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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

FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997

                                       OR

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

FOR THE TRANSITION PERIOD FROM ______________ TO _________________


                           Commission file number N/A


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


          LOUISIANA                                 72-1196619
-------------------------------        ------------------------------------
(State or other jurisdiction of        (I.R.S. Employer Identification No.)
 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 27, 1998, 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 27, 1998, 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").

                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 and 90 feet wide and has a
capacity of 1,800 customers. It features 1,205 gaming positions, made up of 43
table games and 904 slot machines spread over three covered decks, which
surround a large atrium in the center of the riverboat. The 43 table games offer
craps, roulette, blackjack, mini baccarat, Caribbean Stud, Let It Ride and
American poker. The 904 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 and a gift shop. 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 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 570,000 people reside in the greater Baton
Rouge metropolitan area. The major employers in the greater Baton Rouge
metropolitan area include the State of Louisiana, with approximately 27,900
employees, city and parish governments, with approximately 24,200 employees and
the petrochemical industry, with approximately 11,900 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
1996 and 1995, the approximate number of visitors to Baton Rouge was



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2.0 million and 2.1 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 three
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 for
bankruptcy protection 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 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 75% 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 and a
gift shop. 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 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, 1997 the Company had approximately 129,000 slot club members.



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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;
three 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; four for Lake Charles in the southwest part of the state, approximately
120 miles from Baton Rouge; and one which discontinued operations in New Orleans
in October 1997 and whose owners are requesting the approval of the Louisiana
Gaming Control Board (the "Louisiana Board") for what would be the fifth license
in the Shreveport/Bossier City area.

                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 for bankruptcy
protection 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 at least 53.5% market-share of gaming win and customers as
reported by the Louisiana State Police.

                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. 

                Geographically, gaming competition encircles the greater Baton
Rouge area. The Company has competition from other gaming operations located in
Louisiana, including three 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, 1997, approximately 15,000 video lottery
terminals at approximately 3,500 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, voters in four of the



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five parishes in the local Baton Rouge area voted to prohibit video lottery
terminals effective mid-1999.

                In addition, as of December 31, 1997, the Mississippi Gaming
Commission has granted 45 gaming licenses. Of these, 30 of the licensees have
open and operating casinos, nine licensees have opened and subsequently ceased
operations, four licenses have been withdrawn and two licensees have not yet
opened casinos. Four applications to operate casinos in Mississippi have been
filed as of February 9, 1998 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. An emerging trend in Mississippi
gaming, particularly on the Gulf Coast (approximately a two-hour drive from
Baton Rouge), is toward the development of large-scale destination resort
projects. The Imperial Palace, the largest gaming facility on the Gulf Coast,
commenced operations in December 1997 and several projects of similar size have
been proposed for development. A substantial increase in the number of casinos
operating in the Mississippi Gulf Coast could increase the competition for
Louisiana gaming customers, including those in the Company's trading area,
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. For the fiscal year ended November 30, 1997, the amount earned by CSMC
pursuant to the Management Agreement was $2,214,000. Through November 30, 1997,
CSMC has been paid $2,057,000 of the amount earned. Pursuant to the terms of the
separate agreement, CSMC paid Messrs. Meadows, Bayles and Meehan an aggregate
sum of $407,000 for the fiscal year ended November 30, 1997. Of this sum,
$389,000 was paid and $18,000 was owing as of November 30, 1997.

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"). Subject to regulatory
approval, CHC, a leading independent hotel and casino development and management
company, is merging its hotel management business with Patriot American
Hospitality, Inc., a publicly-traded real estate investment trust, and Wyndham
International, Inc. Immediately preceding the merger, CHC will dividend to its
shareholders its interest in CSMC. Following the merger, CSMC's management,
directors and shareholders will be identical to the current management,
directors and shareholders of CHC. 

EMPLOYEES

                The Company maintains a staff of approximately 900 full-time
equivalent employees. None of the employees is covered by a collective
bargaining agreement. In




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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
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 13 are in operation, one is awaiting approval of site selection 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. 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


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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 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



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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, loans, advances or distributions in excess of 5% of retained earnings
for a corporate licensee, or of capital accounts for a partnership or limited
liability company licensee, upon completion of any such transaction. No prior
approval of any such withdrawal, loan, advance or distribution is required, but
any such transaction is ineffective if disapproved by the Louisiana Board within
120 days after the required notification. In addition, the Louisiana Board may
issue an emergency order for not more than 10 days prohibiting payment of
profits, income or accruals by, or investments in a licensee.

                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 $2.50 for each patron boarding the
vessel. For fiscal 1997, the Company's boarding fee expense was $3,704,000. 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. The Company's riverboat is scheduled to be inspected no later than
December 1999. The Company is currently exploring alternatives to the
traditional out of water drydock hull inspection. 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.



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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 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 beginning January 1994, 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 $1.8 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 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, 1997, the rental expense for the
casino site and the general warehousing, office use and employee parking sites,
was $1,040,000 and $176,000, respectively. The casino site rental expense
includes amortization of prepaid rent of $176,000 and accrued rental for
November 1997 of $69,000.




                                       9
<PAGE>   10




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 trial date for this matter has been rescheduled for January 5, 1999. 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, 1997 and 1996. Management has
continued to classify this as a current liability due to its expectation of a
resolution of this matter by early fiscal 1999. 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 is also involved in other legal proceedings, none of
which are anticipated to have a material effect on the Company's financial
position.

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

           Not applicable.

                                     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



                                       10
<PAGE>   11



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 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, 1997 the Board of Directors
authorized, and the Company paid, a total of $482,000 in dividends to the
holders of the Company's Common Stock and distributions to common stock warrant
holders. 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 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.



                                       11
<PAGE>   12



                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, 1997 and
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.

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 eleven months ended
November 30, 1993, and the years ended November 30, 1994, 1995, 1996 and 1997.
During 1993 the Company changed its fiscal year end from December 31 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).





                                       12
<PAGE>   13



<TABLE>
<CAPTION>
                                                Eleven Months
                                                    Ended                             Year Ended November 30,
                                                 November 30,      --------------------------------------------------------------
                                                   1993(1)         1994               1995(2)             1996               1997
                                                   -------         ----               -------             ----               ----
<S>                                              <C>             <C>                  <C>                <C>               <C>    
Statement of Operations Data:
  Net revenues                                  $      -         $     -              $67,083            $76,740           $69,697
  Expenses excluding income taxes                  2,564           8,246               61,093             68,097            64,145
  Income (loss) before income taxes               (2,564)         (8,246)               5,990              8,643             5,552
  Provision for income taxes                           -               -                    -              1,340             2,045
  Net income (loss)                               (2,564)         (8,246)               5,990              7,303             3,507
  Dividend requirement on                                                                
    redeemable preferred stock                         -            (132)                (132)              (132)             (132)
  Market value warrant adjustment                      -            (285)              (2,790)                 -                 -
  Distributions paid to common stock                                                      
    warrant holders                                    -               -                 (408)              (584)              (65)
  Net income (loss) assigned to                                                                
    common shareholders                           (2,564)         (8,663)               2,660              6,587             3,310
  Ratio of earnings to fixed charges (3)               -               -                 1.60               2.25              1.95

Share and Per Share Data:
  Earnings (loss) per common and common
    equivalent share(4)                         $  (6.00)        $ (8.55)             $  2.71            $  6.31           $  2.97
  Cash dividends declared on common
    stock and common equivalent shares          $      -         $     -              $  2.67            $  3.82           $  0.42
  Weighted average common and
    common equivalent shares
    outstanding(4)                               427,187         980,333              982,783          1,135,783         1,135,783
</TABLE>

<TABLE>
<CAPTION>

                                                                                  November 30,
                                          ------------------------------------------------------------------------------------------
                                               1993                1994                1995               1996               1997
                                          ---------------     ---------------     --------------     --------------     ------------
<S>                                              <C>              <C>                 <C>                <C>               <C>    
Balance Sheet Data:
Current assets                                   $   519         $ 8,647              $12,059            $11,630           $16,807
Total assets                                       4,802          59,030               62,692             58,438            59,757
Current liabilities(5)                             5,838           7,995               13,863             12,612            12,488
Long-term obligations(6)                               -          54,802               49,609             42,656            39,869
Redeemable preferred stock and warrants (7)            -           2,818                5,740              5,872             6,004
Shareholders' deficit                             (1,036)         (6,585)              (6,520)            (3,683)             (790)
</TABLE>

(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 eleven months ended November 30, 1993 and the year ended
November 30, 1994, the deficiency was approximately $2,564,000 and $9,877,000,
respectively. For the years ended November 30, 1995, 1996 and 1997, fixed
charges were $9,756,000, $7,002,000 and $5,955,000, 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 warrant holders 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 years
ended November 30, 1996 and 1997 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) Amounts as of November 30, 1996 and 1997 include $1,700,000 for estimated
dispute resolution cost.

(6) 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.

(7) Such amount includes redeemable preferred stock valued at $1,232,000,
$1,364,000, $1,496,000 and $1,628,000 as of November 30, 1994, 1995, 1996 and
1997, 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, 1996 and 1997.

                                       13
<PAGE>   14



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.

RESULTS OF OPERATIONS

                Year ended November 30, 1997 compared to year ended November 30,
1996.

                Casino revenues in the two riverboat Baton Rouge gaming market
for the years ended November 30, 1997 and 1996 were $117,058,000 and
$127,491,000, respectively. Riverboat casino patron counts in Baton Rouge for
the same respective periods were 2,768,000 and 2,910,000. Management believes
the principal factors contributing to the 8.2% decline in casino revenues for
the Baton Rouge market are (i) milder weather in the first quarter of 1997
compared to the same period in 1996, allowing persons to become more involved in
alternative forms of outdoor leisure activities, (ii) the negative impact of an
accident involving an overturned barge containing benzene on the Mississippi
River in Baton Rouge during March 1997, (iii) a decline in winnings from premium
player activity, and (iv) the additional reasons discussed below. The ability of
the Company and its competitor to offset such declines continues to be limited
by competitive constraints to expand into markets beyond Baton Rouge. The
Company's casino revenues and customer counts declined 9.6% and 10.5%,
respectively, in 1997 compared to 1996. The Company's competitor's riverboat
casino revenues decreased 6.1% as its customer counts increased 2.5% in 1997
compared to 1996. The Company's share of the Baton Rouge gaming market was 58.6%
and 59.5% of casino revenues and 53.5% and 56.9% of admissions for the years
ended November 30, 1997 and 1996, respectively. Management believes the decrease
in the Company's market share of gaming revenues and admissions is attributable
to (i) the Company's competition having made product improvements, consisting of
a new parking garage and an enclosed entertainment/retail shopping area, which
opened during the second quarter of 1996 and extensive food and cash promotions
by such competitor, (ii) a decrease in the Company's table and slot hold
percentages and winnings from premium player activity, all as discussed below,
and (iii) the general decline in customer visits impacting the Company.

                Casino revenues for the Company were $67,694,000 and $74,615,000
for the years ended November 30, 1997 and 1996, respectively. Table revenues,
excluding poker, decreased 17.8% in 1997 compared to 1996 due to winnings from
premium player activity in the 1996 period that did not occur in 1997, a
decrease in table game hold percentage and a decrease in table drop. Slot
revenues decreased 4.8% in 1997 compared to 1996 primarily due to a 3.7% decline
in slot coin in. Poker win for 1997 and 1996 was $300,000 and $1,103,000,
respectively, as the Company initially eliminated its poker operations in March
1997 and then reintroduced them for competitive reasons in December 1997.
Management believes the decrease in table drop and slot coin in is reflective of
lower customer visits affecting the entire Baton Rouge marketplace. The decrease
in table game hold percentage, excluding premium player activity in 1996, is due
to its changes in odds on craps tables and increased skill level of blackjack
players in the market combined with the randomness associated with games of
chance. 


                                       14
<PAGE>   15



For the year ended November 30, 1997 win per passenger increased 1.3% to $45.69
compared to $45.09 in the same period of 1996. Revenues from casino operations
were 75.2% from slot machines and 24.8% from table games in 1997 compared to
71.6% and 28.4%, respectively, for 1996. Such mix of slot machine and gaming
table win is attributable to the continuing popularity of slot machines among
the Company's base of casino patrons and generally conforms to that experienced
by riverboats throughout Louisiana.

                Casino expenses for the years ended November 30, 1997 and 1996
were $31,826,000 and $33,947,000, respectively, which represented 47.0% and
45.5% of casino revenues in each period. Overall casino expenses are down
reflecting (i) decreased taxes associated with gaming revenues, (ii) lower
expenses for payroll and related costs in the gaming and casino marketing
departments, and (iii) lower costs for selling and administering the bus
program. These decreases in expenses were partially offset by increased costs
for promotional expenses and casino support departments.

                Selling, general and administrative expenses were $21,039,000
and $21,954,000 for the years ended November 30, 1997 and 1996, respectively.
Overall selling, general and administrative expenses for 1997 are lower than
1996 due to (i) one time expenses incurred in 1996 related to a campaign in
support of riverboat gaming in Baton Rouge, (ii) decreased insurance premiums
and deductible expenses, and (iii) decreased management fees and land lease
expenses that resulted from lower revenues. These lower expenses were partially
offset by increased marketing, security, human resources and facility department
expenses for 1997 compared to 1996.

                Income before depreciation, amortization and interest was
$15,514,000 and $19,546,000 for the years ended November 30, 1997 and 1996,
respectively. Such amounts as a percentage of net revenues (or operating
margins) were 22.3% and 25.5% for the 1997 and 1996 periods, respectively.
Management believes the decrease in operating margins was due to (i) winnings
from premium player activity in the 1996 period that did not occur in 1997, and
(ii) the decline of gaming revenues in the Baton Rouge market without a
proportionate decline in expenses.

                Net interest expense was $5,675,000 and $6,761,000 for the years
ended November 30, 1997 and 1996, respectively. The reduction in interest
expense is due to a decline in outstanding debt due to the 1997 and 1996
mandatory Note repurchases and the continuing amortization of principal under
the Credit Agreement.

                The Company recorded a provision for income taxes of $2,045,000
and $1,340,000 for the years ended November 30, 1997 and 1996, respectively. For
the year ended November 30, 1997, the Company recorded a current tax provision
of $650,000 and a deferred tax provision of $1,395,000. For the year ended
November 30, 1996, the Company released the remaining balance of a 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.

                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



                                       15
<PAGE>   16



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 higher 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 for the Company 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. 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 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 customers 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) expenses incurred in 1996 related
to a campaign in support of riverboat casinos in Baton Rouge, and (iii)
marketing expenses included in selling, general and administrative expenses in
1996 compared to 1995 increased 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. 


                                       16
<PAGE>   17



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 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.

LIQUIDITY AND CAPITAL RESOURCES

                During the year ended November 30, 1997 the Company generated
$9,621,000 in cash flows from operations as compared to $12,708,000 for the year
ended November 30, 1996. The decrease in cash flow from operations was due to a
decrease in net income from 1996 to 1997 of $3,796,000.

                Cash flows used by investing activities were $253,000 and
$1,585,000, respectively, for the years ended November 30, 1997 and 1996. For
the year ended November 30, 1997 the Company utilized $939,000 of restricted
cash, as permitted by the Indenture, to partially fund capital expenditures for
continuing operations. Results for the year ended November 30, 1996 reflect
capital expenditures for continuing operations financed by cash from operations.

                Financing activities for the years ended November 30, 1997 and
1996 used cash of $6,121,000 and $11,456,000,respectively. The use of funds in
1997 was related to (i) regularly scheduled principal amounts due under the
Credit Agreement, as amended, (ii) payment of dividends to shareholders and
distributions to warrant holders aggregating $482,000, (iii) an increase in
restricted cash of $2,694,000 related to Cumulative Excess Cash Flow for the
semiannual periods ended May 31 and November 30, 1997, and (iv) the repurchase
of $722,000 of Notes on August 29, 1997 as required by the Indenture. The use of
funds in 1996 were (i) the February 28, and August 29, 1996 repurchases 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 warrant holders aggregating $4,334,000, and (iii) $2,400,000
for the repayment of regularly scheduled principal amounts due under the Credit
Agreement.

                Based on an expectation of continuing profitable operations,
the Company expects to continue to generate sufficient cash flows to meet
operating needs and periodic debt service obligations through November 30, 1998.
Pursuant to provisions of the Indenture, on December 1, 1998 all of the
outstanding Notes will mature and become due and payable. As of November 30,
1997, approximately $43,946,000 of Notes were outstanding. In addition, the
warrant holders 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. There were
153,000 issued and outstanding warrants as of November 30, 1997, representing
13.5% of the Company's ownership on a fully diluted basis. 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



                                       17
<PAGE>   18



these warrants. The estimated accreted value attributed to the redeemable common
stock warrants as of November 30, 1997 and 1996 was $4,376,000. The Company is
unable at this time to estimate the value of the common stock warrants at
December 1, 1998.

                The Company's ability to meet its obligations at December 1,
1998 with respect to the Notes and common stock warrants will be dependent on
its ability to secure adequate replacement financing. Currently, management is
considering various strategies and alternatives with regard to financing
prospects. Given the profitable operating history of the Company and its
competitive position in the Baton Rouge market, management believes that
adequate financing can be obtained prior to December 1, 1998. However, there can
be no assurance that financing will be obtained in an amount and on terms
satisfactory to the Company. The inability to secure adequate financing prior to
December 1, 1998 will have a material adverse effect on the financial position
of the Company.

                As of November 30, 1997, liquidity and capital resources of the
Company included cash and cash equivalents, and restricted cash totaling
$12,731,000, 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. Payment of the outstanding Notes on December 1, 1998 and
                  payment to those warrant holders that exercise their put
                  rights, each as described above.

                  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, 1997 amounted to $3,795,000. As
                  required by the Indenture, the Company made an offer to
                  repurchase Notes at par to the extent of such Cumulative
                  Excess Cash Flow on January 28, 1998. The Company's offer to
                  repurchase Notes expired on February 26, 1998 with $119,000
                  principal amount of Notes being tendered. A cash payment of
                  approximately $122,000 (principal plus accrued interest) was
                  made on February 27, 1998. Pursuant to the terms of the
                  Indenture, of the $3,676,000 of Cumulative Excess Cash Flow
                  not used to repurchase Notes, $2,813,500 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 ending May 31, 1998 and is classified as a
                  current liability at November 30, 1997. The remaining $862,500
                  is considered an addition to the $1,012,000 Cash Available for
                  Reinvestment as of November 30, 1997.

                       Based on an expectation of continuing profitable
                  operations, the Company anticipates generating Cumulative
                  Excess Cash Flow for the semiannual period ending May 31,
                  1998. At the present time, the Company is unable to predict
                  the amount of Cumulative Excess Cash Flow that may be realized
                  for such semiannual period. The Company believes existing cash
                  balances and cash generated from continuing operations will be
                  sufficient to meet cash requirements for any offer to
                  repurchase Notes.

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

                  iv.  Payment for capital expenditures for remodeling projects
                  of the Casino Rouge facilities expected to cost approximately
                  $1,615,000.

                  v. Cash dividends to the holders of the Company's Common Stock
                  and distributions to warrant holders 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.

                  The Company's secured debt financing includes (i) $51,000,000
of the Notes ($43,946,000 of which were outstanding on November 30, 1997), which
were issued along with 153,000 detachable warrants to purchase one share each of
the Company's Common Stock at a price of $0.01 any time prior to December 1,
1998, and (ii) $440,000 of secured equipment



                                       18
<PAGE>   19



financing pursuant to an amendment to the Credit Agreement dated December 20,
1995 which bears interest on the outstanding balance (which was $18,000 as of
November 30, 1997) 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
amounts financed by the Credit Agreement, as amended, were 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.

ITEM 7A.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

                  Not applicable.

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.

                                    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.
<TABLE>
<CAPTION>

                           NAME                AGE           POSITION

                  <S>                          <C>           <C>                  
                  Robert B. Sturges            50            Chairman of the Board
                  Dan S. Meadows               51            President and Director
                  Leon R. Tarver II            55            Independent Director
                  W. Peter Temling             50            Acting Chief Financial Officer
                  Dale A. Darrough             50            General Manager
</TABLE>

                  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. He also serves as a director of CHC. 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.



                                       19
<PAGE>   20



                  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 seven
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 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 and a director 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.

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, 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.



                                       20
<PAGE>   21



ITEM 11.           EXECUTIVE COMPENSATION.

                  The following table provides a summary of the compensation for
the year ended November 30, 1997 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
<TABLE>
<CAPTION>

                                                                                                    Other Annual
    Name                            Position                           Salary        Bonus          Compensation (1)
    ----                            --------                           ------        -----          ----------------
<S>                                 <C>                                <C>        <C>               <C>      
    Robert B. Sturges (2)           Chairman of the Board              $    -     $   -             $  -
    Dan S. Meadows (2)              President                          $    -     $   -             $  -
    Dale A. Darrough                General Manager                    $161,000   $ 50,000          $  -
    James F. Dolan (3)              Secretary/Treasurer                $ 92,800   $ 20,000          $  -
</TABLE>




(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. Dolan was Secretary/Treasurer and Vice President of Finance of the
Company through February 11, 1998.

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 meetings
attended. On December 1, 1994, the Company issued 2,450 shares of Common Stock
to Mr. Tarver, which are now fully vested. 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.






                                       21
<PAGE>   22




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, 1998 (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.
<TABLE>
<CAPTION>

                                                                                                       Common Stock      Percent
Name and Address of Beneficial Owner                                                              Beneficially Owned(1)  of Class
------------------------------------                                                              ---------------------  --------
<S>                                                                                                        <C>             <C>  
CSMC-Management Services, Inc ...........................................................................   588,200        59.9%
3250 Mary Street
Miami, Florida 33133

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

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

Thomas L. Meehan ........................................................................................   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          (2)
Louisiana Casino Cruises, Inc.
1717 River Road North
Baton Rouge, Louisiana 70802

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

James F. Dolan(3)........................................................................................        --          --
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)
</TABLE>

(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."

(2)  Less than 1%.

(3)  Mr. Dolan was Secretary/Treasurer and Vice President of Finance of the
Company through February 11, 1998.




                                       22
<PAGE>   23



ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

                  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, 1997 was
$2,214,000. 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 Meehan to be divided among them as they shall elect. For the
fiscal year ended November 30, 1997 the amount paid and accrued by CSMC to
Messrs. Meadows, Bayles and Meehan totaled $407,000. 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 the holders 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 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






                                       23
<PAGE>   24



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."

                                     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-16 hereto.

                           Report of Independent Accountants

                           Balance Sheets - November 30, 1997 and 1996.

                           Statements of Operations -  Years ended November 30,
                           1997, 1996 and 1995.

                           Statements of Changes in Shareholders' Deficit -
                           Years ended November 30, 1995, 1996 and 1997.

                           Statements of Cash Flows - Years ended November 30,
                           1997, 1996 and 1995.

                           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

                                    (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)

                           4.2      Form of Warrant Certificate. (2)

                           4.3      Form of Certificate for Common Stock. (2)


                                       24

<PAGE>   25
 


                           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, 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, 1997.






                                       25
<PAGE>   26

(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.


                                       26
<PAGE>   27
                                   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: March 2, 1998                              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: March 2, 1998                   /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)





                                       27
<PAGE>   28



                          INDEX TO FINANCIAL STATEMENTS

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

Balance Sheets - November 30, 1997 and 1996................................F-3

Statements of Operations -
Years ended November 30, 1997, 1996 and 1995...............................F-4

Statements of Changes in Shareholders' Deficit -
Years ended November 30, 1995, 1996 and 1997...............................F-5

Statements of Cash Flows -
Years ended November 30, 1997, 1996 and 1995...............................F-6

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









                                      F-1
<PAGE>   29



                        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, 1997 and 1996, and
the results of its operations and its cash flows for each of the three years in
the period ended November 30, 1997, 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
December 12, 1997, except as to 
paragraph 8 of Note 3 which is
as of February 26, 1998










                                      F-2
<PAGE>   30

                         LOUISIANA CASINO CRUISES, INC.
                                 BALANCE SHEETS
                        (in thousands, except share data)
<TABLE>
<CAPTION>

                                                                                              November 30,
                                                                               -----------------------------------------
                                                                                      1997                    1996
                                                                               -------------------      ----------------
ASSETS
------
<S>                                                                            <C>                      <C>            
Current assets:
    Cash and cash equivalents                                                  $            7,924       $         4,677
    Restricted cash (Notes 1 and 3)                                                         4,807                 3,052
    Receivables, less allowance for doubtful accounts
       of $298 and $236 at 1997 and 1996, respectively                                        479                   424
    Prepaid and other current assets                                                        1,103                   797
    Inventories                                                                               443                   439
    Deferred tax asset - current (Note 8)                                                   2,051                 2,241
                                                                               -------------------      ----------------
         Total current assets                                                              16,807                11,630

Property and equipment, net (Note 2)                                                       40,872                43,888

Prepaid and other asset                                                                     2,078                2,920
                                                                               -------------------      ----------------
Total assets                                                                   $           59,757       $        58,438
                                                                               ===================      ================

LIABILITIES AND SHAREHOLDERS' DEFICIT
-------------------------------------

Current liabilities:
  Accounts payable                                                             $            2,566        $        2,681
  Accrued interest                                                                          2,527                 2,578
  Accrued liabilities                                                                       1,642                 1,601
  First mortgage notes, current portion (Note 3)                                            2,932                 1,526
  Estimated dispute resolution cost (Note 7)                                                1,700                 1,700
  Notes payable, current portion (Note 3)                                                      18                 2,223
  Other current liabilities                                                                   240                   303
                                                                               -------------------      ----------------
         Total current liabilities                                                         11,625                12,612
First mortgage notes, net of original issue
    discount (Note 3)                                                                      40,732                42,638
Notes payable (Note 3)                                                                          -                    18
Deferred tax liability (Note 8)                                                             2,186                   981
                                                                               -------------------      ----------------
         Total liabilities                                                                 54,543                56,249
                                                                               -------------------      ----------------
Redeemable preferred stock (Note 4)                                                         1,628                1,496
                                                                               -------------------      ----------------
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 1997 and 1996                                                            1                    1

Accumulated deficit                                                                          (791)              (3,684)
                                                                               -------------------      ----------------
Total shareholders' deficit                                                                  (790)              (3,683)
                                                                               -------------------      ----------------
Total liabilities and shareholders' deficit                                    $           59,757       $       58,438
                                                                               ===================      ================
</TABLE>



                     The accompanying notes are an integral
                       part of these financial statements

                                       F-3


<PAGE>   31



                         LOUISIANA CASINO CRUISES, INC.
                            STATEMENTS OF OPERATIONS
                        (in thousands, except share data)
<TABLE>
<CAPTION>
                                                                Year Ended November 30,
                                                --------------------------------------------------------
                                                     1997                  1996                1995
                                                --------------        --------------      --------------
<S>                                           <C>                    <C>                 <C>           
Revenues:
    Casino                                    $        67,694        $       74,615      $       65,187
    Food and beverage                                   1,345                 1,351               1,382
    Other                                                 658                   774                 514
                                                --------------        --------------      --------------
    Net revenues                                       69,697                76,740              67,083
                                                --------------        --------------      --------------
Costs and expenses:
    Casino                                             31,826                33,947              29,849
    Food and beverage                                   1,318                 1,293               1,619
    Selling, general and administrative                21,039                21,954              18,085
    Pre-opening expenses                                    -                     -               1,625
                                                --------------        --------------      --------------
Total operating expenses                               54,183                57,194              51,178
                                                --------------        --------------      --------------
Income before depreciation,
    amortization and interest                          15,514                19,546              15,905
Depreciation and amortization                           4,287                 4,142               3,584
                                                --------------        --------------      --------------
    Operating income                                   11,227                15,404              12,321
Other income (expense):
    Interest income                                       280                   241                 344
    Interest expense                                   (5,955)               (7,002)             (6,675)
                                                --------------        --------------      --------------
Income before provision for income taxes                5,552                 8,643               5,990
Provision for income taxes (Note 8)                     2,045                 1,340                   -
                                                --------------        --------------      --------------
Net income                                              3,507                 7,303               5,990
Dividend requirement on redeemable
    preferred stock (Note 4)                              132                   132                 132
Market value warrant adjustment                             -                     -               2,790
Distributions paid to common stock
   warrant holders                                         65                   584                 408
                                                --------------        --------------      --------------
Net income assigned to
    common shareholders                       $         3,310        $        6,587      $        2,660
                                                ==============        ==============      ==============
Earnings per common and
    common equivalent share (Note 5)          $          2.97        $         6.31      $         2.71
                                                ==============        ==============      ==============
Weighted average common and common
    equivalent shares outstanding (Note 5)          1,135,783             1,135,783             982,783
                                                ==============        ==============      ==============
</TABLE>


                     The accompanying notes are an integral
                       part of these financial statements

                                       F-4


<PAGE>   32



                         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, 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 warrant holders                                     -              -              -         (3,028)             (3,028)
                                                                                                                           5,990
Net income                                                    -              -              -          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 warrant holders                                     -              -              -         (4,334)             (4,334)
Net income                                                    -              -              -          7,303               7,303
                                                   -------------  -------------  -------------  --------------  ------------------
Balance at November 30, 1996                            982,783              1              -         (3,684)             (3,683)
                                                   -------------  -------------  -------------  --------------  ------------------
Dividend requirements on
    redeemable preferred stock                                -              -              -           (132)               (132)

Dividends paid to holders of common
    stock and distributions to common
    stock warrant holders                                    -               -              -           (482)               (482)
Net income                                                   -               -              -          3,507               3,507
                                                   ------------   -------------  -------------  --------------  ------------------
Balance at November 30, 1997                            982,783   $          1   $          -  $        (791)   $           (790)
                                                   =============  =============  =============  ==============  ==================
</TABLE>







                     The accompanying notes are an integral
                       part of these financial statements

                                       F-5


<PAGE>   33



                         LOUISIANA CASINO CRUISES, INC.
                            STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                                    Year Ended November 30,
                                                                 --------------------------------------------------------------
                                                                          1997                  1996                1995
                                                                 ---------------------  -------------------  ------------------
<S>                                                              <C>                   <C>                  <C>               
Net income                                                       $              3,507  $             7,303  $            5,990
Net cash flows from operating activities:
  Depreciation and amortization                                                 4,287                4,142               3,584
  Amortization of deferred costs                                                  917                1,404                 926
  Loss on sale of fixed assets                                                     47                   20                  15
  Provision for doubtful accounts                                                  94                  258                  97
  Increase in receivables                                                        (149)                (260)               (513)
  Increase in inventories                                                          (4)                 (54)               (385)
  (Increase) decrease in prepaid and other assets                                (285)                 843              (1,810)
  Decrease (increase) in deferred tax assets                                      190               (1,649)               (592)
  (Decrease) increase in accrued interest                                         (51)                (372)                 17
  Increase in accounts payable and other liabilities                            1,068                1,073                 884
                                                                 ---------------------  -------------------  ------------------
      Net cash provided by operating activities                                 9,621               12,708               8,213
                                                                 ---------------------  -------------------  ------------------
Cash flows from investing activities:
  Capital expenditures                                                         (1,214)              (1,655)            (11,526)
  Proceeds from sale of fixed assets                                               22                    8                  83
  Decrease in restricted cash                                                     939                   62              15,941
                                                                 ---------------------  -------------------  ------------------
      Net cash (used) provided by investing activities                           (253)              (1,585)              4,498
                                                                 ---------------------  -------------------  ------------------
Cash flows from financing activities:
  Proceeds from issuance of note payable                                            -                  440               5,559
  Repayment of obligations for gaming and other equipment                           -                    -              (4,654)
  Repayment of first mortgage notes                                              (722)              (6,332)                  -
  (Increase) decrease in restricted cash                                       (2,694)               1,170              (4,222)
  Repayments of notes payable                                                  (2,223)              (2,400)             (1,358)
  Dividends paid to holders of common stock and
    distributions to common stock warrant holders                                (482)              (4,334)             (3,028)
                                                                 ---------------------  -------------------  ------------------
      Net cash used by financing activities                                    (6,121)             (11,456)             (7,703)
                                                                 ---------------------  -------------------  ------------------
Net increase (decrease) in cash and cash equivalents                            3,247                 (333)              5,008
Cash and cash equivalents at beginning of year                                  4,677                5,010                   2
                                                                 ---------------------  -------------------  ------------------
Cash and cash equivalents at end of year                         $              7,924  $             4,677  $            5,010
                                                                 =====================  ===================  ==================
</TABLE>



                     The accompanying notes are an integral
                       part of these financial statements

                                       F-6


<PAGE>   34



                         LOUISIANA CASINO CRUISES, INC.
                            STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                              Year Ended November 30,
                                                                 --------------------------------------------------
                                                                     1997               1996              1995
                                                                 -------------      ------------      -------------
<S>                                                              <C>               <C>                <C>         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for interest                                           $      5,264      $      6,146       $      6,193
                                                                 =============      ============      =============

Cash paid for income taxes                                       $      1,077      $      2,053       $        684
                                                                 =============      ============      =============
</TABLE>


    SUPPLEMENTAL DISCLOSURE OF NONCASH OPERATING, INVESTING AND FINANCING
    ACTIVITIES:

    Redeemable preferred stock dividends of $132,000 were accrued in each of the
    years ended November 30, 1997, 1996 and 1995. (See Note 4)














                     The accompanying notes are an integral
                       part of these financial statements

                                       F-7


<PAGE>   35

                         LOUISIANA CASINO CRUISES, INC.
                         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 commencement 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
and 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 $4,500,000, $4,579,000 and $4,497,000 for the years
ended November 30, 1997, 1996 and 1995, respectively. The estimated costs of
such complimentary items have been classified as casino costs and totaled
$2,432,000, $2,416,000 and $2,226,000 for the years ended November 30, 1997,
1996 and 1995, respectively. The estimated retail value of promotional items was
$716,000, $601,000 and $282,000 for the years ended November 30, 1997, 1996 and
1995, respectively. The estimated costs of such promotional items have been
classified as selling, general and administrative costs and totaled $658,000,
$563,000 and $336,000 for the years ended November 30, 1997, 1996 and 1995,
respectively.

RESTRICTED CASH

         In accordance with the terms of the Indenture (Note 3), Cumulative
Excess Cash Flow not previously used to repurchase Notes and Cash Available For
Reinvestment not used for limited purposes as provided in the Indenture are
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.







                                      F-8
<PAGE>   36




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
and are amortized over the license period, which is five years. Costs incurred
in connection with the Offering are recorded as deferred offering costs and are
being amortized on the effective interest method over five years, the term of
the Notes. Deferred licensing charges and offering costs are classified under
prepaid and other assets in the accompanying balance sheets.

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 include cash and cash equivalents,
restricted cash, notes payable and warrants. The fair value of the Notes, based
on quoted market prices, was approximately $44,166,000 and $46,455,000 at
November 30, 1997 and 1996, respectively. The fair value of cash and cash
equivalents, restricted cash, 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 in the financial statements for the years ended
November 30, 1996 and 1995 have been reclassed to conform to the presentation of
the financial statements for the year ended November 30, 1997.





                                      F-9
<PAGE>   37




NOTE 2 - PROPERTY AND EQUIPMENT

         Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>

                                                            As of November 30,
                                               --------------------------------------------
                                                           1997                      1996
                                               ------------------        ------------------
<S>                                        <C>                         <C>               
Vessel                                     $             16,673        $           16,661
Building                                                 19,062                    19,029
Furniture and fixtures                                    6,025                     5,787
Gaming equipment                                          8,790                     8,186
Other equipment                                           1,918                     1,709
                                               ------------------        ------------------
                                                         52,468                    51,372

Less: accumulated depreciation                          (11,596)                   (7,484)
                                               ------------------        ------------------
                                           $             40,872        $           43,888
                                               ==================        ==================
</TABLE>

          Capitalized interest included in the cost of property and equipment at
November 30, 1997 and 1996 is $1,628,000. Unamortized capitalized interest at
November 30, 1997 and 1996 is $1,313,000 and $1,421,000, respectively.

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, 1997 at par as
provided in the Indenture. The aggregate principal amount of the Notes
outstanding as of November 30, 1997 and 1996 was $43,946,000 and $44,668,000,
respectively.

         The Notes are secured by a first mortgage on the riverboat and
land-based facility and certain related assets, and an assignment of all leases
and operating agreements related thereto. 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 $253,000, $234,000 and
$227,000 for the years ended November 30, 1997, 1996 and 1995, respectively. In
addition to original issue discount amortization, for the years ended November
30, 1997 and 1996 the Company recorded a credit of $30,000 and an additional
$134,000, respectively, of the original issue discount as interest expense
relating to the Notes repurchased by the Company. The unamortized original issue
discount balance at November 30, 1997 and 1996 was $281,000 and $504,000,
respectively.

         The warrant holders 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




                                      F-10
<PAGE>   38



expects to repurchase these warrants. The estimated accreted value attributed to
the redeemable common stock warrants as of November 30, 1997 and 1996 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. 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 to repurchase the Notes at par to the extent of such Cumulative Excess
Cash Flow on January 29, 1997. The Company's offer to repurchase Notes expired
on February 27, 1997 with no Notes being tendered. Pursuant to the Indenture,
50% of 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 (see Restricted Cash -
Note 1). 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 (as defined in the Indenture), and is available to the Company for
use in limited purposes as defined in the Indenture.

         Cumulative Excess Cash Flow for the semiannual period ended May 31,
1997 was $3,098,000, including 50% ($1,526,000) of the Cumulative Excess Cash
Flow for the semiannual period ended November 30, 1996. As required by the
Indenture, the Company made an offer on July 30, 1997 to repurchase the Notes at
par to the extent of such Cumulative Excess Cash Flow. This offer expired on
August 28, 1997 with $722,000 of Notes being tendered. Pursuant to the terms of
the Indenture, of the $2,376,000 of Cumulative Excess Cash Flow not used to
repurchase Notes, $1,951,000 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 November 30, 1997. The remaining $425,000 is
considered Cash Available for Reinvestment and together with 50% ($1,526,000) of
the Cumulative Excess Cash Flow for the semiannual period ended November 30,
1996 is available to the Company for limited purposes as provided in the
Indenture. Cash Available for Reinvestment in the amount of $939,000 has been
used for capital expenditures from March 1 through November 30, 1997.

         Cumulative Excess Cash Flow for the semiannual period ended November
30, 1997 amounted to $3,795,000. Such amount includes $1,951,000 equal to the
remaining Cumulative Excess Cash Flow for all semiannual periods through May 31,
1997 and Excess Cash Flow equal to $1,844,000 for the semiannual period ended
November 30, 1997. As required by the Indenture, the Company made an offer to
repurchase the Notes at par to the extent of such Cumulative Excess Cash Flow on
January 28, 1998. The Company's offer to repurchase Notes expired on February
26, 1998 with $119,000 of Notes being tendered. Pursuant to the terms of the
Indenture, of the $3,676,000 of Cumulative Excess Cash Flow not used to
repurchase Notes, $2,813,500 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 ending May 31, 1998 and is classified as a current
liability at November 30, 1997. The remaining $862,500 is considered an addition
to the $1,012,000 of Cash Available for Reinvestment balance at November 30,
1997 (see above).

         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 accrued
interest at 8.9% per annum, payable monthly in arrears. Principal was payable in
monthly installments through September 1997. The loan agreement required the
Company to maintain a certain cash flow ratio. The loan was secured by gaming
and other equipment and limited the sale or encumbrance of such equipment. The
outstanding principal balance as of November 30, 1997 and 1996 was $0 and
$2,003,000, 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 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, 1997 and 1996 was $18,000 and $238,000, respectively.



                                      F-11
<PAGE>   39



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

        Year ending 
        November 30,
        ------------   



          1998                  $   2,950,000

          1999                     41,014,000
                                -------------
          Total                 $  43,964,000
                                =============

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, 1997 and 1996, at a carrying value of $1,628,000 and
$1,496,000, 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 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 warrant
holders during the period. Accordingly, earnings per share for the years ended
November 30, 1997 and 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 years ended November 30, 1997 and
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 warrant holders and the
market value warrant adjustment, by the weighted average number of common shares
outstanding during the period.

         Earnings per share for each quarter of fiscal 1997, reported in Note
11, is calculated using the equity method. 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.

         In 1997, the Financial Accounting Standards Board issued SFAS No. 128
"Earnings Per Share," which will require the Company to present basic earnings
per share (EPS) and diluted earnings per share. The new standard requires
additional informational disclosures, and also makes certain modifications to
the currently applicable EPS calculations. The new standard is required to be
adopted by all companies for reporting periods ending after December 15, 1997
(the Company's first quarter of fiscal 1998), and will require restatement of
EPS for all prior periods reported. The following table presents pro forma
earnings per common share amounts computed using SFAS No. 128:

                                      F-12
<PAGE>   40





                                                 Year Ended November 30,
                                               ---------------------------
                                               1997       1996        1995
                                               ----       ----        ----
Pro forma earnings per common share:
Basic earnings per share                       $3.37      $6.70       $2.71
Diluted earnings per share                     $2.97      $6.31       $2.70



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.

         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, 1997 and 1996 for costs associated with
eventual resolution of the matter. The trial date for this matter has been
rescheduled for January 5, 1999. The accrued estimated cost of resolution has
been classified as a current liability on the balance sheets due to management's
expectation of a resolution of this matter by early fiscal 1999.

         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, 1997, 1996 and 1995 was
$1,215,523, $1,316,157 and $1,270,653, respectively. Rental expense for the
years ended November 30, 1997, 1996 and 1995 includes $464,000, $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.
Future minimum lease payments for all leases with non-cancelable terms in excess
of one year are as follows:





                                      F-13
<PAGE>   41




       Year ending
       November 30,
       ------------   
         1998                                        $   547,000
         1999                                            400,000
         2000                                            400,000
         2001                                            400,000
         2002                                            400,000
         Thereafter                                      433,000
                                                     -----------
         Total                                       $ 2,580,000
                                                     ===========

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 $2,214,000, $2,567,000 and $2,264,000 for the years ended
November 30, 1997, 1996 and 1995, respectively. Of the amount earned and
expensed, $157,000 and $186,000 was payable and included in current liabilities
at November 30, 1997 and 1996, respectively.

NOTE 8 - INCOME TAXES

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

<TABLE>
<CAPTION>
                                                                YEAR ENDED NOVEMBER 30,
                                                        ------------------------------------------ 
                                                        1997             1996                 1995
                                                        ----             ----                 ----
Current tax expense:
<S>                                                 <C>               <C>                  <C>       
Federal                                             $   720,000       $ 1,478,000          $  510,000
State                                                  (70,000)           185,000              82,000
                                                    -----------       -----------          ----------
Total current tax expense                               650,000         1,663,000             592,000

Deferred tax provision (benefit)                      1,395,000          (323,000)           (592,000)
                                                    -----------       -----------          ----------
Total provision for income taxes                    $ 2,045,000       $ 1,340,000          $        -
                                                    ===========       ===========          ==========
</TABLE>

         The following is a summary of the components of the provision (benefit)
for deferred income taxes:
<TABLE>
<CAPTION>
                                                                        YEAR ENDED NOVEMBER 30,
                                                              -----------------------------------------
                                                              1997               1996              1995
                                                              ----               ----              ----
<S>                                                    <C>               <C>                   <C>        
Tax net operating loss carry forward                   $            -    $             -       $ 1,365,000
Depreciation                                                1,191,000          1,801,000           672,000
Capitalization of deferred pre-operating costs                      -                  -          (633,000)
Amortization of deferred pre-operating costs                  602,000            602,000           552,000
Alternative minimum tax credit carry forward                 (358,000)          (408,000)                -
Accrued litigation costs                                            -            213,000                 -
Other, net                                                    (40,000)          (132,000)         (178,000)
                                                        -------------     --------------      ------------
Provision for deferred income taxes                         1,395,000          2,076,000         1,778,000
Release valuation allowance                                         -         (2,399,000)       (2,370,000)
                                                       --------------     --------------      ------------
Total provision (benefit) for deferred income taxes       $ 1,395,000     $     (323,000)      $  (592,000)
                                                       ==============     ==============      ============
</TABLE>



                                      F-14
<PAGE>   42



         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:
<TABLE>
<CAPTION>
                                                                                   YEAR ENDED NOVEMBER 30,
                                                                          ----------------------------------------
                                                                          1997               1996             1995
                                                                          ----               ----             ----
<S>                                                           <C>                <C>                   <C>        
Taxes provided at statutory rate                              $      1,888,000   $      2,939,000      $ 2,037,000
State tax expense, net of federal benefit                              278,000            432,000          282,000
Release of valuation allowance                                               -         (2,399,000)      (2,370,000)
Nondeductible lobbying costs                                                 -            366,000                -
Other, net                                                            (121,000)             2,000           51,000
                                                              ----------------   ----------------  ---------------
Total provision for income taxes                              $      2,045,000   $      1,340,000  $             -
                                                              ================   ================  ===============
</TABLE>

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

                                                                     1997                        1996                  1995
                                                                     ----                        ----                  ----
<S>                                                           <C>                         <C>                   <C>        
Deferred pre-operating costs                                  $   602,000                 $   602,000           $   602,000
Accrued litigation costs                                          663,000                     663,000                     -
Alternative minimum tax credit carry forward                      306,000                     526,000                     -
Other, net                                                        480,000                     450,000               261,000
                                                              -----------                 -----------           -----------
                                                                2,051,000                   2,241,000               863,000
Deferred tax asset valuation allowance                                  -                           -              (602,000)
                                                              -----------                 -----------           -----------
Current deferred tax asset                                    $ 2,051,000                 $ 2,241,000           $   261,000
                                                              ===========                 ===========           ===========

Depreciation                                                  $(3,650,000)                $(2,459,000)            $(664,000)
Deferred pre-operating costs                                      653,000                   1,255,000             1,857,000
Accrued litigation costs                                                -                           -               876,000
Alternative minimum tax credit carry forward                      801,000                     223,000                     -
Other, net                                                         10,000                           -                59,000
                                                              -----------                 -----------           -----------
                                                               (2,186,000)                   (981,000)            2,128,000
Deferred tax asset valuation allowance                                  -                           -            (1,797,000)
                                                              -----------                 -----------           -----------
Noncurrent deferred tax (liability) asset                     $(2,186,000)                $  (981,000)          $   331,000
                                                              ===========                 ===========           ===========
</TABLE>




         In accordance with SFAS 109, the Company recorded a valuation allowance
for a portion of the deferred tax asset at November 30, 1995 because of
uncertainty regarding the realization of the related tax benefits. 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.

NOTE 9 - DIVIDENDS

         On March 26, 1997 the Board of Directors declared a dividend of
$0.424377 per share of common stock and an equal distribution per common stock
warrant. An aggregate payment of $482,000 was paid on March 28, 1997 to holders
of record on March 26, 1997.

         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.


                                      F-15



<PAGE>   43




NOTE 10 - EMPLOYEE BENEFIT PLAN

         In January 1996, the Company established a defined contribution plan
(the "Plan") for all employees, qualified under Section 401(k) of the Internal
Revenue Code. The Plan was terminated June 30, 1997, and plan assets and
participant accounts were transferred to the Carnival Hotels and Resorts 401(k)
plan (the "CHC Plan") effective July 1, 1997 at their then current value. The
provisions of the CHC Plan are substantially the same as those of the Plan.
Contributions to the plans by the Company are based on the participants'
contributions. For the years ended November 30, 1997 and 1996, the Company
contributed $129,000 and $134,000, respectively. The Company paid certain
expenses associated with plan administration.

NOTE 11 - SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>

                                                                             Quarter
                                      ----------------------------------------------------------------------------------
                                         First             Second             Third           Fourth           Total
                                      ----------------------------------------------------------------------------------
                                                                (in thousands, except share data)
<S>                                   <C>               <C>               <C>                <C>             <C>             
Fiscal 1997:

Income (loss) assigned to             $    1,073        $     1,260       $        996       $    (19)       $     3,310
common shareholders

Earnings (loss) per common            $     0.94        $      1.17       $       0.88       $  (0.02)       $      2.97
and common equivalent share
(See Note 5)

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
and common equivalent 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
and common equivalent share
(See Note 5)
</TABLE>





                                      F-16

<PAGE>   44


                                                                   SCHEDULE II

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


<TABLE>
<CAPTION>
                                                 Balance at        Additions Charged to                           Balance at
                                             Beginning of Period    Costs and Expense          Deduction         End of Period
                                             -------------------    -----------------          ---------         -------------
<S>                                          <C>                    <C>                        <C>               <C>    
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

                                             =======                =======                    =======           =======
Year Ended November 30, 1997
----------------------------

                                             
Allowance for doubtful accounts              $   236                $    94                    $   (32)          $   298

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

TOTAL                                        $   236                $    94                    $   (32)          $   298

                                             =======                =======                    =======           =======
</TABLE>








                                      S-1