COMPANY IS NOT A SEC REGISTRANT
                       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 DECEMBER 31, 1998.

         
                        Commission File Number 22-27770
                        -------------------------------

                       TREASURE BAY GAMING & RESORTS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


                  Delaware                     64-0835173
                  --------                     ----------

         (State of Incorporation)       (IRS Employer Identification No.)


              1983 Beach Blvd., Biloxi, Mississippi              39531
              -------------------------------------              -----
               (Address of principal executive office)        (Zip Code)

     Indicate  by check mark  whether the  registrant  (a) has filed all reports
     required to be filed by Section 13 of 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 (b) has been subject to
     such filing requirements for the past 90 days.



                                Yes _____ No____

                     This company is not an SEC registrant

As of December 31, 1998, there were 10,000,000 shares of Common Stock, $0.01
par value per share, outstanding.

<PAGE>

                                      INDEX

PART I.
  ITEM 1.  BUSINESS
  ITEM 2.  PROPERTIES
  ITEM 3.  LEGAL PROCEEDINGS
  ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

PART II.
  ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
  ITEM 6.  SELECTED FINANCIAL DATA
  ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
            RESULTS OF OPERATIONS
  ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
            FINANCIAL DISCLOSURES
PART III.
  ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  ITEM 11. EXECUTIVE COMPENSATION
  ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
  ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PART IV.
  ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
<PAGE>


ITEM 1.  BUSINESS 

Treasure Bay Gaming & Resorts,  Inc.  (herein  referred to as the Company),  was
incorporated  in the State of  Delaware  on August 16,  1993.  Its wholly  owned
subsidiary,  Treasure  Bay  Corp.  ('TBC'),  was  incorporated  in the  State of
Mississippi on November 9, 1993. 'TBC' is the Mississippi operating company that
holds the gaming license,  and has the right to conduct gaming  operations under
Mississippi  law.  The  principal  executive  offices  are located at 1983 Beach
Boulevard,  Biloxi, Mississippi.  The Company is presently conducting activities
under the name of 'Treasure Bay Biloxi'.

The Company was  organized to develop,  own and operate  casinos in the State of
Mississippi and other emerging gaming jurisdictions.  The Company currently owns
and operates a casino in Biloxi,  Mississippi  ('Treasure Bay Biloxi') and owned
and  operated a casino in Tunica,  Mississippi  ('Treasure  Bay  Tunica')  which
closed in 1995.

On December 2, 1998, the Company  received a gaming license in St. Croix,  U. S.
Virgin  Islands.  The license is effective from June 2, 1999 until June 1, 2001.
Treasure Bay is in the process of executing a formal  management  agreement with
Grapetree Shores, to operate a gaming facility in St.Croix, U.S. Virgin Islands.
Grapetree  Shores is owned by the managing  partner of the primary holder of the
Company's First Mortgage Notes.

On August 8, 1997, Treasure Bay received confirmation of its reorganization plan
(the 'Plan') that was filed  February 6, 1997. The Company had been operating as
a  debtor-in-possession  under  Chapter  11 of the U.S.  Bankruptcy  Code  since
November 18, 1994, the petition  date.  Under Chapter 11, certain claims against
the Company in existence  prior to the filing of the  petitions for relief under
the Federal  bankruptcy  laws were stayed while the Company  continued  business
operations as debtor-in-possession.

The approved plan provided that all outstanding  Securities (consisting of First
Mortgage Notes,  common stock and preferred  stock) would be canceled,  annulled
and extinguished in exchange for New Notes and Common Stock.  Except as provided
in the  Confirmation  Order,  the Plan discharged the Company from all claims or
debts that arose before the  Petition  Date which  resulted in an  extraordinary
gain on forgiveness of debt of $107,992,000 in the year ended December 31, 1997.
The new equity investors'  contribution was in the form of cash and real estate.
This gave  these  investors  90% of the  Company's  new  stock.  First  mortgage
noteholders  surrendered  all of the old notes and were  issued new notes in the
amount  of  $27,250,000  and 10% of the newly  issued  common  stock,  valued at
$1,000,000.  They  also  loaned  the  reorganized  Treasure  Bay  an  additional
$2,250,000  for working  capital.  Since the Miller family  controlled  both the
Company prior to its reorganization and the group of new investors,  the Company
was not eligible for 'fresh start' accounting. Accordingly, the new common stock
issued to the Miller  family was recorded at the  Miller's  cost of the property
received by the Company  ($4,712,000).  Other  shares  issued as a result of the
reorganization were recorded at values based on the market value of the property
contributed to the Company  ($7,335,000).  The Plan provided for Treasure Bay to
incur certain other indebtedness in settlement of pre-petition claims.

Marketing - The  Company  attracts  customers  to its casino by  developing  and
implementing marketing strategies and promotions that emphasize the Pirate Theme
and an emphasis  on local and repeat  customers.  The  Company has an  extensive
customer database used to reach its patrons by direct marketing.

The  Company  has become  known as a  'locals'  place and  markets as such.  The
Company has also  developed an extensive  air, bus, and hotel sales  programs to
attract customers outside the local market area.

Mississippi  Gaming  Regulations  - Since the Company is operating in the gaming
industry,  it is  licensed  under  the  regulations  of the  Mississippi  Gaming
Commission.  The  ownership,  operation  and  management  of all  casino  gaming
facilities in Mississippi  are also subject to compliance  with extensive  state
and local regulations.

There can be no assurance that any renewal gaming  license  application  will be
approved.  The Company has also obtained  other  licenses and operating  permits
from  various  local,  state and federal  agencies.  Generally  speaking,  these
non-gaming licenses and permits are not transferable and will need to be renewed
periodically.  There can be no assurance that any  non-gaming  license or permit
renewal application will be approved.

Licensing  Risk - The Company is  required,  in order to operate its casino,  to
maintain  certain gaming  licenses from the State of  Mississippi.  In addition,
directors  and  certain  stockholders,  officers  and  other key  employees  are
required  to maintain  their  suitability  to own and  operate a casino,  and in
certain cases will be required to maintain their gaming licenses. The failure of
the  Company  or  certain  of the above  referenced  individuals  to retain  the
necessary  licenses or finding of  unsuitability  would have a material  adverse
impact on the Company.  The licenses  obtained by the Company on April 21, 1994,
and  renewed  in April of 1996,  and  again in April of 1998,  are valid for two
years.   Subject  to  prior  approval  of  the  Commission,   the  licenses  are
transferable and will need to be renewed again by April 21, 2000.


In July 1998, a proposed  referendum that would abolish  legalized gaming in the
State of Mississippi was announced.  The original referendum was not approved by
the State Attorney  General,  however,  a revised  version was approved in April
1999. The referendum will need 98,000  signatures to be placed on the ballot. At
this time a resolution  cannot be predicted  with  certainty.  If the initiative
were to passed it would force the casino to close within a two year period. This
would have a material adverse effect on the Company.

Competition - During 1995,  the gaming  capacity in the Biloxi market  decreased
due to the closure of two competing  properties and remained  unchanged  through
December,  1997. However, the Imperial Palace, Biloxi's first casino operated by
a Las Vegas  casino  operator,  opened in December  1997.  Beau Rivage,  an even
larger competitor,  opened in March 1999. Many of the Company's competitors have
greater financial resources than the Company.

Competition from Other  Jurisdictions - A significant  portion of the revenue in
the Biloxi  market  comes  from  adjacent  states.  Louisiana  currently  has 13
operating  riverboat  casinos.  In  addition,   a  land-based  casino  is  under
construction  in New Orleans,  Louisiana,  and is expected to open in the fourth
quarter of 1999. Other nearby states are considering gaming legislation. Passage
of gaming in any of these states could have a negative  effect on the  Company's
revenues.



ITEM 2. PROPERTIES

Biloxi Operations:
Treasure Bay Biloxi opened April 29, 1994, and is located in the heart of Biloxi
on the  Mississippi  Gulf Coast.  The site includes an existing  262-room hotel.
Treasure Bay Biloxi was one of the first  destination  gaming  resorts along the
Mississippi Gulf Coast,  incorporating a full-service casino,  resort hotel, and
convention facilities.  The casino was constructed on a 300-foot steel barge and
contains 56,000 square feet of gaming space on two levels connected by elevators
and  escalators.  It houses  approximately  1,000  slot  machines  and 60 gaming
tables,  together with several bars and an entertainment lounge. During 1998 and
into 1999, the Company  reduced the number machines to accommodate the build out
of a new brewpub and  restaurant  on the second  floor of the casino.  On shore,
adjacent to the  casino,  a  48,000-square-foot  facility  with an 18th  century
medieval fort  appearance  provides  space for food  services,  retail space,  a
children's  arcade, and administrative  offices.  The casino,  fort, and parking
areas are  located  on 15.2  acres on the  beach  side of  Highway  90 (the main
thoroughfare along the Mississippi Gulf Coast). The hotel and additional parking
occupy  approximately  13.7 acres across Highway 90 from the casino.  The casino
and hotel  facilities  currently have 2,000 parking spaces,  both on-site and at
nearby parking facilities accessible by shuttle service.

ITEM 3.  LEGAL PROCEEDINGS

The Company is a litigant in matters  arising in the normal  course of business.
In the  opinion  of  management,  all such  pending  legal  matters  are  either
adequately  covered by  insurance,  or if not insured,  will not have a material
adverse  effect on the  financial  position  or  results  of  operations  of the
Company.

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

No matters were  submitted to a vote of security  holders  during the year ended
December 31, 1998.

                                                                PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company is not an SEC registrant

ITEM 6.  SELECTED FINANCIAL DATA
The  selected  financial  information  set  forth  has  been  derived  from  the
consolidated  financial  statement from the Company.  The financial  information
should be read in conjunction with the consolidated financial statements,  notes
and other financial information included elsewhere in this FORM 10-K.

<TABLE>
<CAPTION>

                                      December 31,  December 31,
                                         1997        1998
--------------------------------------   -------     -------
                                           (in thousands)
<S>                                      <C>          <C>
Income Statement Data
   REVENUES:
          Casino ....................    57,916      57,858
          Rooms .....................     3,626       3,335
          Food & Beverage ...........    10,473      11,114
          Other .....................     1,000       1,642
                  Promo .   ..... .     (8,400)      (8,500)

            Total Revenues ..........    64,615      65,449
                                        -------       -------   
OPERATING EXPENSES:

          Casino ....................    36,186      36,591

          Food & Beverage ...........     2,950       3,580
                                                             
          Rooms .....................     1,418       1,651

          Utilities .................     1,317       1,370

          Other .....................       426         650
                                                             
          General & Administrative ..    15,128      13,388

          Depreciation & Amortization     3,497       3,968

 Total Operating expenses ...........    60,922      61,198
                                                             
  Operating Income (loss) ...........     3,693       4,251
</TABLE>
<TABLE>
<CAPTION>

                                                           December 31                   December 31

<S>                                                           <C>                            <C> 
                                                              1997                           1998
Balance Sheet Data
-------------------------------------------------                --                             --
      Total Assets ..............................                55                             56
-------------------------------------------------                --                             --
     Long-term debt including current portion ...                39                            41
-------------------------------------------------                --                            --
     Stockholders' equity (deficit)                               7                            5
</TABLE>

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
          OF OPERATIONS.

Except for the historical information contained herein, the matters contained in
this  Annual  Report on Form 10-K may  constitute  'forward-looking  statements'
within the meaning of Section 27A of the Securities Act of 1933. Forward-looking
statements  are subject to a variety of risks and  uncertainties  that may cause
actual  results  to be  materially  different  from  those  anticipated  by  the
Company's  management.  Some factors that may cause actual performance to differ
from projections  include,  among other things:  failure to complete anticipated
projects,  failure to retain  gaming  licenses  or other  regulatory  approvals,
severe weather,  and other changes in the gaming markets. The Private Securities
Litigation  Reform  Act of 1995  (the  "Act")  provides  certain  "safe  harbor"
provisions for forward-looking  statements.  All  forward-looking  statements in
this Annual Report on Form 10-K are made pursuant to the Act.

The following  discussion should be read in conjunction with and is qualified in
its entirety by, the audited  Consolidated  Financial  Statements  and the Notes
thereto included elsewhere in this report.

The  Company has a limited  post-bankruptcy  operating  history  that may not be
indicative  of the Company's  future  performance.  Additionally,  comparison of
results from year to year may not be meaningful due to the  consummation  of the
Company's plan in August 1997. Treasure Bay contemplates  expanding its existing
operation and  establishing  additional  gaming  operations  pursuant to pending
management  agreements with Grapetree  Shores and Divi Resorts.  The Company has
already assumed the management of Alahambra Casino in Aruba.

The Company is  continually  evaluating  and resolving  any  potential  problems
associated  with the Year 2000. The Year 2000 problem  exists  because  computer
applications were historically  designed to use two digit fields instead of four
to designate a year,  and date  sensitive  systems may not properly  account for
2000, which could result in miscalculations or system failures.  The Company has
established a Year 2000 team  composed of members of the Company's management in
conjunction with the management  information department to identify and evaluate
Year 2000 issues, with respect to the Company's information systems,  suppliers,
and facilities. The Company has already updated its financial reporting, payroll
processing  systems,  and most of its hardware to be Year 2000  compatible.  The
cage and credit  system,  and the table and slot  player  tracking  systems  are
scheduled for upgrades in the summer of 1999.  The estimated  costs of upgrading
these systems are estimated to be in excess of $150,000.

Given the inherent risks for a project such as this and the resources  required,
the timing and costs involved could differ  materially from those anticipated by
the Company.  There can be no assurances that these assumptions are correct, the
projects  will be  completed on schedule,  or within  budget and actual  results
could  differ  materially.  Any  failure  of third  party  systems  could have a
material adverse affect on the Company.


RESULTS OF OPERATIONS
FOR THE YEAR ENDED  DECEMBER  31, 1998  COMPARED TO THE YEAR ENDED  DECEMBER 31,
1997.

Net earnings  decreased by $108.5 million to a loss of $2.4 million for the year
ended  December  31, 1998  compared  to the same  period in the prior year.  The
decline was due  primarily  to  interest  expense of $4.8  million in 1998,  and
increase of $2.8 million over 1997, and gains on  Cancellation of Debt of $108.0
million in 1997, in connection with confirmation of the reorganization plan.

Revenues
The Company generated $57.8 million in casino revenue and $16.1 million in gross
hotel, food,  beverage,  retail and other revenue during the year ended December
31, 1998, as compared to the year ended December 31, 1997, the Company generated
$ 57.9  million  in casino  revenue  and $ 15.1  million in gross  hotel,  food,
beverage,  retail and other revenue. The decrease in casino revenue is primarily
due to the fact that the Company  suffered  from major  damage due to  Hurricane
Georges.  The Mississippi  Gaming Commission  required that all Mississippi Gulf
Coast  Casinos  close by 8:00 p.m.,  Friday,  September  25, 1998.  Treasure Bay
suffered from major damage to the casino mooring system and the hotel  facility.
The entire casino remained closed until October 8, 1998. Although,  the facility
was only  closed for 12 days,  the impact was in excess of  $2,000,000.00.  (see
note 3 to the consolidated financial statements included herein)

Costs and Expenses
Total  costs and  expenses  increased  by $1.4  million  during  the year  ended
December 31, 1998. The increase  relates  primarily to increased  revenues which
resulted in higher variable costs such as salaries and wages, prior to Hurricane
Georges and the  increase  in costs of goods sold in an effort to  increase  the
quality of the  Company's  food and retail  choices.  In  addition,  the Company
incurred  certain  costs  associated  with the time the  casino  and hotel  were
closed.

Interest  expense  increased  from $1.9  million in 1997 to $4.8 million for the
year ended  December 31, 1998.  This  increase is because  under  Chapter 11 the
Company had ceased  accruing  and paying  interest  expense on all  pre-petition
liabilities.  Upon confirmation of the  reorganization  plan in August 1997, the
Company began accruing and paying interest.

CAPITAL RESOURCES, CAPITAL SPENDING, AND LIQUIDITY

As of December 31, 1998, the Company had $5.0 million in  unrestricted  cash and
cash  equivalents  compared to $5.8 million in 1997. The decrease in cash is due
to  expenditures  for  capital  improvements  and cash  spent  for  repairs  and
maintenance associated with Hurricane Georges.

Net cash provided by operating  activities  totaled $1.4 million 1998,  and $2.8
million,  in 1997.  The decline in operating  cash flow is due to the closing of
the casino and repairs due to Hurricane Georges.

During 1998,  1997, and 1996, the Company's  capital  expenditures  totaled $2.9
million, $5.6 million, and $ 908,000, respectively.



As of December 31, 1998,  the Company's  long-term  debt included First Mortgage
Notes  which are  balloon  notes  payable in full on August 1,  2006.  he stated
interest  rate on the new First  Mortgage  Notes was  considered  lower than the
interest rate at which the Company could typically have obtained  financing with
similar terms,  which was determined to be 13.5%.  The First Mortgage Notes were
recorded at their discounted  value to approximate  their fair market value. The
difference  between the fair market  value and  principal  value at inception of
$2,286,000 was recorded as debt discount and is being amortized over the term of
the related debt using the effective  interest method.  The Notes are secured by
the vessel, hotel, and other furniture,  fixtures, and equipment.  The Indenture
requires   compliance   with  many  debt   covenants,   including   among  other
restrictions,  the  Company  must  retain a  consolidated  net worth of at least
$3,000,000, maintaining certain fixed coverage ratios, restriction of dividends,
and numerous restrictions on borrowings.  The Company is currently in compliance
with all covenants.

The  Company's  ability  to  service  its debt will be  dependant  on its future
performance,  which will be affected by, among other things, prevailing economic
conditions and financial  business and other  factors,  many of which are beyond
the Company's control.

The Company expects that available cash and cash from future  operations will be
adequate to fund debt  service and working  capital  through  December 31, 1999.
However,  there can be no  assurance  that the Company  will have the capital to
sustain  operations  or  make  some  of the  capital  improvements  that  may be
necessary to remain competitive in the local market.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Treasure  Bay's  primary  exposure to market risk (of the risk of loss caused by
adverse  changes  in  market  rates  and  prices,  currency  exchange  rates and
commodity  prices) is with respect to potential  interest  rate risk  associated
with some notes payable that are based on the interest rates. As of December 31,
1998,  Treasure  Bay did not  hold any  investments  that  are  considered  risk
sensitive instruments as described in Item 305 of Regulations.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements and accompanying footnotes are attached hereto.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
          FINACIAL DISCLOSURES
There  are  no  disagreements  with  accountants  on  accounting  and  financial
disclosures.

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>

<CAPTION>
     ITEM 11.     EXECUTIVE COMPENSATION
<CAPTION>

<S>                     <C>    <C>
         Name            Age   Position
Bernard  P. Burkholder   45    President, Chief Executive Officer, Director

William A. Bryce         48    Director

Edward M. Farrell        35    Director, Executive Vice President, Chief Financial Officer

Ronald J. Jensen         53    Director

Francis L. Miller        67    Director, Chairman of the Board, Majority Stockholder
</TABLE>


Bernie  Burkholder is currently the President and Chief  Executive  Officer.  He
also serves as General  Manager of the operating  company,  Treasure Bay Biloxi.
Mr. Burkholder  formerly held the positions of Vice President of Development and
Secretary/Treasurer.

Mr.  Burkholder  has a broad business  background and still remains  involved in
several ongoing ventures.  He is a stockholder or partner in several independent
entities  involved  with  agriculture  and  aquaculture  projects in the Pacific
Northwest.  In  addition,  these  entities  own and  operate  two  vessels and a
shore-based  enterprise  targeting king crab,  snow crab,  halibut and salmon in
Alaska.

Mr. Burkholder was one of the original partners in Arctic Alaska Fisheries, Inc.
(Arctic  Alaska),  a company that owned and  operated  vessels in Alaska and the
Bering Sea. This company  produced seafood products for sale and distribution to
worldwide  markets.  Mr.  Burkholder  was a member of the team that took  Arctic
Alaska  public in 1987.  The company  was traded on the New York Stock  Exchange
until its sale in 1993 to Tyson Foods. Mr. Burkholder held the original position
of Managing  Captain at Arctic Alaska,  then later moved to the position of Vice
President of Soviet  Operations.

Since joining Treasure Bay, Mr.  Burkholder has been involved in virtually every
stage of project developments including  construction,  licensing,  pre-opening,
and management of the entity through the Chapter 11 proceedings.  In his role as
President and General Manager,  Mr. Burkholder has been active in the management
of the daily operations at Treasure Bay Biloxi.

William A. Bryce has served as  director  since June of 1997.  He brings over 25
years of business  experience to Treasure Bay. In addition to serving as a board
member, he is Global Account Manager with Productivity Point  International,  an
international  training company whose services he sells to Fortune 500 companies
throughout the United States.

His prior  experience  includes 17 years with  International  Business  Machines
(IBM) in sales,  management,  training and operations;  Drake Beam Morin,  Inc.,
where he was Vice  President  of Sales and National  Director of  Training;  and
HealthCare  Recoveries,  where  he  served  as a Sales  and  Marketing  Manager.
Throughout  his career,  Mr.  Bryce has been  involved  with growing or reviving
business units within the companies for which he worked.

Ed Farrell began with Treasure Bay Biloxi in November 1993 prior to its opening.
Mr.  Farrell  worked in the  capacity  of Vice  President  of  Finance,  and was
involved in many facets of the successful opening of the facility. In January of
1996,  he was  appointed to the position of Executive  Vice  President and Chief
Financial Officer.

Mr.  Farrell  has worked in the gaming  industry  since 1984 and has held a wide
variety  of  positions  at both  professional  and  line  levels.  Prior  to his
employment  with Treasure Bay, he served as Vice  President of Finance for Grand
Casino  Gulfport.  While at Grand Casino,  Mr. Farrell was  responsible  for the
design and implementation of virtually all casino-related  systems and controls.
His responsibilities included hiring and training the finance personnel prior to
the Grand  Casino's  opening.  Prior to joining  Grand Casino,  Mr.  Farrell was
employed by Mirage  Resorts,  Inc.,  in various  financial  positions  including
Assistant  Casino  Controller,  Internal  Control  Analyst  and  Internal  Audit
Supervisor.  While at the Mirage, he was involved with the opening of the Mirage
Casino and Hotel, which at that time was the largest revenue producing casino in
U.S. history.

Ronald J. Jensen was President,  Chief Executive  Officer and Director of Arctic
Alaska  Fisheries  Corporation  from  1990 to 1993.  From  1982 to 1987,  he was
President and Chief Executive Officer of Sea-Alaska Products. He has served as a
Director of Tyson Foods, Inc., The Sea Pride Corporation,  U.S. Tuna Foundation,
and Pacific Seafood  Processors  Association.  Mr. Jensen has served on numerous
fishing industry-related governmental committees with the Department of Commerce
and Department of State. From 1982 to 1986, he was the Chief U.S.  spokesman for
the U.S.  - Japan  industry  negotiations.  Mr.  Jensen  is a  Certified  Public
Accountant in Washington.

Francis L.  Miller,  the founder of the  Company,  has served as Chairman of the
Board and Chief Executive Officer of the Company during the start-up of Treasure
Bay  Corp.  From 1987 to 1992,  he was  Chairman  of the Board of Arctic  Alaska
Fisheries  Corp., a public company that conducted the construction and operation
of a 34-vessel fishing fleet in the Bering Sea. Mr. Miller founded Arctic Alaska
and  oversaw  its  growth  into an  international  fishing  and fish  processing
operation  with more that  2,200  employees,  and in excess of $220  million  in
annual  revenues.  He and several other  shareholders  sold the Arctic Alaska in
October 1992 to Tyson Foods, Inc. Mr. Miller served on the Board of Directors of
Tyson Foods, Inc., from October 1992 through early 1993.

The  following  Summary  Compensation  Table  sets forth  information  about the
compensation  paid or accrued by the  Company  during  the  fiscal  years  ended
December 31, 1998, 1997, and 1996, to the Company's Chief Executive  Officer and
each of the other highly compensated executive officers of the company

<TABLE>
Bernard P. Burkholder
<S>       <C>                   <C>                    <C>
           Year                Salary                  Other Compensation
           1998                $200,000
           1997                $200,000
           1996                $199,423

Edward M. Farrell
          1998                 $130,000                 1,800   (a)
          1997                $111,000
          1996                $107,000
</TABLE>
                              
(a)      Reflects matching contributions under the Treasure Bay 401(k) plan.
The  Company's  401 (k) plan is a defined  benefit  plan  which  applies  to all
employees who have completed a year of qualified service,  including  directors
who are employees.

Director Compensation:
The  non-employee  directors  of the Company are all  reimbursed  for travel and
expenses  incurred in attending  board  meetings and other events at the casino.
Mr. William Bryce  receives a monthly  salary of $2,000 for his services,  he is
the only non-employee director to receive a salary.

Employment agreements:
NONE

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The  following  table sets forth the name,  number of shares and  percentage  of
ownership for all owners with more than five percent of the Company's stock.

Name                             Number of Shares        Percentage of Ownership
Francis Miller *                        5,672,975                  56.73%

Ronald Jensen                            589,333                   5.89%

Bernard P. Burkholder                    537,533                  5.38%

Grace Brothers                           995,652                  9.99%





ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  Company  has notes  payable to Francis  Miller in monthly  installments  of
$18,000  through  February  2001,  including  variable  interest  at  the  Chase
Manhattan  base rate plus 1%, the current  balance as of  December  31, 1998 was
$1,878,000.  In February 1999, the Company  entered into another note payable to
Mr. Miller in the amount of $300,000, with the same terms as above.

On February 22, 1999,  the Company  entered into two notes with Coast  Community
Bank  totaling  $1,500,000,  with 9% interest  only due monthly until August 24,
1999, at such time the notes can be renewed with  guarantees  from the President
and  Francis Miller.  The notes are secured by a first lien on certain  land and
improvements.


On February 1, 1999,  the Company  entered into a ten (10) year lease  agreement
with Bay  Investments,  LLC to lease a building  with 8,042  square  foot office
facility and 14,227 square foot warehouse and storage  space.  The terms are for
monthly  payment of $9,000  with the Company to be  responsible  for repairs and
maintenance,  property  taxes,  insurance.  At any time  within  five  years the
Company  may  purchase  the  premises  for  the  sum  of  One  Million   Dollars
($1,000,000).  At any time after five years and within ten years the Company may
purchase the leased  premises for the sum of One Million Three Hundred  Thousand
Dollars  ($1,300,000).  The Company is already utilizing the warehouse space and
will be moving the finance and human resources  departments in order to free the
current  space being used in the hotel.  The hotel intends to lease the space to
provide added amenities to hotel guests. Bay Investments, LLC is a Company owned
by Francis Miller and Bernie Burkholder.  Both are shareholders and directors of
the Company.

                                    PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS

1. Financial  Statements-See  the Index to Financial  Statement and schedules on
   page F-1.
2.  Financial  Statement  Schedules-See  the Index to Financial  Statements  and
   Schedules on page F-1.
3. Exhibits


                   TREASURE BAY GAMING & RESORTS, INC.

            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
               As of the dates and for the periods indicated below

INDEPENDENT AUDITORS' REPORT

Consolidated Balance Sheets as of December 31, 1998 and 1997

Consolidated  Statements  of Operations  for the years ended  December 31, 1998,
1997, and 1996

Consolidated  Statements of Changes in  Stockholders' Equity for the years ended
December 31, 1998, 1997, and 1996

Consolidatd  Statements  of Cash Flows for the years ended  December  31,  1998,
1997, and 1996

Notes to the Financial Statements

Schedules


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Treasure Bay Gaming & Resorts, Inc.:

We have audited the  accompanying  consolidated  balance  sheets of Treasure Bay
Gaming  &  Resorts,   Inc.  (a  Delaware   corporation)  and  subsidiary  as  of
December 31,   1998  and  1997  and  the  related  consolidated   statements  of
operations,  stockholders' equity and cash flows for each the three years in the
period ended  December 31, 1998.  These  financial  statements  and the exhibits
referred  to below  are the  responsibility  of the  Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of Treasure Bay Gaming
& Resorts, Inc. and subsidiary as of December 31, 1998 and 1997, and the results
of their  operations  and their  cash  flows for each of the three  years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles.

Arthur Andersen, LLP
New Orleans, Louisiana,
March 5, 1999



<TABLE>
<CAPTION>

               TREASURE BAY GAMING & RESORTS, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

                        AS OF DECEMBER 31, 1998 AND 1997

                                     ASSETS

<S>                                                                                     <C>               <C> 
                                                                                        1998              1997

CURRENT ASSETS:
   Cash and cash equivalents, including restricted cash
     of $ 57,000 and $55,000 as of December 31, 1998 and 1997,
respectively                                                                       $     5,071,000   $     5,887,000
   Accounts receivable, net of allowance for doubtful accounts of
$510,000, $625,000 as of December 31, 1998 and 1997, respectively                        2,680,000         1,048,000
   Inventories                                                                             412,000           271,000
   Prepaid expenses                                                                        697,000           590,000

         Total current assets                                                            8,860,000         7,796,000

PROPERTY AND EQUIPMENT, net                                                             46,489,000        46,777,000

OTHER ASSETS                                                                             1,077,000           415,000

                                                                                   $    56,426,000   $    54,988,000

                      LIABILITIES AND STOCKHOLDERS' EQUITY

 CURRENT LIABILITIES:
   Accounts payable-trade                                                          $     3,586,000   $     1,346,000
   Accrued salaries and benefits                                                         1,539,000         1,490,000
   Accrued jackpots                                                                        893,000           999,000
   Accrued taxes payable                                                                 1,796,000         1,707,000
   Accrued interest payable                                                                679,000           664,000
   Other accrued liabilities                                                             1,930,000         2,473,000
   Current portion of long-term debt                                                     1,627,000         1,374,000

         Total current liabilities                                                      12,050,000        10,053,000

LONG-TERM DEBT                                                                          39,823,000        38,024,000

         Total liabilities                                                              51,873,000        48,077,000

COMMITMENTS AND CONTINGENCIES (Note 8)

STOCKHOLDERS' EQUITY:
   Common stock, $.01 par value, 20,000,000 shares
     authorized, 10,000,000 shares issued and outstanding                                  100,000           100,000
   Additional paid-in capital                                                           47,382,000        47,382,000
   Accumulated deficit                                                                 (42,929,000)      (40,571,000)

         Total stockholders' equity                                                     4,553,000         6,911,000

                                                                                   $    56,426,000   $    54,988,000
<FN>

                                   The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
<TABLE>

<CAPTION>

                                         TREASURE BAY GAMING & RESORTS, INC. AND SUBSIDIARY


                                                 CONSOLIDATED STATEMENTS OF OPERATIONS

                                         FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


<S>                                                                     <C>                 <C>                 <C>

                                                                         1998               1997               1996

REVENUES:
   Casino                                                          $    57,858,000    $    57,916,000    $    56,130,000
   Food and beverage                                                    11,114,000         10,473,000          9,935,000
   Rooms                                                                 3,335,000          3,626,000          3,231,000
   Other                                                                 1,642,000          1,000,000            748,000

   Less:  Promotional allowances                                        (8,500,000)        (8,400,000)        (8,098,000)

     Net revenues                                                        65,449,000         64,615,000         61,946,000

OPERATING EXPENSES:
   Casino                                                               36,591,000         36,186,000         34,273,000
   Food and beverage                                                     3,580,000          2,950,000          2,363,000
   Rooms                                                                 1,651,000          1,418,000            970,000
   Selling, general and administrative                                  13,388,000         15,128,000         14,210,000
   Utilities                                                             1,370,000          1,317,000          1,333,000
   Depreciation and amortization                                         3,968,000          3,497,000          4,032,000
   Other                                                                   650,000            426,000            692,000

     Total operating expenses                                           61,198,000         60,922,000         57,873,000

     Income from gaming operations before
corporate expenses                                                       4,251,000          3,693,000          4,073,000
     Corporate expenses                                                 (1,946,000)          (847,000)        (1,055,000)

   Income from operations                                                2,305,000          2,846,000          3,018,000

RESTRUCTURING EXPENSES                                                         -       (3,250,000)        (1,546,000)

OTHER INCOME (EXPENSE):
   Interest expense                                                     (4,762,000)        (1,910,000)          (194,000)
   Gain (loss) on disposition of assets                                     35,000             50,000            (11,000)
   Other income, principally interest                                       64,000            391,000            511,000

     Total other income (expense)                                       (4,663,000)        (1,469,000)           306,000

INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR
   INCOME TAXES AND EXTRAORDINARY ITEM                                  (2,358,000)        (1,873,000)         1,778,000

PROVISION (BENEFIT) FOR INCOME TAXES                                           -0-               -0-                -0-

INCOME (LOSS) BEFORE EXTRAORDINARY ITEM                                 (2,358,000)        (1,873,000)         1,778,000

EXTRAORDINARY ITEM - GAIN ON FORGIVENESS
   OF DEBT                                                                     -0-        107,992,000          3,990,000

NET INCOME (LOSS)                                                  $    (2,358,000)   $   106,119,000    $     5,768,000


<FN>

                                   The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>


   TREASURE BAY GAMING & RESORTS, INC. AND SUBSIDIARY


   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

 FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996


<TABLE>
<S>                                                         <C>          
                                                            9% Redeemable
                                                            Cumulative
                                                            Preference                  Additional
                                  Shares           Amount   Shares      Amount           Capital           Deficit         Total
<S>                                  <C>                 <C>             <C>          <C>             <C>                 <C>

BALANCE, December 31, 1995 .  3,307,208.34     33,000.00  1,000   $  15,000,000    $  19,402,000    $(152,458,000)   $(118,023,000)

NET INCOME FOR THE YEAR ....          -           -          -              -                -           5,768,000       5,768,000

BALANCE, December 31, 1996 .. 3,307,208.34      33,000.00     1,000   15,000,000       19,402,000     (146,690,000)   (112,255,000)

CANCELLATION-ORIGINAL EQUITY (3,307,208.34)   (33,000.00)   (1,000)   15,000,000)      15,033,000              -                  -

ISSUANCE OF COMMON STOCK ... 10,000,000.00       100,000         -             -       12,947,000              -         13,047,000

NET INCOME FOR THE YEAR .......       -                -         -           -            -            106,119,000      106,119,000

BALANCE, December 31, 1997 ..10,000,000.00       100,000          -          -         47,382,000      (40,571,000)       6,911,000

NET LOSS FOR THE YEAR .....           -               -          -            -                -       (2,358,000)      (2,358,000)

BALANCE, December 31, 1998 .. 10,000,000.00 $     100,000        -    $      -      $  47,382,000    $ (42,929,000)   $   4,553,000

<FN>

  The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                   TREASURE BAY GAMING & RESORTS, INC. AND SUBSIDIARY

                                          CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996



                                                                                 1998                1997                 1996

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                          <C>                <C>                  <C>           
   Net income (loss)                                                         $   (2,358,000)    $    106,119,000     $    5,768,000
   Adjustments to reconcile net income (loss) provided by
     operating activities-
       Depreciation and amortization                                              3,968,000            3,498,000          4,032,000
       Accretion of discount on notes payable                                       232,000               62,000                -0-
       (Increase) Decrease in receivables                                        (1,657,000)            (462,000)           338,000
       (Increase) Decrease in inventories                                          (141,000)             (76,000)             2,000
       (Increase) Decrease in prepaid expenses                                      (82,000)             (36,000)           (98,000)
       (Increase) decrease in other assets                                         (662,000)             288,000             37,000
       (Decrease) Increase in liabilities subject to compromise                          -0-          (1,653,000)         1,076,000
       (Decrease) Increase in liabilities not subject to compromise               2,183,000            3,130,000        ( 3,514,000)
       Gain on forgiveness of debt                                                      -0-         (107,992,000)        (3,990,000)
       Net (gain) loss on disposal of assets                                        (64,000)             (50,000)           (11,000)

NET CASH PROVIDED BY OPERATING ACTIVITIES                                         1,419,000            2,828,000          3,640,000

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property and equipment                                           (2,879,000)          (5,555,000)          (908,000)
   Other, net                                                                       (50,000)                  -0-                -0-
   Proceeds from sale of assets, net of transaction costs                           250,000              124,000                -0-

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                              (2,679,000)          (5,431,000)          (908,000)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of notes payable                                        2,638,000            2,250,000                -0-
   Repayments of notes payable                                                   (2,194,000)         (12,444,000)        (1,340,000)
   Proceeds from sale of capital stock                                                  -0-            3,308,000                 -0-

NET CASH USED IN FINANCING ACTIVITIES                                               444,000           (6,886,000)        (1,340,000)

NET INCREASE (DECREASE) IN CASH AND CASH
   EQUIVALENTS                                                                     (816,000)          (9,489,000)         1,392,000

CASH AND CASH EQUIVALENTS, beginning of period                                    5,887,000           15,376,000         13,984,000

CASH AND CASH EQUIVALENTS, end of period                                     $    5,071,000     $      5,887,000     $   15,376,000

<FN>

                                   The accompanying notes are an integral part of these statements.
</FN>
<PAGE>

              TREASURE BAY GAMING & RESORTS, INC. AND SUBSIDIARY


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31, 1998, 1997 AND 1996


1.   ORGANIZATIONAL STRUCTURE AND BASIS OF PRESENTATION:

The  accompanying  consolidated  financial  statements  include the  accounts of

Delaware   corporation   incorporated  in  August  1993,  and  its  wholly-owned
subsidiary,  Treasure Bay Corp. ("TBC"), a Mississippi corporation  incorporated
in February  1993.  The financial  information  is represented on a consolidated
basis and significant intercompany accounts have been eliminated.


The Company was  organized to develop,  own and operate  casinos in the State of
Mississippi and other emerging gaming jurisdictions.  The Company currently owns
and operates a casino in Biloxi,  Mississippi  ("Treasure Bay Biloxi") and owned
and  operated a casino in Tunica,  Mississippi  ('Treasure  Bay  Tunica')  which
closed in 1995.


Treasure Bay Biloxi - On July 18, 1993 the Company purchased a 254-room hotel in
Biloxi,  Mississippi.  In 1993, the Company  commenced  construction of a 56,000
square foot dockside casino adjacent to the hotel.  The casino was completed and
licensed by the  Mississippi  Gaming  Commission  on April 21, 1994.  The casino
opened on April 28, 1994.

On December 2, 1998, the Company  received a gaming license in St. Croix,  U. S.
Virgin  Islands.  The license is effective from June 2, 1999 until June 1, 2001.
Treasure Bay is in the process of executing a formal  management  agreement with
Grapetree  Shores,  to  operate a gaming  facility  in  St.Croix,  U.S.  Virgin
Islands. Grapetree Shores is owned by the managing partner of the primary holder
of the Company's First Mortgage Notes (see Note 5).

2.   CONFIRMATION OF REORGANIZATION PLAN:

On August 8, 1997, Treasure Bay received confirmation of its reorganization plan
(the "Plan") that was filed  February 6, 1997. The Company had been operating as
a  debtor-in-possession  under  Chapter  11 of the U.S.  Bankruptcy  Code  since
November 18,  1994.  Under  Chapter 11,  certain  claims  against the Company in
existence  prior to the filing of the  petitions  for relief  under the  Federal
bankruptcy laws were stayed while the Company continued  business  operations as
debtor-in-possession.

The approved plan provided that all outstanding  Securities (consisting of First
Mortgage Notes,  common stock and preferred  stock) would be canceled,  annulled
and extinguished.  New Notes and Common Stock were issued. Except as provided in
the Confirmation Order, the plan discharged the Company from all claims or debts
that arose before the bankruptcy date which resulted in an extraordinary gain on
forgiveness of debt of $107,992,000 in the year ended December 31, 1997. The new
equity  investors'  contribution  was in the form of cash and real estate.  This
gave these investors 90% of the Company's new stock. First mortgage  Noteholders
surrendered  all of the old notes  and were  issued  new notes in the  amount of
$27,250,000 and 10% of the newly issued common stock valued at $1,000,000.  They
also loaned the  reorganized  Treasure Bay an additional  $2,250,000 for working
capital.  Since the  Miller  family  controlled  both the  Company  prior to its
reorganization and the group of new investors,  the Company was not eligible for
"resh start" accounting.  Accordingly, the new common stock issued to the Miller
family was recorded at the Miller's cost of the property received by the Company
($4,712,000).  Other  shares  issued  as a  result  of the  reorganization  were
recorded at values based on the market value of the property  contributed to the
Company ($7,335,000).  The Plan provided for Treasure Bay to incur certain other
indebtedness in settlement of pre-petition claims (see Note 5).

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Use of 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 revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.
Fair Value of Financial Instruments

Cash  Equivalents,   Receivables  and  Accounts  Payable-The  carrying  amount
approximates fair value because of the short maturity of these instruments.
Cash and Cash Equivalents

Cash and  cash  equivalents  are  highly  liquid  investments  with an  original
maturity of three  months or less and are stated at market  value  which  equals
cost.  Restricted  cash of $57,000 and  $55,000 at  December  31, 1998 and 1997,
respectively,  is  in a  money  market  account  that  secures  unpaid  worker's
compensation claims.

Accounts Receivable

At December 31, 1998,  accounts  receivable  consists  primarily of markers from
casino  credit play and  receivables  from hotel guests  (collectively,  "casino
receivables") and insurance claims receivable totaling $900,000. At December 31,
1997, accounts receivable consist primarily of casino receivables.

Inventories

Inventories  consisting  primarily  of food and  beverage  and retail  items are
stated at cost, using a first-in/first-out basis.

Property and Equipment

Property and equipment are recorded at cost.  Depreciation  and amortization are
provided for on the  straight-line  method over the following  estimated  useful
lives:
           Building and improvements                              20-30 years
           Leasehold acquisition costs                            10-30 years
           Furniture, fixtures and equipment                      4-7 years

Effective  January 1, 1997, the Company changed the depreciable lives on certain
equipment from four to seven years. The change was made due to the fact that the
equipment  was  approaching  the end of four  years of service  and the  Company
intends to continue to use the  equipment  for  several  more years.  The change
increased net income for 1997 by approximately $710,000.


Normal   repairs  and   maintenance   are  charged  to  expense  when  incurred.
Expenditures  which materially  extend the useful life of the capital assets are
capitalized.

Leasehold  acquisition  costs were  amortized over the initial term of the lease
including the renewal options, which the Company expected to exercise.

Other Assets

Other  assets  consist  primarily  of  deposits  held by vendors  and prizes for
various slot jackpots.

Income Taxes

The Company files consolidated  Federal and Mississippi tax returns. The Company
has adopted the provisions of Statement of Financial  Accounting Standards (FAS)
No. 109, "Accounting for Income Taxes", which requires, among other things, that
deferred tax assets and liabilities be recorded using the liability method,  and
that  deferred tax assets be  recognized,  subject to  appropriate  reserves for
realization.

The Company has a net operating  loss  carryforwards  for income tax purposes of
approximately  $73,000,000 which will begin expiring in 2008. No net tax benefit
for the  losses  has been  recorded.  The  deferred  tax  asset  resulting  from
differences in the timing of the deduction of asset valuation provisions and the
capitalization  and amortization of preopening  expenses for income tax purposes
account  for  substantially  all of the  differences  between  book and  taxable
income.

Litigation and Contingencies
The Company adheres to FAS No. 5,'Accounting for Contingencies', concerning the
recording of liabilities for pending litigation.

Casino Revenues and Complimentaries
In accordance  with  prevailing  industry  practice,  the Company  recognizes as
casino  revenues  the net win from gaming  activities,  which is the  difference
between  gaming wins and  losses.  Revenues  include the retail  value of rooms,
food,  beverage,  and other goods and  services  provided to  customers  without
charge. Such amounts are then deducted as promotional allowances.  The estimated
cost of  providing  these  complimentary  goods  and  services  was  $6,650,000,
$6,009,000,  and $5,803,000 for food and beverage and $832,000,  $1,041,000, and
$593,000  for rooms and other  expenses  for the years ended  December 31, 1998,
1997 and 1996, respectively.

Restructuring Expenses
Restructuring   expenses  primarily  include  legal  and  professional  services
rendered in connection with restructuring activities.

Consolidated Statement of Cash Flows
The following supplemental  disclosures are provided as part of the consolidated
statement of cash flows.

The Company paid cash for interest of $4,747,000,  $1,195,000 and $42,000 during
1998, 1997 and 1996,  respectively.  During 1997, the Company partially financed
the purchase of land with a $900,000 note payable (see Note 5).

Accounting Standard
The Financial Accounting Standards Board has issued FAS No. 121, "Accounting for
the Impairment of Long-Lived  Assets and  Long-Lived  Assets to be Disposed Of",
effective for fiscal years beginning after December 15, 1995. Generally, FAS No.
121  requires  that  long-lived  assets that are expected to be held and used in
operations be reported at the lower of cost or fair value.  Long-lived assets to
be disposed of are to be reported at the lower of carrying  amount or fair value
less cost to sell. The Company has employed the  methodology  prescribed by this
standard in evaluating the carrying amounts of its long-lived assets.



Reclassifications

Certain reclassifications of prior year information have been made to conform to
the current year presentation.

Risk Factors
Certain  risk factors  have been  identified  by the Company that may impact its
ability  to achieve  ongoing  successful  operations.  Suchfactors  include  the
following:

Ability to Service Debt  Obligations - The Company has  significant  outstanding
indebtedness as of December 31,  1998, and has incurred additional  indebtedness
subsequent to year-end. Incremental future borrowings are anticipated.

The Company's  substantial  indebtedness  could  adversely  affect the Company's
business, financial condition and results of operationsby:

o  increasing  the  Company's  vulnerability  to general  adverse  economic  and
industry conditions;

o limiting the Company's ability to obtain additional  financing on satisfactory
terms and to otherwise fund its future working capital and capital expenditures.

Local  Competition - During 1995 gaming capacity in the Biloxi market  decreased
due to the closure of two competing  properties and remained  unchanged  through
December 1997. However, in the future, competition on the Gulf Coast is expected
to  increase  as new and  current  casino  operators  expand  their  facilities.
Imperial Palace,  Biloxi's first casino operated by a Las Vegas casino operator,
opened in December 1997. Beau Rivage, an even larger competitor, opened in 1999.
Many of the Company's  competitors  have greater  financial  resources  than the
Company.

Competition from Other  Jurisdictions - A significant  portion of the revenue in
the Biloxi  market  comes  from  adjacent  states.  Louisiana  currently  has 13
operating  riverboat  casinos.  In  addition,   a  land-based  casino  is  under
construction  in New Orleans,  Louisiana,  and is expected to open in the fourth
quarter of 1999. Other nearby states are considering gaming legislation. Passage
of gaming in any of these states could have a negative  effect on the  Company's
revenues.



Licensing  Risk - The Company is  required,  in order to operate its casino,  to
maintain  certain gaming  licenses from the State of  Mississippi.  In addition,
directors  and  certain  stockholders,  officers  and  other key  employees  are
required  to maintain  their  suitability  to own and  operate a casino,  and in
certain cases will be required to maintain their gaming licenses. The failure of
the  Company  or  certain  of the above  referenced  individuals  to retain  the
necessary  licenses or finding of  unsuitability  would have a material  adverse
impact on the Company.  The current casino  operator's  license is valid through
April 2000.

Severe  Weather  - A  hurricane,  flood  or other  severe  weather  could  cause
significant  physical  damage to the Company's  casino and on-shore  facilities,
which  could  result in  service  interruption  and  reduction  in the number of
potential customers traveling to the Company's casino market, which could have a
material  adverse impact on the Company's  operating  results.  On September 25,
1998, the Company suspended  operations due to Hurricane Georges, and the casino
remained  closed until October 10, 1998.  The Company  estimates that due to the
closure of the casino and other related factors, operating income was negatively
impacted by approximately $2 million during 1998.

<CAPTION>

   PROPERTY AND EQUIPMENT:

Property and equipment consists of the following as of December 31:

                                                                                 1998              1997
<S>                                                                              <C>                <C>

       Land                                                                 $   18,244,000    $ 18,244,000
       Casino barge, buildings and improvements                                 38,747,000       37,754,000
       Leasehold acquisition costs                                              19,548,000       19,548,000
       Furniture, fixtures and equipment                                        23,571,000       21,669,000

                                                                               100,110,000       97,215,000
       Less:  Accumulated depreciation and Amortization                        (18,621,000)     (15,438,000)
              Valuation reserve                                                (35,000,000)     (35,000,000)

                  Total property and equipment, net                         $   46,489,000    $ 46,777,000
</TABLE>

Real  property and  furniture,  fixtures and equipment are pledged as collateral
for notes payable (Notes 5 and 6). In accordance  with FAS No. 121 (see Note 3),
the Company  established  reserves during 1994 to reduce the value of its casino
facilities to the current  estimated fair value.  The Treasure Bay Biloxi casino
was  written  down to the  lower of cost or market  value.  This  resulted  in a
$35,000,000 charge to income for Treasure Bay Biloxi for the year ended December
31, 1994.

In November  1996,  Treasure Bay deeded over the land owned in Tunica  County to
the Tunica  County tax assessor  along with a cash payment of $215,000  from the
restricted  cash account in full  settlement  of all personal and real  property
taxes payable to Tunica County.  This settlement  resulted in a reduction of tax
expense in the amount of $175,000.
5.   LONG-TERM DEBT:

Long-term debt, including capital lease obligations, consists of the following:
<TABLE>

<S>                                                                                                            <C>
                                                                                                      December 31,
<S>                                                                                            <C>             <C>        
                                                                                               1998            1997       

12% First Mortgage Notes due August 1, 2006 ...........................................   $30,385,000   $29,500,000

Note payable in monthly installments of $88,000 through
November 1, 2003, including interest at 10% secured by
gaming equipment..................................................................        4,092,000      4,657,000

Notes payable to Francis Miller in monthly installments of $18,000
 Through February, 2001, including variable interest at the
Chase Manhattan base rate plus 1%............................     ..................      1,878,000             -0-

Notes payable in monthly installments of $13,000 through
May 1, 2015, including interest at 8% secured by land ............... ................     1,476,000     1,517,000

Note payable in monthly installments of $34,000 through
September 1, 2002, including interest at 12%, as settlement of
pre-petition taxes owed to Harrison County and the State of
Mississippi ..........................................................................     1,280,000     1,527,000


Note payable in monthly installments of $18,000 through
September 16, 2002, including interest at 8.5% secured by land .......................       709,000       863,000

Note payable to lessor  in monthly installments of $ 18,000
through September 1, 2002, including interest at 8%, to pay
pre-petition rent ......................................................................     682,000      832,000

Capital lease obligations secured by assets .............................................    159,000        51,000

Note payable in monthly installments of $8,000 through
September 1, 2002 as satisfaction of a pre-petition obligation ..........................     166,000       267,000
                                                                                             40,827,000    39,214,000

Other long-term debt ..................................................................      2,730,000     2,522,000

                                                                                             43,557,000    41,736,000

Less current maturities..........................................................    .....   .1,627,000    1,374,000

Less debt discount on First Mortgage Notes and certain
other notes payable .....................................................................     2,107,000     2,338,000
                                                                                            ,000   $38,024,000
</TABLE>


The First  Mortgage  Notes are balloon notes payable in full on August 1,  2006.
Interest is payable quarterly;  however, the Indenture provides that the Company
may make certain  interest  payments in kind through the issuance of  additional
first  mortgage  notes,  limited  to  one-half  of the  interest  due on any one
interest payment date,  one-half of three quarterly  interest payments in fiscal
1998, or one interest  payment during any year in which the  Mississippi  Gaming
Commission  orders the  closure of the casino due to adverse  weather or certain
other conditions.  In September 1998, the Mississippi  Gaming Commission ordered
all casinos to close in anticipation  of Hurricane  Georges.  Consequently,  the
Company  made the  interest  payment due  November 1, 1998 as a payment in kind.
Also,  one-half of the interest  payment due in February,  1999 was made in kind
pursuant  to the terms of the  Indenture.  The stated  interest  rate on the new
First Mortgage  Notes was  considered  lower than the interest rate at which the
Company could  typically have obtained  financing with similar terms,  which was
determined  to be  13.5%.  The  First  Mortgage  Notes  were  recorded  at their
discounted value to approximate their fair market value. The difference  between
the fair  market  value and  principal  value at  inception  of  $2,286,000  was
recorded as debt  discount and is being  amortized  over the term of the related
debt using the effective  interest method.  The First Mortgage Notes are secured
by the  vessel,  hotel,  and  other  furniture,  fixtures,  and  equipment.  The
Indenture  requires  compliance  with  certain  financial  and other  covenants,
including, but not limited to, a minimum net worth requirement,  a fixed charges
coverage ratio requirement and restrictions on certain operating  activities and
future  borrowings.  The Company must  maintain a  consolidated  net worth of at
least  $3,000,000.  The  Company  believes  it is in  compliance  with  all such
covenants as of December 31, 1998.

Other Long-Term Debt represents the estimated  amount of a settlement  agreement
for  pre-petition  and gap claims,  (as defined by the United States  Bankruptcy
Code) due to a vendor for progressive jackpot payments and software services.

The  agreement  provides  for  additional   progressive   payments  of  1.5%  on
progressive  machines  for a total of 30 months.  In  addition,  the Company has
accrued  deferred rent to normalize  the annual lease  payments over the initial
term of the lease plus the first two renewal periods (see Note  7).deferred rent
to normalize  the annual lease  payments over the initial term of the lease plus
the first two renewal periods (see Note 7).

Annual maturities of long-term debt for the five years  following  December 31,
1998, are as follows:

                      1999                           1,627,000
                      2000                           1,746,000
                      2001                           1,815,000
                      2002                           1,824,000
                      2003                           1,184,000
                      Thereafter                    32,631,000

During 1998,  the Company  entered into a $2,000,000  capital  expenditure  loan
agreement with its primary stockholder, Francis Miller. Variable interest (Chase
Manhattan  Base  Rate  plus  1%) is due on the  first  day of  each  month.  The
principal is due February 1, 2001. In February 1999, Francis Miller advanced the
Company an additional $300,000 under the same terms.

6.   LIABILITIES SUBJECT TO COMPROMISE:
As described in Note 2, the Company had been  operating as  debtor-in-possession
under the U. S.  Bankruptcy Code since November 18, 1994. In accordance with the
provisions of the U. S. Bankruptcy  Code,  payment on the Company's  prepetition
debt was suspended and reclassified as 'Liabilities Subject to Compromise'.

Payment or other  disposition  of the secured and unsecured  liabilities  of the
Company existing as of the date of the bankruptcy proceedings was deferred until
a plan of  reorganization  had been  approved  by the  requisite  number  of the
Company's  creditors and confirmed by the U. S.  Bankruptcy  Court.  The plan of
reorganization  settled all of the liabilities referred to above. As of December
31, 1998 and 1997, all of the obligations have been paid, cancelled, transferred
to new notes, or remain in the accrued liability section of the balance sheet.

During 1996, the Company  recognized as extraordinary  gain of $4.0 million as a
result of cancellation of indebtedness relating to the actions of the Bankruptcy
Court in identifying  allowed claims. The extraordinary  gains on forgiveness of
debt  were  calculated  as  the  difference   between  the  fair  value  of  the
consideration given and the carrying value of the related debt.

7.   OPERATING LEASES:

The Company  conducts  certain  operations on leased property and leases certain
equipment and machinery. The Company's operating leases, including the Company's
property leases, are executory contracts.

The Company entered into an operating lease for its Biloxi,  Mississippi mooring
site  commencing  March 4,  1993. The lease is for an initial term of ten years,
with two ten-year renewal options and an additional renewal option extending the
term  to 50  years  subject  to  renegotiated  terms.  Under  the  terms  of the
agreement,  the annual rent  escalates  from  $1,310,000  in the initial year to
$2,335,000 per year in years 21-30,  with additional  annual  increases based on
the Consumer Price Index. The Company has accrued deferred rent to normalize the
annual  lease  payments  over the  initial  term of the lease plus the first two
renewal periods.  At December 31,  1996,  accrued deferred rent is recorded as a
liability  subject to  compromise.  Subsequent to December 31, 1996, the Company
accepted the lease,  contingent upon confirmation of the plan of reorganization.
The lease  provides  that,  upon  completion by the Company of an initial public
offering of the  Company's  common  stock,  the lessors are entitled to purchase
from the Company $1,000,000 worth of common stock at the initial offering price.
The Company is required to pay all taxes,  insurance,  utilities and maintenance
expenses related to the leased property.  The Company entered into a stipulation
agreement to continue  the lease and has recorded a long-term  note payable (see
Note 5) as a settlement of all prepetition  rents.  The stipulation  reduces the
annual  lease  payments to $  1,200,000 a year with an increase of $100,000  per
year  until  the  rent  payments  catch  up with  the  original  lease  amounts.
Percentage  rent is also due on gaming  revenues  in excess of  $58,000,000  per
year. The amount of the bonus rent increases as gaming revenue  increases.

In December 1992, the Company entered into an operating lease for  approximately
2.9 acres adjacent to its Biloxi mooring site to be used for parking facilities.
In  connection  with the lease,  the Company may be required to pay  $250,000 as
liquidated  damages  in the  event of a default  in lieu of all  other  remedies
available to the lessor.  The Company is not aware of any  defaults  that exist.
This  lease is for an  initial  term of ten  years,  with two  ten-year  renewal
options. The lease provides for an initial lump-sum payment of $50,000, and rent
of $24,000 per month subject to an annual  increase  based on the Consumer Price
Index.  The  Company is  required  to pay all taxes,  insurance,  utilities  and
maintenance expenses related to the leased property.  On July 15,  1998 a second
addendum to the lease was executed  which  increased  the renewal  option for an
additional 50 years.  Consideration included a one time payment of approximately
$83,000 and an increase in the annual payments to $370,000 per year.

The Company entered into a Public Trust Tidelands Lease  (the"Tidelands  Lease")
with the State of  Mississippi  (the  "State")  with respect to state  tidelands
adjacent to the property  covered by the Biloxi  gaming site lease.  The Company
was  required to enter into the  Tidelands  Lease prior to the  construction  of
improvements  on the state  tidelands for the mooring of the vessel at the site.
The Tidelands  Lease has an initial term of ten years  beginning  March 1, 1994,
with an option to renew for five  additional  years.  Following  that time,  the
State will grant the Company an  opportunity  to renew the lease on the property
on terms to be  negotiated.  The annual  rent for the first five years was to be
$550,000;  in year six, the State may  redetermine  the rent in accordance  with
Mississippi  law and cancel the lease if the parties  cannot agree to acceptable
terms.  In 1996 the annual lease amount was reduced to $475,000 per year payable
in  annual  installments  for  the  initial  term of the  lease.  The  State  of
Mississippi has notified Treasure Bay that,  effective March 1, 1999, the annual
rent will be increased based upon the Consumer Price Index.

Contractual  future  minimum lease  payments at December 31, 1998 for all leases
with  noncancellable  lease  terms in  excess of one year are  approximately  as
follows:
                             Year Ended          Annual Payments

                                 1999                    2,369,000
                                 2000                    2,424,000
                                 2001                    2,498,000
                                 2002                    2,585,000
                                 2003                    2,287,000
                             Thereafter                 50,490,000

Rent expense  totaled  $2,631,000,  $2,876,000 and $3,084,000 in the years ended
December 31, 1998, 1997 and 1996, respectively.

In  February,  1999,  the Company  entered into a lease for office space with an
entity owned by the President of the Company and a significant stockholder.  The
lease provides for monthly payments of $9,000 through January 31, 2009.
8.   COMMITMENTS AND CONTINGENCIES:

Litigation

In the  opinion  of  management,  all such  pending  legal  matters  are  either
adequately  covered by  insurance,  or if not insured,  will not have a material
adverse  effect on the  financial  position  or  results  of  operations  of the
Company.

9.   SUBSEQUENT EVENTS:

On February 22, 1999,  the Company  entered into two notes with Coast  Community
Bank  totaling  $1,500,000,  with 9% interest  only due monthly until August 24,
1999, at such time the notes can be renewed with  guarantees  from the President
and  Francis Miller.  The notes are secured by a first lien on certain  land and
improvements.

In March,  1999,  Hancock Bank approved a $5,000,000 loan to the Company bearing
interest  at  Chase  Manhattan  prime  plus  1.75%  and  payable  in 36  monthly
installments  of principal  and interest  with a final payment due at the end of
the  three-year  period.  The purpose of this loan is to a)  refinance  existing
indebtedness at Coast Community Bank (see above), b) recoup working capital used
for, and complete  construction  of, a brewpub located in the Casino,  c) recoup
working capital spent on capital  projects,  and d) provide  additional  working
capital.  If executed,  the loan will be secured by a first lien on certain land
and land improvements.
<PAGE>

                                   SIGNATURES

     Pursuant to the  requirements  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.

TREASURE BAY GAMING & RESORTS, INC.

By     /S/ LEE ANN HUNTER
     -------------------------
          LEE ANN HUNTER
     Director of Finance

Dated:    April 29, 1999