by April 30, 1997, the
                Company believes substantially all costs will be approved by
                the TAT as the result of future arbitration proceedings, as
                provided for under the Management Agreement.

             The Company assesses the recoverability of the long-term
                receivable by determining whether the amount can be recovered
                from future undiscounted cash flows of the 4 Bears Casino and
                Lodge. The amount of impairment, if any, is measured based on
                projected discounted cash flows of the 4 Bears Casino and Lodge
                using a discount rate reflecting the Company's average cost of
                funds. As of September 30, 1996, there is no impairment based
                upon this analysis.

             NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE

             For the years ended September 30, 1996 and 1995, net income per
                common and common equivalent share was computed using the
                weighted average number of common shares and common stock
                equivalents, consisting of stock options and warrants
                outstanding.

             DEPRECIATION

             It is the Company's policy to provide depreciation using the
                straight-line method on property and equipment based on the
                following estimated useful lives and salvage values:

<TABLE>
<CAPTION>
                                                                                  Life         Salvage value
------------------------------------------------------------------------------------------------------------
                <S>                                                            <C>                <C>
                Video lottery equipment and furniture
                  and equipment                                                  5-7 years        0-15%
                Vehicles                                                           5 years        0-10
                Leasehold improvements                                         7-20 years         0
                Building                                                          39 years        0
</TABLE>

                                                                     (Continued)





                                      F-10
<PAGE>   43


                  CONCORDE GAMING CORPORATION AND SUBSIDIARIES


             AMORTIZATION

             Noncompetition agreements, which range from two to five years, are
                amortized over the life of the agreements using the
                straight-line method. Amounts reflected on the balance sheets
                are net of accumulated amortization of $97,338 and $203,486 in
                1996 and 1995, respectively.

             Goodwill (excess of purchase price over net assets acquired) is
                amortized over its estimated useful life of ten years using the
                straight-line method. Amounts reflected on the consolidated
                balance sheets are net of accumulated amortization of $171,062
                and $94,894 in 1996 and 1995, respectively.

             Casino development and financing costs related to the Management
                Agreement are amortized using the straight-line method over the
                seven-year term of the Management Agreement.

             The Company assesses the recoverability of intangible assets other
                than noncompete agreements by determining whether the
                amortization of the intangible assets over their remaining
                lives can be recovered through undiscounted future operating
                cash flows of the acquired or related operations. The amount of
                impairment, if any, is measured based on projected discounted
                future operating cash flows using a discount rate reflecting
                the Company's average cost of funds. As of September 30, 1996,
                there is no impairment based upon this analysis.

             CASINO DEVELOPMENT COSTS

             It is the Company's policy to capitalize all costs incurred
                relating to the state approval of a license to operate a casino
                and the establishment of a gaming operation.

             INCOME TAXES

             The Company accounts for income taxes under Statement of Financial
                Accounting Standards No. 109. Deferred tax assets and
                liabilities are recognized for the future tax consequences
                attributable to differences between the financial statement
                carrying amounts of existing assets and liabilities and their
                respective tax bases. Additionally deferred tax assets are
                recorded for income tax operating loss carryforwards.  Deferred
                tax assets are reduced by a valuation allowance when, in the
                opinion of management, it is more likely than not that some
                portion or all of the deferred tax assets will not be realized.
                Deferred tax assets and liabilities are adjusted for the
                effects of changes in tax laws and rates on the date of
                enactment.

                                                                     (Continued)





                                      F-11
<PAGE>   44


                  CONCORDE GAMING CORPORATION AND SUBSIDIARIES


             NEWLY ISSUED ACCOUNTING STANDARDS

             In March 1995, the Financial Accounting Standards Board (FASB)
                issued Statement of Financial Accounting Standards No. 121,
                (SFAS 121) Accounting for the Impairment of Long-Lived Assets
                and for Long-Lived Assets to Be Disposed Of, which is effective
                for fiscal years beginning after December 15, 1995 (beginning
                with the Company's fiscal 1997). SFAS 121 established
                accounting standards for the impairment of long-lived assets,
                certain identifiable intangibles, and goodwill related to those
                assets to be held and used and for long-lived assets and
                certain identifiable intangibles to be disposed of. The
                implementation of SFAS No. 121 in the Company's fiscal 1997 is
                not expected to have a material impact on the Company's results
                of operations or financial position.

             In October 1995, the Financial Accounting Standards Board (FASB)
                issued Statement of Financial Accounting Standards No. 123,
                (SFAS 123), Accounting for Stock-Based Compensation, which is
                effective for fiscal years beginning after December 15, 1995
                (beginning with the Company's fiscal 1997), which establishes a
                fair value method of accounting for stock-based compensation
                plans. SFAS 123 allows companies to continue to apply
                pre-existing accounting guidance contained in APB Opinion No.
                25 (APB 25), Accounting for Stock Issued to Employees, but
                requires disclosure of pro forma net income and earnings per
                share as if the fair value based accounting method had been
                used to account for stock-based compensation.  Management plans
                to retain the current accounting method and will provide the
                necessary fair value disclosures in 1997.

             RECLASSIFICATIONS

             Certain 1995 amounts have been reclassified to conform to the 
                1996 presentation.

   (2)   ACQUISITION OF BRUCE H. LIEN COMPANY

          On September 30, 1993, as part of a merger agreement, the Company
             acquired all of the outstanding capital stock of Bruce H. Lien
             Company (BHL).

          As consideration for the BHL shares acquired from Bruce H. Lien, an
             individual, hereinafter referred to as "Lien", the Company issued
             4,892,000 shares to Lien and 2,349,800 shares to an escrow agent
             for a total of 7,241,800 shares. In accordance with the merger
             agreement, the shares issued and held in escrow were to be
             released to Lien in proportion to a "lookback" valuation based on
             the income generated by the Management Agreement. The lookback
             provision required that the shares in escrow be reduced by 1.5
             shares for each dollar that the Management Agreement income (after
             tax) was less than $1,566,533 during the year ended September 30,
             1994. Based on the Management Agreement operating results, the
             escrow agent returned 153,400 shares to the Company for
             cancellation.

                                                                     (Continued)





                                      F-12
<PAGE>   45


                  CONCORDE GAMING CORPORATION AND SUBSIDIARIES


   (3)    MANAGEMENT AGREEMENT

          The Company has an agreement with the TAT for the management of the
             Casino located on the Fort Berthold Indian Reservation near New
             Town, North Dakota. The Management Agreement governs the
             relationship between the Company and the Tribe with respect to the
             construction, renovation, financing, and management of the casino,
             lodge, restaurant, and bingo hall (the Casino).

          The five-year Management Agreement commenced upon the opening of the
             Casino in July 1993. In October 1994, the Company exercised its
             option to extend the Management Agreement for two additional
             years. The Company receives 40% of the net profits during the
             initial five-year term of the agreement and 30% during the two-
             year option period. Net profits are defined in the agreement and
             include a deduction for repayment of construction and other
             capital costs incurred by the Company (note 5).

          The Management Agreement was approved by the Bureau of Indian Affairs
             (BIA) and the United States Department of the Interior to be in
             compliance with the Indian Gaming Regulatory Act of 1988 (IGRA).
             Subsequent to approval by the BIA, the National Indian Gaming
             Commission (NIGC) assumed authority for the approval and review of
             Management Agreements. As part of the matter discussed in note 16,
             in June 1995, the NIGC initiated a review of the Management
             Agreement. On May 17, 1996, the NIGC notified the Company and the
             TAT that modifications to the agreement were necessary. It
             provided the parties a list of deficiencies that concerned
             provisions in the agreement and its submission to the NIGC. The
             NIGC also communicated that operation of the Casino without proper
             licensing and background investigations violated NIGC regulations.
             The NIGC threatened possible closure and civil penalties if the
             parties failed to make progress towards regulatory compliance.

          On September 27, 1996, the Company and TAT negotiated a buyout
             settlement agreement (Settlement Agreement), whereby the TAT
             agrees to purchase from the Company the right to terminate the
             Management Agreement in exchange for $8.65 million, payable to the
             Company by February 24, 1997. If the parties fail to close by
             February 24, 1997, the TAT must pay the Company interest on the
             Settlement Agreement amount equal to the Company's blended cost of
             funds, not to exceed 18%, until closing or April 30, 1997,
             whichever occurs sooner. In the event the parties fail to close by
             April 30, 1997, the Management Agreement shall be deemed to have
             been unaffected by the Settlement Agreement and the parties'
             rights and claims asserted with respect to the Management
             Agreement shall be deemed to have been preserved. Until the
             closing, the Company remains as Manager of the Casino and will
             assist the TAT in training its designated personnel for management
             of the Casino subsequent to the closing date. Monthly distribution
             amounts received by the Company after October 15, 1996 will offset
             the Settlement Agreement amount. All necessary governmental
             approvals are also required to be obtained by the closing date. At
             closing, the Company must turnover management control to the TAT
             and the parties agree to dismiss all outstanding disputes between
             them (see note 16).

                                                                     (Continued)





                                      F-13
<PAGE>   46


                  CONCORDE GAMING CORPORATION AND SUBSIDIARIES


          As of September 30, 1996,the Company has approximately $6,000,000 in
             notes receivable and other assets related to the Management
             Agreement. Accordingly, considering the Settlement Agreement
             payment of $8.65 million, the Company expects a gain on closing of
             this transaction. The amount of gain will be affected by monthly
             distribution amounts as described above and closing costs.

   (4)    NOTES RECEIVABLE

          Notes receivable consist of:

<TABLE>
<CAPTION>
                                                                                                    1996          1995
                       <S>                                                                      <C>              <C>   
                       --------------------------------------------------------------------------------------------------
                       Various notes receivable repaid in full during the year ended
                          September 30, 1996                                                    $         0       650,981

                       Other notes receivable                                                        39,093             0
                       --------------------------------------------------------------------------------------------------
                                                                                                     39,093       650,981

                       Less current maturities                                                       30,584       426,846
                       --------------------------------------------------------------------------------------------------
                                                                                                $     8,509       224,135
                       ==================================================================================================
</TABLE>               

   (5)   RECEIVABLE FROM THE THREE AFFILIATED TRIBES

          The Company has a receivable from the TAT for monies expended
             pursuant to the Management Agreement relating to development and
             expansion of the Casino and related facilities as follows:

<TABLE>
<CAPTION>
                                                                                           1996             1995
                          ------------------------------------------------------------------------------------------
                          <S>                                                           <C>                <C>
                          Pursuant to the commitment under the Management Agreement     $ 7,450,000        7,450,000
                          Additional amounts expended for expansion                       2,280,021        2,280,021
                          ------------------------------------------------------------------------------------------
                                                                                          9,730,021        9,730,021

                          Less repayments received                                       (3,978,017)      (2,488,006)
                          ------------------------------------------------------------------------------------------
                                                                                          5,752,004        7,242,015

                          Less current maturities                                        (1,675,800)     (1,486,600)
                          ------------------------------------------------------------------------------------------

                                                                                        $ 4,076,204        5,755,415
                          ==========================================================================================
</TABLE>



          In accordance with the Settlement Agreement discussed in notes 3 and
             16, the TAT will make monthly payments of $194,412, which does not
             include interest, from October 1, 1996 to the date of closing.

                                                                     (Continued)





                                      F-14
<PAGE>   47


                  CONCORDE GAMING CORPORATION AND SUBSIDIARIES


          In the event the Company and the TAT fail to close by April 30, 1997,
             the receivable will follow the current terms of the Management
             Agreement. The Company will receive equal monthly installments
             over the first 60 months of the Management Agreement, including
             interest at a variable rate, 24% at September 30, 1996.  Monthly
             payment is limited not to exceed 50% of the net distributable
             profits from the Casino.

          Pursuant to terms of the Management Agreement, the TAT must approve
             construction and development costs related to the Casino. As of
             September 30, 1996, $5,444,750 of the $9,730,021 had been approved
             and the remaining $4,285,271 is pending approval (of which
             $2,005,250 is pursuant to the commitment under the Management
             Agreement and $2,280,021 is in excess of budgeted amounts and
             subject to arbitration). As further discussed in notes 1, 3, and
             16, the approval process may not be necessary due to the
             Settlement Agreement with TAT.  In the event the Settlement
             Agreement fails to close by April 30, 1997, the increase in the
             amount of expansion costs to be reimbursed in excess of $7,450,000
             may be subject to approval by the chairman of the NIGC and will
             likely be subject to arbitration proceedings.

   (6)    INVESTMENT IN UNCONSOLIDATED AFFILIATE

          In January 1994, the Company acquired a 49.6% interest in Bayou
             Gaming, Inc. (Bayou), which operates a video poker route in
             Louisiana. On September 30, 1995, the Company sold its entire
             interest in Bayou to an unrelated party for $330,000, consisting
             of $100,000 in cash and $230,000 in notes receivable.

          On April 1, 1996, the Company reacquired a 38.5% interest in Bayou in
             forgiveness of $180,000 of the notes receivable plus accrued
             interest. Goodwill of $96,000 has been recorded in connection with
             the reacquisition and is being amortized over five years. The
             Company accounts for its investment using the equity method of
             accounting under which its proportionate share of the earnings of
             the subsidiary are included in the consolidated financial
             statements since acquisition.

          In November 1996, each parish (county) in Louisiana gave voters the
             opportunity to decide if video poker would continue to be allowed
             to operate within each parish. If the voters decided to disallow
             video poker operations within the parish, all existing video poker
             establishments could operate until June 30, 1999. A significant
             portion of Bayou's routes are located in parishes that voted to
             cease the video poker operations as of June 30, 1999. The
             Company's management anticipates Bayous operations will generate
             sufficient cash flows prior to the termination of video poker in
             these parishes to recover its investment in this unconsolidated
             affiliate of $236,364 at September 30, 1996.

                                                                     (Continued)





                                      F-15
<PAGE>   48


CONCORDE GAMING CORPORATION AND SUBSIDIARIES


   (7)    CASINO DEVELOPMENT AND FINANCING COSTS

          Casino development and financing costs consist of:

<TABLE>
<CAPTION>
                                                                                     1996           1995
         --------------------------------------------------------------------------------------------------
          <S>                                                                  <C>                 <C>
          Related to the Management Agreement:
             Finder's fee                                                      $    241,972         241,972
             Financial accommodation costs (note 13)                                200,000         200,000
          Related to new casino development                                         263,679          80,795
         --------------------------------------------------------------------------------------------------
                                                                                    705,651         522,767
          
          Less accumulated amortization                                            (181,910)       (112,560)
         --------------------------------------------------------------------------------------------------          
                                                                               $    523,741         410,207
         ==================================================================================================
</TABLE>

          Finder's fee relates to amounts paid to a third party for assistance
in securing the Management Agreement.

   (8)    NOTES PAYABLE AND LINES OF CREDIT

          Notes payable and lines of credit consist of:

<TABLE>
<CAPTION>
                                                                                       1996          1995
         ---------------------------------------------------------------------------------------------------
          <S>                                                                    <C>                 <C>
          Unsecured note payable to a related party, controlled by the
              majority stockholder, with interest at prime plus 2% due
              December 1997.                                                     $     690,000       690,000
          
          Bank line of credit with maximum borrowings of $500,000, interest
              is charged at prime plus 2%, interest only payments required
              through maturity date, June 1997; secured  by video lottery
              machines and guaranteed by majority stockholder                          500,000             0
                                                                                                            
          
          Bank line of credit with maximum borrowings of $100,000, interest
              is charged at prime plus .5%, interest only payments required
              through maturity date, May 1997; guaranteed by the majority
              stockholder.                                                              95,000             0
          
          Other, repaid during the year ended September 30, 1996                             0        15,000
         ---------------------------------------------------------------------------------------------------
                                                                                     1,285,000       705,000
          
          Less current maturities                                                     (595,000)      (15,000)
         ---------------------------------------------------------------------------------------------------          
                                                                                 $     690,000       690,000
         ===================================================================================================
</TABLE>

                                                                     (Continued)





                                      F-16
<PAGE>   49


                 CONCORDE GAMING CORPORATION AND SUBSIDIARIES


   (9)    LONG-TERM DEBT

          Long-term debt consists of:

<TABLE>
<CAPTION>
                                                                                   1996               1995
             -------------------------------------------------------------------------------------------------
            <S>                                                              <C>                     <C>
             Note payable to third party paid off during year ended
                 September 30, 1996.                                         $             0         1,118,115
            
             Note payable to third party relating to contract
                 termination expense; payable in monthly installments
                 through December 31, 1996, in amounts fluctuating
                 based upon proceeds from the Management Agreement,
                 with an effective interest rate of 11%, secured by
                 proceeds from the Management Agreement.                             634,306         1,525,964
                                                                                                              
            
             Note payable to a vendor paid off during year ended
                 September 30, 1996.                                                       0           352,232
            
             Note payable to a vendor paid off during the year ended
                September 30, 1996.                                                        0            95,638
            
             Note payable to a bank refinanced during the year ended
                September 30, 1996.                                                        0           980,767
            
             11.5% note payable to third party in monthly installments
                of $7,013, including interest to August 1997; secured
                by video lottery machines.                                            73,728           144,702
            
             13% note payable to third party in monthly installments of
                $5,464, including interest to January 1998; secured by
                video lottery machines.
                                                                                      80,218           131,455
            
             Note payable to individual at prime plus 2% plus a monthly
                finance fee of $20,000, monthly payments of $150,000,
                including interest, through August 1997; guaranteed by
                the majority stockholder.
                                                                                   1,497,892         2,400,000
            
             Note payable to a bank, with interest at prime plus 2%,
                monthly principal payments of $22,222 through June 1998
                when the remaining balance is due; secured by video
                lottery machines and guaranteed by majority stockholder.             733,334                 0
</TABLE>


                                                                     (Continued)





                                      F-17
<PAGE>   50


                 CONCORDE GAMING CORPORATION AND SUBSIDIARIES


<TABLE>
<CAPTION>
                                                                                              1996              1995
                     ---------------------------------------------------------------------------------------------------
                     <S>                                                               <C>                    <C>
                       8% note payable to third party in monthly payments of
                          $4,638 including interest to November 1999; secured by
                          real estate.                                                 $       154,883                 0

                       Other, due in various monthly installments to October
                          1999, at various rates from 6.90% to 13.93%, secured in
                          part by property and equipment.                                       75,394           145,841    
                     ---------------------------------------------------------------------------------------------------
                                                                                             3,249,755         6,894,714    
                                                                                                                            
                       Less current maturities                                              (2,631,981)       (4,293,388)   
                     ---------------------------------------------------------------------------------------------------
                                                                                       $       617,774         2,601,326    
                     ===================================================================================================
</TABLE>

          The prime interest rates at September 30, 1996 and 1995 were 8.25%
             and 8.75%, respectively.

          On December 21, 1995, the Company entered into an extension agreement
             for the $1,497,892 note payable to an individual with terms as
             described above. As of September 30, 1996, pursuant to the terms
             of the prior note payable, the Company issued the individual
             warrants to purchase 960,000 common shares. The warrants have an
             exercise price ranging from $0.75 to $1.00 per common share and
             expire between December 1998 and November 2000. The warrants were
             valued by the Company's management at $1,600 and $15,000 for the
             years ended September 30, 1996 and 1995, respectively.

          On January 7, 1997, the Company reached an agreement with a third
             party for the note payable for $634,306 to amend the payment terms
             as follows (a) $50,000 per month commencing January 25, 1997
             through June 25, 1997, and (b) $75,000 per month thereafter
             beginning July 25, 1997, until the note payable is paid in full.
             Interest is payable on the unpaid amount at a rate of 15% per
             annum for the period January 1, 1997 through June 30, 1997, and 
             18% per annum thereafter.
        
          The future aggregate annual maturities of long-term debt at September
             30, 1996 are as follows:

<TABLE>
<CAPTION>
             Fiscal year ending:
             -----------------------------------------------------------------------------------------------
                     <S>                                                                      <C>
                     1997                                                                     $    2,631,981
                     1998                                                                            551,180
                     1999                                                                             57,613
                     2000                                                                              8,981
             -----------------------------------------------------------------------------------------------             
                                                                                              $    3,249,755
             ===============================================================================================
</TABLE>

          The future aggregate maturities schedule reflects indebtedness at the
             latest possible due date without regard to potential late payment
             and interest penalties. These penalties will be recorded as
             interest expense when they become an obligation of the Company.

                                                                     (Continued)





                                      F-18
<PAGE>   51


                  CONCORDE GAMING CORPORATION AND SUBSIDIARIES


          The Company has a working capital deficit of $1,849,222 as of
             September 30, 1996. The working capital deficit results from a
             significant portion of the Company's long-term borrowings coming
             due during the 12 months ending September 30, 1997. The Company
             believes that its cash flow generated from operations, bank loan
             agreements, and anticipated cash to be received related to the
             Settlement Agreement described in notes 1, 3, and 16, will be
             sufficient to meet its current obligations. Certain of the
             Company's debt agreements contain financial covenants including
             maintenance of debt service ratios and minimum net income levels.
             At September 30, 1996, the Company was not in compliance with
             certain of the covenants. The Company's lender has waived all of
             the covenant violations as of September 30, 1996 and, accordingly,
             the Company has continued to classify its long-term debt in
             accordance with the original agreements.

  (10)    STOCK SUBSCRIPTION IN THE FORM OF A NOTE AND RELATED ACCRUED INTEREST
          RECEIVABLE

          The stock subscription in the form of a note and related accrued
             interest receivable is due from an unrelated corporation in
             monthly installments of $6,611 including interest at an effective
             rate of 18.3% through September 1999. The note was assigned to the
             Company by its majority stockholder as consideration for the
             purchase of Company common stock. The note is secured by a second
             interest in the corporation's personal property and its common
             stock. However, due to the length to maturity of the note and full
             collection being dependent upon the future success of the maker,
             which cannot be assured, the note and related accrued interest
             receivable have been reflected as a stock subscription receivable
             and interest on the note is credited to additional paid-in capital
             as it is earned.

  (11)    INCOME TAXES

          The income tax provision for the years ended September 30, 1996 and 
             1995 is as follows:

<TABLE>
<CAPTION>
                                                                                        1996           1995
             ------------------------------------------------------------------------------------------------
             <S>                                                                  <C>                 <C>
             Current:
                      Federal                                                     $    352,600        103,000
                      State                                                              8,000          6,300
             Deferred (benefit)                                                        (21,600)       513,700
             ------------------------------------------------------------------------------------------------             
                                                                                  $    339,000        623,000
             ================================================================================================
</TABLE>

                                                                     (Continued)





                                      F-19
<PAGE>   52


                  CONCORDE GAMING CORPORATION AND SUBSIDIARIES


          The income tax provision differs from the amount of income tax
             determined by applying the statutory tax rate to pretax income due
             to the following:

<TABLE>
<CAPTION>
                                                                                       1996           1995
             ----------------------------------------------------------------------------------------------
             <S>                                                                  <C>               <C>
             Computed "expected" tax expense                                      $   318,320       589,006
             Effect of graduated rates                                                 (9,095)      (16,829)
             Permanent differences, net                                                 5,645         6,900
             State income taxes, net of federal effect                                  5,200         4,095
             Other                                                                     18,930        39,828
             ----------------------------------------------------------------------------------------------             
                                                                                  $   339,000       623,000
             ==============================================================================================
</TABLE>

          Net deferred tax liabilities are as follows:

<TABLE>
<CAPTION>
                                                                                      1996           1995
          ----------------------------------------------------------------------------------------------------
          <S>                                                                     <C>                 <C>
          Deferred tax assets:                                                                                
            Intangibles                                                           $     58,000          39,200
          ----------------------------------------------------------------------------------------------------
                                                                                        58,000          39,200
             
          Deferred tax liabilities:
            Property and equipment                                                    (104,600)       (107,400)
          ----------------------------------------------------------------------------------------------------
                                 Net                                              $    (46,600)        (68,200)
          ====================================================================================================
</TABLE>

  (12)   STOCK OPTION PLAN AND STOCK WARRANTS ISSUED AS COMPENSATION

          The Company has reserved 2,200,000 shares of its common stock for
             issuance under the 1992 Performance Stock Option Plan (the Plan).
             The Plan allows for the issuance of incentive stock options and
             nonqualified stock options to certain officers, directors, and
             employees of the Company. Incentive stock options may be granted
             at prices not less than fair market value on the date of grant,
             while nonqualified stock options may be granted at prices less
             than fair market value on the date of grant. At September 30,
             1996, 1,110,000 incentive stock options were issued and
             outstanding under the Plan. The options were granted at exercise
             prices ranging from $0.40 to $1 per share and vest ratably over a
             five year period. Options for the purchase of 225,612 shares were
             vested at September 30, 1996. No options under the Plan have been
             exercised.

          On June 12, 1995, the Company issued a warrant for the purchase of
             80,000 shares of the Company's common stock at an exercise price of
             $1.50 per share to a financial advisor for services rendered. The
             warrant is exercisable through February 1, 1999. 

                                                                     (Continued)





                                      F-20
<PAGE>   53


                  CONCORDE GAMING CORPORATION AND SUBSIDIARIES


          On January 26, 1994, the Company granted its majority stockholder a
             warrant to purchase 2,000,000 shares of the Company's common stock
             at $1 per share through January 2004. The warrant was issued as
             consideration for the stockholder's financial accommodations and
             guarantees of over $9,000,000 in Company debt. The warrant was
             valued by the Company's Management at $0.10 per share or $200,000.
             Because the financial accommodations were substantially to finance
             the Casino, the amount has been capitalized as a casino development
             and financing cost and is being amortized over the term of the
             Management Agreement.

  (13)   RELATED PARTY TRANSACTIONS

          Rent expense to related parties totaled $28,501 and $28,740 for 1996
             and 1995, respectively. The Company leases office space from a
             related party under a lease that expires September 30, 1997.

          The Company also leases an airplane from a related party. The lease
             payments are based on the Company's actual usage and totaled
             $43,966 and $43,101 during 1996 and 1995, respectively.

          Through January 31, 1996, the Company was charged for employee health
             care premiums that are paid by a related party. During the years
             1996 and 1995, $13,333 and $25,440, respectively, were charged to
             the Company.

          Interest expense relating to notes payable to majority shareholder
             and related parties controlled by the majority shareholder was
             $74,318 and $67,238 for the years 1996 and 1995, respectively.

  (14)    COMMITMENTS

          COMMON STOCK REPURCHASES

          In the event any officer, director, and/or stockholder who owns 5% or
             more of the common stock of the Company is disqualified by the
             South Dakota Lottery Commission pursuant to the State Lottery Act,
             the Company has the absolute right to repurchase, at the market
             price or the original purchase price, whichever is the lesser, any
             security, share, or other interest in the Company.

          LEASES

          The Company has several noncancelable operating leases, primarily for
             video lottery casino locations, that expire over the next five
             years. These leases generally contain renewal options for periods
             ranging from two to five years and require the Company to pay all
             executory costs such as maintenance and insurance.  Rental expense
             for operating leases during the years ended September 30, 1996 and
             1995 was $79,969 and $95,427, respectively.

          Future minimum lease payments under noncancelable operating leases
             are not significant.


                                                                     (Continued)





                                      F-21
<PAGE>   54


                  CONCORDE GAMING CORPORATION AND SUBSIDIARIES


          RETIREMENT PLAN

          During the year ended September 30, 1996, the Company adopted a
             defined contribution 401(k) profit sharing plan covering
             substantially all employees. Employer contributions under the Plan
             are discretionary and vest ratably over a six-year period.
             Employer contributions totaled $12,266 during the year ended
             September 30, 1996.

  (15)    CONCENTRATION OF REVENUES/CREDIT RISK

          A substantial portion of the Company's revenues are derived from the
             Management Agreement. The Company also has a significant portion
             of its assets in the form of notes receivable and a significant
             portion of its short-term and long-term notes payable that are
             related to the Management Agreement. Should the terms of the
             Settlement Agreement described in notes 3 and 16 not be fulfilled,
             the Company's ability to continue to earn management fees, collect
             on the notes receivable, and meet its short-term and long-term
             obligations will be highly dependent upon the future earnings and
             cash flow from the Management Agreement. Any adverse change in the
             operations of the Casino, the Company's relationship with the TAT,
             compliance with the TAT's gaming compact with the State of North
             Dakota, or an adverse ruling in the related legal proceedings
             could be detrimental to the Company.

  (16)    LITIGATION AND NIGC REVIEW OF MANAGEMENT AGREEMENT

          In 1995, the Company initiated arbitration before the American
             Arbitration Association as a remedy available under the Management
             Agreement. Through its demand for arbitration, the Company is
             seeking to enforce reimbursement of $2,280,021 of costs that were
             expended for expansion of the Casino (see note 5 regarding these
             costs). Furthermore, the Company claims that the TAT materially
             breached the Management Agreement by amending its gaming ordinance
             (Amended Gaming Ordinance) in January 1995, which would require
             the Company to pay additional aggregate annual license fees of
             approximately $700,000. The TAT's Gaming Commission refused to
             accept the Casino's application for renewal of its gaming permit
             because it was not in conformance with the Gaming Commission's new
             application and fee schedule under the Amended Gaming Ordinance.
             As a result, the establishment permit for the Casino was not
             renewed in 1995. However, gaming operations at the Casino were not
             affected during fiscal 1995 and fiscal 1996.

                                                                     (Continued)





                                      F-22
<PAGE>   55


                  CONCORDE GAMING CORPORATION AND SUBSIDIARIES


          Through the arbitration demands, the Company is seeking actual and
             exemplary damages of approximately $35,000,000, and is seeking
             judgment disallowing the increased license fees. The arbitration
             proceedings were enjoined by the TAT tribal court, pending the
             outcome of the NIGC's review of the Management Agreement.
             Consequently, the Company commenced an action in United States
             District Court against the TAT that sought to compel arbitration
             proceedings. On November 10, 1995, a federal judge held that the
             NIGC had initial jurisdiction to decide the validity of the
             Management Agreement and that injunctive relief to compel the
             arbitration would not be granted. On August 28, 1996, the Eighth
             Circuit Court of Appeals affirmed the District Court's ruling that
             it had federal question jurisdiction but reversed its decision not
             to defer to the Tribal Court for that court's determination as to
             its "jurisdiction and a discussion regarding the legal validity of
             the management contract." Regardless of this decision, the parties
             continued with settlement discussions, which had begun earlier
             during the NIGC review process. As part of this process, the NIGC
             had notified the parties on May 17, 1996, that modifications to
             the Management Agreement were necessary, along with regulatory
             compliance regarding background investigations and Casino
             licensing (see note 3). The NIGC encouraged the parties to enter
             good faith negotiations to settle their disputes arising out of
             the Management Agreement. The Settlement Agreement facilitated by
             the NIGC is the product of these negotiations. As part of the
             Settlement Agreement, the TAT has issued the Company and the Casino
             gaming licenses for their continued operations on the Fort
             Berthold Reservation until closing. If the Settlement Agreement
             closes, the Company will receive $8.65 million in exchange for all
             amounts due the Company and relinquishing its rights under the
             Management Agreement and the NIGC review process will end, as well
             as all outstanding litigation between the parties. The parties
             have mutually stayed all existing legal proceedings between them
             until the closing or April 30, 1997 at the latest.

          While the Company's management cannot give any assurance that the
             Settlement Agreement will close, it is nevertheless preparing for
             such. In the event that the Settlement Agreement does not close,
             the parties will proceed with their legal claims, however, the
             Company is unable to predict the outcome of the parties' legal
             claims, the outcome of possible arbitration, or the outcome of the
             NIGC's review of the Management Agreement.





                                      F-23
<PAGE>   56
                                   SIGNATURES

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

                                      CONCORDE GAMING CORPORATION
                                      
                                                                            
January 8, 1997                       By   /s/ Jerry L. Baum                  
                                         ------------------------------
                                               Jerry L. Baum, President


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



<TABLE>
<S>                                        <C>                               <C>
/s/ Brustuen "Bruce" H. Lien               Chairman of the Board             January 8, 1997
----------------------------               of Directors and Chief
Brustuen "Bruce" H. Lien                   Executive Officer     
                                                                 

/s/ Jerry L. Baum                          President, Chief Operating        January 8, 1997
----------------------------               Operating Officer and
Jerry L. Baum                              Director             
                                                   


/s/ Deanna B. Lien                         Director                          January 8, 1997
----------------------------
Deanna B. Lien


/s/ David L. Crabb                         Chief Financial Officer,          January 8, 1997
----------------------------               Principal Accounting 
David L. Crabb                             Officer and Treasurer
                                                                
</TABLE>
<PAGE>   57
                               INDEX TO EXHIBITS



<TABLE>
<CAPTION>
Exhibit No.       Description
-----------       -----------
<S>              <C>
3.1              Amended and Restated Articles of Incorporation.(1)

3.2              Third Amended and Restated Bylaws.(1)

4                Form of Common Stock Certificate.(2)

10.2             1992 Performance Stock Option Plan.(3)

10.3             Management Agreement By and Between the Three Affiliated Tribes and Bruce H. Lien Company, dated as of
                 December 7, 1992, and amended as of February 19, 1993.(4)

10.6             Agreement to sublease dated June 2, 1993 between the Registrant and Jon Yi Company.(5)

10.7             Settlement Agreement dated September 30, 1994 between the Registrant, Bruce H. Lien Company, Brustuen
                 "Bruce" H. Lien and Four Bears Investment Limited Liability Company.(6)

10.8             Stock Purchase Agreement between the Company and Yvonne R. Scott dated September 29, 1995.(1)

10.9             Development Agreement among the Company, Concorde Gaming of Missouri, Inc. and the City of Lexington,
                 Missouri dated September 26, 1995.(1)

10.10            Indemnification Agreement between the Company and Bruce H. Lien.(1)

10.11            Second Renewal Promissory Note in the principal amount of $2,400,000 dated December 21, 1995 issued by
                 the Company to Roland Gentner.(1)

10.12            Second Loan Extension Agreement dated December 21, 1995 between the Company and Roland Gentner.(1)

10.13            Promissory Note in the amount of $690,000 dated September 30, 1996 issued by the Company to BHL 
                 Capital Corporation.(+)

10.14            Assignment Agreement dated April 6, 1995 between the Company and Federalist Municipal Development
                 Corporation.(1)
</TABLE>
<PAGE>   58
<TABLE>
<S>            <C>
10.15          Contract for Purchase of Assets dated November 10, 1995 between the Company and J & U, Inc.(1)

10.16          Settlement Agreement between The Three Affiliated Tribes of the Fort Berthold Reservation and Bruce H.
               Lien Company dated September 27, 1996.(7)

10.17          Loan Agreement between the Company and BNC National Bank of Minnesota dated June 20, 1996.(+)

10.18          Term Note in the amount of $800,000 dated June 20, 1996 issued by BNC National Bank to the Company.(+)

10.19          Sort-Term Revolving Note in the amount of $500,000 dated June 20, 1996 issued by BNC National Bank to the Company.(+)

10.20          Supplemental Revolving Note in the amount of $300,000 dated December 13, 1996 issued by BNC National Bank 
               to the Company.(+)

10.21          Amendment No. 1 to Settlement Agreement dated January 7, 1997 between BHL and FBILLC.(+)

11             Computation of Per Share Earnings.(+)

21             Subsidiaries of the Registrant.(1)

23             Consent of Independent Accountants.(+)

27             Financial Data Schedule.(+)
</TABLE>

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

(1) Previously filed with the Securities and Exchange Commission as an exhibit
to the Company's Annual Report on Form 10-KSB for the year ended September 30,
1995.
(2) Previously filed with the Securities and Exchange Commission on May 6,
1991, as an Exhibit to the Annual Report on Form 10-K of the Company for the
fiscal year ended September 30, 1990 and incorporated herein by this reference.
(3) Previously filed with the Securities and Exchange Commission by the Company
on September 24, 1992 as Exhibit 10 to the Registration Statement on Form S-8,
file number 33-52388 and incorporated herein by this reference.
(4) Previously filed with the Securities and Exchange Commission on October 15,
1993, as an Exhibit to the Current Report of the Company on Form 8-K and
incorporated herein by this reference.
(5) Previously filed with the Securities and Exchange Commission by the Company
on July 30, 1993 as an Exhibit to the Current Report on Form 8-K and
incorporated herein by this reference.
(6) Previously filed with the Securities and Exchange Commission as an exhibit
to the Company's Annual Report on Form 10-KSB for the year ended September 30,
1994.
(7) Previously filed with the Securities and Exchange Commission by the Company
as an exhibit to its Current Report on Form 8-K dated September 27, 1996.  
(+) Filed herewith.