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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K

     (Mark One)

[x]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE 
     ACT OF 1934 [FEE REQUIRED]


                  FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1996
                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES 
     EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

FOR THE TRANSITION PERIOD FROM ______________ TO _________________

                         Commission file number 33-73534

                         LOUISIANA CASINO CRUISES, INC.
             (Exact name of registrant as specified in its charter)

LOUISIANA                                              72-1196619
---------------------------------          ------------------------------------
(State or other jurisdiction               (I.R.S. Employer Identification No.)
 of incorporation or organization)

1717 River Road North
Baton Rouge, Louisiana                                                 70802
---------------------------------------                               ---------
(Address of principal executive offices)                              (Zip Code)

Registrant's telephone number, including area code: (504) 381-7777
                                                   ---------------
Securities registered pursuant to Section 12(b) of the Act: None
                                                           -------
Securities registered pursuant to Section 12(g) of the Act: None
                                                           ------- 
         Indicate  by check  mark  whether  the  registrant:  (1) has  filed all
reports  required to be filed by Section 13 or 15(d) of the Securities  Exchange
Act of 1934 during the preceding 12 months (or for such shorter  period that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. YES X NO ____

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

         As of February 28, 1997, the aggregate market value of the voting stock
held by  non-affiliates  of the registrant was $0.  (Calculated by excluding all
shares  that may be  deemed  to be  beneficially  owned by  executive  officers,
directors and greater than 10% shareholders of the registrant, without conceding
that all such persons are  "affiliates"  of the  registrant  for purposes of the
federal securities laws.)

         As of  February  28,  1997,  the  number of  outstanding  shares of the
registrant's Common Stock was 982,783.


                       DOCUMENTS INCORPORATED BY REFERENCE

None











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                                     PART I




Item 1.           Business.

General

    Louisiana Casino Cruises, Inc. (the "Company") owns and operates a riverboat
gaming facility in Baton Rouge, Louisiana (the "Casino Rouge"). The Casino Rouge
is one of two  riverboat  gaming  facilities in Baton Rouge.  Current  Louisiana
legislation  authorizes 15 riverboat casinos statewide and one land-based casino
in New  Orleans.  In  addition,  three  casinos  operate in  Louisiana on Native
American land under compact  agreements with the state.  The Casino Rouge opened
on December 28, 1994. The Casino Rouge is managed by CSMC - Management Services,
Inc.  ("CSMC"),  an  experienced  operator  of  gaming  facilities  and owner of
approximately  60%  (51.8%  of  the  fully  diluted  equity  securities)  of the
Company's common stock, no par value per share (the "Common Stock"). On February
21, 1997,  the Company  announced  that a non-binding  letter of intent had been
executed with holders of 40% of the Common Stock and all of its preferred stock,
providing  for  the  purchase  of all  such  interests  by  CSMC.  See  "Certain
Relationships and Related Transactions."

    The Company was  incorporated  in Louisiana in August 1991. From the date of
incorporation until December 27, 1994, the Company devoted  substantially all of
its efforts to evaluating gaming opportunities in Louisiana, including seeking a
Louisiana  gaming license,  the development and construction of the Casino Rouge
and the financing thereof.

Facilities

    The Casino  Rouge  consists  of a 47,000  square foot  four-story  riverboat
casino with 28,000 square feet of gaming space,  a 58,000 square foot  two-story
dockside  embarkation  building and adjacent  surface parking for  approximately
1,100 cars.

    The  riverboat  replicates  a 19th  century  Mississippi  River  paddlewheel
steamboat.  The  riverboat is 258 feet long,  90 feet wide and has a capacity of
1,800 customers.  It features 1,216 gaming positions,  made up of 47 table games
and 850 slot machines  spread over three covered  decks,  which surround a large
atrium in the center of the riverboat. The 47 table games offer craps, roulette,
blackjack,  Caribbean Stud,  progressive  poker, Let It Ride and American poker.
The 850 slot machines  include  denominations  of $0.05,  $0.25,  $1.00,  $5.00,
$10,00,  $25.00 and $100.00,  with primary  concentration in the $0.25 and $1.00
denominations.  The  riverboat  emphasizes  spaciousness  and  thereby  enhances
customer comfort.

    The dockside  embarkation facility features a 250-seat buffet restaurant and
bar, a 100-seat fast food grill,  a 40-seat bar,  lounges,  snack areas,  a gift
shop and a supervised  children's activity center operated by a third party. The
embarkation  facility offers  panoramic  views of the Mississippi  River and the
overall  spaciousness  of  the  facility  is  complemented  by  a  grand  atrium
connecting the two levels of

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the embarkation  facility.  The restaurant is the only restaurant in Baton Rouge
located on the Mississippi River and features  buffet-style  service targeted to
the Casino Rouge's local customer  base.  The  embarkation  facility also houses
administrative  offices and other support  facilities.  The area in front of the
embarkation facility is reserved for valet parking and bus drop-off.

Market

    Baton  Rouge,  the  state  capital  of  Louisiana,   is  located  along  the
Mississippi  River,  approximately  75 miles  northwest  of New Orleans in south
central  Louisiana.  Approximately  565,000  people  reside in the  Baton  Rouge
greater  metropolitan area. The major employers in Baton Rouge include the State
of Louisiana,  with approximately 24,000 employees,  the petrochemical industry,
with  approximately  15,600  employees,  and city and parish  governments,  with
approximately  4,400 employees.  Baton Rouge also is a major port located at the
head of the deep water navigation of the Mississippi River. Additionally,  Baton
Rouge is the home of Louisiana State University ("LSU") and Southern  University
("Southern"),  which have a combined student enrollment of approximately  36,000
students.  The Company operates the Casino Rouge throughout the year and has not
experienced material seasonal trends in business levels.

    Baton  Rouge  offers a number of  tourist  attractions  in or near the city,
including  antebellum homes, the state capitol and other historic sites, as well
as  LSU  and  Southern  football,  basketball  and  baseball  games.  Due to its
political,   business  and  educational  importance,  as  well  as  its  tourist
attractions,  Baton Rouge draws a  significant  number of visitors each year. In
1995 and 1994, the approximate number of visitors to Baton Rouge was 2.1 million
and 1.5 million,  respectively.  The Company hopes to supplement  its core local
customer base with the existing Baton Rouge visitor market.

    Local residents are the primary component of the Company's customer base and
its  strategy is to appeal to persons  residing  within 25 miles of Baton Rouge.
Although  marketing  initiatives  are employed to expand the trading area beyond
the greater Baton Rouge  metropolitan  area,  this strategy is limited by direct
competition from three Indian casinos within 45 to 120 miles of the Casino Rouge
and from the  greater  New  Orleans  market,  which has four  riverboat  casinos
currently  operating.  A temporary  land-based  casino,  located in New Orleans,
operated for  approximately  seven months  during 1995.  During  November  1995,
operations of the temporary  casino and  construction of a permanent casino were
halted when the controlling partnership filed bankruptcy under Chapter 11.

Strategy

    The Company  obtains most of its  customers  from the Baton Rouge area,  and
therefore  has focused on appealing to this  customer base in all aspects of its
operations.  The location and design of the riverboat and embarkation  facility,
ample on-site parking,  the type of and low minimum betting limits on the casino
games  offered,  the  services  provided and the focused  marketing  efforts all
target the local gaming

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customer.  Competition in Louisiana and Mississippi makes it generally difficult
for the  Company to expand its  trading  area  beyond the  greater  Baton  Rouge
metropolitan area.

    Convenience.  The  Company  selected  the site of the  Casino  Rouge for its
convenient location and easy  accessibility.  The 18-acre site is located on the
east bank of the Mississippi River in the East Baton Rouge Downtown  Development
District less than one-quarter mile from the state capitol complex.  The site is
within  approximately  one mile of each of Interstate 10 and Interstate  110. In
addition,  the site has a surface  parking  area for  approximately  1,100  cars
adjacent  to the  embarkation  facility.  The  Company  believes  that  the easy
accessibility  and surface parking  facilities  enhance patron  satisfaction and
provide the Company with a competitive advantage over the only other Baton Rouge
riverboat.

    Atmosphere.  The Casino Rouge emphasizes  spaciousness  and excitement.  The
riverboat  includes ample aisle space,  13 to 15 foot ceilings,  a large central
atrium and specially designed interior and exterior lighting. The overall effect
avoids the cramped claustrophobic atmosphere found in some riverboat casinos.

    Gaming and land-based  services.  The land-based  facility and the riverboat
are open 24 hours a day.  There are  eight  cruises  daily.  Each  cruise  lasts
approximately  1 hour and 30  minutes,  followed  by 1 hour and 30  minutes  for
debarkation and embarkation  between cruises.  The casino gaming  operations are
open continuously.

    Approximately  70% of the Casino Rouge's gaming positions are slot machines.
The slot machines and table games  offered are  principally  lower  denomination
machines or have low minimum betting limits.  Over 95% of the machines are $1.00
or lower in  denomination.  The Company believes that this mix is attuned to the
local Baton Rouge target market.

    The embarkation  facility  features a 250-seat buffet  restaurant and bar, a
100-seat fast food grill, a 40-seat bar, lounges, snack areas, a gift shop and a
supervised  children's  activity center  operated by a third party.  The Company
believes that these features appeal to its target market.

    Marketing.  The Company is using frequent  promotional  programs in order to
attract its target customers and establish a high level of customer recognition.
In addition to  aggressive  marketing  through  television,  radio and newspaper
advertising, the Company sponsors promotions designed for senior citizens, shift
workers in the  petrochemical  industry and attendees at local college  sporting
events.  A primary  focus of the  Company's  marketing  effort is a "slot  club"
directed at regular patrons.  The Company utilizes an electronic player tracking
system to monitor frequency and level of play for its slot club customers.  This
information enhances the Company's marketing and promotional efforts.  Slot club
members  receive special  privileges,  including  entrance to slot  tournaments,
bonus play prizes, including

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<PAGE>




cash rewards based upon level of play, and buffet meals on a complimentary basis
or at reduced  prices.  The slot club  includes a promotional  news  publication
mailed to members. As of November 30, 1996 the Company had approximately  89,000
slot club members.

Competition

    The Louisiana  Riverboat  Economic  Development  and Gaming Control Act (the
"Louisiana  Act") limits the number of gaming  casinos to 15  riverboat  casinos
statewide  and one  land-based  casino  in New  Orleans.  Absent  further  state
legislation, additional licenses cannot be granted. Fourteen of the 15 available
riverboat  licenses are currently issued and  outstanding:  two for Baton Rouge;
four for the greater New Orleans area; four for the Shreveport/Bossier City area
in the northwest  part of the state,  approximately  235 miles from Baton Rouge;
and four for Lake Charles in the southwest part of the state,  approximately 120
miles from Baton  Rouge.  One  license may be  transferred  from the greater New
Orleans area to the Shreveport/Bossier City area effective late 1997.

    The Company has filed an application with the Louisiana Gaming Control Board
(the  "Louisiana  Board") to be issued the  remaining  riverboat  license and to
operate a riverboat  casino in Shreveport.  There are other  applicants for this
license  and no  assurance  can be given that it will be issued to the  Company,
that, if issued to the Company,  subject to approval by the Louisiana  Board, it
will not be transferred to another  company,  or that, if issued to the Company,
the Shreveport riverboat casino will become operational or will be successful.

    Two riverboats  ceased  operations in New Orleans in June 1995. The licenses
associated  with these  riverboats  have been assigned to Casino America in Lake
Charles and to Casino Magic in Bossier City. The final determination of what, if
any,  competitive  impact  relocating  such  licenses will have on the Company's
operations is subject to a great deal of uncertainty  and cannot be predicted at
this time.

    During  November 1995, the controlling  partnership  which owns the right to
operate the only land-based  casino in New Orleans closed its temporary  casino,
halted  construction on its permanent  casino and filed bankruptcy under Chapter
11.  There is no  assurance  that the  land-based  casino will not  reopen.  The
determination of future  operations of the land-based  casino in New Orleans and
what,  if  any,  competitive  impact  such  event  will  have  on the  Company's
operations is subject to a great deal of uncertainty  and cannot be predicted at
this time.

    The  Company's  principal  competitor  is the other  Baton  Rouge  riverboat
casino,  which  opened  September  30, 1994 and is owned and  operated by Argosy
Gaming Company  ("Argosy").  Since opening on December 28, 1994 Casino Rouge has
achieved  approximately 59% market-share of gaming win and customers as reported
by the Louisiana State Police.

    Contributing to the success of Casino Rouge over the Argosy  riverboat are a
number  of  physical  factors.  Casino  Rouge  has  convenient  surface  parking
surrounding the casino terminal for 1,100 vehicles, while the

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Argosy riverboat has limited surface parking and a parking garage of 700 spaces.
In addition,  the  Company's  strategy of providing an open  exciting  riverboat
casino  interior has  successfully  differentiated  Casino Rouge from its Argosy
competitor.

     Argosy has constructed a retail, restaurant and entertainment center called
"Catfish Town" as an integral part of its landside facility. Catfish Town opened
for  operations  in April 1996.  The success of Catfish Town is dependent on the
number and type of tenants  which  choose to lease  space.  Because  the present
tenant  base of Catfish  Town is  limited,  its future  effect,  if any,  on the
operating performance of the Company cannot be predicted at this time.

    Geographically,  gaming competition  encircles the greater Baton Rouge area.
The Company has competition from other gaming  operations  located in Louisiana,
including  four  riverboat  facilities in the greater New Orleans area and three
gaming  facilities  permitted on Indian  lands,  all located  within  reasonable
driving distance of the greater Baton Rouge area. The closest such Indian casino
is a land-based  facility  located on the  Chitimacha  Reservation in Charenton,
Louisiana,  approximately  45 miles  southwest of Baton  Rouge,  but the closest
Indian casino to Baton Rouge by way of a major highway is a land-based  facility
located on the Tunica-Biloxi Reservation in Mansura, Louisiana, approximately 65
miles northwest of Baton Rouge.  This  distribution of competition  presents the
Company with limited  opportunities  to grow and expand its customer base in new
markets beyond the Baton Rouge area. There can be no assurance that patrons will
not prefer land-based gaming to cruising  riverboat gaming. In addition,  Indian
casinos  are not  subject to  Louisiana  gaming  taxes or  admission  fees which
represent  approximately  24% of casino win. This provides Indian casinos with a
substantial advantage in providing incentives to patrons.

    Proposals have been  introduced  into the Louisiana  legislature to increase
the number of facilities  permitted in Louisiana;  all such  proposals have been
defeated  to date.  Such  proposals,  if passed,  could have a material  adverse
effect on the Company's operations. Alternative forms of gaming are available to
potential  customers.  Louisiana  state law  allows  the  operations  of a State
Lottery,  horse  racing  and  charitable  bingo.  In July 1991,  Louisiana  also
authorized  operation of video lottery  terminals at various types of facilities
in the state,  including  taverns,  restaurants,  hotels/motels,  truckstops and
racing facilities.  As of December 31, 1996,  approximately 15,450 video lottery
terminals at  approximately  3,750  locations  were in operation  throughout the
state. These facilities are widely distributed throughout the state and have had
no greater  impact on the Baton Rouge  riverboat  casinos  than other  Louisiana
riverboats.

     In 1996, the Louisiana Legislature passed a bill providing for local option
elections in which voters could separately  determine  whether to allow in their
respective parishes riverbaot gaming,  video poker or land-based casinos.  Local
elections  were held on  November  5, 1996 and with  respect to East Baton Rouge
Parish where the City of Baton Rouge is located, and other parishes comprising a
significant portion of the population in Casino Rouge's market,  voters rejected
video poker.  Pursuant to the statute,  in those  parishes where video poker was
rejected, video poker no longer will be allowed after mid-1999.

    In addition,  as of October 31, 1996, the Mississippi  Gaming Commission has
granted  43  gaming  licenses.  Of  these,  29 of the  licensees  have  open and
operating  casinos,   seven  licensees  have  opened  and  subsequently   ceased
operations,  four licenses have been withdrawn and three  licensees have not yet
opened casinos.  Four  applications to operate casinos in Mississippi  have been
filed as of October  31,  1996 with the  Mississippi  Gaming  Commission,  which
allows  dockside  gaming  and does not limit the number of casinos or the square
footage of gaming space in such facilities. A substantial increase in the number

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of casinos operating in Mississippi could increase the competition in Louisiana,
particularly  in  New  Orleans,  and  therefore  could  force  the  New  Orleans
facilities  to  more  aggressively  market  to  the  west,  thereby  potentially
adversely  affecting the Company.  Lower tax rates in  Mississippi  also provide
casinos there with a substantial advantage in providing incentives to patrons.

Management Agreement

    CSMC and the  Company  are  parties to a Casino  Consulting  and  Management
Agreement,  dated  December 11, 1992, as amended (the  "Management  Agreement").
Pursuant to the Management Agreement,  prior to the opening of the Casino Rouge,
CSMC provided  consulting  and  technical  services to the Company in connection
with the planning,  development and equipping of the Casino Rouge. CSMC assisted
the Company in preparing  the Casino Rouge for  operations,  including  hiring a
full staff of employees,  designing the Casino  Rouge,  establishing  accounting
systems,  and developing  marketing and casino  operations  concepts.  After the
Casino Rouge opened, pursuant to the Management Agreement,  CSMC is handling all
aspects of its management. The term of the Management Agreement is 10 years from
the opening of the Casino  Rouge,  which will be extended for an  additional  10
years unless CSMC specifies  otherwise.  The annual  management fee, which began
upon the opening of the Casino Rouge,  is equal to 2% of Gross  Revenues plus 5%
of  Total  Operating  Income  (as  such  terms  are  defined  in the  Management
Agreement). By separate agreement, CSMC has agreed to pay one-half of its 5% fee
of Total  Operating  Income to Dan S.  Meadows,  Jerry L.  Bayles  and Thomas L.
Meehan,  aggregate  holders of approximately  40% of the Company's Common Stock.
These funds are to be divided among them as they shall elect.  Messrs.  Meadows,
Bayles and Meehan have entered into a  non-binding  letter of intent to sell all
their Common Stock and preferred  stock to CSMC. In connection with the proposed
sale, they will relinquish all rights under the Management Agreement,  including
the right to receive  one-half of CSMC's 5% fee of Total Operating  Income.  See
"Security  Ownership of Certain  Beneficial  Owners and Management" and "Certain
Relationships and Related  Transactions." For the fiscal year ended November 30,
1996,  the  amount  earned by CSMC  pursuant  to the  Management  Agreement  was
$2,567,000.  Through  November 30, 1996,  CSMC has been paid  $2,381,000  of the
amount  earned.  Pursuant  to the  terms of the  separate  agreement,  CSMC paid
Messrs. Meadows,  Bayles, and Meehan an aggregate sum of $516,000 for the fiscal
year ended  November  30, 1996.  Of this sum,  $482,000 was paid and $34,000 was
owing as of November 30, 1996.

Management Company

    CSMC is a wholly-owned subsidiary of CHC International, Inc., d/b/a Carnival
Hotels & Casinos  ("CHC"),  and the largest  shareholder  in the  Company  (with
approximately 51.8% of the fully diluted equity  securities).  CHC was formed in
March 1994, as a result of the  combination of CSMC and  affiliates,  previously
wholly-owned  subsidiaries  of  Carnival  Corporation  ("Carnival"),   with  The
Continental Companies and affiliates ("TCC"). CHC is a leading independent hotel
and casino development and management  company.  CHC's current casino operations
include the management of four casinos, including the Casino

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Rouge,  in the United  States,  Canada and the  Caribbean.  CHC is also actively
pursuing several potential gaming  opportunities.  CHC manages through its hotel
operations 71 hotels with approximately  18,000 rooms,  including hotels managed
by Gemcom, its 50%-owned hotel management joint venture.

    CHC was  selected by the  Chippewas  of Rama First  Nation  (Canada) and the
Ontario Casino Corporation (a Crown Corporation of the provincial  government of
Ontario  Canada)  in 1995 to  develop  and  operate  a casino  located  north of
Toronto.  The casino commenced operations on July 31, 1996. CHC has the right to
manage the casino for a minimum period of ten years.

    On February 21, 1997,  the Company  announced  that a non-binding  letter of
intent  had  been  executed  by CHC and  Messrs.  Meadows,  Bayles  and  Meehan,
providing  for the  purchase  by CSMC of all of the Common  Stock and  preferred
stock held by Messrs.  Meadows,  Bayles and Meehan.  See "Security  Ownership of
Certain  Beneficial  Owners and Management." The purchase is subject to a number
of  conditions,  including  definitive  documentation,  regulatory  approval and
financing by CHC. CHC has undertaken in the letter of intent to pursue obtaining
the  requisite   financing  and  to  commence  the   preparation  of  definitive
documentation.  No assurance can be given that the transactions  contemplated by
the letter of intent will be consummated.

    In  connection  with any financing  pursuant to the letter of intent,  it is
likely  that CHC would seek  additional  financing  in an amount  sufficient  to
permit the  redemption  of the Notes,  although no  assurance  can be given that
adequate financing will be obtained or that, even if obtained, any Notes will be
redeemed. See "Certain Relationships and Related Transactions."

Employees

    The Company  maintains a staff of  approximately  800  full-time  equivalent
employees.  None  of  the  employees  is  covered  by  a  collective  bargaining
agreement. In 1995, two separate union elections, involving a total of less than
5% of all employees,  were held and both initiatives were defeated.  The Company
believes that its employee relations are good.

Regulatory Matters

    The Company is subject to  regulation  by the State of  Louisiana  and, to a
lesser extent,  by federal law. The Company is subject to regulations that apply
specifically  to the gaming  industry  and casinos,  in addition to  regulations
applicable  to  businesses   generally.   Below  is  a  description  of  certain
regulations  to which the  Company is  subject.  Legislative  or  administrative
changes in applicable legal  requirements  have been proposed from time to time.
It is possible that the applicable  requirements  will become more stringent and
burdensome,  and that taxes, fees and expenses may increase,  as the state gains
further  experience  in  regulating  gaming.  Failure  to comply  with  detailed
regulatory requirements may be grounds for the suspension or revocation

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of a license which would have a materially adverse effect upon the Company.

Louisiana Riverboat Gaming Regulation

    In July 1991,  the  Louisiana  legislature  adopted  legislation  permitting
certain types of gaming  activity on certain  rivers and waterways in Louisiana.
Since May 1, 1996, gaming activities have been regulated by the Louisiana Board.
Local authorities may impose an admission fee of up to $2.50 per passenger.

    The  Louisiana Act  authorized  the issuance of up to 15 licenses to conduct
gaming  activities  on a  riverboat  of  new  construction  in  accordance  with
applicable law. However,  no more than six licenses may be granted to riverboats
operating from any one parish. Of the 15 available licenses, currently 14 are in
operation and one has been returned to the state.

    In issuing a license,  the Louisiana Board must find that the applicant is a
person of good  character,  honesty and  integrity and the applicant is a person
whose  prior  activities,  criminal  record,  if any,  reputation,  habits,  and
associations  do not  pose a  threat  to the  public  interest  of the  State of
Louisiana or to the  effective  regulation  and control of gaming,  or create or
enhance  the dangers of  unsuitable,  unfair or illegal  practices,  methods and
activities in the conduct of gaming or the carrying on of business and financial
arrangements  in  connection  therewith.  The  Louisiana  Board will not grant a
license unless it finds that: (a) the applicant is capable of conducting  gaming
operations,  which means that the  applicant  can  demonstrate  the  capability,
either through training, education, business experience, or a combination of the
above, to operate a gaming casino;  (b) the proposed  financing of the riverboat
and the gaming  operations is adequate for the nature of the proposed  operation
and from a source  suitable  and  acceptable  to the  Louisiana  Board;  (c) the
applicant  demonstrates a proven ability to operate a vessel of comparable size,
capacity  and  complexity  to a  riverboat  so as to  ensure  the  safety of its
passengers,  with each employee being appropriately  Coast Guard certified;  (d)
the  applicant  submits  a  detailed  plan of  design  of the  riverboat  in its
application for a license;  (e) the applicant  designates the docking facilities
to be used by the riverboat;  (f) the applicant shows adequate financial ability
to construct  and maintain a riverboat;  and (g) the  applicant has a good faith
plan to recruit, train and upgrade minorities in all employment classifications.

    An applicant must  periodically  submit  detailed  financial,  operating and
other reports to the Louisiana Board.  Substantially all loans, leases, sales of
securities  and similar  financing  transactions  entered into by the  riverboat
owner must be reported to or approved  by the  Louisiana  Board.  The Company is
also required to submit to the Louisiana  Board any other  information or report
that is or should be used in the operation of riverboat gaming.

    The applicant for a gaming license, its directors,  officers, key personnel,
partners and persons  holding a 5% or greater  interest in the applicant will be
required to be found suitable by the Louisiana Board.

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This  requires the filing of an extensive  application  to the  Louisiana  Board
disclosing personal,  financial,  criminal, business and other information.  The
applicant  is  required  to pay all  costs of  investigation.  These  costs  are
included in a $50,000 initial  application fee. Any funds which are not used are
refunded to the applicant,  and any  additional  funds needed are charged to the
applicant in an amount not to exceed an additional  $50,000.  An application for
licensing of an  individual  may be denied for any cause deemed  reasonable.  On
July 18, 1994, the predecessor to the Louisiana Board,  having found the Company
suitable,  issued the Company a Riverboat  Gaming License to operate a riverboat
casino for five years subject to satisfying certain  conditions.  Having met all
conditions,  including  passing  a mock  cruise  inspection,  gaming  operations
commenced  December 28, 1994 when the riverboat vessel was complete and landside
facilities were substantially complete.

    Any individual who is found to have a material  relationship to, or material
involvement  with, the Company may be required to be investigated in order to be
found  suitable or be licensed as a business  associate of a licensed  riverboat
owner/operator.  Key  employees,  controlling  persons  or others  who  exercise
significant  influence upon the management or affairs of the Company may also be
deemed to have such a relationship or involvement.

    If a  director,  officer or key  employee  were found to be  unsuitable  for
licensing or unsuitable to continue having a relationship with an applicant, the
applicant would have to suspend,  dismiss and sever all relationships  with such
person.  The applicant would have similar  obligations with regard to any person
who refused to file appropriate applications. Each gaming employee must obtain a
gaming  employee  permit from the Louisiana  Board which may be revoked upon the
occurrence of certain  specified events.  Changes in licensed  positions must be
reported to and approved by the Louisiana Board.

    If the  Louisiana  Board  finds  that an  individual  holder of a  corporate
licensee's securities or a director, partner, officer or manager of the licensee
is no  longer  qualified  to  continue  as a  licensee,  it can  propose  action
necessary to protect the public interest, including the suspension or revocation
of a license or permit.  It may also  issue,  under  penalty  of  revocation  of
license,  a condition of  disqualification  naming the person and declaring that
such person may not (a) receive  dividends  or  interest  on  securities  of the
licensee, (b) exercise any right conferred by securities of the licensee, or (c)
receive remuneration or any other economic benefit from the licensee or continue
in an  ownership  or economic  interest in the licensee or remain as a director,
partner, officer or manager of the licensee.

    The Louisiana Act specifies certain  restrictions and conditions relating to
the operation of riverboat  gaming,  including the following:  (a) gaming is not
permitted  while a  riverboat  is  docked,  other  than the 45  minutes  between
excursions, and during times when dangerous weather or water conditions exist as
certified by the riverboat's  master;  (b) each round-trip  riverboat cruise may
not be less  than  three nor more  than  eight  hours in  duration,  subject  to
specified  exceptions;  (c) agents of the Louisiana Board are permitted on board
at any time during

                                       10

<PAGE>




gaming  operations;  (d) gaming  devices,  equipment  and  supplies  may only be
purchased or leased from permitted suppliers;  (e) gaming may only take place in
the  designated  gaming area while the  riverboat is upon a designated  river or
waterway; (f) gaming equipment may not be possessed,  maintained or exhibited by
any person on a riverboat except in the specifically  designated gaming area, or
a secure  area used for  inspection,  repair or storage of such  equipment;  (g)
wagers may be received only from a person present on a licensed  riverboat;  (h)
persons under 21 are not permitted in  designated  gaming areas;  (i) except for
slot  machine  play,  wagers may be made only with tokens,  chips or  electronic
cards purchased from the licensee aboard a riverboat; (j) licensees may only use
docking facilities and routes for which they are licensed and may only board and
discharge  passengers at the riverboat's licensed berth; (k) licensees must have
adequate  protection  and  indemnity  insurance;  (l)  licensees  must  have all
necessary  federal  and  state  licenses,   certificates  and  other  regulatory
approvals  prior to operating a riverboat;  and (m) gaming may only be conducted
in accordance with the terms of the license, the Louisiana Act and the rules and
regulations adopted by the Louisiana Board.

    The transfer of a license or permit or an interest in a license or permit is
prohibited without approval. The sale, purchase, assignment, transfer, pledge or
other  hypothecation,  lease,  disposition  or acquisition (a "Transfer") by any
person of securities which represent 5% or more of the total outstanding  shares
issued by a  corporation  that holds a license is  subject  to  Louisiana  Board
approval. A security issued by a corporation that holds a license must generally
disclose these restrictions.  Prior Louisiana Board approval is required for the
Transfer of any ownership  interest of 5% or more in any non-corporate  licensee
or for the Transfer of any "economic  interest" of 5% or more in any licensee or
affiliate.  An "economic  interest" is defined for purposes of a Transfer as any
interest  whereby a person  receives or is entitled to receive,  by agreement or
otherwise,  a profit,  gain, thing of value,  loan,  credit,  security interest,
ownership interest or other benefit.

     A licensee must notify the Louisiana  Board of any  withdrawals of capital,
granting  of  loans,  or  other  extensions  of  credit,   or  any  advances  or
distributions  in excess of 5% of the  licensees  net  gaming  proceeds  for the
preceeding  12  month  period  within  five  days  of  completion  of  any  such
transaction.

    Riverboat  gaming  licensees and their affiliates are required to give prior
notification  to the  Louisiana  Board if such  person  applies  for,  receives,
accepts  or  modifies  the  terms of any loan or  other  financing  transaction.
Subject to certain  exceptions,  the Louisiana  Board is required to investigate
the reported  financing  transaction,  and to either  approve or disapprove  the
transaction.

    Fees  for  conducting  gaming  activities  on a  riverboat  pursuant  to the
Louisiana  Act include (i) $50,000 per riverboat for the first year of operation
and $100,000 per year per riverboat  thereafter  plus (ii) 18 1/2% of net gaming
proceeds. The Louisiana Act also authorizes the local governing body to assess a
boarding fee up to $2.50 in East Baton Rouge Parish. The City of Baton Rouge has
imposed an admission fee of

                                       11

<PAGE>




$2.50 for each  patron  boarding  the vessel.  For fiscal  1996,  the  Company's
boarding fee expense was $4,137,000.  For competitive  reasons,  the Company has
elected not to collect boarding fees from patrons.

    During 1996, the Louisiana  legislature passed two bills dealing with gaming
in the state.  The bills related to the holding of parish elections to determine
whether  various forms of gaming would be permitted in that parish.  Pursuant to
one bill, the Louisiana  Constitution was amended to provide that no gaming will
be licensed or relicensed in a parish unless a one-time referendum election on a
proposition  to allow  such  gaming  is held in the  parish  and  approved  by a
majority of those voting. The second bill provided for local option elections in
parishes at which voters  could  separately  determine  whether to allow in that
parish  riverboat  gaming,  video poker or land-based  casinos.  Local elections
pursuant to this statute and the constitutional  amendment were held on November
5,  1996.  In the six  parishes  in  which  riverboats  are  currently  located,
including East Baton Rouge Parish, voters approved the continuation of riverboat
gaming.  In East Baton Rouge Parish and the six parishes as a whole, the vote in
favor of riverboat gaming was 59% and 66%, respectively.

U.S. Coast Guard

    Each cruising  riverboat  also is regulated by the U.S.  Coast Guard,  whose
regulations affect boat design and stipulate on-board facilities,  equipment and
personnel  (including  requirements  that each  vessel be  operated by a minimum
complement  of licensed  personnel)  in addition  to  restricting  the number of
persons who can be aboard the boat at any one time. The Company's riverboat must
hold,  and  currently  possesses,  a  Certificate  of  Inspection.  Loss  of the
Certificate  of  Inspection  of a vessel would  preclude its use as an operating
riverboat. The vessel must be drydocked periodically for inspection of the hull,
which will  result in a loss of service  that can have an adverse  effect on the
Company.  For vessels of the Company's type, the inspection  cycle is every five
years. Less stringent rules apply to permanently moored vessels such as dockside
barges.  The Company  believes that these  regulations,  and the requirements of
operating and managing cruising gaming vessels generally, make it more difficult
to conduct riverboat gaming than to operate land-based casinos.

    All  shipboard  employees  of the  Company  employed  on  U.S.  Coast  Guard
regulated  vessels,  even those who have nothing to do with the actual operation
of the vessel, such as dealers,  cocktail hostesses and security personnel,  may
be subject to the Jones Act, which, among other things,  exempts those employees
from state limits on workers'  compensation awards. The Company believes that it
has adequate insurance to cover employee claims.

Shipping Act of 1916; Merchant Marine Act of 1936

    The federal Shipping Act of 1916 and the federal Merchant Marine Act of 1936
and applicable  regulations  thereunder  contain  provisions which would prevent
persons who are not  citizens of the United  States,  as defined  therein,  from
holding in the aggregate more than 25% of the

                                       12

<PAGE>




outstanding  shares of  Common  Stock.  For a  discussion  of by-law  provisions
relating to potential ownership of the Company's Common Stock by persons who are
not citizens of the United States,  see "Market for  Registrant's  Common Equity
and Related Stockholder
Matters."

General Non-Gaming Regulation

    The Company is subject to certain federal, state and local safety and health
laws,  regulations and ordinances that apply to non-gaming businesses generally,
such as the Clean Air Act, Clean Water Act,  Occupational Safety and Health Act,
Resource Conservation Recovery Act and the Comprehensive Environmental Response,
Compensation  and  Liability  Act.  The  Company  has not  made,  and  does  not
anticipate making, material expenditures with respect to such environmental laws
and regulations. However, the coverage and attendant compliance costs associated
with such laws, regulations and ordinances may result in future additional costs
to the Company's operations.

Paid Advertising and Marketing

    The Federal  Communications  Commission ("FCC") prohibits  broadcasters from
accepting  advertising that actively promotes gaming,  although the FCC does not
ban  all  advertising  for  casinos.   Federal  regulation  also  restricts  the
circulation  of certain  materials  related to gaming  through the United States
mail.

Discouragement of Share Accumulations

    Louisiana  state  law  requiring  approval  of  shareholdings  over  certain
thresholds  may  discourage  accumulations  over such limits and  therefore  may
discourage changes in control of the Company. The federal laws referred to above
may  also  discourage  ownership  by  shareholders  who  are not  United  States
citizens.

Item 2.           Properties.

    The Casino  Rouge is located  on the east bank of the  Mississippi  River in
Baton Rouge,  Louisiana on an 18-acre leased site. The site is in the East Baton
Rouge Downtown  Development  District less than  one-quarter mile from the state
capitol complex.  It is within  approximately  one mile of each of Interstate 10
and Interstate  110, major  thoroughfares  serving the Baton Rouge  metropolitan
area.

    The  Company  leases the  18-acre  site for the Casino  Rouge  pursuant to a
10-year  lease,  the term of which may be extended at the  Company's  option for
four five-year periods.  The annual rent is equal to the greater of (a) 1.25% of
all revenue generated on or by the leased premises or any riverboat docked there
or (b)  $7,500  per  month for the  first  nine  months  and  $33,333  per month
thereafter.  In addition, the Company prepaid rent of approximately $1.7 million
in connection  with the lessor's  acquisition  of nine acres of the 18-acre site
subject  to the lease.  Pursuant  to the lease,  the  Company  must also pay all
property  taxes.  The Company has the option to purchase the entire 18-acre site
on or after the fifteenth anniversary of the date of the

                                       13

<PAGE>




lease for a purchase  price equal to the then  appraised  value of the  original
nine acres  subject  to the lease  (not  including  any  leasehold  improvements
thereon).

    The Company  also  leases a total of  approximately  81,600  square feet for
general  warehousing,  office use and employee  parking pursuant to two two-year
leases.  The rents are  $6,987  per month for one lease and $7,660 per month for
the other.  Each lease is a triple net lease,  has two two-year  renewal options
and grants the Company a right of first refusal to purchase the properties.  For
the year ended November 30, 1996, the rental expense for the casino site and the
general  warehousing,  office use and employee parking sites, was $1,150,000 and
$166,000,  respectively. The casino site rental expense includes amortization of
prepaid rent of $176,000 and accrued rental for November 1996 of $78,000.

Item 3.           Legal Proceedings.

    On July 1, 1994, a lawsuit was filed against the Company by BRH Consultants,
Inc. ("BRH") (No. M407543,  Parish of East Baton Rouge) for an alleged breach of
a service  agreement.  In early 1993, the Company had discussions  with BRH with
respect to BRH's providing certain services to the Company.  The Company and BRH
subsequently   executed  a  letter  whereby,  upon  the  occurrence  of  certain
conditions,  a contract  would be entered  into  pursuant  to which BRH could be
entitled to  compensation  equal to the greater of 4% of gross  gaming win or $2
million per year,  plus  certain  lesser  amounts.  The  Company  decided not to
proceed with this arrangement and discussed a settlement with BRH of any alleged
claim.  Management believes that any claims by BRH are without merit but offered
a payment of $250,000 a year for 10 years.  This offer was rejected and has been
rescinded.  The Company is vigorously  defending the suit. The case has been set
for trial in October 1997. During 1993, the Company recorded a provision of $1.7
million  (the  then  present  value  of the  Company's  offer  to  BRH)  for any
unfavorable  outcome of this matter.  Such amount is reflected under the caption
"Estimated  dispute  resolution cost" in the  accompanying  balance sheets as of
November 30, 1996 and 1995. The Company cannot accurately predict the outcome of
litigation.  It could result in damages in excess of the amount reflected in the
financial  statements and could have a material  adverse effect on the Company's
financial position.

    The  Company  was the  subject  of a  lawsuit  filed  on April  12,  1993 in
Louisiana  by Robert S.  Miller  (No.  C393232,  Parish  of East  Baton  Rouge),
claiming breach of an alleged employment contract.  Mr. Miller sought damages of
$60,000 in cash and $150,000 in Common Stock plus termination benefits. Trial of
this matter was held in July 1995 and a judgment  was  rendered  August 9, 1995,
awarding Mr.  Miller  $60,000 plus legal  interest and denying all other claims.
Costs of the  proceedings  were ordered to be divided  between the parties.  The
Company posted a bond and appealed the judgment,  which has been  affirmed.  Mr.
Miller has filed for a rehearing of the court's judgment.

    The Company was the subject of a lawsuit filed on January 5, 1994 by
Richard F. Dohoney and Robert Reardon (No. F401974, Parish of East

                                       14

<PAGE>




Baton  Rouge),  claiming  breach  of  an  alleged  nonexclusive  loan  brokerage
agreement  in  connection  with the original  issuance of the  Company's 11 1/2%
First  Mortgage  Notes due 1998 (the  "Notes").  The  plaintiffs'  claim was for
$510,000, or 1% of the amount of Notes issued. In March 1995, the court rendered
judgment for the plaintiffs in the amount of $510,000 plus interest. The Company
included  $561,000 in professional  fees for the year ended November 30, 1994 to
reflect the judgment. The Company posted a bond and appealed the judgment, which
has been affirmed.  The Company made payment of $613,000 in June 1996 to satisfy
the judgment, interest and costs and the bond has been released. The bond amount
was  reflected  under the  caption  "Prepaid  and other  current  assets" in the
accompanying balance sheet as of November 30, 1995.

    The Company was the subject of three  lawsuits filed by  subcontractors  and
material  suppliers  of Bender  Shipyard,  Inc.  ("Bender"),  the builder of the
Casino Rouge, in regard to the construction of the Company's  riverboat  vessel.
Each of the three  plaintiffs  sought  payment of amounts  due. The Company paid
Bender the total  amounts  due,  but Bender  failed to remit the  amounts to the
subcontractors  and  suppliers.  These suits have been resolved by payments from
Bender  pursuant to an agreement  with the Company.  The riverboat  construction
contract  with Bender to  construct  the  riverboat  specified  that the cost of
construction would be $14,000,000, which amount has been paid by the Company. In
addition,  the Company has paid  approximately  $315,000 to Bender for  contract
change orders issued during the course of the construction  project. The Company
paid Bender an additional  $329,000 upon Bender's  completion of further work on
the riverboat and Bender's payment of all unpaid subcontractors and suppliers to
effect release of any pending or threatened liens on the vessel. The Company had
posted lien bonds totalling  $506,000 at November 30, 1995,  reflected under the
caption "Prepaid and other current assets" in the  accompanying  balance sheets,
in order to continue  operation of the riverboat  vessel as it defended  against
the suits. All bonds posted by the Company were released by the court in 1996.

    On  February  8, 1995,  the  Company  filed suit in  Louisiana  against  the
district attorney for East Baton Rouge Parish, Doug Moreau (No. C413892,  Parish
of East Baton  Rouge)  seeking a  preliminary  injunction  against the  district
attorney to prevent him from  indicting  or  prosecuting  any  employee,  agent,
officer or director of the Company for alleged regulatory violations not defined
as criminal acts under the Louisiana  Criminal Code.  The district  attorney has
publicly  articulated  that if a  riverboat  fails to cruise  and  continues  to
conduct gaming activities,  these activities  constitute gambling and are thus a
crime.  He convened a grand jury in December  1993 to  investigate  the cruising
activities of riverboats  and  generally  all matters  concerning  licensing and
other  regulatory  issues.  The identical  relief sought by the Company has been
granted by a court in another  parish and allowed to stand by a Court of Appeal.
Based upon the rulings and opinions of the Louisiana  Supreme  Court,  regarding
the injunction  issued by the court in another parish,  the Company believes its
suit has stated a valid cause of action.  No date has been set for the Company's
hearing.  Due to the uncertainly of the outcome of litigation,  both the Company
and the district attorney are abstaining from further action pending legislative
action on the specific issues involved in the suit.

                                       15

<PAGE>




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

    At the Annual Meeting of Shareholders held on September 6, 1996, the holders
of all of the outstanding Common Stock voted in person or by proxy to retain the
existing Board of Directors by electing Messrs.
Sturges, Meadows and Tarver as directors.

                                     PART II

Item 5.           Market for Registrant's Common Equity and Related Stockholder
                  Matters.

    There is no established public trading market for the Company's Common Stock
or common stock warrants. All of the outstanding Common Stock is currently owned
by CSMC and four individual  shareholders.  The warrants  entitle the holders to
acquire up to 153,000  shares of Common Stock,  subject to certain  antidilution
provisions. See "Security Ownership of Certain Beneficial Owners and Management"
and "Certain Relationships and Related Transactions."

    All  capitalized  terms not otherwise  defined  herein are as defined in the
Indenture, dated as of November 15, 1993 (the "Indenture"),  between the Company
and The Bank of New York, as successor Trustee, pursuant to which the Notes were
issued. The Indenture limits the Company's ability to make Restricted  Payments,
which include the payment of dividends on the Common Stock.

    The  Indenture  provides  that the  Company  shall  not  make,  directly  or
indirectly,  and shall not permit any Restricted Subsidiary to make, directly or
indirectly, any Restricted Payment, unless:

     (a) no Default or Event of Default shall have occurred and be continuing at
the time of and after giving effect to such Restricted Payment;

    (b) immediately after giving effect to such Restricted Payment,  the Company
could incur at least $1.00 of Indebtedness and the  Consolidated  Coverage Ratio
of the Company would be no less than 2.5:1; and

    (c) the aggregate of all Restricted Payments declared or made after December
28,  1994 does not exceed the sum of (i) 50% of  Consolidated  Net Income (or in
the event such  Consolidated  Net Income shall be a deficit,  minus 100% of such
deficit) accrued during the period (treated as one accounting  period) beginning
on  December  28, 1994 and ending on the last day of the  Company's  last fiscal
quarter ending before the date of such proposed  Restricted Payment plus (ii) an
amount equal to the aggregate Net Cash Proceeds received by the Company from the
issuance or sale (other than to a Subsidiary)  of its Capital  Stock  (excluding
Disqualified  Stock,  but  including  Capital  Stock issued upon  conversion  of
convertible Indebtedness and from the exercise of options, warrants or rights to
purchase  Capital Stock (other than  Disqualified  Stock) of the Company)  after
December 28, 1994;  provided,  however,  that the foregoing  provisions will not
prevent (i) the payment

                                       16

<PAGE>




of any  dividend  within  60  days  after  the  declaration  thereof,  if at the
declaration date such payment would have complied with the foregoing provisions,
provided  that no Default or Event of Default has  occurred  and is  continuing;
(ii)  Investments in Marketable  Securities;  or (iii) the repurchase of Capital
Stock with the net proceeds of a concurrent issuance of Capital Stock.

    During the year ended  November 30, 1996 the Board of Directors  authorized,
and the Company  paid, a total of  $4,334,000 in dividends to the holders of the
Company's  Common Stock and  distributions to common stock  warrantholders.  The
Company  intends to declare and pay dividends to the extent  permitted  based on
future earnings, the Indenture, legal limitations and available cash balances.

Required Divestiture of Common Stock

    As noted  herein,  there are various  state and federal  regulations  on the
ownership of the Company's Common Stock.  The Company's  By-laws provide that if
any  governmental   commission,   regulatory   authority,   entity,   agency  or
instrumentality  (collectively,  an "Authority")  having  jurisdiction  over the
Company  or any  affiliate  of the  Company  or  that  has  granted  a  license,
certificate  of  authority,  franchise  or  similar  approval  (collectively,  a
"License") to the Company or any affiliate of the Company orders or requires any
shareholder  to divest any or all of the  shares  owned by such  shareholder  (a
"Divestiture  Order") and the shareholder fails to do so by the date required by
the Divestiture Order (unless the Divestiture Order is stayed), the Company will
have the right to acquire from the  shareholder  the shares that the shareholder
failed to divest as required by such  Divestiture  Order.  If, after  reasonable
notice  and an  opportunity  for  affected  parties to be heard,  any  Authority
determines  that  continued  ownership  of the  Company's  Common  Stock  by any
shareholder  shall be grounds  for the  revocation,  cancellation,  non-renewal,
restriction  or  withholding  of any  License  granted to or applied  for by the
Company or any  affiliate  of the  Company,  such  shareholder  shall divest the
shares that provide the basis for such  determination,  and if such  shareholder
fails  to  divest  shares  within  10  days  after  the  date  the   Authority's
determination  becomes  effective  (unless the  determination  is  stayed),  the
Company shall have the right to acquire such shares from the shareholder.

    If the Company  determines  that  persons who are not citizens of the United
States as determined  under the Shipping Act of 1916 or the Merchant  Marine Act
of 1936 (the "Foreign Citizens") own more than 25% of the Company's  outstanding
Common Stock,  the Company may require the Foreign  Citizen(s) who most recently
acquired the shares that bring total Foreign Citizen  ownership to more than 25%
of the  outstanding  Common  Stock (the  "Excess  Shares")  to divest the Excess
Shares to persons who are United States citizens.  If the Foreign  Citizen(s) so
directed fail to divest the Excess Shares to United  States  citizens  within 30
days after the date on which the Company  gives a written  notice to the Foreign
Citizen(s)  to divest the Excess  Shares,  the  Company  shall have the right to
acquire the shares that the Foreign  Citizen(s)  failed to divest as required by
the Company's notice.  Such acquisition from the Foreign  Citizen(s) need not be
preceded by an

                                       17

<PAGE>


order  or  requirement  by an  Authority,  nor  is  there  any  requirement  for
notification within a specified period.

    Whenever  the  Company has the right to acquire  shares  from a  shareholder
pursuant to the provisions  described in the preceding  paragraphs,  the Company
will pay the  shareholder a price per share equal to the price per share paid by
the shareholder to acquire such Common Stock.  Such payment from the Company may
be made in cash,  notes or preferred stock which, in the opinion of a nationally
recognized banking firm, have a value equal to the amount required to be paid.

    When  any  Divesture  Order  is  entered  or when the  Company  tenders  the
consideration for which it may acquire shares, as described above, the shares in
question  shall no longer be entitled to any  voting,  dividend or other  rights
until  such  time  as they  have  been  appropriately  divested.  The  foregoing
provisions of the By-laws  relating to required  divestiture are in addition to,
and not in replacement of, any applicable legal requirements.

    The  provisions  of  the  By-Laws   described  above  are  uncommon  and  no
controlling  precedent  has  been  found  to  determine  how  such  By-laws  (or
comparable  provisions  in the Articles of  Incorporation)  would be enforced or
whether they are enforceable.

Redeemable Preferred Stock

    The  Company's  Articles  of  Incorporation   authorizes  50,000  shares  of
preferred  stock,  of which 11,000  shares of  redeemable  preferred  stock were
issued and outstanding and held by Thomas L. Meehan as of November 30, 1996. The
redeemable preferred stock receives non-cash cumulative dividends at the rate of
12% per annum.  The preferred  stock must be redeemed by the Company on December
1, 1999 and may be  redeemed  at any time  prior  thereto if the Notes have been
paid in full. After the Notes have been paid in full, the Company cannot pay any
dividends  on the  Common  Stock  until the  preferred  stock is  redeemed.  The
redeemable preferred stock has no voting rights and a liquidation  preference of
$100 per share.  Mr. Meehan has executed a non-binding  letter of intent to sell
the  preferred   stock  to  CSMC.   See  "Certain   Relationships   and  Related
Transactions."

Item 6.           Selected Financial Data.

    The following table sets forth selected financial data for the Company.  The
selected  financial  data were  derived  from the  financial  statements  of the
Company,  which have been audited by the Company's  independent  accountants and
should be read in  conjunction  with  "Management's  Discussion  and Analysis of
Financial Condition and Results of Operations," the financial  statements of the
Company, the related notes thereto and the other financial  information included
elsewhere herein.  The financial  information is for the year ended December 31,
1992,  the eleven months ended  November 30, 1993,  and the years ended November
30, 1994, 1995 and 1996.

    During 1993 the Company changed its fiscal year end from December 31

                                       18

<PAGE>




to November 30. From  inception in August 1991  through  December 27, 1994,  the
Company  devoted   substantially   all  of  its  efforts  to  evaluating  gaming
opportunities in Louisiana,  including  seeking a Louisiana gaming license,  the
development  and  construction  of the Casino Rouge and the  financing  thereof.
Accordingly,  through  the fiscal  year ended  November  30,  1994,  the Company
reported net operating  losses and had no earnings from  continuing  operations.
(All amounts shown in thousands except per share, number of shares and ratios).
<TABLE>
<CAPTION>


                                                       Eleven
                                        Year Ended   Months Ended Year Ended    Year Ended   Year Ended
                                        December 31, November 30, November 30,  November 30, November 30,
                                             1992        1993(1)       1994        1995(2)       1996
                                          ----------    ---------    ---------    ---------    ---------
<S>                                        <C>          <C>          <C>          <C>          <C>      
Statement of Operations Data:
  Net revenues .........................   $       -    $       -    $       -    $  67,083    $  76,740
  Expenses excluding income taxes ......       1,342        2,564        8,246       61,093       68,097
  Income (loss) before income taxes ....      (1,342)      (2,564)      (8,246)       5,990        8,643
  Provision for income taxes ...........           -            -            -            -        1,340
  Net income (loss) ....................      (1,342)      (2,564)      (8,246)       5,990        7,303
  Dividend requirement on
    redeemable preferred stock .........           -            -         (132)        (132)        (132)
  Market value warrant adjustment ......           -            -         (285)      (2,790)           -
  Distributions paid to common stock
    warrantholders .....................           -            -            -         (408)        (584)
  Net income (loss) assigned to
    common shareholders ................      (1,342)      (2,564)      (8,663)       2,660        6,587
  Ratio of earnings to fixed charges (3)           -            -            -         1.60         2.25

Share and Per Share Data:
  Earnings (loss) per common and
   common equivalent share (4) .........   $   (3.42)   $   (6.00)   $   (8.55)   $    2.71    $    6.31
 Cash dividends declared on common
   stock and common equivalent shares ..           -            -            -    $    2.67    $    3.82
 Weighted average common and
   common equivalent shares
   outstanding (4) .....................     392,133      427,187      980,333      982,783    1,135,783
</TABLE>

<TABLE>
<CAPTION>


                               December 31,           November 30,(1)
                                 -------    -------------------------------------------    
                                  1992       1993        1994        1995        1996
                                 -------    -------    --------    --------    --------    
<S>                              <C>        <C>        <C>         <C>         <C>     
Balance Sheet Data:
Current assets ...............   $     8    $   519    $  8,647    $ 12,059    $ 11,630
Total assets .................       352      4,802      59,030      62,692      58,438
Current liabilities ..........     1,824      5,838       7,995      13,863      12,612
Long-term obligations (5) ....         -          -      54,802      49,609      42,656
Redeemable preferred stock and
  warrants (6) ...............         -          -       2,818       5,740       5,872
Shareholders' deficit ........   $(1,472)   $(1,036)   $ (6,585)   $ (6,520)   $ (3,683)
</TABLE>


                                       19


<PAGE>





         (1) The Company historically operated on a calendar fiscal year end. In
1993, the Company changed its fiscal year end to November 30.

         (2) The Casino Rouge  commenced  operations  on December 28, 1994.  The
financial  statements for the year ended November 30, 1995,  therefore,  reflect
both  developmental  and  initial  operating  stages and should not be viewed as
being representative of a normal period of operations. All revenues for the year
ended  November  30, 1995 were earned  during the period of December 28, 1994 to
November 30, 1995.

         (3) As indicated  above,  through  November 30, 1994 the Company had no
earnings while in the development stage;  accordingly earnings were not adequate
to cover fixed charges.  For the year ended December 31, 1992, the eleven months
ended November 30, 1993, and the year ended November 30, 1994 the deficiency was
approximately  $1,342,000,  $2,564,000,  and $9,877,000,  respectively.  For the
years  ended  November  30,  1995 and 1996 fixed  charges  were  $9,756,000  and
$7,002,000,  respectively.  Fixed charges include interest charges, amortization
of debt  expense  and  discounts,  and  the  change  to the  accreted  value  of
redeemable warrants.

         (4)  Earnings  (loss)  per  common  and  common   equivalent  share  is
calculated  using either the debt or equity  method,  whichever is more dilutive
giving  consideration  to the  effect of changes  to the  accreted  value of the
warrants and distributions  paid to warrantholders  during the period.  Earnings
(loss) per common and common  equivalent  share for the years ended November 30,
1994 and 1995 are  calculated by not  including  the Common Stock  issuable upon
exercise of the warrants in the weighted average common shares outstanding.  For
the year ended November 30, 1996, the weighted average common shares outstanding
includes the Common Stock issuable upon exercise of the warrants.
The warrants were issued on December 1, 1993.

         (5) Such amount  includes the long-term  portion of the Notes and notes
payable.  Amounts as of November 30, 1994 and 1995 also include  $1,700,000  for
estimated dispute resolution cost.

         (6)  Such  amount  includes   redeemable   preferred  stock  valued  at
$1,232,000,  $1,364,000 and  $1,496,000 as of November 30, 1994,  1995 and 1996,
respectively,  and the  assigned  value  of the  warrants  of  $1,586,000  as of
November 30, 1994 and $4,376,000 as of November 30, 1995 and 1996.

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

General

    On December 28, 1994 the Company  commenced  operations of the Casino Rouge.
Prior to that date,  the Company  was in the  development  stage  engaged in the
development and construction of the Casino Rouge.  From inception in August 1991
through December 27, 1994, the Company devoted  substantially all of its efforts
to evaluating gaming  opportunities in Louisiana,  including seeking a Louisiana
gaming license,  the  development  and  construction of the Casino Rouge and the
financing  thereof.  Accordingly,  prior to December 28, 1994 the Company had no
earnings.

    The  Company's  activities  have  been  financed  from  (i) cash  flow  from
operations,  (ii) equity and other capital  contributions  of the  shareholders,
(iii) the issuance of 51,000 units,  each unit  consisting  of $1,000  principal
amount of Notes and three  warrants to purchase one share each of Common  Stock,
and (iv)  secured  equipment  financing  pursuant  to the  terms of a bank  loan
agreement  dated  December  13,  1994 (the  "Credit  Agreement"),  as amended on
December 20, 1995.

                                       20

<PAGE>




Results of Operations

    Year ended November 30, 1996 compared to year ended November 30, 1995.

     Casino  revenues in the two  riverboat  Baton Rouge  gaming  market for the
years ended  November  30,  1996 and 1995 were  $127,491,000  and  $116,704,000,
respectively.  Riverboat  casino  patron  counts  in  Baton  Rouge  for the same
respective  periods were 2,910,000 and 2,931,000.  Management  believes the 9.2%
growth in casino  revenues is  attributable  to (i) an  additional  28 days (366
versus  338) of  gaming  operations  for the  Casino  Rouge in the  1996  period
compared  to the 1995  period  and (ii) the  positive  impact of 1996  marketing
efforts on the part of the two  riverboat  casinos,  whereas  the casino  patron
count has declined as a result of patrons  having  visited both casinos in 1995,
during the early months of operations of each facility,  out of curiosity and to
reach a decision as to which riverboat they preferred. Measures of the Company's
market share of admissions  and casino  revenue for the years ended November 30,
1996 and 1995 are not  comparable  as the Company did not operate a full year in
the period  ended  November  30, 1995 due to the casino  opening on December 28,
1994.  The Company's  share of the Baton Rouge gaming market was 59.5% and 59.2%
of casino revenues and 56.9% and 60.9% of admissions for the year ended November
30, 1996 and the eleven months ended November 30, 1995, respectively. Management
believes  that its  greater  than  share of the  Baton  Rouge  gaming  market as
compared to the other riverboat  casino is due to the comfort and convenience of
the Casino Rouge's facilities and the Company's 1996 slot marketing efforts.

    The Casino Rouge  commenced  operations on December 28, 1994 and the Company
was in both the developmental and initial operating stages during the year ended
November  30,  1995.  Therefore  the results of  operations  for the years ended
November 30, 1996 and 1995 are not fully comparable.

     Casino  revenues  were  $74,615,000  and  $65,187,000  for the years  ended
November  30,  1996 and  1995,  respectively.  The  increase  of 14.5% in casino
revenues  is  primarily  attributable  to (i) 28 more days (366  versus  338) of
operating  results  included in the year of 1996 compared to 1995 because of the
Company's  commencement  of operations on December 28, 1994, (ii) an increase of
slot  coin-in per guest of 22.0% in 1996  compared to 1995 and (iii) an increase
in the table games hold percentage. During the year ended November 30, 1996, the
hold percentage of table games  increased 2.1 percentage  points (22.5 vs. 20.4)
and the hold percentage of slots decreased 0.3 percentage  points (6.9 vs. 7.2).
Management  believes the change in the hold percentages of table games and slots
is due to  normal  fluctuations  associated  with  games  of  chance  and is not
indicative of a continuing  trend.  The  combination of changes in gaming volume
and hold percentages resulted in a 6% increase in average daily casino revenues.
Management  believes the  increase was due to the table play of certain  premium
customers;  the  marketing  of  an  expanded  frequent  player  reward  program;
increased prize, food and valet parking  promotions;  and an increase in patrons
from

                                       21

<PAGE>




a tour bus  marketing  program.  Average win per passenger was $45.09 and $38.10
for the  years  ended  November  30,  1996 and  1995,  respectively.  Management
believes  the  increase  in  average  win  per  passenger  was  due to a  higher
concentration of serious gaming patrons during the year ended November 30, 1996.

    Food and beverage revenues, net of promotional  allowances,  were $1,351,000
and  $1,382,000  for the years ended  November 30, 1996 and 1995,  respectively.
While  revenues  decreased  2.2% in 1996  compared  to 1995,  food and  beverage
operating  costs  decreased  20.1% to $1,293,000 for the year ended November 30,
1996. The decrease in food and beverage  operating  costs was exclusively in the
Company's food operations,  as food service, cost control and pricing strategies
were  implemented  to service better the Company's  regular gaming  customer and
improve profits.

    Casino  expenses  for the  years  ended  November  30,  1996 and  1995  were
$33,947,000 and $29,849,000,  respectively, which represented 45.5% and 45.8% of
casino  revenues  in each  period.  The dollar  increase  in casino  expenses is
primarily  attributable to (i) the increased number of days of operations in the
year ended  November 30, 1996  compared to 1995,  (ii) gaming  revenue  taxes of
18.5% paid to the State of Louisiana and (iii) casino marketing expenses for the
frequent player reward program and a tour bus marketing program.

    Selling,   general  and   administrative   expenses  were   $21,954,000  and
$18,085,000  for the years  ended  November  30,  1996 and  1995,  respectively.
Principal  reasons  for the  increase in  selling,  general  and  administrative
expenses  include (i) the  increased  number of days of  operations  in the year
ended November 30, 1996 compared to 1995,  (ii) inclusion of $1,033,000  related
to a 1996 campaign in support of riverboat casinos in Baton Rouge, no such costs
were  incurred  in the 1995  period and (iii)  marketing  expenses  included  in
selling,  general and administrative expenses in 1996 compared to 1995 increased
approximately  $860,000 due to additional  advertising  production and placement
costs;  prize,  food, and valet parking  promotions;  entertainment  and special
events; and personnel administering and selling the tour bus program.

     Income before  depreciation,  amortization and interest was $19,546,000 and
$15,905,000 for the years ended November 30, 1996 and 1995,  respectively.  Such
amounts as a percentage  of net revenues (or  operating  margins) were 25.5% and
23.7% for the 1996 and 1995  periods,  respectively.  After  adjustment  for the
$1,033,000  expended for the 1996 campaign in support of riverboat gaming,  1996
operating margins were 26.8% as compared to the 1995 operating margins of 23.7%.
Management  believes the improvement in operating margins was due to its greater
than fair  share  revenue  performance  of the Casino  Rouge in the Baton  Rouge
marketplace and cost effective slot marketing programs implemented in 1996.

    Net  interest  expense was  $6,761,000  and  $6,331,000  for the years ended
November 30, 1996 and 1995,  respectively.  This increase is the result of (i) a
decrease in interest income as invested funds

                                       22

<PAGE>




were  expended  on  construction  and  development  costs,  (ii) an  increase in
interest  expense as a portion of the interest was not  capitalized  in 1996 but
was in 1995  prior to  opening  and as  construction  was  completed  after  the
commencement of operations and (iii) the expensing of $443,000 of offering costs
and original issue  discount,  associated  with the $4,222,000 and $2,110,000 of
Notes  repurchased  by  the  Company  on  February  28,  and  August  29,  1996,
respectively,  which  negated a reduction in interest  expense of  approximately
$425,000.

    The Company  recorded a provision for income taxes of $1,340,000  and $0 for
the years ended  November  30, 1996 and 1995,  respectively.  For the year ended
November 30, 1996, the Company  released all remaining  balances of the deferred
tax valuation  allowance of $2,399,000 in accordance  with SFAS 109. The release
of the  valuation  allowance  partially  offset the  current  tax  provision  of
$1,663,000  and the deferred  tax  provision  of  $2,076,000  for the year ended
November 30, 1996. For the year ended November 30, 1995, the Company  recorded a
current tax  provision of $592,000 and a deferred tax  provision of  $1,778,000.
These amounts were offset by a release of the deferred tax  valuation  allowance
of $2,370,000 for the year ended November 30, 1995.

    Year ended November 30, 1995 compared to year ended November 30, 1994.

    The Casino Rouge  commenced  operations on December 28, 1994.  The financial
statements  for the year  ended  November  30,  1995,  therefore,  reflect  both
developmental  and  initial  operating  stages and should not be viewed as being
representative of a normal period of operations. All revenues for the year ended
November  30, 1995 were earned  during the period  December 28, 1994 to November
30,  1995.  In  addition,  the Company was in the  development  stage during the
entire year ended November 30, 1994.  Therefore,  the year ended periods are not
comparable.  As a  result,  there  are no  comparisons  to the  prior  year  for
operating revenues or expenses.

    Casino  revenues were  $65,187,000  during the year ended November 30, 1995,
and  consisted of  $17,678,000  of table game win and  $47,509,000  of slot win.
Casino  Rouge's share of the Baton Rouge gaming  market  (which  consists of two
licensed  riverboat  gaming  operations)  was 60.9% of  admissions  and 59.2% of
casino win for the eleven  months of  operations  ended  November 30, 1995.  Win
percentage for table games and for slots was 20.4% and 7.2%,  respectively.  The
average win per  passenger  was  approximately  $38.10,  based on  approximately
1,711,000 passengers.

    Food and beverage  revenues were $1,382,000 which included revenues from the
buffet  restaurant  and fast food grill in the land-based  facility,  all casino
bars and the food carts on the riverboat. Other revenue consisted of commissions
of $352,000,  and gift shop,  parking and  miscellaneous  revenues  amounting to
$162,000.


                                       23

<PAGE>




    Casino expenses were $29,849,000, which included gaming taxes of $12,091,000
based on a state tax of 18.5% of taxable casino  revenues;  $6,501,000 of casino
payroll and related  costs;  $4,277,000 of admission fees payable to the City of
Baton Rouge at $2.50 per passenger; $2,690,000 of promotional expenses; $718,000
of other direct  expenses;  and  $3,572,000  of payroll,  taxes and benefits and
other costs of casino support  departments.  Casino support  departments include
cashiering,  surveillance and casino marketing.  Casino expenses constituted 46%
of casino revenues.

    Food and beverage costs were $1,619,000, including payroll, the cost of food
and beverage sold and related expenses. To attract patronage to the casino, food
outlets  offered  retail  prices below actual cost to the Company.  Accordingly,
food and beverage costs constituted 117% of food and beverage revenues.

    Selling,  general and  administrative  expenses were  $18,085,000.  Expenses
included  in selling,  general  and  administrative  expenses  were  principally
$2,706,000  for  marketing;  $2,852,000  for  capital  expenses  (consisting  of
property  taxes,  insurance on the  riverboat  and the  land-based  facility and
ground lease  payments);  $2,705,000  for general and  administrative  expenses;
$2,264,000 for management fees; and $2,548,000 for marine operations.

    The Company recorded  pre-opening  expenses of $1,625,000 for the year ended
November 30, 1995 (of which $1,184,000 was incurred during the period December 1
through  December 27, 1994)  compared to $4,389,000  for the year ended November
30, 1994.  These amounts are not comparable  between  years,  as the 1995 period
contains the approximately  one-month period just prior to opening, during which
preopening  expenses are  customarily  at their  highest  level,  while the 1994
period  contains twelve months of development  stage  activities with preopening
expenses at a reduced monthly level.

    Depreciation and amortization was $3,584,000 for the year ended November 30,
1995 compared to $34,000 for the year ended November 30, 1994. This increase was
due to the placement of assets into service upon  commencement of operations and
the related depreciation of those assets.

    Net interest  expense was  $6,331,000  for the year ended  November 30, 1995
compared to  $3,823,000  for the year ended  November  30, 1994.  This  increase
resulted from (i) a decrease in interest  income as invested funds were expended
on construction and development costs, (ii) an increase in interest expense as a
portion of the  interest was no longer  capitalized  after the  commencement  of
operations and (iii) interest expense related to the Credit Agreement.

    The Company had a net income of $5,990,000  for the year ended  November 30,
1995 compared to a net loss of $8,246,000 for the year ended November 30, 1994.




                                       24

<PAGE>

Liquidity and Capital Resources


    During the year ended November 30, 1996 the Company generated $12,708,000 in
cash flows from operations as compared to $8,213,000 for the year ended November
30, 1995. The improvement in cash flows from operations was primarily due to (i)
increased  net  income  in  1996  due to (a) an  increased  number  of  days  of
operations,  (b) growth in table and slot revenues, and (c) pre-opening expenses
paid in 1995  and (ii) a net use of cash of  $160,000  in  fiscal  1996 for cash
requirements of working  capital and other assets and liabilities  compared to a
net use of cash of $2,302,000 for similar cash requirements in fiscal 1995.

    Cash flows from  investing  activities  were  ($1,585,000)  and  $4,498,000,
respectively,  for the years ended  November 30, 1996 and 1995.  Results for the
year ended  November  30,  1996  reflect  capital  expenditures  for  continuing
operations financed by cash from operations. Results for the year ended November
30, 1995 were  attributable  to capital  expenditures of $11,526,000 to complete
the  construction  and  development  of the Casino  Rouge and the  reduction  of
restricted cash in the amount of $15,941,000 utilized for original construction,
equipment and pre-opening expenses.

     Financing  activities  for the year ended  November  30,  1996 used cash of
$11,456,000  due to (i) the February 28, and August 29, 1996 repurchase of Notes
in the principal amounts of $4,222,000 and $2,110,000, respectively, as required
by  the  Indenture,   (ii)  the  payment  of  dividends  to   shareholders   and
distributions to warrantholders aggregating $4,334,000, and (iii) $2,400,000 for
the  repayment of  regularly  scheduled  principal  amounts due under the Credit
Agreement.  For the year ended November 30, 1995, financing activities used cash
in the amount of $7,703,000. During fiscal 1995, the Company borrowed $5,559,000
under the Credit Agreement, repaid obligations for gaming and other equipment of
$4,654,000, made repayments of notes payable principal of $1,358,000, classified
Cumulative  Excess  Cash Flow of  $4,222,000  for the  semiannual  period  ended
November 30, 1995 as restricted cash pursuant to the terms of the  Indenture,and
paid dividends to shareholders  and  distributions  to  warrantholders  totaling
$3,028,000.

    As of November  30,  1996,  liquidity  and capital  resources of the Company
included  cash  and  cash  equivalents  and  restricted  cash  of  approximately
$7,729,000,  which the  Company  deems  sufficient  for  continuing  operations,
including the maintenance of an appropriate casino bankroll. Current anticipated
obligations of the Company over the next year include, in material part:

         i.       Debt service, including periodic payment of interest on
    the Notes and principal and interest payments required by the
    Credit Agreement.

         ii.      Mandatory offers to repurchase Notes as required by the
    Indenture should the Company, in any semiannual period, exceed
    $2,000,000 in Cumulative Excess Cash Flow as set forth in the
    Indenture. Cumulative Excess Cash Flow for the semiannual period
    ended November 30, 1996 amounted to $3,052,000. As required by

                                       25

<PAGE>




the  Indenture,  the  Company  made an offer to  repurchase  Notes at par to the
extent of such  Cumulative  Excess Cash Flow on January 29, 1997.  The Company's
offer to  repurchse  Notes  expired on  February  27,  1997 with no Notes  being
tendered.  As required by the Indenture,  50% of Cumulative Excess Cash Flow for
the  semiannual  period ended  November 30, 1996 must be used to aquire Notes in
the open market or be included in the  determination  of Cumulative  Excess Cash
Flow for the  semiannual  period  ending  May 31,  1997.  The  remaining  50% of
Cumulative Excess Cash Flow is considered Cash Available for  Reinvestment,  and
is available to the Company for limited purposes,  including making  investments
in  or  loans  to  a  Restricted   Subsidiary,   making  of  Permitted   Related
Invenstments,  repurchasing  Notes in the open  market or making  investment  in
marketable  securities,  all as defined in the Indenture.  Management intends to
purchase  marketable  securities until the appropriate use of the Cash Available
For Reinvestment is determined.

         Based on an expectation of continuing profitable  operations,  and as a
    result of the approximate $1,526,000 of Cumulative Excess Cash Flow carried
    over from the  semiannual  period  ended  November  30,  1996,  the  Company
    anticipates  generating  Cumulative  Excess  Cash  Flow  for the  semiannual
    periods  ending May 31, 1997 and November 30, 1997. At the present time, the
    Company is unable to predict the amount of Cumulative  Excess Cash Flow that
    may be  realized  for such  semiannual  periods  or  whether  the  amount of
    Cumulative  Excess  Cash Flow  would  cause the  Company  to make  offers to
    repurchase  Notes.  Should any of these mandatory offers to repurchase Notes
    be required,  the Company believes existing cash balances and cash generated
    from   continuing   operations   will  be   sufficient  to  meet  such  cash
    requirements.

         In connection with any financing  pursuant to the letter of intent with
    Messrs.  Meadows,  Bayles  and  Meehan,  it is likely  that CHC  would  seek
    additional financing in an amount sufficient to permit the redemption of the
    Notes,  although no assurance can be given that adequate  financing  will be
    obtained or that, even if obtained, any Notes will be redeemed.

         iii.     Payment of Federal and Louisiana state income taxes as
    may be required from time to time.

         iv. Cash  dividends  to the holders of the  Company's  Common Stock and
    distributions  to  warrantholders  may be  declared  from time to time.  The
    Company  intends to declare and pay dividends to the extent  permitted based
    on future  earnings,  the Indenture,  legal  limitations  and available cash
    balances.

    In the opinion of management, the Company will continue to
generate sufficient cash flows to meet operating needs and debt
service requirements, including those listed above, for the next
year.  See "Certain Relationships and Related Transactions."

    The Company's  secured debt financing  includes (i) $51,000,000 of the Notes
($44,668,000 of which were outstanding on November 30, 1996),  which were issued
along  with  153,000  detachable  warrants  to  purchase  one share  each of the
Company's Common Stock at a price of

                                       26

<PAGE>




$0.01 any time prior to December 1, 1998, (ii)  $5,560,000 of secured  equipment
financing which bears interest on the outstanding  balance (which was $2,003,000
as of November 30, 1996) at a rate of 8.9% per annum and requires  level monthly
payments of principal  and interest  through  September  1997, at which time the
loan is fully  amortized,  and (iii)  $440,000 of additional  secured  equipment
financing  pursuant to an amendment to the Credit  Agreement  dated December 20,
1995 which bears interest on the  outstanding  balance (which was $238,000 as of
November 30,  1996) at a rate of 10.5% per annum and  requires 24 equal  monthly
payments of principal plus interest on the outstanding  balance through December
1997.

    Certain  covenants  in the  Indenture  limit the  ability of the Company to,
among other things,  incur  indebtedness,  grant liens,  sell assets,  amend the
Management  Agreement,  enter  into  sale-leaseback  transactions  and engage in
transactions with affiliates. In the event of a Change of Control (as defined in
the  Indenture),  the Company is required to offer to purchase  all  outstanding
Notes  at a  redemption  price of 101% of the  principal  amount  thereof,  plus
accrued and unpaid interest, if any, to the redemption date.

    All amounts  borrowed  under the Credit  Agreement  as amended  were used to
finance  furniture,  fixtures  and  equipment  for the Casino  Rouge.  All items
financed  by the Credit  Agreement,  as amended,  are  pledged as  security  for
amounts due thereunder.  All of the remaining  assets of the Company,  including
the riverboat and land-based  facilities,  are pledged as security for repayment
of the Notes.

    The  warrantholders  have put rights  whereby  the Company is  obligated  to
purchase the warrants on December 1, 1998 at the value of the  Company's  Common
Stock at that time, as determined by two independent  investment  banking firms.
The warrants are  classified as  redeemable  equity due to the put right feature
and, at each balance sheet date, are accreted to the amount at which the Company
expects to repurchase these warrants. The estimated accreted value attributed to
the  redeemable  common  stock  warrants  as of  November  30,  1996 and 1995 is
$4,376,000.

Item 8.           Financial Statements and Supplementary Data.

    Reference is made to the Index to Financial Statements on page F-1.

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

    Not applicable.

                                       27

<PAGE>




                                    PART III

Item 10.          Directors and Executive Officers of the Registrant.

     The  following  table sets forth those  individuals  who are  directors and
executive officers of the Company.


   Name                    Age   Position

Robert B. Sturges          49   Chairman of the Board
Dan S. Meadows             50   President and Director
Leon R. Tarver II          54   Independent Director
W. Peter Temling           49   Acting Chief Financial
                                       Officer
Dale A. Darrough           49   General Manager
James F. Dolan             39   Secretary/Treasurer

    The following information summarizes the business experience during at least
the past five years of each director and executive officer of the Company.

    Robert B. Sturges has been President, Gaming Group, of CHC since March 1994.
Prior thereto, from 1989 he was President of Carnival Management Services,  Inc.
(then a wholly-owned  subsidiary of Carnival and now known as CSMC) and Carnicon
Management  Associates  ("Carnicon"),  a series of joint  ventures  of CMSC with
affiliates  of TCC. He began his  affiliation  with Carnival in 1983 and in 1986
was named Special Assistant to the Chairman of Carnival.  Shortly thereafter, he
was promoted to Vice President of Resorts and Gaming,  with  responsibility  for
all of Carnival's gaming and land-based development.  Prior to joining Carnival,
Mr. Sturges  served for 10 years in the New Jersey  Attorney  General's  Office,
including  three years in the Division of Gaming  Enforcement as Deputy Director
and  Acting  Director.  He has also been a  consultant  to a number  of  foreign
governments  relating to gaming and casino  development.  Mr.  Sturges  became a
director of the Company in October 1993 and was elected Chairman of the Board in
April 1995.

    Dan S. Meadows has been  President of the Company since  October 1993.  From
the   incorporation   of  the   Company   until   October   1993  he  served  as
Secretary/Treasurer.  He was elected a director  in July 1993.  For the last six
years he has been the President and  co-founder of Synura,  Inc.  ("Synura"),  a
financial  holding company  involved in real estate  investments and funding for
two corporations in which he and Thomas L. Meehan owned a significant  interest:
Sportlite,  Inc.,  an  Arizona  corporation  involved  in  the  development  and
marketing  of energy  saving  lighting,  and the Company.  Prior to  co-founding
Synura, Mr. Meadows was involved in real estate development and marketing for 19
years.

    Leon R. Tarver II has been a director of the Company  since  December  1994.
Since January 1997, he has been President,  and since January 1992, Professor of
Public Administration,of Southern. From February 1994 through December 1996, Mr.
Tarver was  Chancellor  for  Administration  of  Southern.  From  August 1989 to
January 1992, Mr. Tarver served as the Secretary of the Louisiana  Department of
Revenue and Taxation.

    W. Peter Temling has been acting Chief Financial Officer of the

                                       28

<PAGE>




Company  since October 1993. He was a director of the Company from November 1993
through  November  1994. He also is Executive Vice  President/Finance  and Chief
Financial  Officer of CHC.  Prior to the  formation  of CHC in March  1994,  Mr.
Temling held similar positions with TCC and Carnicon.  Mr. Temling joined TCC in
1981  after  serving  12  years  with  the  Sheraton   Corporation,   where  his
responsibilities  included  business  planning  for more  than 100  hotels,  the
opening of hotels  worldwide  and  directing  the  financial  functions  for the
franchise  division  consisting  of 400 hotels and inns.  Mr.  Temling also is a
certified public accountant.

    Dale A.  Darrough has been  General  Manager of the Company  since  February
1996. From October 1995 to February 1996, he served as Executive Vice President,
Operations,  with Shuffle Master Gaming,  Inc. Prior thereto,  from August 1995,
Mr. Darrough was a Consultant to Hyatt  Development Corp. He held positions with
Bally's Casino Resort from April 1991 to July 1995, most recently as Senior Vice
President, Casino Operations.

    James F. Dolan has been  Secretary/Treasurer  of the Company since May 1996.
Since December  1995, he also has served as Vice President of Finance.  Prior to
joining the Company,  Mr.  Dolan was Director of Finance of Harrah's  Shreveport
Casino  from June 1993 to  December  1995.  Prior  thereto,  he held  management
positions  with Promus  Companies,  Inc.  from  January  1990 to May 1993,  most
recently as Director of Accounting Services.

Related Matters

     Mr. Meadows was a party to an employment  agreement  with the Company.  The
employment agreement, entered into in September 1993, was for a term of one year
and was amended and extended through April 16, 1995. The Company originally paid
Mr. Meadows' local transportation,  lodging and meal expenses.  Thereafter, from
October 1, 1994 his salary was  increased to reflect his direct  payment of such
amounts. Mr. Meadows received a monthly salary of $18,587 (originally  $13,000).
The Company  reimbursed  the costs for Mr.  Meadows to  participate in insurance
plans through Sportlite,  Inc. The employment  agreement terminated on April 16,
1995. Thereafter, Mr. Meadows has continued to serve as President and a director
of the Company.
    Pursuant to employment agreements, any of Messrs. Meadows, Bayles or Meehan,
upon becoming a full-time  employee of the Company,  such as Mr.  Meadows,  must
agree  that for two  years  after the sale of all his  Common  Stock he will not
solicit  business  from or offer  services  or  products  to any  clients of the
Company or any of its affiliates  which is  competitive  with the business of or
services or products  offered by the Company or any of its  affiliates or engage
in any business  activity in any capacity which is competitive with the business
of the Company or any of its affiliates  being conducted at the time of the sale
of his Common Stock within the State of Louisiana. The two-year limitation shall
expire  upon the sale of all  shares  of  Common  Stock  held by all of  Messrs.
Meadows,

                                       29

<PAGE>




Bayles and Meehan and CSMC.

    Section  83  of  the  Louisiana   Business   Corporation  Law  authorizes  a
corporation  to  indemnify  any  director,  officer,  employee  or  agent  of  a
corporation,  if such person  acted in good faith and in a manner he  reasonably
believed to be in, or not opposed to, the best interests of the corporation, and
with respect to any criminal  action or proceeding,  had no reasonable  cause to
believe  his  conduct  was  unlawful.  To the extent  that such  person has been
successful  on the merits or otherwise in defense of any claim,  issue or matter
therein,  he shall be indemnified  by the  corporation.  A corporation  may also
procure or maintain insurance or other similar arrangement on behalf of any such
person.

Item 11.           Executive Compensation.

    The  following  table  provides a summary of the  compensation  for the year
ended  November  30,  1996 of the  Chairman  of the Board and  President  of the
Company and the other  executive  officers who  received  cash  compensation  in
excess of $100,000.

Summary Compensation Table

                                                                Other Annual
Name                       Position      Salary        Bonus    Compensation (1)
----                       --------     --------       -----    ----------------

Robert B. Sturges (2)     Chairman of  $      0           -                 -
                          the Board

Dan S. Meadows (2)        President    $      0           -                 -

Dale A. Darrough (3)      General      $120,785           -                 -
                          Manager


     (1)  Aggregate  amount of other  annual  compensation  does not  exceed the
lesser of $50,000 or 10% of executive officer's salary and bonuses.

     (2) Mr.  Sturges and Mr. Meadows serve as the only members of the Executive
Committee of the Board of Directors.  They do not receive any compensation  from
the  Company.  They  are  reimbursed  their  reasonable  expenses  for  Board of
Directors  meetings  attended as explained below in "Compensation of Directors".
See "Directors and Executive Officers of the Registrant," "Security Ownership of
Certain Beneficial Owners and Management" and "Certain Relationships and Related
Transactions."

     (3) Mr.  Darrough has been General  Manager of the Company  since  February
1996.

Compensation of Directors

    Directors of the Company who are either  employees of the Company or elected
pursuant to the Shareholder  Agreement (as  hereinafter  defined) are reimbursed
their reasonable  expenses for meetings attended but do not receive any separate
compensation.  As a Director,  Mr. Tarver receives an annual retainer of $10,000
and reimbursement of reasonable expenses for

                                       30

<PAGE>




meetings  attended.  On December 1, 1994,  the Company  issued  2,450  shares of
Common Stock to Mr. Tarver. The shares will vest over a three-year period but he
will receive all dividends  from the date of issuance.  In addition,  Mr. Tarver
receives  $24,000  annually  to  serve as  chairman  of the  Company's  Minority
Business and Economic Advisory Committee.
Compensation Committee Interlocks and Insider Participation

    The  Company  has  no  standing  Compensation  Committee  of  the  Board  of
Directors;  therefore,  all  members of the Board of  Directors  participate  in
deliberations concerning executive officer compensation.

Item 12.         Security Ownership of Certain Beneficial Owners and Management.

    The following  table sets forth  certain  information  regarding  beneficial
ownership  of the  Company's  Common  Stock as of February  21, 1997 (a) by each
person who  beneficially  owned more than five percent of the  Company's  Common
Stock,  (b) by each of the Company's  directors,  (c) by each executive  officer
listed in the Summary  Compensation Table who is not a director,  and (d) by all
executive officers and directors as a group.

                                             Common Stock             Percent
Name and Address of Beneficial Owner     Beneficially Owned(1)       of Class

CSMC-Management Services, Inc (2).................588,200              59.9%
3250 Mary Street
Miami, Florida 33133

Dan S. Meadows (2)................................130,711              13.3%
Louisiana Casino Cruises, Inc.
2231 East Camelback Road, Suite 202
Phoenix, Arizona  85016

Jerry L. Bayles (2)(3)............................130,711              13.3%
Louisiana Casino Cruises, Inc.
1717 River Road North
Baton Rouge, Louisiana 70802

Thomas L. Meehan (2)..............................130,711              13.3%
12128 Grandview Terrace
Apple Valley, Minnesota 55124

Robert B. Sturges.................................    --                  --
CHC International, Inc.
3250 Mary Street
Miami, Florida 33133

Leon R. Tarver II................................. 2,450                 (4)
Louisiana Casino Cruises, Inc.
1717 River Road North
Baton Rouge, Louisiana 70802


                                       31

<PAGE>




Dale A. Darrough..................................    --                  --
Louisiana Casino Cruises, Inc.
1717 River Road North
Baton Rouge, Louisiana 70802

All directors and executive officers .............133,161              13.5%
   as a group (six persons) (2)

     (1) The voting  and  investment  power with  regard to the shares of Common
Stock  beneficially  owned  by  all  the  shareholders  are  restricted  by  the
Shareholder Agreement.  See "Certain Relationships and Related Transactions." In
addition,  the  Common  Stock  beneficially  owned by Mr.  Tarver is  subject to
vesting. See "Executive Compensation."

     (2) On February 21, 1997, the Company  announced that a non-binding  letter
of intent has been  executed  by CHC and  Messrs.  Meadows,  Bayles and  Meehan,
providing  for the  purchase  by CSMC of all of the Common  Stock and  preferred
stock held by Messrs. Meadows, Bayles and Meehan. See "Certain Relationships and
Related Transactions."

     (3) Mr.  Bayles has  applied  to the  Louisiana  Board to  approve  certain
transfers of Common Stock. See "Certain Relationships and Related Transactions."

     (4) Less than 1%.

Item 13.           Certain Relationships and Related Transactions.

    On February 21, 1997,  the Company  announced  that a non-binding  letter of
intent  had  been  executed  by CHC and  Messrs.  Meadows,  Bayles  and  Meehan,
providing  for the  purchase  by CSMC of all of the Common  Stock and  preferred
stock held by Messrs.  Meadows,  Bayles and Meehan.  See "Security  Ownership of
Certain  Beneficial  Owners and Management." The purchase is subject to a number
of  conditions,  including  definitive  documentation,  regulatory  approval and
financing by CHC. CHC has undertaken in the letter of intent to pursue obtaining
the  requisite   financing  and  to  commence  the   preparation  of  definitive
documentation.  No assurance can be given that the transactions  contemplated by
the letter of intent will be consummated.

    In  connection  with any financing  pursuant to the letter of intent,  it is
likely  that CHC would seek  additional  financing  in an amount  sufficient  to
permit the  redemption  of the Notes,  although no  assurance  can be given that
adequate financing will be obtained or that, even if obtained, any Notes will be
redeemed.

    CSMC and the Company are parties to the  Management  Agreement,  pursuant to
which  CSMC  provided  consulting  and  technical  services  to the  Company  in
connection  with the  planning,  development  and  equipping of the Casino Rouge
prior to the opening on December 28, 1994. After the Casino Rouge opened,  under
the  Management  Agreement CSMC is handling all aspects of its  management.  The
management  fee expensed to the Company for the year ended November 30, 1996 was
$2,567,000.  See "Business - Management Agreement." By separate agreement,  CSMC
has agreed to pay one-half of its fee of 5% of Total Operating Income to Messrs.
Meadows, Bayles and

                                       32

<PAGE>




Meehan to be divided  among them as they shall  elect.  In  connection  with the
proposed sale of their  interests in the Company,  Messrs.  Meadows,  Bayles and
Meehan will relinquish all rights under the Management Agreement,  including the
right to receive  one-half of CSMC's 5% fee of Total Operating  Income.  For the
fiscal  year ended  November  30,  1996 the amount  paid and  accrued by CSMC to
Messrs. Meadows, Bayles and Meehan totaled $516,000. Messrs. Sturges and Temling
each  beneficially  own less than 5% of the outstanding  common stock of CHC, of
which CSMC is a wholly-owned subsidiary. See "Business-Management Company."

    On September  22, 1993,  CSMC extended a $2 million  credit  facility to the
Company.  At the closing of the issuance of the Notes, CSMC converted all of the
$2 million of indebtedness  then outstanding under such facility into 20% of the
Common Stock.

    In October 1993,  the Company issued and sold to CSMC 40% of the then issued
and  outstanding  Common  Stock  for $3  million  pursuant  to a Stock  Purchase
Agreement (the "Stock Purchase  Agreement") among the Company,  CSMC and Messrs.
Meadows,  Bayles and Meehan. The Company and Messrs. Meadows, Bayles and Meehan,
on the one hand,  and CSMC on the other,  agreed to indemnify  each other in the
event of certain  breaches  of the Stock  Purchase  Agreement.  The  Company and
Messrs. Meadows, Bayles and Meehan further agreed to indemnify CSMC in the event
of certain  liabilities arising out of activities prior to the date of the Stock
Purchase Agreement.

    All shareholders are parties to the Shareholder  Agreement (the "Shareholder
Agreement")  with regard to the ongoing  operation,  management and financing of
the Company.

    Pursuant to the Shareholder Agreement, all actions by the Board of Directors
require the majority approval of the directors.  The Shareholder  Agreement also
provides for an Executive  Committee of the Board,  consisting of one nominee of
CSMC and one  nominee of the  individual  shareholders,  who  currently  are Mr.
Sturges and Mr. Meadows,  respectively.  All actions of the Executive  Committee
require the unanimous  approval of both members.  Unless  rescinded by a vote of
51% of the outstanding Common Stock, the Shareholder Agreement provides that the
Executive  Committee is delegated all of the duties and  responsibilities of the
Board of  Directors  save  anything  required to be approved by the  Independent
Director  under the  Indenture.  The  Shareholder  Agreement  also provides that
certain  actions  cannot be taken  without the approval of the holders of either
51% or 67% of the outstanding  Common Stock, as the case may be, including:  (a)
the  authorization or issuance of any additional Common Stock (or any securities
convertible  into or rights  to  acquire  Common  Stock);  (b) the sale,  lease,
transfer,  mortgage, pledge or other disposition of or the acquisition of all or
substantially  all of the  assets of the  Company,  other  than in the  ordinary
course of developing or operating the Casino  Rouge;  (c) the  authorization  or
execution of contracts  for major  landsite  improvements,  any amendment to the
landsite lease and contracts for acquiring additional land as part of the Casino
Rouge;  (d) all  submissions  to the  Louisiana  Board and any  modification  or
amendment of any approvals or licenses; (e) the redemption, retirement, purchase
or other  acquisition by the Company of any Common Stock and the  declaration of
any dividend or distribution on account of any capital

                                       33

<PAGE>




stock or any merger, consolidation,  split, reverse split or other change of the
capitalization of the Company; (f) the election of any additional members of the
Board of Directors;  (g) the approval of the  operational  budget for the Casino
Rouge presented by CSMC pursuant to the Management Agreement; (h) the resolution
of any  deadlock  between  the  members  of the  Executive  Committee;  (i)  any
amendment to the Articles of  Incorporation  or By-laws of the Company;  and (j)
the  initiation or settlement of any material  litigation or other dispute by or
against the Company.

    The Shareholder Agreement also limits the transfer of the Common Stock owned
by the  shareholders  party  thereto.  Any shares of Common  Stock  issued  upon
exercise of the warrants are not subject to the transfer restrictions  contained
in the  Shareholder  Agreement.  Such  restrictions  will  also  lapse  upon the
consummation  of a public offering of Common Stock.  Additionally,  any transfer
must be subject to any required regulatory approvals.  The transferee must agree
to hold its shares subject to the terms of the Shareholder Agreement and must be
of such character and reputation so as not to jeopardize any regulatory approval
held by the Company or the  shareholders and affiliates  thereof.  Any transfer,
other than to Permitted  Transferees (as defined in the Shareholder  Agreement),
is subject to a right of first refusal by the other  parties.  If the Management
Agreement  terminates for any reason, CSMC shall have the right to make an offer
to sell to the other  shareholders  all its Common Stock or to purchase from the
other shareholders all their Common Stock on the terms set forth in the offer.

    The Shareholder  Agreement also requires CSMC, to the extent required by any
individual  vendor or supplier,  to  negotiate  and enter into a guaranty of the
Company's  payment  obligations  under  agreements  to lease or purchase  gaming
equipment.  The terms of such  guaranties  shall be subject to the  approval  of
CSMC.

    As of November 30, 1993, Synura had incurred expenses of approximately  $2.5
million in  connection  with  evaluating  gaming  opportunities  in Louisiana on
behalf of the Company. At the closing of the issuance of the Notes, $1.1 million
of such amount was  exchanged  for  redeemable  preferred  stock of the Company,
$275,000 was repaid,  and the balance was treated as a contribution  to capital.
See "Market for Registrant's Common Equity and Related Stockholder Matters."

    Mr. Bayles has applied to the Louisiana Board to approve  certain  transfers
of Common Stock. Mr. Bayles is seeking to transfer  one-half of his Common Stock
(65,355.5  shares,  representing  approximately  6.7% of the outstanding  Common
Stock) to his wife, Sheila Bayles.  His remaining shares of Common Stock,  along
with all rights to share in the  management  fee, are to be  transferred  to The
Jerry Lee Bayles 1996 Inter Vivos Trust (the "Trust").  The Trust is irrevocable
for one year.  Mr.  Bayles  is the  principal  beneficiary  of the Trust and Ms.
Bayles will receive the income  (including any portion of the  management  fee).
Mr.  Meadows  will act as the trustee and will have the power to vote the shares
but cannot sell any trust property.  The trustee may be removed by Mr. Bayles at
any time after the one-year  irrevocability  period.  The principal  beneficiary
cannot get any  distributions  during the first year and  thereafter the trustee
may make  distributions  of principal if he  determines  the  beneficiary  needs
additional resources. The income will be distributed

                                       34

<PAGE>




upon receipt.  The foregoing  transfers  will become  effective  upon receipt of
approval by the Louisiana Board. If the transactions  contemplated by the letter
of intent are consummated, Mr. Bayles intends to withdraw his application to the
Louisiana  Board.  See  "Security  Ownership  of Certain  Beneficial  Owners and
Management."

                                                           PART IV

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


    a.   (1)    Financial Statements.

                  The following  financial  statements of the Company and report
                  of independent  accountants  are included on pages F-1 through
                  F-15 hereto.

                  Report of Independent Accountants

                  Balance Sheets - November 30, 1996 and November 30, 1995.

                  Statements of Operations - Years ended November 30, 1996, 1995
                  and 1994.

                  Statements of Changes in  Shareholders'  Deficit - Years ended
                  November 30, 1994, 1995 and 1996.

                  Statements of Cash Flows - Years ended November 30, 1996, 1995
                  and 1994.

                  Notes to Financial Statements

                  (2)    Financial Statement Schedules.

                  The following schedule is included on page S-1 attached hereto
                  and should be read in  conjunction  with the related financial
                  statements and notes thereto.

                  Schedule II - Valuation and Qualifying Accounts

                  The following schedule is included as EX-27.

                  EX-27 - Financial Data Schedule

                  (3)    Exhibits.

                  3.1    Amended and Restated Articles of Incorporation of the
                         Company. (1)

                  3.2    By-laws of the Company. (1)

                  4.1    Warrant Agreement, dated as of November 15, 1993,
                         between the Company and The Bank of New York, as
                         successor Warrant Agent. (1)

                                       35

<PAGE>




                  4.2    Form of Warrant Certificate. (2)

                  4.3    Form of Certificate for Common Stock. (2)

                  4.4    Registration Agreement,dated November 24, 1993, between
                         the Company and Salomon Brothers Inc and Oppenheimer &
                         Co., Inc. (1)

                  4.5    Indenture, dated as of November 15, 1993, between the
                         Company and The Bank of New York, as successor
                         Trustee.(1)

                  10.1   Security Agreement, dated as of November 15, 1993, from
                         the Company to The Bank of New York, as successor
                         Trustee. (1)


                  10.2   Mortgage, Leasehold Mortgage, Assignments of Rents,
                         Fixture Filing, Security Agreement and Financing
                         Statement, dated as of November 30, 1993, between the
                         Company, as Grantor, and The Bank of New York, as
                         successor Trustee. (1)

                  10.3   Employment Agreement, dated as of September 3, 1993,
                         between the Company and Donna K. Koester. (1)

                  10.4   Employment Agreement, dated as of September 3, 1993,
                         between the Company and Dan S. Meadows. (1)

                  10.5   Agreement, dated as of September 15, 1993, between
                         Bender Shipyard, Inc. and the Company, as amended
                         through November 24, 1993. (1)

                  10.6   Construction Contract, dated November 22, 1993, between
                         the Company and Woodrow Wilson Construction Company,
                         Inc. (Terminal Contract). (1)

                  10.7   Construction Contract, dated November 22, 1993, between
                         the Company and Woodrow Wilson Construction Company,
                         Inc. (Platform Contract). (1)

                  10.8   Shareholder Agreement, dated October 8, 1993, among the
                         Company, Jerry L. Bayles, Dan S. Meadows, Thomas L.
                         Meehan, Leon R. Tarver II and CSMC - Management
                         Services, Inc., as amended. (1)

                  10.9   Ground  Lease  Agreement  between  the  Company and
                         Capital Lake Properties, Inc., dated June 16, 1993,
                         as amended.(1)

                  10.10  Amendment, dated as of October 12, 1994, to the
                         Agreement, dated as of September 15, 1993, between
                         Bender Shipyard, Inc. and the Company, as amended. (3)

                  10.11  Commercial Loan Agreement, dated December 13, 1994,

                                       36

<PAGE>




                         between the Company and City National Bank of Baton
                         Rouge. (3)

                  10.12  First Preferred Ship Mortgage in favor of The Bank of
                         New York, as successor Trustee. (3)

                  10.13  Lease Agreement, dated July 29, 1994, between Anvil
                         Realty, Inc. and the Company. (3)

                  10.14  Lease Agreement, dated July 29, 1994, between Anvil
                         Realty, Inc. and the Company. (3)

                  10.15  First Amendment to Commercial Loan Agreement, dated as
                         of December 20, 1995, between the Company and City
                         National Bank of Baton Rouge. (4)


b.   Reports on Form 8-K.

    There were no reports on Form 8-K filed for the three months ended  November
30, 1996.



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

(1)      Incorporated by reference from the Company's Registration Statement
on Form S-4 (No. 33-73536).

(2)      Incorporated by reference from the Company's Registration Statement
on Form S-1 (No. 33-73534).

(3)  Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended November 30, 1994.

(4)  Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended November 30, 1995.


                                       37

<PAGE>





                                   SIGNATURES

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


                                                  LOUISIANA CASINO CRUISES, INC.



Dated: February 28, 1997                 By: /s/ Dan S. Meadows
                                         -----------------------
                                         Dan S. Meadows
                                         President and Director

    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
registrant and on the dates indicated.



Dated: February 28, 1997                 /s/ Robert B. Sturges
                                         -----------------------
                                         Robert B. Sturges, Chairman of the
                                         Board and Director


                                         /s/ Dan S. Meadows
                                         -----------------------
                                         Dan S. Meadows, President and
                                         Director (Principal Executive Officer)



                                         /s/ Leon R. Tarver, II
                                         -----------------------
                                         Leon R. Tarver II, Director



                                         /s/ W. Peter Temling
                                         -----------------------
                                         W. Peter Temling, Acting Chief
                                         Financial Officer (Principal Financial
                                         and Accounting Officer)



                                       38

<PAGE>





                          INDEX TO FINANCIAL STATEMENTS



Report of Independent Accountants............................................F-2

Balance Sheets - November 30, 1996 and 1995..................................F-3

Statements of Operations - Years ended November 30, 1996, 1995 and
    1994 ....................................................................F-4

Statements of Changes in Shareholders' Deficit -
    Years ended November 30, 1994, 1995 and 1996 ............................F-5

Statements of Cash Flows - Years ended November 30, 1996,
    1995 and 1994 ...........................................................F-6

Notes to Financial Statements................................................F-8

                                       F-1

<PAGE>




                        Report of Independent Accountants


To the Board of Directors and Shareholders
of Louisiana Casino Cruises, Inc.


    In our opinion, the financial statements listed in the index appearing under
Item  14(a)1 and 2 present  fairly,  in all  material  respects,  the  financial
position of Louisiana  Casino  Cruises,  Inc. at November 30, 1996 and 1995, and
the results of its  operations and its cash flows for each of the three years in
the period ended  November 30,  1996,  in  conformity  with  generally  accepted
accounting principles.  These financial statements are the responsibility of the
Company's  management;  our  responsibility  is to  express  an opinion on these
financial  statements  based on our  audits.  We  conducted  our audits of these
statements  in accordance  with  generally  accepted  auditing  standards  which
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,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for the opinion expressed above.


PRICE WATERHOUSE LLP



New Orleans, Louisiana December 12, 1996, except for the sixth paragraph of Note
3 which is as of February 27, 1997





                                       F-2

<PAGE>




                         LOUISIANA CASINO CRUISES, INC.
                                 BALANCE SHEETS
                                 (in thousands)

                                                           November     November
                                                           30, 1996     30, 1995
                                                           --------     --------
ASSETS
Current assets:
    Cash and cash equivalents ..........................   $  4,677    $  5,010
    Restricted cash (Note 3) ...........................      3,052       4,284
    Receivables, less allowance for doubtful accounts
       of $236 and $97, respectively ...................        424         422
    Prepaid and other current assets ...................        797       1,697
    Inventory ..........................................        439         385
    Deferred tax asset - current, less valuation
      allowance of $0 and $602, respectively (Note 8) ..      2,241         261
                                                           --------    --------

         Total current assets ..........................     11,630      12,059
Property and equipment, at cost, less accumulated
  depreciation of $7,484 and $3,490, respectively (Note 2)   43,888      46,271
Prepaid and other assets ...............................      2,920       4,362
                                                           --------    --------

Total assets ...........................................   $ 58,438    $ 62,692
                                                           ========    ========


LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
  Accounts payable .....................................   $  2,681    $  2,823
  Accrued liabilities ..................................      1,601       1,440
  Accrued interest .....................................      2,578       2,950
  First mortgage notes, current portion (Note 3) .......      1,526       4,222
  Notes payable, current portion (Note 3) ..............      2,223       2,198
  Other current liabilities ............................        303         230
  Estimated dispute resolution cost (Note 7) ...........      1,700           -
                                                           --------    --------

         Total current liabilities .....................     12,612      13,863
First mortgage notes, net of original issue
    discount (Note 3) ..................................     42,638      45,906
Notes payable (Note 3) .................................         18       2,003
Estimated dispute resolution cost (Note 7) .............          -       1,700
Deferred tax liability (Note 8) ........................        981           -
                                                           --------    --------

         Total liabilities .............................     56,249      63,472
                                                           --------    --------

Redeemable preferred stock (Note 4) ....................      1,496       1,364
                                                           --------    --------

Redeemable common stock warrants (Note 3) ..............      4,376       4,376
                                                           --------    --------

Shareholders' deficit :

    Common stock, no par value:
    10,000,000 shares authorized: 982,783 shares issued
    and outstanding at November 30, 1996 and 1995 ......          1           1

Accumulated deficit ....................................     (3,684)     (6,521)
                                                           --------    --------

Total shareholders' deficit ............................     (3,683)     (6,520)
                                                           --------    --------
Total liabilities and shareholders' deficit ............   $ 58,438    $ 62,692
                                                           ========    ========


                     The accompanying notes are an integral
                       part of these financial statements


                                       F-3

<PAGE>




                         LOUISIANA CASINO CRUISES, INC.
                            STATEMENTS OF OPERATIONS
                        (in thousands, except share data)


                                                 Year Ended November 30,
                                            ---------------------------------
                                              1996        1995       1994
                                            ---------   ---------  ----------
Revenues:
    Casino ...............................  $  74,615   $  65,187  $        -
    Food and beverage ....................      1,351       1,382           -
    Other ................................        774         514           -
                                            ---------   ---------   ---------

    Net revenues .........................     76,740      67,083           -
                                            ---------   ---------   ---------

Costs and expenses:
    Casino ...............................     33,947      29,849           -
    Food and beverage ....................      1,293       1,619           -
    Selling, general and administrative ..     21,954      18,085           -
    Pre-opening expenses .................          -       1,625       4,389
                                            ---------   ---------   ---------

Total operating expenses .................     57,194      51,178       4,389
                                            ---------   ---------   ---------

Income (loss) before depreciation,
    amortization and interest ............     19,546      15,905      (4,389)

Depreciation and amortization ............      4,142       3,584          34
                                            ---------   ---------   ---------

    Operating income (loss) ..............     15,404      12,321      (4,423)

Other income (expense):

    Interest income ......................        241         344       1,357
    Interest expense .....................     (7,002)     (6,675)     (5,180)
                                            ---------   ---------   ---------

Income (loss) before income taxes ........      8,643       5,990      (8,246)

Provision for income taxes (Note 8) ......      1,340           -           -
                                            ---------   ---------   ---------

Net income (loss) ........................      7,303       5,990      (8,246)

Dividend requirement on redeemable
    preferred stock (Note 4) .............        132         132         132
Market value warrant adjustment ..........          -       2,790         285
Distributions paid to common stock
   warrantholders ........................        584         408           -
                                            ---------   ---------   ---------

Net income (loss) assigned to
    common shareholders ..................  $   6,587   $   2,660   $  (8,663)
                                            =========   =========   =========

Earnings (loss) per common and
    common equivalent share (Note 5) .....  $    6.31   $    2.71   $   (8.55)
                                            =========   =========   =========

Weighted average common and common
    equivalent shares outstanding (Note 5)  1,135,783     982,783     980,333
                                            =========   =========   =========


                     The accompanying notes are an integral
                       part of these financial statements


                                       F-4

<PAGE>




                         LOUISIANA CASINO CRUISES, INC.
                 STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
                        (in thousands, except share data)
<TABLE>
<CAPTION>
                                                        Additional
                                           Common Stock  Paid-In     Accumulated
                                          Shares  Amount Capital   Deficit    Total
                                          -------  ----  -------   -------   -------

<S>                                       <C>      <C>   <C>       <C>       <C>     
Balance at November 30, 1993 ...........  653,555  $  1  $  (860)  $  (177)  $(1,036)
Conversion of credit facility to equity   326,778     -    2,000         -     2,000
Capital contribution by shareholders ...        -     -    1,114         -     1,114
Market value warrant adjustment ........        -     -     (285)        -      (285)
Dividend requirements on
    redeemable preferred stock .........        -     -     (132)        -      (132)
Losses incurred during development stage        -     -        -    (8,246)   (8,246)
                                          -------  ----  -------   -------   -------

Balance at November 30, 1994 ...........  980,333     1    1,837    (8,423)   (6,585)
                                          -------  ----  -------   -------   -------

Issuance of common stock ...............    2,450     -       25         -        25
Market value warrant adjustment ........        -     -   (1,793)     (997)   (2,790)
Dividend requirements on
    redeemable preferred stock .........        -     -      (69)      (63)     (132)
Dividends paid to holders of common
    stock and distributions to common
    stock warrantholders ...............        -     -        -    (3,028)   (3,028)
Net income .............................        -     -        -     5,990     5,990
                                          -------  ----  -------   -------   -------

Balance at November 30, 1995 ...........  982,783     1        -    (6,521)   (6,520)
                                          -------  ----  -------   -------   -------

Dividend requirements on
    redeemable preferred stock .........        -     -        -      (132)     (132)
Dividends paid to holders of common
    stock and distributions to common
    stock warrantholders ...............        -     -        -    (4,334)   (4,334)
Net income .............................        -     -        -     7,303     7,303
                                          -------  ----  -------   -------   -------

Balance at November 30, 1996 ...........  982,783  $  -  $     -   $(3,684)  $(3,683)
                                          =======  ====  =======   =======   =======
</TABLE>



                     The accompanying notes are an integral
                       part of these financial statements


                                       F-5

<PAGE>





                         LOUISIANA CASINO CRUISES, INC.
                            STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>

                                                               Year Ended November 30,
                                                           ------------------------------
                                                             1996       1995       1994
                                                           --------   --------   --------

<S>                                                         <C>         <C>         <C>      
Net income ..............................................   $  7,303    $  5,990    $ (8,246)

Net cash flows from operating activities :
  Depreciation and amortization .........................      4,142       3,584          34
  Amortization of deferred costs ........................      1,404         926         520
  Loss (gain) on sale of fixed assets ...................         20          15          (3)
  Provision for doubtful accounts .......................        258          97        --
  (Increase) decrease in receivables ....................       (260)       (513)        497
  Increase in inventory .................................        (54)       (385)       --
  Decrease (increase) in prepaid and other assets .......        843      (1,810)     (1,806)
  Increase in deferred tax assets .......................     (1,649)       (592)       --
  (Decrease) increase in accrued interest ...............       (372)         17       2,915
  Increase in accounts payable and other liabilities ....      1,073         884       7,619
                                                            --------    --------    --------

      Net cash provided by operating activities .........     12,708       8,213       1,530
                                                            --------    --------    --------

Cash flows from investing activities :
  Capital expenditures ..................................     (1,655)    (11,526)    (34,439)
  Proceeds from sale of fixed assets ....................          8          83           6
  Decrease (increase) in restricted cash ................         62      15,941     (16,003)
                                                            --------    --------    --------

      Net cash (used) provided by investing activities ..     (1,585)      4,498     (50,436)
                                                            --------    --------    --------

Cash flows from financing activities :
  Proceeds from issuance of note payable ................        440       5,559        --
  Repayment of obligations for gaming and other equipment       --        (4,654)       --
  Proceeds from issuance of first mortgage notes ........       --          --        51,000
  Payments for debt offering costs ......................       --          --        (2,855)
  Proceeds from borrowings under credit facility ........       --          --         1,022
  Repayment of first mortgage notes .....................     (6,332)       --          --
  Decrease (increase) in restricted cash ................      1,170      (4,222)       --
  Repayments of notes payable ...........................     (2,400)     (1,358)       --
  Repayments of borrowings from affiliated company ......       --          --          (275)
  Dividends paid to holders of common stock and
    distributions to common stock warrantholders ........     (4,334)     (3,028)       --
                                                            --------    --------    --------

      Net cash (used) provided by financing activities ..    (11,456)     (7,703)     48,892
                                                            --------    --------    --------

Net (decrease) increase in cash and cash equivalents ....       (333)      5,008         (14)

Cash and cash equivalents at beginning of year ..........      5,010           2          16
                                                            --------    --------    --------

Cash and cash equivalents at end of year ................   $  4,677    $  5,010    $      2
                                                            ========    ========    ========
</TABLE>


                     The accompanying notes are an integral
                       part of these financial statements


                                       F-6

<PAGE>











                                                    Year Ended November 30,
                                                --------------------------------
                                                 1996         1995         1994
                                                ------       ------       ------

Supplemental disclosure of cash flow information:

Cash paid for interest ..................       $6,146       $6,193       $2,937
                                                ======       ======       ======

Cash paid for income taxes ..............       $2,053       $  684       $ --
                                                ======       ======       ======


Supplemental   disclosure   of  noncash   operating,   investing  and  financing
activities:

The  accreted  value of the  redeemable  common  stock  warrants  liability  was
estimated at  $4,376,000  at November  30, 1996 and 1995.  During the year ended
November  30, 1996 and 1995 the  estimated  liability  was  increased  by $0 and
$2,790,626,  respectively.  Increases to the common stock warrant  liability are
recorded by an equal increase to shareholders' deficit. (See Note 3)

Redeemable  preferred  stock  dividends of $132,000  were accrued in each of the
years ended November 30, 1996, 1995 and 1994. (See Note 4)


                     The accompanying notes are an integral
                       part of these financial statements


                                       F-7

<PAGE>




                          NOTES TO FINANCIAL STATEMENTS


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

   Louisiana Casino Cruises,  Inc. (the Company), a Louisiana  corporation,  was
formed in  August  1991 for the  purpose  of  developing  and  operating  gaming
activities  in  Louisiana.  For the  period  March 26,  1993,  when the  Company
obtained  preliminary  regulatory approval to construct a riverboat casino based
in Baton Rouge, Louisiana,  through December 28, 1994, the commence ment date of
operations,  the  Company's  activities  consisted  of applying  for the license
necessary to operate the riverboat;  designing,  planning and  constructing  the
Baton  Rouge  riverboat  and  land-based  facility;   negotiating  and  securing
financing  for  construction;  negotiating  contracts;  and  training for gaming
operations.  These costs are included in pre-opening  expenses in the statements
of  operations.  Financing  for the project  has  included an issuance of common
stock  for   $3,000,000  to  Carnival   Management   Services,   Inc.   (renamed
CSMC-Management  Services, Inc. "CSMC" on April 8, 1994), a credit facility from
CSMC for $2,000,000  (subsequently converted to equity),  secured bank financing
of  approximately  $6,000,000  and a private  placement  offering  (Offering) of
$51,000,000  in first  mortgage  notes  (Notes).  The  Notes  were  issued  with
detachable  warrants to purchase up to an aggregate  amount of 153,000 shares of
the Company's  common stock at a price of $0.01 per share. On December 28, 1994,
the  Louisiana  Riverboat  Gaming  Enforcement  Division  granted  the Company a
permanent  license to conduct  riverboat gaming  activities for a period of five
years.

   Prior to commencement  of gaming  activities,  the Company  accounted for its
operations  as a  development  stage  enterprise,  as  defined by  Statement  of
Financial  Accounting  Standards  No. 7. The financial  statements  for the year
ended November 30, 1995 reflect both  developmental and initial operating stages
and therefore should not be viewed as being representative of a normal period of
operations.

Casino Revenue and Promotional Allowances

   Casino  revenue  represents  the net win from gaming wins and losses.  Food &
beverage and other  revenues are recorded at amounts  collected  from guests and
exclude  the  retail  value of food,  beverage  and other  items  provided  on a
complimentary and promotional basis to customers.  The estimated retail value of
complimentary  items was  $4,579,000 and $4,497,000 for the years ended November
30, 1996 and 1995, respectively. The estimated costs of such complimentary items
have been  classified as casino costs and totaled $ 2,416,000 and $2,226,000 for
the years ended November 30, 1996 and 1995,  respectively.  The estimated retail
value of  promotional  items was  $601,000  and  $282,000  for the  years  ended
November  30,  1996  and  1995,  respectively.   The  estimated  costs  of  such
promotional  items have been classified as selling,  general and  administrative
costs and totaled $ 563,000 and $336,000  for the years ended  November 30, 1996
and 1995, respectively.

Restricted Cash

   Cash proceeds  remaining from the initial  financing  transactions  described
above were  classified as restricted cash as the amounts were designated for use
in the construction and development of the riverboat and land-based facility. In
accordance  with the  terms of the  Indenture, Cumulative  Excess  Cash Flow not
previously used to repurchase Notes is classified as restricted cash.

Inventories

   Inventories  consist of food,  beverage  and  supplies  and are stated at the
lower of cost or market. Cost is determined on a first-in, first-out basis.

Licensing and Financing Costs

   All costs incurred  which relate to obtaining the regulatory  approval of the
Baton Rouge riverboat facility are recorded as deferred licensing charges.  Such
costs  are  being  amortized  over a period  of five  years,  the  period of the
license, following commencement of operations,  which took place on December 28,
1994.  Costs  incurred in connection  with the Offering are recorded as deferred
offering costs.  Beginning  December 1, 1993,  such deferred  offering costs are
being amortized on the effective  interest  method over five years,  the term of
the Notes,  and such  amortization  is included in  interest  expense.  Deferred
licensing  charges and offering  costs are  classified  under  prepaid and other
assets in the accompanying balance sheets.


                                       F-8

<PAGE>




Property and Equipment

   Property and equipment are stated at cost.  Depreciation is calculated on the
straight-line  basis  over  the  estimated  useful  lives of the  assets  or the
expected  term of the land lease  (including  renewals),  whichever  is shorter.
Useful  lives  range from five to thirty  years.  Expenditures  for  repairs and
maintenance are charged to expenses as incurred. Expenditures for major renewals
and  betterments,  which  significantly  extend  the  useful  lives of  existing
equipment, are capitalized and depreciated.

Fair Value of Financial Instruments

   The  Company's  financial  instruments  recorded on the balance sheet include
cash and cash  equivalents,  notes payable and  warrants.  The fair value of the
Company's First Mortgage Notes, based on quoted market prices, was approximately
$46,455,000 at November 30, 1996. The fair value of cash and cash  equivalents,
other notes payable and warrants approximates carrying value.

Income Taxes

   The Company adopted  Statement of Financial  Accounting  Standards (SFAS) No.
109, "Accounting for Income Taxes," which recognizes the amount of taxes payable
or refundable for the current year and recognizes  deferred tax  liabilities and
assets for future tax  consequences  of events that have been  recognized in the
Company's  financial  statements or tax returns,  including  net operating  loss
carryforwards.

Accounting Estimates

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

Reclassifications

     Certain amounts  included in cash and cash equivalents in the Balance Sheet
at November 30, 1995 have been  reclassified  as restricted cash to conform with
the presentation at November 30, 1996 in accordance with the Indenture (see Note
3).  Certain  other  amounts in the  financial  statements  for the years  ended
November 30, 1995 and 1994 have been reclassed to conform to the presentation of
the financial statements for the year ended November 30, 1996.

NOTE 2 - PROPERTY AND EQUIPMENT

   Property and equipment consists of the following (in thousands):


                                                             November 30,
                                                        1996             1995
                                                      --------         --------

Vessel .......................................        $ 16,661         $ 16,141
Building .....................................          19,029           18,984
Furniture and fixtures .......................           5,787            5,453
Gaming equipment .............................           8,186            7,718
Other equipment ..............................           1,709            1,465
                                                      --------         --------
                                                        51,372           49,761
Less: accumulated depreciation ...............          (7,484)          (3,490)
                                                      --------         --------
                                                      $ 43,888         $ 46,271
                                                      ========         ========

    Capitalized  interest  included in the cost of  property  and  equipment  at
November 30, 1996 and 1995 is $1,628,000.  Unamortized  capitalized  interest at
November 30, 1996 and 1995 is $1,421,000 and $1,528,000, respectively.



                                       F-9

<PAGE>




NOTE 3 -FIRST MORTGAGE NOTES, NOTES PAYABLE AND REDEEMABLE COMMON STOCK WARRANTS

   Pursuant to the Indenture,  dated as of November 15, 1993 (the  "Indenture"),
between the Company and The Bank of New York, as successor trustee,  the Company
issued  $51,000,000  of 11 1/2% First  Mortgage  Notes due December 1, 1998 in a
private  placement  offering on December 1, 1993.  These notes were exchanged in
April 1994 for  $51,000,000  in aggregate  principal of the  Company's new first
mortgage notes (the "Notes")  which are  registered  under the Securities Act of
1933.  The proceeds from the offering were used to finance the  development  and
construction  of the Baton Rouge  riverboat  facility.  Interest is payable each
June  1  and  December  1,  commencing  June  1,  1994.  The  Notes  are  freely
transferable by the holders  thereof.  The Notes are redeemable at the option of
the Company, in whole or in part after December 1, 1996 at the redemption prices
specified  in the  Indenture.  The  aggregate  principal  amount  of  the  Notes
outstanding as of November 30, 1996 and 1995 was  $44,668,000  and  $51,000,000,
respectively.

   The Notes are secured by a first  mortgage on the  riverboat  and  land-based
facility and certain related  assets,  an assignment of all leases and operating
agreements related thereto,  and a security interest in the construction account
established to fund costs related to the  development  and  construction  of the
riverboat and land-based  facility.  The Indenture  contains  various  covenants
including restrictions on common stock dividend payments.

   The  private  placement  offering  was  made in  units,  consisting  of first
mortgage notes in the principal  amount of $1,000 and three warrants to purchase
one share each of the  Company's  no par value common stock at the price of $.01
per share.  The original  issue discount on the private  placement  offering was
$1,301,000,  the amount  assigned  to the value of the  warrants  at December 1,
1993. The amortization of the original issue discount was $234,000, $227,000 and
$201,000 for the years ended November 30, 1996, 1995 and 1994, respectively. For
the year ended November 30, 1996, the Company recorded an additional $134,000 of
the  original  issue  discount  as  interest   expense  relating  to  the  Notes
repurchased  by the  Company.  The  balance at  November  30,  1996 and 1995 was
$504,000 and $872,000, respectively.

   The  warrantholders  have put rights  whereby  the  Company is  obligated  to
purchase the warrants on December 1, 1998 at the value of the Company's stock at
that time,  as determined  by two  independent  investment  banking  firms.  The
warrants are  classified as redeemable  equity due to the put right feature and,
at each  balance  sheet  date,  are  accreted to the amount at which the Company
expects to repurchase these warrants. The estimated accreted value attributed to
the  redeemable  common  stock  warrants  as of  November  30,  1996 and 1995 is
$4,376,000.

   If the Company has Cumulative  Excess Cash Flow, as defined in the Indenture,
equal to or greater than  $2,000,000  at the end of any  semiannual  period,  as
defined in the  Indenture,  the Company is required to offer to  repurchase  the
Notes at par to the  extent of such  Cumulative  Excess  Cash  Flow.  Cumulative
Excess Cash Flow for the semiannual  periods ended November 30, 1995 and May 31,
1996 amounted to $4,222,000  and  $2,110,000,  respectively.  As required by the
Indenture,  on  January  29, and July 30,  1996,  the  Company  made an offer to
holders  of  the  Notes  to  repurchase  up  to   $4,222,000   and   $2,110,000,
respectively,  of  Notes  at par  plus  interest  up to but  not  including  the
respective  payment dates of February 28, and August 29, 1996.  Cash payments of
$4,339,000 and  $2,169,000  (principal  plus accrued  interest) were made by the
Company on February 28, and August 29, 1996, respectively.

     Cumulative  Excess Cash Flow for the  semiannual  period ended November 30,
1996 amounted to $3,052,000.  As required by the Indenture,  the Company made an
offer on January 29, 1997 to  repurchase  the Notes at par to the extent of such
Cumulative  Excess Cash Flow. The Company's offer to repurchase Notes expired on
February 27, 1997 with no Notes being tendered.  Pursuant to the Indenture,  50%
of the such  Cumulative  Excess  Cash Flow must be used for the  acquisition  of
Notes in the open market or included in the  determination of Cumulative  Excess
Cash Flow for the semiannual period ended May 31, 1997. Accordingly,  $1,526,000
is classified as a current  liability at November 30, 1996. The remaining 50% of
such  Cumulative  Excess Cash Flow for the semiannual  period ended November 30,
1996 is  considered  Cash  Available for  Reinvestment,  and is available to the
Company for use in limited  purposes as defined in the Indenture (see Restricted
Cash - Note 1).

   In  December  1994,  the  Company  entered  into a loan  agreement  with City
National  Bank of Baton  Rouge  in the  amount  of  $5,560,000.  The loan  bears
interest at 8.9% per annum, payable monthly in arrears.  Principal is payable in
monthly  installments  through  September 1997. The loan agreement  requires the
Company to maintain a certain cash flow ratio. The loan is secured by gaming and
other  equipment  and  limits the sale or  encumbrance  of such  equipment.  The
outstanding  principal  balance as of November 30, 1996 and 1995 was  $2,003,000
and $4,201,000, respectively.

   On January 2, 1996 the Company  obtained an additional  loan in the amount of
$440,000 from City National Bank of Baton Rouge.  The additional  loan amount is
payable in 24 equal principal  payments plus interest  commencing  January 1996.
The loan

                                      F-10

<PAGE>




bears  interest  at  10.5  % per  annum,  payable  monthly  in  arrears,  on the
outstanding  balance of the loan.  Provisions of the new loan are  substantially
the same as the December  1994 loan.  The  outstanding  principal  balance as of
November 30, 1996 and 1995 was $238,000 and $0, respectively.



   Future minimum payments on the first mortgage notes and the Notes payable are
as follows:



                               Fiscal year ending
                               November 30,
                               ------------------
                               1997   $ 3,749,000
                               1998        18,000
                               1999    43,142,000
                                      -----------

                               Total  $46,909,000
                                      ===========


NOTE 4 - REDEEMABLE PREFERRED STOCK

   The Company has authorized  50,000 shares of preferred stock, of which 11,000
shares of 12% cumulative  redeemable  preferred stock are issued and outstanding
at November 30, 1996 and 1995, at a carrying value of $1,496,000 and $1,364,000,
respectively,  including accrued non-cash dividends. The preferred stock must be
redeemed by the Company on  December 1, 1999,  or may be redeemed  prior to that
date if the  first  mortgage  notes  have  been  paid in  full.  The  redeemable
preferred  stock has no voting  rights and a redemption  value of $100 per share
plus accrued dividends.

NOTE 5 - EARNINGS (LOSS) PER COMMON SHARE

   In accordance  with Emerging Issues Task Force Issue 88-9,  primary  earnings
per share is  calculated  under the more dilutive of the equity or debt methods,
giving  consideration  to the  effect of changes  to the  accreted  value of the
Company's   redeemable   common  stock  warrants  and   distributions   paid  to
warrantholders during the period.  Accordingly,  earnings per share for the year
ended  November 30, 1996 is  calculated  using the equity method by dividing net
income,  reduced by dividend  requirements on redeemable preferred stock, by the
weighted  average of common and common  equivalent  shares  outstanding  for the
period.  The  common  equivalent  shares for the year ended  November  30,  1996
consist of redeemable  common stock  warrants for 153,000  shares.  Earnings per
share for the year ended  November 30, 1995 is calculated  using the debt method
by dividing net income, reduced by dividend requirements on redeemable preferred
stock,  distributions  paid to common stock  warrantholders and the market value
warrant adjustment,  by the weighted average number of common shares outstanding
during the period.

   Earnings per share,  reported in Note 11, for the quarters ended February 29,
and May 31, 1996 have been  calculated  using the equity method,  while earnings
per share for the  quarters  ended  August 31, and  November  30, 1996 have been
calculated  using the debt method.  As a result of using the different  methods,
the sum of earnings  per share for the four  quarters of 1996 does not equal the
earnings  per share  amount  calculated  for the year ended  November  30, 1996.
Earnings  per share for each  quarter of fiscal  1995,  reported  in Note 11, is
calculated using the debt method.

   The loss per share for each  quarter of 1994 and for the year ended  November
30, 1994,  reported in Note 11, was calculated by dividing net loss,  reduced by
dividend  requirements on redeemable  preferred  stock, by the weighted  average
number of common  shares  outstanding  during  each  period.  The loss per share
calculations  do not include  the  outstanding  warrants as the effect  would be
antidilutive.

NOTE 6 - RELATED PARTY TRANSACTIONS

   On September  22, 1993,  CSMC  extended a $2,000,000  credit  facility to the
Company.  On December 1, 1993, the Company converted the $2,000,000  outstanding
under this credit facility  (consisting of $978,266  outstanding at November 30,
1993 and an additional  $1,021,734  subsequently borrowed under the facility) to
326,778 shares of Company's  unissued common stock. The $2,000,000 was allocated
entirely to additional paid-in capital.


                                      F-11

<PAGE>




   On December 1, 1993, a loan payable,  the related  interest payable and other
accounts payable due to Synura,  Inc., an affiliated company owned by two of the
Company's individual shareholders, totaling $2,489,740 were extinguished through
an exchange for  $1,100,000  (11,000  shares) of redeemable  preferred  stock, a
$275,000 cash payment and a capital  contribution  of the  remaining  balance of
$1,114,740.


   The Company has a consulting and management agreement with CSMC in connection
with the planning and  development  of the riverboat  facility and management of
casino operations. (See Note 7.)

NOTE  7 - CONTINGENCIES

Legal Matters

   At  November  30,  1993,  the Company  was  involved  in a dispute  regarding
consulting services.  Although a formal demand had not been made to the Company,
management  believed the dispute could lead to litigation and accrued $1,700,000
for the estimated cost of resolution.  In July 1994, an action was filed against
the Company with regard to the matter.  Management  and legal counsel  intend to
vigorously  defend the  Company's  position,  however,  because of the  inherent
uncertainties  of  litigation,  management  is unable to  predict  the  ultimate
outcome of this matter and  believes  the accrued  liability  of  $1,700,000  an
appropriate  estimate at November  30, 1996 and 1995 for costs  associated  with
eventual  resolution  of the  matter.  Trial  for this  matter  has been set for
October 1997.  Accordingly,  the accrued  estimated  cost of resolution has been
classified as a current liability on the balance sheet as of November 30, 1996.

   The Company is also  involved in other legal  proceedings.  In the opinion of
management,  the resolution of these matters will not have a material  effect on
the financial statements or the results of operations of the Company.

Lease Agreements

   The  Company  has an  operating  lease  agreement  for  property on which the
Company  constructed the riverboat  facility and parking  facility.  The initial
lease term is ten years  beginning  January 1994. The terms of the lease include
payment of minimum monthly rent of $7,500 through October 1, 1994, increasing to
the greater of $33,333 or 1.25% of the gross  revenue for the  remainder  of the
lease term.  The Company  subsequently  entered  into an  amendment to the lease
agreement  to lease an  additional  parcel of land from the lessor.  The Company
prepaid rent of $1,755,707  for this  additional  property.  The prepaid rent is
being  amortized  over the  initial  lease  term.  The Company has the option to
purchase the entire site on or after fifteen years for the then appraised  value
of the original site,  excluding  improvements.  The Company also leases general
warehousing,  office  use and  employee  parking  sites  under  operating  lease
agreements.

   Rental  expense for the years ended  November  30, 1996,  1995,  and 1994 was
$1,316,157, $1,270,653, and $438,822, respectively. Rental expense for the years
ended November 30, 1996 and 1995 includes  $574,000 and $463,000,  respectively,
of contingent rental payments above the monthly minimum rent with respect to the
land lease for the  riverboat and parking  facilities.  There were no contingent
rental  payments  for the year ended  November 30, 1994.  Future  minimum  lease
payments for all leases with  non-cancelable  terms in excess of one year are as
follows:



                             Fiscal year ending
                             November 30,
                             ----------------------
                             1997        $  576,000
                             1998           547,000
                             1999           400,000
                             2000           400,000
                             2001           400,000
                            Thereafter      833,000
                                         ----------

                            Total        $3,156,000
                                         ==========


                                      F-12

<PAGE>




Management Agreement

   The  Company  and CSMC are  party to a  separate  consulting  and  management
agreement dated December 11, 1992, as amended,  whereby CSMC provides consulting
and  technical  services  to the Company in  connection  with the  planning  and
development of the riverboat  facility and management of the casino  operations.
CSMC receives an annual  management fee of 2% of gross  revenues,  as defined in
the agreement,  plus 5% of total operating income from all gaming activities and
other  concessions  or  sales,  as  defined  in the  agreement.  The term of the
agreement is ten years from the commencement of casino operations, renewable for
an  additional  ten years at the option of CSMC.  CSMC  entered  into a separate
agreement  with  three  individual  shareholders  whereby  the three  individual
shareholders receive half of the fee of 5% of total operating income. The amount
earned by CSMC under the management  agreement and expensed for management  fees
by the Company was  $2,567,000  and  $2,264,000 for the years ended November 30,
1996 and 1995,  respectively.  Of the amount earned and  expensed,  $186,000 and
$170,000  was payable and included in current  liabilities  at November 30, 1996
and 1995,  respectively.  Per the terms of the management agreement,  management
fee expense was zero for the fiscal year ended November 30, 1994.

NOTE 8 - INCOME TAXES

   The  provision  for income taxes  attributable  to  continuing  operations is
comprised of the following:


                                            Year ended November 30,
                                   -----------------------------------------
                                      1996           1995           1994
                                   -----------    -----------    -----------
Current tax expense:
  Federal ......................   $ 1,478,000    $   510,000    $         -
  State ........................       185,000         82,000              -
                                   -----------    -----------    -----------
Total current tax expense ......     1,663,000        592,000              -
Deferred tax benefit ...........      (323,000)      (592,000)             -
                                   -----------    -----------    -----------
Total provision for income taxes   $ 1,340,000    $         -    $         -
                                   ===========    ===========    ===========




   The  following  is a summary of the  components  of the benefit for  deferred
income taxes:

<TABLE>
<CAPTION>

                                                                                Year ended November 30,
                                                            ---------------------------------------------------------------
                                                                 1996                   1995                    1994
                                                            ---------------        ---------------        -----------------
<S>                                                    <C>            <C>            <C>         
Tax net operating loss carry forward ...............   $         -    $ 1,365,000    $(1,355,000)
Depreciation .......................................     1,801,000        672,000         (8,000)
Capitalization of deferred pre-operating costs .....             -       (633,000)    (1,496,000)
Amortization of deferred pre-operating costs .......       602,000        552,000              -
Alternative minimum tax credit carry forward .......      (408,000)             -              -
Accrued litigation costs ...........................       213,000              -       (213,000)
Other, net .........................................      (132,000)      (178,000)      (141,000)
                                                       -----------    -----------    -----------
Total provisions (benefit) for deferred income taxes     2,076,000      1,778,000     (3,213,000)
Record (release) valuation allowance ...............    (2,399,000)    (2,370,000)     3,213,000
                                                       -----------    -----------    -----------
Total benefit for deferred income tax ..............   $  (323,000)   $  (592,000)   $         -
                                                       ===========    ===========    ===========
</TABLE>



                                      F-13

<PAGE>





   The difference  between the taxes  provided for continuing  operations at the
United States federal  statutory rate and the Company's  actual tax provision is
reconciled below for the year ended November 30:


                                                1996          1995
                                            -----------    -----------
Taxes provided at statutory rate ........   $ 2,939,000    $ 2,037,000
State tax expense, net of federal benefit       432,000        282,000
Release of valuation allowance ..........    (2,399,000)    (2,370,000)
Nondeductible lobbying costs ............       366,000              -
Other, net ..............................         2,000         51,000
                                            -----------    -----------
                                            $ 1,340,000    $         -
                                            ===========    ===========



   The approximate  effect of temporary  differences and carryforwards that give
rise to deferred tax balances at November 30 were as follows:
<TABLE>
<CAPTION>


                                                                              Year ended November 30,
                                                        -------------------------------------------------------------------
                                                                     1996                     1995                     1994
                                                        -----------------        -----------------        -----------------
<S>                                                   <C>                      <C>                      <C>                
Federal net operating loss carryforward               $                 -      $                 -      $         1,365,000
Deferred pre-operating costs                                      602,000                  602,000                  552,000
Accrued litigation costs                                          663,000                        -                        -
Alternative minimum tax credit carryforward                       526,000                        -                        -
Other, net                                                        450,000                  261,000                        -
                                                        -----------------        -----------------        -----------------
                                                                2,241,000                  863,000                1,917,000
Deferred tax asset valuation allowance                                  -                (602,000)              (1,917,000)
                                                        -----------------        -----------------        -----------------
Current deferred tax asset                            $         2,241,000      $           261,000      $                 -
                                                        =================        =================        =================

Depreciation                                          $       (2,459,000)      $         (664,000)      $             9,000
Deferred pre-operating costs                                    1,255,000                1,857,000                1,826,000
Accrued litigation costs                                                -                  876,000                  876,000
Alternative minimum tax credit carryforward                       223,000                        -                        -
Other, net                                                              -                   59,000                  141,000
                                                        -----------------        -----------------        -----------------
                                                                (981,000)                2,128,000                2,852,000
Deferred tax asset valuation allowance                                  -              (1,797,000)              (2,852,000)
                                                        -----------------        -----------------        -----------------
Noncurrent deferred tax (liability) asset             $         (981,000)      $           331,000      $                 -
                                                        =================        =================        =================
</TABLE>


   In accordance  with SFAS 109, the Company  recorded a valuation  allowance on
the  entire  amount of the  deferred  tax asset at  November  30,  1994  because
operations had not commenced and uncertainty  existed  regarding the realization
of the related tax  benefits.  The net  decrease in the  valuation  allowance of
$2,370,000  from November 30, 1994 to November 30, 1995 resulted from the income
generated  during the fiscal year ended  November 30, 1995.  The net decrease in
the  valuation  allowance of  $2,399,000  from November 30, 1995 to November 30,
1996 was due to the realization of future tax benefits.


                                      F-14

<PAGE>




NOTE 9 - DIVIDENDS

         On March 27,  July 29,  and  October  15,  1996 the Board of  Directors
declared a dividend of $1.587450,  $1.610345, and $0.618080,  respectively,  per
share of common  stock  and an equal  distribution  per  common  stock  warrant,
payable to the holders of record on March 27,  July 29, and  October  15,  1996,
respectively.  Aggregate payments of $1,803,000,  $1,829,000,  and $702,000 were
disbursed on March 28, July 31, and October 18, 1996, respectively.

NOTE 10 - EMPLOYEE BENEFIT PLAN

         In January 1996, the Company  established a defined  contribution  plan
(the "Plan") for all  employees.  The Plan is qualified  under Section 401(k) of
the Internal Revenue Code. Contributions to the Plan by the Company are based on
the  participants'  contributions.  For the year ended  November 30,  1996,  the
Company  contributed  $134,000 to the Plan. The Company pays expenses associated
with the administration of the Plan.


NOTE 11 - SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)


                                                    Quarter
                                -------------------------------------------
                                 First     Second    Third    Fourth     Total
                                -------   -------   -------   -------   -------
                                            (in thousands, except share date) 
Fiscal 1996:
Income (loss) assigned to       $ 2,601   $ 3,130   $ 1,125   $  (269)  $ 6,587
common shareholders
Earnings (loss) per common      $  2.29   $  2.97   $  1.14   $ (0.27)  $  6.31
share (See Note 5)

Fiscal 1995:
Income (loss) assigned to       $(1,418)  $ 1,635   $ 2,082   $   361   $ 2,660
common shareholders
Earnings (loss) per common      $ (1.44)  $  1.66   $  2.12   $  0.37   $  2.71
share (See Note 5)


Fiscal 1994:
(Loss) assigned to common       $(1,649)  $(1,541)  $(1,776)  $(3,697)  $(8,663)
shareholders
(Loss) per common share (See    $ (1.68)  $ (1.57)  $ (1.81)  $ (3.48)  $ (8.55)
Note 5)


                                      F-15

<PAGE>

<TABLE>
<CAPTION>


                                                                     SCHEDULE II
                         LOUISIANA CASINO CRUISES, INC.
                        VALUATION AND QUALIFYING ACCOUNTS
                                 (In thousands)


                                          Balance at  Additions Charged
                                           Beginning      to Costs                      Balance at
                                           of Period     and Expense     Deduction    End of Period
                                          -----------    -----------    -----------     -----------
<S>                                       <C>            <C>                <C>         <C>        
Year Ended November 30, 1994
Deferred tax asset valuation allowance    $     1,556    $     3,213        $     -     $     4,769
Allowance for doubtful accounts ......              -              -              -               -
                                          -----------    -----------    -----------     -----------
TOTAL ................................          1,556          3,213              -           4,769
                                          ===========    ===========    ===========     ===========

Year Ended November 30, 1995
Deferred tax asset valuation allowance          4,769              -         (2,370)          2,399
Allowance for doubtful accounts ......              -             97              -              97
                                          -----------    -----------    -----------     -----------
TOTAL ................................          4,769             97         (2,370)          2,496
                                          ===========    ===========    ===========     ===========

Year Ended November 30, 1996
Deferred tax asset valuation allowance          2,399              -         (2,399)              -
Allowance for doubtful accounts ......             97            258           (119)            236
                                          -----------    -----------    -----------     -----------
TOTAL ................................    $     2,496    $       258    $    (2,518)    $       236
                                          ===========    ===========    ===========     ===========
</TABLE>












<PAGE>