================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-K

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

                     For the Fiscal Year ended June 30, 1997

                                       OR

            [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

              THE SECURITIES EXCHANGE ACT of 1934 [NO FEE REQUIRED]

                        For the transition period from to

                         Commission file number 33-75808

                             ARIZONA CHARLIE'S, INC.
             (Exact name of Registrant as specified in its charter)

                        NEVADA 88-0199671 (State or other
                       jurisdiction of identification no.)
                  (IRS employer incorporation or organization)

                           740 South Decatur Boulevard
                             Las Vegas, Nevada 89107
                    (Address of Principal Executive Offices)

                  Registrant's telephone number: (702) 258-5200

           Securities registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to Section 12(g) of the Act:
            12% First Mortgage Notes due November 15, 2000, Series B
                                (Title of class)

     Indicate by check mark whether the Registrant (1) has filed all reports
          required to be filed by Section 13 or 15(d) of the Securities
        Exchange Act of 1934 during the preceding 12 months (or for such
             shorter period that the Registrant was required to file
             such reports), and (2) has been subject to such filing
                       requirements for the past 90 days.

                                Yes X No _______

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

       The aggregate market value of the Registrant's voting stock held by
       non-affiliates of the Registrant at September 15, 1997 was $0. The
        number of shares of the Registrant's Common Stock outstanding as
                        of September 15, 1997 was 1,000.

                       DOCUMENTS INCORPORATED BY REFERENCE
             Specified exhibits listed in Part IV of this report are
                            incorporated by reference
         to the Registrant's previously filed Registration Statement on
                      Form S-4 (33-75808) previously filed.


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                                     PART I


      The  Private  Securities  Litigation  Reform Act of 1995  provides a "safe
harbor" for forward-looking  statements.  Certain  information  included in this
Form  10-K and  other  materials  filed or to be filed by the  Company  with the
Securities  and Exchange  Commission  (as well as  information  included in oral
statements  or  other  written  statements  made or to be  made by the  Company)
contains  statements that are  forward-looking,  such as statements  relating to
plans for future expansion and other business development  activities as well as
other  capital  spending,  financing  sources  and  the  effects  of  regulation
(including  gaming and tax regulation) and  competition.  Such forward-  looking
information  involves important risks and uncertainties that could significantly
affect  anticipated  results in the future and,  accordingly,  such  results may
differ from those  expressed  in any  forward-looking  statements  made by or on
behalf of the  Company.  These  risks  and  uncertainties  include,  but are not
limited  to,  those  relating  to  development  and   construction   activities,
dependence  on existing  management,  debt  service  (including  sensitivity  to
fluctuations  in  interest  rates),  domestic  economic  conditions,  changes in
federal  or state tax laws or the  administration  of such laws and  changes  in
gaming laws or  regulations  (including  the  legalization  of gaming in certain
jurisdictions).

Item 1.    Business

      Arizona Charlie's, Inc. ("AC" or the "Company"), a wholly owned subsidiary
of  Becker  Gaming,  Inc.  ("BGI"),  opened  in  April  1988  as a  full-service
casino-hotel  geared toward the Las Vegas locals  market.  Arizona  Charlie's is
situated  on a 12.5-  acre  site  located  prominently  on a  major  north-south
thoroughfare  in an  established  retail  and  residential  neighborhood  in the
western  metropolitan  area of Las Vegas.  A 60-foot  high neon sign  located in
front of the facility provides Arizona Charlie's high visibility.

      The Company employs operating and marketing strategies formulated to build
a loyal, repeat resident customer base consisting  principally of Las Vegas area
employees and retirees residing in surrounding  well-established  neighborhoods.
Arizona  Charlie's  market  acceptance has resulted largely from its emphasis on
providing  attractive  pricing,  friendly  service,  quality food,  and exciting
entertainment, all in a comfortable atmosphere. In addition, the casino features
a  selection  of games that invite  personal  interaction  and which  management
believes, based on data published by state gaming regulators, are set for higher
payout  rates than those at other Las Vegas  casinos  generally.  See  "Business
Strategy."

     From  January  1994 to February  1995,  the Company  expanded  and enhanced
Arizona  Charlie's (the  "Expansion")  through the addition of new casino space,
hotel rooms, specialty restaurants, and banquet/meeting room facilities, and the
expansion  of existing  restaurant,  entertainment,  and other  facilities.  The
Expansion  also  involved the general  remodeling of existing  hotel rooms,  the
casino,  and other  interior  areas,  as well as the  upgrading  of the exterior
facade and addition of a porte cochere at the front entrance.

      Casino. As of August 31, 1997, Arizona Charlie's had approximately  47,000
square feet of casino space open 24 hours a day, 365 days a year.  At that date,
the casino  included  approximately  1,435  gaming  machines  and 25 table games
(blackjack,  craps, roulette,  Caribbean Stud, Let It Ride and poker), a 92-seat
race and sports  book,  and a 400-seat  bingo  parlor,  which is operated on the
second floor.

      Over 88% of Arizona  Charlie's  gaming  machines  consist  of video  poker
games.  Although video poker machines are typically set for a lower net win rate
for the house and have longer playing time per bet as compared with  traditional
slot machine  games,  Arizona  Charlie's  emphasizes  video poker  because it is
popular with local players and generates,  as a result, high volumes of play and
casino  revenues.   Most  of  Arizona  Charlie's  table  games  are  devoted  to
double-deck, hand-dealt blackjack play, which locals prefer due to its potential
for more frequent payouts and greater customer  interaction.  For the year ended
June 30, 1997, approximately 86.1% of gaming revenues was attributable to gaming
machine  play  and  9.6% of  gaming  revenues  was  generated  by  table  games.
Approximately  17.6% of its gaming  machines are devoted to five dollar,  dollar
and  half-dollar  play and  approximately  82.4% to quarter and nickel play. See
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations - Arizona Charlie's, Inc. - Results of Operations."

      The Company maintains  stringent controls on receipts and disbursements at
the casino. Security personnel,  overhead cameras and other security devices are
deployed throughout the facilities.  In addition,  the Company has established a
series of other controls,  including locked cash boxes, independent auditors and
observers,  and daily tabulation and balancing of all cash  transactions  within
the gaming areas.

      Hotel.  Arizona  Charlie's  hotel is  comprised  of an eight-  story tower
consisting  of 160  rooms  and 10  suites  opened  on  September  2,  1994 and a
three-story  tower opened in 1988  consisting  of an  additional  100 rooms that
underwent  minor upgrades in the Expansion.  Arizona  Charlie's  hotel customers
include local residents and their  out-of-town  guests,  as well as business and
leisure travelers who, because of location and cost  considerations,  choose not
to stay on the Las Vegas Strip or at other hotels in Las Vegas.  Occupancy rates
for  the  years  ended  June  30,  1997  and  1996  averaged  86.1%  and  86.9%,
respectively,   at  average   daily   rates  of  $43.00  and  $39.81  per  room,
respectively.  See "Item 7.  Management's  Discussion  and Analysis of Financial
Condition  and  Results of  Operations  - Arizona  Charlie's,  Inc. - Results of
Operations." Arizona Charlie's has generated high occupancy rates,  particularly
during weekends,  with little if any marketing of the hotel. Management believes
that its favorable  room rates,  which are indicative of the value it offers its
customers  generally,  have contributed to Arizona  Charlie's ability to achieve
such occupancy  rates. The Company will continue to set aside a small percentage
of rooms and suites  (approximately  5%) for  complimentary use by its preferred
casino customers.

     Food and Beverage.  The Company  operates five restaurants at the facility.
The Sourdough Cafe, open 24 hours a day, is located adjacent to the casino floor
and seats 247 patrons.  The  all-you-can-eat  Wild West Buffet is located on the
second  floor and seats 238  patrons  and the Food Court  which was  enlarged in
July,  1997 is  located  in close  proximity  to the poker room and the race and
sports book. Two specialty  restaurants,  Charlie  Chin's,  which offers Chinese
cuisine and the Yukon Grille, an American-style steakhouse, with 100 seats each,
attract guests  interested in a varied dining  experience.  The  restaurants are
designed to help attract more diverse casino patrons. Arizona Charlie's also has
three bars,  which  include a lounge bar, a sports book bar and a bar to service
the restaurants.

     As with many casinos,  Arizona  Charlie's food and beverage  operations are
not directly  profitable,  but are used as marketing  tools to stimulate  casino
activity.  See "Management's  Discussion and Analysis of Financial Condition and
Results  of  Operations  -  Arizona  Charlie's,  Inc."  Nonetheless,  costs  are
minimized and operations are  streamlined by using one kitchen to serve all five
restaurants.  The Sourdough Cafe, the Wild West Buffet,  Yukon Grille,  the Food
Court and Charlie  Chin's offer quality food and service at  affordable  prices.
The Company  believes that much of its casino and other business is attributable
to  traffic  created  by the  restaurants,  and thus  prices  are set at  levels
designed to draw patrons to the facility.

      Entertainment  and  Other  Facilities.   Arizona  Charlie's   emphasis  on
reasonably priced  entertainment  has been an integral  component of its overall
customer  appeal.  The Naughty Ladies Saloon,  a 108-seat  facility,  features a
variety of entertainment including celebrity acts, live bands, musician showcase
nights and jam sessions. The Company also presents mini-concerts, boxing events,
and other events in its second,  much larger  entertainment  facility-the Palace
Grand Theatre. This 700-seat showroom,  located on the second floor, also serves
as a meeting and banquet  facility.  The  Company  has focused  added  marketing
emphasis on the appeal of its  entertainment  programming.  The larger  showroom
enables the Company to present  better-recognized musical acts, when attainable,
charge higher cover prices and attract more gaming  customers.  The availability
of two  showrooms  allows the Company to present more and varied  entertainment.
The banquet and  meeting  space has enabled the Company to expand its  marketing
efforts to visiting business travelers and the small meetings market segment.

      A small gift shop located  adjacent to the casino provides a limited range
of inexpensive gift items, candy,  newspapers,  magazines and cigarettes.  Added
focus has been placed on logo merchandise  promoting the Arizona  Charlie's name
and motif.

      Parking Facility.  Arizona Charlie's offers on-site valet and self-parking
lots with combined capacity for over 650 vehicles.  Ease of access to the casino
is believed to be an  important  element in the appeal of Arizona  Charlie's  to
local customers.

     Claims by Trustee.  AC currently has  outstanding  $55,000,000 of 12% First
Mortgages  Notes due 2000. SC has issued a limited  guaranty with respect to the
AC Notes (the "SC  Limited  Guaranty").  Capitol  Queen & Casino,  Inc.  ("CQC")
currently has  outstanding  $20,000,000 of 12% First Mortgage Notes due 2000. AC
has issued a limited  guaranty  with  respect to the CQC Notes (the "AC  Limited
Guaranty").  The  amount  and  extent  of AC's  guaranty  of the CQC Notes is in
dispute due to certain  provisions  of the  Indenture  under which the CQC Notes
were issued, as well as certain  provisions of State and/or Federal Law that may
be applicable in or with respect to financial restructuring. It is AC's position
that, based on advice from legal counsel, its limited guaranty does not create a
material  liability on its part for the payment of the obligations under the CQC
Notes.

      IBJ Schroder Bank & Trust Company,  as Trustee under the Indentures  under
which such Notes are outstanding, has declared the AC Notes and the CQC Notes to
be in default and has declared all such Notes to be immediately due and payable.
The Trustee has also notified AC that the purported  obligations of AC under its
guaranty have been accelerated and has declared the obligations of AC thereunder
to be due.  Management of AC and CQC and the holders of the Notes are discussing
possible  financial  restructuring  of the AC and CQC  obligations,  but no such
restructuring has yet been agreed to. The Trustee has taken no further action to
enforce the Notes or the  purported  guaranties  thereof or to  foreclose on any
assets of AC or CQC. No assurance can be given,  however,  that the Trustee will
not do so.

      Employees.  As of September 1, 1997,  the Company  employed  approximately
1,179 persons,  none of which is employed  pursuant to collective  bargaining or
other union arrangements. Approximately 40 BGI employees were transferred to the
employ of the  Company  in March,  1995 in  connection  with the  suspension  if
activity of CQC. Management believes that its employee relations are good.

      Government  Regulation.  The  ownership  and  operation  of casino  gaming
facilities  in Nevada are subject to (i) the Nevada  Gaming  Control Act and the
regulations  promulgated  thereunder,  and (ii) various  local  regulation.  The
gaming  operations of the Company are subject to the  licensing  and  regulatory
control of the Nevada Gaming Commission,  the Nevada State Gaming Control Board,
the Clark County Liquor and Gaming  Licensing  Board,  the city of Las Vegas and
other local jurisdictions.


Item 2.    Properties

     Arizona  Charlie's is located at 740 South  Decatur  Boulevard,  Las Vegas,
Nevada and comprises  approximately  170,000 square feet on  approximately  12.5
acres owned by AC. In addition,  The Company leases office,  storage and laundry
space  located  in an  adjacent  shopping  center  owned by  Charleston  Heights
Shopping  Center,  a  partnership  owned by the Becker  family,  pursuant to two
leases expiring in 1998. The current annual rent payable  (including  insurance,
tax  and  common  area  maintenance  payments)  under  these  leases  aggregates
approximately $222,000.

Item 3.    Legal Proceedings

     The  Company  is party to various  lawsuits  relating  to  routine  matters
incidental to its business.  Based on the amounts  believed to be in controversy
and management's  evaluation of the merits of the claims after consultation with
counsel, management does not believe that the outcome of such litigation, in the
aggregate, will have a material adverse effect on the Company.


                             PART II

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


      There is no established  public  trading  market for the Company's  Common
Stock,  all of which is held by BGI.  The Company  has not  declared or paid any
cash  dividends on its Common Stock and does not  anticipate the payment of cash
dividends in the foreseeable future.

Item 6.    Selected Financial Data

<TABLE>
================================================================================
                 Arizona Charlie's, Inc. Selected Financial Data
                              Years Ended June 30,
                  (amounts in thousands, except per share data)
================================================================================
<CAPTION>
                                                 1997         1996         1995
                                             --------     --------     --------

<S>                                          <C>          <C>         <C>
Income Statement Data:
  Operating revenues ....................    $ 58,084     $ 63,301    $ 57,082
  Operating income (loss)................        (341)       2,199       1,058
  Net income (loss) .....................      (7,145)      (4,559)     (4,936)
  Net income (loss) per share (1) .......      (7,145)      (4,559)     (4,936)

Other Data:
  Interest expense, net of amounts
   capitalized ..........................       7,275        7,095       6,574
  Capital expenditures ..................         501          190      24,253
  Distributions to stockholders (2) .....        --           --          --


Balance Sheet Data:
  Unrestricted cash and cash
   equivalents ..........................    $  5,481     $  4,591    $  5,404
  Cash in escrow account restricted
   for construction .....................          10           10          10
  Total assets ..........................      61,957       62,357      65,273
  Long-term obligations (3)
      Long-term debt (4) (5) ............       6,284        5,000      60,000
      Capitalized lease obligation ......          29           22           4
  Stockholder's equity (deficit) ........     (16,646)      (9,501)     (4,942)
</TABLE>
<TABLE>
<CAPTION>
                                                             1994          1993
                                                           -------       -------
<S>                                                        <C>          <C>
Income Statement Data:
  Operating revenues ...............................       $ 46,447     $45,880
  Operating income (loss)...........................          5,105       6,032
  Net income (loss) ................................          1,134       4,585
  Net income (loss) per share (1) ..................          1,134       4,585

Other Data:
  Interest expense, net of amounts
   capitalized .....................................          4,763       1,440
  Capital expenditures .............................         11,379       1,067
  Distributions to stockholders (2) ................          5,317       2,140



Balance Sheet Data:
  Unrestricted cash and cash equivalents ...........       $  4,014     $ 3,528
  Cash in escrow account restricted for
   construction ....................................          3,613        --
  Total assets .....................................         67,915      27,184
  Long-term obligations (3)
   Long-term debt (4) (5) ..........................         60,000        --
   Capitalized lease obligation ....................              1         778
  Stockholder's equity (deficit) ...................             (6)      5,953

----------
<FN>
(1)   The number of shares used in the  computation of earnings (loss) per share
      of common  stock was 1,000 for each of the five years in the period  ended
      June 30, 1997. A total of 2,500 shares of common stock are  authorized  at
      no par value, 1,000 shares of which are issued and outstanding.
(2)   Because AC elected to be treated as an S corporation for the most of 1994,
      and all of fiscal 1993, a substantial  portion of its income in past years
      was  distributed  to its  stockholders.  In December  1993, AC distributed
      $5,000 of previously  taxed retained  earnings to its  stockholders.  This
      amount was loaned back to AC in exchange for stockholder notes.  Effective
      January 1, 1994, AC terminated its S corporation  tax status.  The ability
      of AC to pay dividends is  restricted  by the Indenture  governing its 12%
      First  Mortgage  Notes  due  November  15,  2000  (the  "AC  Notes").  See
      "Management's  Discussion and Analysis of Financial  Condition and Results
      of Operations_Arizona Charlie's, Inc._General
(3)   Includes subordinated notes to stockholders, non-current obligations under
      capital  leases,  and  excludes  current  maturities.  At June  30,  1993,
      approximately  $16,900 of bank debt was  classified as current,  as it was
      due and payable.  See  Management's  Discussion  and Analysis of Financial
      Condition and Results of  Operations_Arizona  Charlie's,  Inc._General and
      "Notes to Financial Statements__Arizona Charlie's, Inc._ Long Term Debt."
(4)   At June 30, 1996 and June 30, 1997 $55,000 of AC Notes was  classified  as
      current due to certain defaults of the AC Indenture.  See Notes 2 and 6 of
      AC's Notes to Financial Statements.
(5)   At June 30, 1993,  approximately $16,900 of bank debt of AC was classified
      as  current  as it was due and  payable.  Such  amount was paid off from a
      portion of the proceeds from the sale of the AC Notes in November, 1993.
</FN>
</TABLE>
<TABLE>
================================================================================
                    Sunset Coin, Inc. Selected Financial Data
                        As Of Or For Years Ended June 30, (amounts in thousands,
                  except per share data)
================================================================================
<CAPTION>
                                                    1997        1996      1995
                                                    ----        ----      ----
<S>                                               <C>         <C>       <C>
Income Statement Data:
  Operating revenues .......................      $2,667      $2,649    $2,742
  Operating income .........................         838         817     1,128
  Net income ...............................         591         381       688
  Net income per share (1) .................       1,477         952     1,720

Other Data:
  Interest expense, net of amounts
   capitalized .............................         366         398       352
  Capital expenditures .....................          63         208     1,142
  Distribution to stockholders (2) .........        --          --        --



Balance Sheet Data:
  Unrestricted cash and cash
   equivalents .............................      $  707      $1,122    $  506
  Total assets (3) .........................       6,507       5,891     5,349
  Long-term obligations (4)
      Long-term debt (5) ...................       3,305       3,502     3,664
      Capitalized lease obligations ........        --          --          28
  Stockholders' equity .....................       2,049       1,458     1,077
</TABLE>
<TABLE>
<CAPTION>
                                                                  1994      1993
                                                               ------    ------

<S>                                                            <C>       <C>
Income Statement Data:
     Operating revenues ..................................     $2,859    $2,959
     Operating income ....................................      1,333     1,382
     Net income ..........................................      1,010     1,408
     Net income per share (1) ............................      2,525     3,520

Other Data:
     Interest expense, net of amounts capitalized ........        190        67
     Capital expenditures ................................        232       297
     Distribution to stockholders (2) ....................      3,280       940



Balance Sheet Data:
     Unrestricted cash and cash equivalents ..............     $1,940    $  854
     Total assets (3) ....................................      3,845     3,270
     Long-term obligations (4)
         Long-term debt (5) ..............................      3,220       364
         Capitalized lease obligations ...................         85       205
     Stockholders' equity ................................        389     2,659

----------
<FN>
(1)   The number of shares used in the  computation of earnings (loss) per share
      of common  stock was 400 for each of the five  years in the  period  ended
      June 30, 1997. A total of 25,000 shares of common stock are  authorized at
      no par value, 400 shares of which are issued and outstanding.
(2)   Because SC elected to be treated as an S corporation during these periods,
      a substantial  portion of its net income in past years was  distributed to
      its stockholders.  In December,  1993, SC distributed $3,000 of previously
      taxed retained earnings to its  stockholders.  This amount was loaned back
      to SC in exchange for  stockholder  notes.  Effective  January 1, 1994, SC
      terminated its S corporation status. The ability of SC to pay dividends is
      restricted  under the  Indenture  governing  the AC Notes.  See  "Dividend
      Policy," "Management's  Discussion and Analysis of Financial Condition and
      Results   of   Operations_Sunset   Coin,    Inc._General"   and   "Certain
      Relationships and Related Transactions."
(3)   Includes $3,150 in notes  receivable from AC, resulting from advances made
      by SC to AC. Due to the financial  condition of AC, management believes it
      is  reasonably  possible  that a portion of the notes  receivable  will be
      uncollectible.  However,  an  estimate  of the loss  cannot  presently  be
      determined. See Note 3 of SC's Notes to Financial Statements.
(4)  Excludes   current  maturities.   See  "Notes  to  Financial
      Statements_Sunset Coin, Inc._Long-Term Debt."
(5)  At June 30, 1997, $322 of SC debt was classified as Current
     Notes Payable.
</FN>
</TABLE>

================================================================================



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

     General
     -------

      The Company's  revenues are derived largely from gaming  activities at its
Arizona Charlie's casino-hotel, and, to a lesser extent, from food and beverage,
lodging,  entertainment  and  retail  sales.  The  Company  generally  views its
non-casino   operations  as  complementary   to  its  core  casino   operations.
Accordingly,  it utilizes  entertainment  primarily as a casino  marketing tool.
Further,  the Company maintains food and beverage pricing structures designed to
benefit casino volumes,  often resulting in departmental  operating losses, even
in periods where individual  restaurants or bars report operating  profits.  The
Company  seeks to maximize  profits from its hotel  operations,  however,  while
maintaining  attractive room rental rates. Gaming revenues represent the net win
from  gaming  wins and  losses.  The retail  value of  accommodations,  food and
beverage  provided to customers without charge is included in gross revenues and
deducted as promotional allowance.  See "Notes to Financial Statements - Arizona
Charlie's,  Inc. - Summary of  Significant  Accounting  Policies." The estimated
costs of providing such  promotional  allowances  have been classified as gaming
expenses through interdepartmental allocations as follows (in thousands):

<TABLE>
<CAPTION>
                                            Years Ended June 30,
                                         1997      1996      1995
                                         ----      ----      ----
           <S>                         <C>       <C>       <C>

           Hotel .........             $  349    $  261    $  164
           Food & Beverage              4,094     3,824     2,260
                                        -----     -----     -----
                                       $4,443    $4,085    $2,424
                                       ======    ======    ======
</TABLE>


      On November 18, 1993,  AC issued  $55,000,000  in principal  amount of 12%
First Mortgage  Notes due November 15, 2000 (the "AC Notes"),  which resulted in
net  proceeds  of  approximately  $51,100,000.  The AC Notes  are  currently  in
default. See "Item 1. Business - Arizona Charlie's, Inc. - Claims by Trustee". A
portion of the net proceeds was used to retire approximately $16,900,000 in bank
debt plus accrued interest of $500,000. The balance of approximately $33,700,000
was initially  deposited into a restricted  escrow account and  subsequently was
used  to  fund  the  expansion  and   enhancement  of  Arizona   Charlie's  (the
"Expansion")  through the addition of new casino space,  hotel rooms,  specialty
restaurants and banquet/meeting  room facilities,  and the expansion of existing
restaurants,  entertainment  and  other  facilities.  See  "Notes  to  Financial
Statements - Arizona  Charlie's,  Inc. - Long-Term Debt." The Company  commenced
construction  of the Expansion in January  1994.  The Expansion was completed in
February 1995 at an under-budget cost of approximately $35,632,000.

      Concurrent  with the private  placement of the AC Notes,  Capitol  Queen &
Casino,  Inc., a sister company,  issued  $40,000,000 in principal amount of 12%
First  Mortgage  Notes due November 15, 2000,  $20,000,000 in principal of which
currently remain outstanding (the "CQC Notes"). The Company has issued a limited
guaranty in respect to the payment of all  principal  of and interest on the CQC
Notes,  the amount and extent of which are  currently  in dispute.  See "Item 1.
Business - Arizona Charlie's,  Inc. - Claims by Trustee". CQC currently does not
have any means to pay amounts  owing on the CQC Notes which are in default.  See
"Liquidity  and Capital  Resources".  The  Company,  which now operates as a "C"
corporation,  was operated as an "S" corporation  through December 31, 1993. See
"Notes to Financial Statements -
  Arizona Charlie's Inc. - Summary of Significant  Accounting  Policies - Income
Taxes." In anticipation of the termination of S corporation  status, in December
1993, the Company  distributed to its stockholders an aggregate of $5,000,000 of
retained  earnings on which the  stockholders had previously paid federal income
taxes.  This  amount was loaned  back to the  Company  in full in  exchange  for
subordinated  stockholder  notes in the principal amount of such  distributions,
which AC stockholder  notes bear interest  payable monthly at the annual rate of
10.0% and mature in January 2001.  See "Notes to Financial  Statements - Arizona
Charlie's, Inc. - Related Party Transactions."

<TABLE>
     Results of Operations
<CAPTION>
                                             Years Ended June 30,
                                            (dollars in thousands)

                                        1997        1996         1995
                                        ----        ----         ----

<S> ..............................   <C>         <C>         <C>
Revenues:
   Gaming ........................   $ 47,857    $ 52,831    $ 47,466
   Food/beverage .................     13,583      13,401      10,877
   Hotel .........................      3,352       3,208       2,614
   Gift Shop .....................        553         590         577
   Other (1) .....................        923         948         682

Gross revenues ...................     66,268      70,978      62,216
Less, promotional allowances (2) .     (8,184)     (7,677)     (5,134)

   Net revenues ..................     58,084      63,301      57,082

   Total operating expenses ......     58,425      61,102      56,024

   Total operating income (loss)..   $   (341)   $  2,199    $  1,058

----------
<FN>
(1)  Includes  primarily  revenues  from   entertainment   cover  charges,   PBX
     operations (hotel switchboard and room telephone system) and commissions on
     automated teller machines located in the casino.
(2)  Amounts  represent  the retail  value of rooms,  food,  beverage  and other
     promotional allowances provided to customers without charge.
</FN>
</TABLE>

      Comparison of fiscal years ended June 30, 1997,  1996 and 1995.  Despite a
reduction in operating  expenses,  results from  operations for fiscal 1997 were
lower  than the  prior  year as a result of  decreased  gaming  revenues  caused
primarily by lesser patron play at the gaming machines.  Results from operations
for  fiscal  1996  were  higher  than  fiscal  1995  due to  increased  revenues
reflecting a full year of operations with the expanded casino-hotel  facilities.
The Expansion  added new gaming  machines and table games,  an expanded race and
sports book,  a new hotel tower,  a remodeled  coffee  shop,  two new  specialty
restaurants and a new delicatessen,  an expanded buffet room, a remodeled floor-
level entertainment lounge and new second-floor showroom/banquet facility.

     Net revenues at AC for fiscal years 1997,  1996 and 1995 were  $58,084,000,
$63,301,000  and  $57,082,000  respectively.  Operating  expenses for these same
fiscal  periods were  $58,425,000,  $61,102,000  and  $56,024,000.  As such, the
operating loss for fiscal 1997 was $341,000,  with a corresponding  negative net
operating  margin of 0.6%.  Operating income for fiscal 1996 and fiscal 1995 was
$2,199,000 and $1,058,000, respectively, resulting in operating margins for such
years of 3.5% and 1.9%.  For fiscal 1997, the decrease in revenues and resulting
decline in operating margin,  despite decreases in operating expenses, is due to
decreased  gaming  revenues  reflecting  lesser  patron  play.  The  increase in
operating  expenses and  resulting  decline in operating  margin for fiscal 1996
resulted  principally from increased  gaming  department  expense,  amounting to
$3,253,000,  costs  attributable  to CQC in the  amount  of  $601,000,  and  the
addition  of  staff  personnel,   equipment  and  related   operating   expenses
transferred to AC.

       For fiscal 1997, AC had total gaming revenues of $47,857,000, as compared
to  $52,831,000  and  $47,466,000  for fiscal 1996 and 1995,  respectively.  The
decrease  of 9.4% in fiscal  1997 is  primarily  attributed  to  gaming  machine
revenues which decreased $3,426,000, or 7.7% from $44,612,000 for fiscal 1996 to
$41,186,000 for fiscal 1997,  reflecting lesser play from patrons.  In addition,
table  game  revenues   decreased  $281,000  or  5.8%.  Other  gaming  revenues,
consisting  of  revenues  from  bingo,  poker and race and sports  decreased  by
$1,267,000  for fiscal 1997 largely due to race and sports book  revenues  which
decreased  $548,000 or 18.6% from  $2,957,000  to $2,408,000  reflecting  lesser
pari-mutuel  horse race play from  patrons.  Such  decrease is a result of fewer
televised  races  arising  from a dispute  over  increased  fees  that  began in
November  1996,  between  the  Nevada  Pari-Mutuel   Association  and  both  the
Thoroughbred  Owners of  California  and the  California  Horse Racing Board who
provide and authorize televised  disseminator services to Race & Sports books in
Nevada.  Such  dispute  was  eventually  resolved  and AC  was  able  to  resume
pari-mutuel horse race wagering beginning in August 1997. The increase in gaming
revenues of 11.3% for fiscal 1996 is  primarily  attributable  to  increases  in
gaming machine  revenues of 11.1% to  $44,612,000  from  $40,140,000  for fiscal
1995. The increase in gaming revenues for fiscal 1996 is primarily the result of
increased  levels of play by patrons in response to additional slot  promotional
events.  Other gaming  revenues for fiscal 1996 increased by 34.0% to $3,346,000
primarily as a result of the added  pari-mutuel  race  facilities  and increased
sports book revenues from the expanded  race and sports  facilities.  For fiscal
1997, 1996 and 1995, 86.1%,  84.4% and 84.6%,  respectively,  of gaming revenues
were  attributable  to gaming  machine play,  compared to 9.6%,  9.2% and 10.2%,
respectively, attributable to table games and 4.3%, 6.4% and 5.2%, respectively,
attributable to other gaming revenues.

     Food and beverage  revenues  increased 1.4% to $13,583,000 for fiscal 1997,
after  increasing  23.2% to  $13,401,000  for fiscal 1996 from  $10,877,000  for
fiscal  1995.  The fiscal 1997 and fiscal 1996  increases  are due to  increased
complimentary sales in the food and beverage department. Such sales are included
in revenues at retail value and are then  deducted as a  promotional  allowance.
Increased complimentary sales in food and beverage departments are the result of
casino promotion and marketing  efforts  designed to attract,  reward and retain
qualified patrons.

     Hotel revenues increased to $3,352,000 for fiscal 1997, from $3,208,000 and
$2,614,000 for fiscal 1996 and 1995, respectively.  The 4.5% and 22.7% increases
for  fiscal  1997 and  fiscal  1996,  respectively,  are the  result of a slight
decrease  in average  occupancy  rate from 86.9 % to 86.1% in fiscal 1997 and an
increase from 84.3% to 86.9% in fiscal 1996  combined with a larger  increase in
the average  room rate from $39.81 to $43.00 in fiscal 1997 and $37.27 to $39.81
in fiscal 1996.

     Gift shop  revenues  decreased  6.3% to  $553,000  in fiscal  1997 due to a
lesser  number of  patrons  in the  hotel/casino  facility.  Gift shop  revenues
increased  2.3% to $590,000 in fiscal 1996 due primarily to the  remodeling  and
expansion  of the gift shop area,  which was  re-opened in January  1995.  Other
revenues  decreased  $25,000  or 2.6%  during  fiscal  1997 as a result of fewer
banquets and entertainment  events including musical concerts and boxing events.
Other  revenues  increased  $266,000 or 39.0% during  fiscal 1996 as a result of
increases in entertainment cover charge revenues attributable to the addition of
a new showroom facility that opened in December 1994.

      Gaming  expenses  decreased  $1,383,000 or 7.4% to $17,229,000  for fiscal
1997  primarily  due to  management  and staff  reductions in the slot and table
games  departments  and  fewer  slot  department  promotions.   Gaming  expenses
increased  by 21.2% to  $18,612,000  for  fiscal  1996.  The  increased  expense
includes  higher slot  promotional  expense of $638,000;  higher  gaming tax and
license  fees of  $406,000;  increased  salary  and  wages of  $468,000  and the
additional  expense of a newly  created  casino  marketing  department  totaling
$479,000, all associated with the expansion of gaming facilities in 1995. Gaming
expenses  represented 36.0%, 35.2% and 32.4% of gaming revenues for fiscal 1997,
1996 and 1995, respectively.

     Food and beverage  expenses  decreased 1.4% to $12,337,000  for fiscal 1997
due to staff  reductions  in both the food and  beverage  departments.  Food and
beverage expenses increased 9.9% to $12,511,000 for fiscal 1996 from $11,388,000
for fiscal 1995 due to salary and wage increases  associated with increasing the
hours of  operation  at one  specialty  restaurant  and  normal  salary and wage
increases for food and beverage employees.

      Hotel expenses decreased 1.6% to $1,390,000 for fiscal 1997 as a result of
the staff  reductions of room and laundry  attendants,  front desk personnel and
reservation clerks.  Hotel expenses increased 2.6% to $1,413,000 for fiscal 1996
from $1,377,000 for fiscal 1995 as a result of normal salary and wage increases.
Net  contribution by the hotel  department  (hotel revenues less hotel operating
expenses) improved to $1,962,000 for fiscal 1997 from $1,795,000 for fiscal 1996
and $1,237,000 for fiscal 1995.

      Gift shop expenses  increased by 9.3% to $519,000 for fiscal 1997 and 5.6%
to $475,000  for fiscal 1996 due to increased  costs of  inventory  items in the
gift shop, combined with normal salary and wage increases.

      General  and  administrative   expenses  decreased  $197,000  or  1.1%  to
$17,463,000  for fiscal 1997  resulting  from staff  reductions in the security,
entertainment and internal  maintenance  departments  during the last quarter of
the fiscal year and a reduction in expense  associated  with the  operation of a
jet airplane which was sold in July, 1996. General and  administrative  expenses
increased by 15.0% to $17,660,000  for fiscal 1996 from  $15,358,000  for fiscal
1995.  The  increases  resulted  from  additional  staffing  in the  accounting,
payroll,  personnel  and  technical  services  departments  and the  transfer of
executive  personnel  (and  related  departmental  costs)  in March  1995 to the
Company from BGI. Other  expenses  transferred  from BGI to the Company  include
maintenance  and other  operating  expenses  associated with an airplane and two
boats.  Other  general and  administrative  expenses  included  payments made on
behalf of CQC in the amount of $220,000  for fiscal 1997 and $601,000 for fiscal
1996 and  $1,592,000  for fiscal 1995 for  insurance,  maintenance  and interest
payments made on the CQC bonds.  The Company accrued  management fees payable to
BGI of $664,000,  $1,396,000  and  $3,099,000  for fiscal  1997,  1996 and 1995,
respectively. Due to a decision to suspend development of CQC's riverboat casino
project and sell its assets, the majority of BGI's management and administrative
services are anticipated to benefit the Company in the future.  Accordingly,  in
late  March  1995,  BGI  transferred  approximately  40  employees  involved  in
accounting and administrative  functions from BGI to the Company.  In connection
with this transfer,  in October 1995, BGI temporarily  reduced the amount of the
Company's  management fee to 1.0% of the Company's  gross  revenues  (previously
5.0% of gross  revenues) based on the reduction in services it will receive from
BGI in the future. (See Note 9 of the Company's Notes to Financial  Statements).
As a percentage of net revenues, general and administrative expenses were 30.1%,
27.9% and 26.9% for fiscal 1997, 1996 and 1995, respectively.

     Advertising and promotion  expenses increased $87,000 or 1.8% to $4,813,000
due to additional  newspaper  advertising  associated with the computerized slot
club  and  player  tracking  system   purchased  and  installed  in  May,  1997.
Advertising and promotion  expenses were $4,726,000 for fiscal 1996, as compared
to  $3,837,000  for fiscal 1995.  The  increase of $889,000,  or 23.1% is due to
additional television  advertising of $466,000, new casino related promotions of
$166,000,  and salary and wage increases of $116,000. The additional advertising
and  promotions  were  conducted in an effort to increase  casino  patronage and
compete with other "local"  casinos  opened in western Las Vegas in fiscal 1995,
including Texas Station and the Fiesta. Management anticipates that it will need
to  maintain  advertising  expenditures  at the 1997 level in order to  continue
attracting  customers  and to promote  entertainment  events and the  restaurant
facilities in its expanded facilities.

      Depreciation and amortization  expense increased by 2.2% to $3,568,000 for
fiscal 1997. Also,  depreciation and amortization  expense  increased by 3.5% to
$3,491,000 for fiscal 1996 from $3,373,000 for fiscal 1995.  These increases are
attributable  to  additional  depreciation  expense  associated  with the  newer
expansion assets.

      The Company had other  expenses (net of other  income) of  $6,804,000  for
fiscal 1997  compared to  $6,758,000  and  $5,994,000  for fiscal years 1996 and
1995. The fiscal 1997 increase is due to additional interest expense of $180,000
on the SC notes and the  financing  of the  computerized  slot  club and  player
tracking  system  and a decrease  in  interest  income of  $14,000  offset by an
increase in other  income,  primarily a gain on sale of assets of $129,000.  The
fiscal 1996 increase of $764,000 is due to a reduction of  capitalized  interest
in the amount of $676,000,  a decrease of interest income of $294,000  partially
offset by a  decrease  of  interest  expense  in the  amount of  $155,000  and a
increase in other income of $51,000.


     Income Taxes
     ------------

     As a result  of the  termination  of its  election  to be  treated  as an S
corporation,  AC is liable  (as part of the BGI  consolidated  group) for income
taxes  on  income  earned  from  and  after  January  1,  1994.  Prior  to  such
termination,  AC did not incur or pay income taxes but  distributed  cash to its
stockholders in amounts  sufficient to pay their income tax liability in respect
to income of AC. See "Notes to Financial Statements - Arizona Charlie's,  Inc. -
Summary of  Significant  Accounting  Policies - Income  Taxes;  - Related  Party
Transactions."  Since  terminating its S corporation  status, AC generated a net
operating loss for income tax purposes of approximately $17,165,000.  Due to low
operating margins and high interest and depreciation costs,  management does not
anticipate that AC will generate taxable income in the foreseeable future.


<TABLE>
Liquidity and Capital Resources
<CAPTION>
                                        As of or for the years ended June 30,
                                            1997        1996        1995
                                            ----        ----        ----

<S>                                     <C>         <C>         <C>
Cash and cash equivalents ...........   $  5,481    $  4,591    $  5,404
Working capital (deficit) (1) .......    (62,380)    (58,530)      2,920


Cash provided by operating activities      1,200       1,639       2,772
Cash used for investing activities ..     (1,003)     (2,240)     (3,401)
Cash provided by (used for)
  financing activities ..............        693        (212)      2,019

----------
<FN>
(1)  At June 30,  1997  and  1996,  the AC  Notes  are  reflected  as a  current
     liability in the amount of $55,000 due to default under Covenants.
</FN>
</TABLE>

      For fiscal 1997, cash provided by operating  activities decreased $439,000
to $1,200,000  from  $1,639,000 in fiscal 1996. The 26.8% decrease is the result
of a higher  net loss,  a  decrease  in  accounts  payable  and an  increase  in
management fees, partially offset by a significant increase in accrued expenses,
which consists primarily of $3,300,000 in accrued interest on the AC Notes, that
was due on May 15, 1997. For fiscal 1996, cash provided by operating  activities
decreased  to  $1,639,000  from  $2,772,000  for fiscal  1995.  The  decrease is
attributable to a reduction in net income,  prior to consideration of management
fees and other  non-cash  items,  and changes in operating  assets and operating
liabilities.

     For fiscal 1997,  cash flows used in investing  activities was  $1,003,000,
down from  $2,240,000 in 1996.  The decrease was due to a small  increase in BGI
receivables  compared  to the prior  year,  partially  offset by an  increase in
capital  expenditures.  Cash flows used in investing  activities for fiscal 1996
were  $2,240,000  compared to $3,401,000 for fiscal 1995. The decrease is due to
(i) a reduction in cash advances to BGI resulting in decreased  receivables from
BGI of $4,154,000,  (ii) a reduction in notes issued to CQC of  $1,200,000,  and
(iii) a  reduction  in  capital  expenditures  of  $24,063,000  (reflecting  the
completion  of the  majority of the  construction  of the  expanded  facility in
fiscal 1995), partially offset by a $26,102,000 net reduction in restricted cash
which was utilized for the expansion in fiscal 1995).  Cash flows from investing
and  financing  activities  for fiscal 1995 were  significantly  impacted by the
November 1993 issuance of the AC Notes.

      Cash flows  provided by financing  activities  increased in fiscal 1997 to
$693,000 from ($212,000) in fiscal 1996, as a direct result of additional  loans
from related parties in the amount of $900,000. Cash flows provided by financing
activities  for fiscal 1996 decreased to ($212,000)  from  $2,019,000 for fiscal
1995. The decrease is due to a reduction of proceeds from borrowing,  marginally
offset by a decrease in principal  payments on notes and an increase in payments
under capital lease obligations.

      The Company is currently in default under the  Indenture  governing the AC
Notes because it has not made its required  semi-annual  interest payment in the
amount of $3,300,000 due on May 15, 1997 and has neither maintained the required
minimum  level of  consolidated  tangible net worth nor offered to  repurchase a
portion  of the AC Notes  as  required  if such  minimum  level of  consolidated
tangible net worth is not  maintained.  In  addition,  the Company has failed to
maintain the minimum consolidated fixed charge coverage ratio required under the
Indenture and has advanced funds to BGI in excess of the amounts permitted to be
so advanced  under the Indenture.  Also, the Company  incurred new notes payable
(in the  amount of  approximately  $1,748,000)  for the  purchase  of an on-line
reporting and player club system in excess of the $1,000,000 allowed.  See "Item
1. Business - Arizona Charlie's, Inc. - Claims by Trustee".

      The AC Notes are  reflected  as a current  liability  at June 30, 1997 and
1996 as a result of the above  default.  The  Company's  long-term  obligations,
approximately  $6,313,000 at June 30, 1997, consist of the stockholder notes and
capitalized  equipment notes and leases. The Company has annual interest expense
aggregating  $6,600,000  and  $500,000  with  respect  to the AC  Notes  and the
stockholder  notes,  respectively.  Beginning May 1, 1997 the stockholders  have
voluntarily  postponed the receipt of interest  payments on the AC Notes.  As of
June 30, 1997,  unpaid interest on the AC Notes and the stockholder notes amount
to $3,300,000 and $85,000, respectively. In addition, the Company is expected to
have future annual capital expenditure requirements of approximately $1,000,000.

      The Company has a contingent  obligation resulting from a limited guaranty
issued by it on the CQC Notes,  an aggregate of $20,000,000 in principal  amount
of which  remain  outstanding.  The amount and  extent of such  guaranty  are in
dispute. See "Item 1. Business - Arizona Charlie's, Inc. - Claims by Trustee" As
a result of a September 1994 ruling of the Missouri  Gaming  Commission  denying
CQC's gaming license application,  CQC has adopted a plan to sell its assets for
the purpose of repaying,  to the extent possible,  the outstanding CQC Notes and
accrued interest  thereon.  See "Business - Capitol Queen & Casino,  Inc." There
can be no  assurance  that CQC will be  successful  in its  efforts  to sell its
assets or, that if a sale is effected,  the proceeds will be sufficient to fully
or substantially repay the CQC Notes and accrued interest thereon. To the extent
any funds CQC may  realize  from the sale of its  assets are not  sufficient  to
repay the CQC Notes and accrued interest  thereon,  the Company may be obligated
under  the AC  Limited  Guaranty  of the CQC  Notes  to fund  the a  portion  of
shortfall.

      Moreover,  because it has failed to pay  interest  due on the Notes and it
has not yet effected the sale of its assets, CQC is in default of the CQC Notes.
CQC is not able to pay the outstanding CQC Notes without an infusion of capital,
which is not expected to be available.  If the Company is obligated under the AC
Limited  Guaranty  to pay a portion of the CQC Notes it is not  expected to have
the resources to satisfy such obligation should it materialize.  If the AC Notes
and the CQC Notes are accelerated,  substantial doubt exists about the Company's
ability to continue as a going  concern.  See "Notes to  Financial  Statements -
Arizona  Charlie's,  Inc.  - CQC  Gaming  License,  Default  Under  Indebtedness
Management's Plans, and Going Concern".

      The Company's ability to obtain capital, is significantly restricted under
the  Indentures  governing  the AC Notes and the CQC Notes.  The  ability of the
Company to service its debt  obligations  (and to comply  with the  consolidated
tangible  net worth  covenant)  will be dependent  upon its future  performance,
which  performance  will be  influenced by prevailing  economic  conditions  and
financial,  business  and  competitive  factors,  many of which are  beyond  the
Company's control.

     Competitive Environment
     -----------------------

      Various forms of  casino-style  gaming have been legalized in numerous new
jurisdictions   within  the  past  few  years,   including  casino   riverboats,
limited-stakes   frontier   town   gambling,   full-scale   casinos   on  Indian
reservations,  card  rooms and  video  lottery  terminals,  which  resemble  the
Company's  gaming  machines.  In  addition,  several  major  casino-hotels  were
completed   and  opened  in  Las  Vegas  in  the  past  year,   continuing   the
transformation of Las Vegas into an entertainment destination offering much more
than gaming. Management expects the legalization of gaming to continue to spread
and that Las Vegas will continue to experience at least limited  expansion.  See
"Item 1. Business - Market and Competition."

      In fiscal 1997,  casino  revenues at Arizona  Charlie's (and for Las Vegas
generally) have declined. Lesser play from patrons at the Company are the result
of increased  competition  from  surrounding  hotels/casinos  that appeal to the
Company's "local" patron. However,  management believes that the Company has and
will continue to benefit from the  expansion of the Las Vegas market,  which has
resulted  in  continued  growth in the  residential  population  from  which the
Company  generates  the  majority of its  revenues.  There can be no  assurance,
however,  that the  spread  of  legalized  gaming,  or the  construction  of new
casino-hotels in Las Vegas, will not have an adverse impact on future revenues.

     Inflation
     ---------

      The Company  believes  that its results of  operations  are not  dependent
upon, or materially affected by, the rate of inflation.


Sunset Coin, Inc.

     General
     -------

SC derives  its  revenues  and profits  largely  from its gaming  machine  route
pursuant to participation  contracts and, to a lesser extent,  space leases. See
"Notes to  Financial  Statements  Sunset  Coin,  Inc. - Summary  of  Significant
Accounting  Policies  Revenue."  Under its  participation  contracts,  SC pays a
percentage of the net win (amounts  wagered less winnings  paid) from its gaming
machines  to the site owner.  The  balance is  retained  by SC.  Under its space
leases,  SC pays the site owner a fixed space  rental fee and retains all of the
net win. SC's gaming revenues under participation contracts represent SC's share
of the net win after payments to the location,  and under space leases represent
all revenues before lease payments, which are treated as expenses. A majority of
SC's gaming machines are installed at locations  controlled by the Becker family
and the contracts  with such locations are expected to be renewed as a matter of
general course. See "Item 1. Business - Sunset Coin, Inc."

     In addition  to the  operation  of its gaming  machine  route,  SC services
gaming machines owned by other operators for fixed service fees.  Included among
its service agreement are contracts with each of the five BGG restaurants, which
are expected to be renewed in general course, and one additional  location owned
by unrelated  parties.  See "Item 1. Business - Sunset Coin, Inc." and "Notes to
Financial Statements - Sunset Coin, Inc. - Related Party Transactions."

      AC currently has outstanding  $55,000,000 of 12% First Mortgages Notes due
2000.  SC has issued a limited  guaranty  with  respect to the AC Notes (the "SC
Limited  Guaranty").  CQC currently  has  outstanding  $20,000,000  of 12% First
Mortgage  Notes due 2000.  AC has issued a limited  guaranty with respect to the
CQC Notes (the "AC Limited  Guaranty").  IBJ Schroder Bank & Trust  Company,  as
Trustee under the Indenture  under which such notes are outstanding has declared
the AC Notes and the CQC Notes to be immediately due and payable. The amount and
extent of SC's guaranty of the AC Notes is in dispute due to certain  provisions
of the  Indenture  under  which the AC Notes  were  issued,  as well as  certain
provisions of State and/or Federal Law that may be applicable in or with respect
to financial restructuring.

      As in the case of AC, SC operated as an S corporation through December 31,
1993. In connection with the termination of S corporation status, SC distributed
$3,000,000 of  previously  taxed  retained  earnings to its  stockholders.  This
amount was loaned back to SC in full in exchange for  stockholder  notes bearing
interest at the annual rate of 10.0% and maturing in January  2001.  The payment
of the SC stockholder  notes is subordinated to any payments required to be made
by SC under the SC Limited Guaranty of the AC Notes.


 <TABLE>
     Results of Operations
<CAPTION>
                                                          Years ended June 30,
                                                         (dollar in thousands)
                                                         ---------------------
                                                    1997        1996        1995
                                                    ----        ----        ----
<S>                                               <C>         <C>         <C>
Revenues:

Gaming machine route:
   Participation contracts .................      $2,481      $2,294      $2,535
   Spaces leases ...........................          69         229          75
                                                     ---         ---          --
Total gaming machine revenues ..............       2,550       2,523       2,610
Gaming machine services fees ...............         117         126         132
                                                     ---         ---         ---
Total revenues .............................      $2,667      $2,649      $2,742
                                                  ======      ======      ======

Operating income:

Gaming machine route:
   Slot route and service ..................      $1,350      $1,311      $1,112
   General and administration...............          51          86         103
   Management fees to related parties ......         140         137         150
   Depreciation and amortization............         288         298         249
                                                     ---         ---         ---
Total operating expenses ...................       1,829       1,832       1,614
                                                     ---         ---       -----
Total operating income .....................      $  838      $  817      $1,128
                                                  ======      ======      ======
</TABLE>

      During  fiscal  1997,  two  participation  locations  were  added  and one
participation contract was terminated.

      Comparison  of Fiscal  Years  Ended  June 30,  1997,  1996 and 1995.  SC's
results of operations  increased  for 1997  compared to 1996.  Net income before
income taxes  increased by 41.2% to $817,000 from $577,000 in fiscal 1996.  Such
increase is  attributable  to four factors:  the absence of the $101,000 loss on
sale of Charlie's  Saloon  assets in fiscal  1996,  additional  interest  income
associated  with the new $900,000 note to AC,  recoveries of bad debt previously
written-off of $57,000 and lower interest  expense from the payoff of four notes
payable in late fiscal 1996. For 1996 compared to 1995, net income  declined due
to Charlie's  Saloon loss noted above,  increased  depreciation  costs resulting
from  additional  gaming  machine  purchases and  increased  payroll and related
staffing costs needed for additional security personnel.

      SC's total  revenues  increased  during fiscal 1997 by 0.7% to $2,667,000.
This slight increase was a result of two  participating  locations added in 1997
and the conversion of some coin only gaming  machines to coin and bill validator
gaming machines. For 1996, the primary reason revenues declined compared to 1995
was the reduction in slot route  revenues at locations not controlled by related
parties.  Gaming  machine  service fee revenue  decreased  7.1% to $117,000  for
fiscal 1997 from  $126,000 in 1996 and 4.5% from  $132,000 in 1995 to 1996.  The
declines are mainly the resulting loss of 15 gaming  machines from the Charlie's
Saloon closing in April, 1996.

     The total number of gaming  machines  operated by SC including BGG machines
in fiscal 1997 were 385 compared to 395 in 1996 and 397 in 1995,  the reductions
were due to the closing of participating  locations.  The total number of gaming
machines  from BGG  locations  that are  serviced by SC was 115 for the past two
fiscal years compared to 130 for 1995,  reduction due to aforementioned  closing
of  Charlie's  Saloon (BGG Bar).  Correspondingly,  slot  service  fees from BGG
decreased to $85,000 from  $93,000 for the last fiscal year.  Revenues  from the
locations  controlled by the Becker family  increased from $2,370,000 in 1996 to
$2,424,000  in 1997,  primarily  due to two  additional  locations and increased
gaming play at other locations.

       Gaming machine route  expenses  increased by 3.0% to $1,350,000 in fiscal
1997 compared to 1996 primarily due to added security  personnel plus repair and
maintenance costs, payroll and related staffing costs. For 1996 compared to 1995
the  increase  of  $199,000  (17.9%)  was due to the  significant  increases  in
security  personnel  to offset the added crime  rates in Las Vegas.  General and
administrative  expenses for fiscal 1997 were  significantly  lower  compared to
1996 and 1995 due to the  write-off of bad debts in the prior years.  Also,  the
write-off  recoveries  in the amount of $57,000  in 1997 was  recorded  to other
income,  resulting in an increase when compared to prior years.  Management fees
due to Becker Gaming, Inc. remained relatively  unchanged from 1997 to both 1996
and 1995  fiscal  years.  Depreciation  and  amortization  decreased  by 3.4% to
$288,000 for 1997,  reflecting decreased  depreciation costs associated with the
April, 1996 closing of Charlie's Saloon.  SC abandoned  furniture,  fixtures and
equipment contained in this bar at the time of the closing. In 1996 depreciation
was  higher  than 1995 due to  additional  depreciation  on new  gaming  machine
purchases in 1996.

      Interest  income  and  other  income  increased  during  1997  due  to the
additional $900,000 note to AC and the $57,000 write-off recovery.  The $115,000
loss on sale of  assets  in 1996 was  mainly  due to the  closing  of  Charlie's
Saloon.  Interest  expense  declined  by 8.0% in 1997  attributable  to  reduced
interest  expense  resulting  from four notes  paid-off in the fourth quarter of
fiscal 1996.

     Income Taxes
     ------------

     As a result  of the  termination  of its  election  to be  treated  as an S
corporation,  SC is liable  (as part of the BGI  consolidated  group) for income
taxes  on  income  earned  from  and  after  January  1,  1994.  Prior  to  such
termination,  SC did not incur or pay income taxes but  distributed  cash to its
stockholders in amounts  sufficient to pay their income tax liability in respect
of income of SC. See "Item 13. Certain  Relationships and Related  Transactions"
and "Notes to Financial  Statements - Sunset Coin, Inc. - Summary of Significant
Accounting  Policies - Income Taxes;  - Related Party  Transactions."  In fiscal
1997 and 1996,  no estimated  income tax payments  were paid. In fiscal 1995, SC
made an estimated  income tax payment of $102,000 This payment was based upon an
anticipated  effective federal income tax rate  approximating the statutory rate
of 34%.


     Liquidity and Capital Resources
     -------------------------------

      Cash  provided by operating  activities  remained  virtually  unchanged at
$1,003,000 in fiscal 1996 to $992,000 in fiscal 1997. For 1996, cash provided by
operating  activities  declined from  $1,138,000 in 1995 to $1,003,000  due to a
lower net income partially offset by a loss on sale of equipment relating to the
abandonment of Charlie's Saloon in April, 1996.

      Cash used in investing  activities for fiscal 1997 increased from $180,000
in 1996 to  $1,074,000  in 1997 due to the  increase in related  party notes and
advances  partially  offset by a  reduction  on capital  expenditures.  For 1996
compared to 1995 a significant  reduction of $2,954,000 or 94% resulted from the
absence of  additional  related  party  notes and  advances  in 1996 and reduced
capital expenditures for gaming machines.

      Cash provided by financing activities decreased each year from $562,000 in
fiscal  1995 and  $(207,000)  in 1996 to  $(333,000)  in fiscal  1997 due to the
reduction of proceeds of additional notes and recurring payments toward existing
notes in the 1997 and 1996 fiscal years.

      SC's indebtedness  includes the stockholder notes and notes collateralized
by its gaming equipment and other assets. The collateralized notes bear interest
at annual rates of approximately  10.89%, in the case of fixed rate loans, or at
prime plus 1.5% in the case of a collateralized  line of credit, the outstanding
aggregate balance of which was converted to a note at July 1, 1994, with monthly
payments  through June 1998. SC requested  advances through October 28, 1995, at
which time the  Company's  right to receive  advances  under the  agreement  was
terminated.   The  $1.5  million   non-revolving  line  of  credit  includes  an
acceleration  clause  which  would cause the full  amount of the  obligation  to
become  due on demand if a  material  adverse  change  occurs in the  borrower's
financial condition, business operations or ownership or management.

     In July 1994,  SC entered  into an  agreement  with a bank for a $1,200,000
non-revolving line of credit.  Each advance under the line shall be evidenced by
a separate promissory note with a maturity date not exceeding 66 months from the
date of the respective  advance giving rise to the note.  During fiscal 1995, SC
drew down an aggregate of $738,000 and in fiscal 1996,  an aggregate of $109,000
of the non-revolving  line of credit with various monthly payments through April
2001.  Advances  under the agreement bear interest at the bank's prime rate plus
1.5% to 2.0%. SC's management believes that it has sufficient funds through cash
generated by operations to meet its projected needs for existing  operations and
limited  expansion of its gaming machine route business.  Should SC determine to
expand on more than a limited basis,  it is likely that further capital would be
necessary.  SC's access to additional  capital will be significantly  restricted
under  the AC  Indenture  so long as SC is a  guarantor  of the AC  Notes.  Such
guaranty,  although  limited,  will be released upon AC's achievement of a fixed
charge coverage ratio of 2.25 to 1, which is not currently anticipated to occur.

      Because AC is in default under the Indenture  governing the AC Notes,  the
AC Notes have been  accelerated.  See  "Arizona  Charlie's,  Inc._Liquidity  and
Capital  Resources."  AC does not have the  resources  to pay the AC  Notes.  In
addition, AC may have limited liability under the AC Limited Guaranty of the CQC
Notes which may exceed the amount which it could  immediately  support or repay.
In either case, SC, as guarantor of the AC Notes,  may have liability  under the
SC Limited  Guaranty,  and such liability could exceed the amount which it could
immediately support. Accordingly, substantial doubt exists about SC's ability to
continue  as a going  concern if the  Trustee  for the AC Notes and CQC Notes is
able to enforce its acceleration  thereof.  See "Notes to Financial Statements -
Sunset Coin, Inc. - Guarantee Obligation, Management's Plans and Going Concern."

     Competitive Environment
     -----------------------

     As SC's gaming machine route contracts  reach  maturity,  SC is required to
compete for renewals with numerous route  operators in the Las Vegas area,  some
of  which  are   significantly   larger  and  better   capitalized   and  manage
substantially  more gaming machines than SC.  Although SC's management  believes
that the  continuing  expansion of the Las Vegas  gaming  market has resulted in
substantial growth of the local residential  population,  the market in which SC
generates  the majority of its route  business,  there can be no assurance  that
increased  competition  for  gaming  machine  route  locations  will not have an
adverse  impact on the future  revenues.  In  addition,  the spread of legalized
gaming into new  jurisdictions  may also impact the competitive  position of SC.
See "Item 1. Business - Sunset Coin, Inc."

     Inflation
     ---------

      Management  believes  that SC's results of  operations  are not  dependent
upon, or materially affected by, the rate of inflation.


Item 8.    Financial Statements and Supplementary Data

      The  Index to  Financial  Statements  and  Schedules  appears  at page F-1
hereof,  the Report of  Registrant's  Independent  Auditors  appears at page F-2
hereof,  and the Financial  Statements and Notes to Financial  Statements of the
Registrant  and SC appear at page F-3 through  F-25 hereof and page F-26 through
F- 44 hereof, respectively.

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

     Not Applicable.


                                    PART III

Item 10.   Directors and Executive Officers of the Registrant

      The  following  table sets forth certain  information  with respect to the
directors and executive officers of AC.

<TABLE>
<CAPTION>
      Name           Age              Position(s) Held
      ----           ---              ----------------

<S>                  <C>    <C>
Bruce F. Becker      46     Chairman, President and Chief
                             Executive Officer of AC
Barry W. Becker      52     Secretary and Director of AC
Ron Lurie            56     Director of Marketing of AC
Jerry Griffis        41     Controller of AC
Gerald Heetland      57     General Counsel of AC
Ernest A. Becker     78     Director and Treasurer of AC
III
Ernest A. Becker     54     Director and Vice President AC
IV
W. Bucky Howard      59     General Manager of AC
Paul Tomba           49     Food and Beverage Director of AC
Debra Pingul         39     Director of Personnel of AC
Doug Hardesty        45     Director of Technical Services of AC
</TABLE>



      Bruce F.  Becker  has  served  as  Chairman  of the  Board  of  Directors,
President,  Chief Executive  Officer and Treasurer of BGI since its inception in
July 1993 and as Secretary since November 1993. He has served each of the Nevada
subsidiaries  of BGI as President and Chief  Executive  Officer since July 1989.
Mr.  Becker has also been a director and  Chairman of AC since its  inception in
July 1984 and  Chairman  of the  Board of  Directors  of SC and BGG since  their
inceptions in 1980 and 1986,  respectively.  He is the  Chairman,  President and
Chief  Executive  Officer of CQC, and the Sole Officer and Director of Innerout,
Inc.  Mr.  Becker  also  sits on the Board of  Directors  of the  Nevada  Resort
Association.

      Barry W. Becker has served as Assistant  Secretary  of BGI since  November
1993,  and as Secretary of BGI from its inception  until  November  1993. He has
served each Nevada  subsidiary of BGI (other than Innerout,  Inc.) as a Director
since its respective  inception and as Secretary  since July 1989. Mr. Becker is
also the Sales Manager for Becker  Enterprises,  a Becker  family-owned  company
that purchases,  sells and leases residential and commercial  property.  He is a
past  president  of the  Southern  Nevada  Builders  Association  and serves the
community as a member on the boards of  directors of the Rotary Club,  Las Vegas
Chamber of  Commerce,  Boys Club of Clark  County and the Boy Scouts of America.
Mr.  Becker was  appointed  by the then  Governor  of the State of Nevada to the
State Environment Commission and was an Environmental Commissions Representative
on the State Multiple Use Advisory Land Committee.

      Ron Lurie has served as the General  Manager of Sunset  Coin,  Inc.  since
November 1990. He has also served as Director of Marketing of Arizona Charlie's,
Inc. since  February of 1995 and Director of Corporate  Development of BGI since
inception.  He has been involved with the gaming industry since 1978, serving in
several capacities prior to being employed by Sunset Coin, Inc., including Sales
Manager for International  Game Technology and regional Sales Director for Sigma
Games. In addition to Mr. Lurie's fourteen years in the gaming industry, he also
served fourteen years as a Las Vegas City Councilman and four years as the Mayor
of Las Vegas.

      Jerry Griffis has served as Chief Financial  Officer of BGI and Controller
of CQC since their  respective  dates of  inception,  and as  Controller  of the
Nevada  subsidiaries  of BGI since  February  1989.  Prior to joining the Nevada
subsidiaries,  Mr. Griffis was employed as a Certified Public Accountant.  Prior
thereto, Mr. Griffis acted as Assistant Controller for the Silver Slipper Casino
from 1981 to 1983 and the Frontier Hotel & Casino from 1979 to 1981. Mr. Griffis
is a CPA and a member of the Nevada Society of CPA's and the American  Institute
of Certified Public Accountants.

     Gerald  Heetland has 30 years of corporate  legal and business  experience,
with over 15 years in the gaming  industry.  He has served as General Counsel of
Becker  Gaming,  Inc. and the BGI  subsidiaries  since  January  1997.  Prior to
joining Becker Gaming,  Inc., he served as Vice  President,  General Counsel and
Secretary of Fitzgeralds  Gaming  Corporation  and its  subsidiaries  for over 5
years and as Vice President,  General Counsel and Secretary  Counsel of Del Webb
Hotels and Casinos for 8 years,  starting at the positions of Associate  General
Counsel and Assistant  Secretary of Del Webb Corporation in Phoenix,  Arizona in
1981 and relocating to Las Vegas, Nevada in May 1986.

      Ernest A.  Becker  III is a  director  of BGI and has  served  each of the
Nevada  subsidiaries of BGI (other than Innerout,  Inc.) as a Director since its
respective  inception and as Treasurer  since July 1989.  Mr. Becker has been an
active developer of residential,  recreational and commercial properties in both
Southern  California and Southern  Nevada since 1952.  Mr. Becker  organized the
Charleston  Heights Water Company in 1954, which paved the way for the growth of
the northwestern  area of Las Vegas. He is a past president and Life Director of
the National Association of Home Builders.

     Ernest A.  Becker IV is a director of BGI and has served each of the Nevada
subsidiaries  of BGI  (other  than  Innerout,  Inc.)  as a  Director  since  its
respective  inception  and as Vice  President  since  July  1989.  He  currently
operates  Becker Built, a construction  company owned by the Becker family.  Mr.
Becker has served as a Director of the Southern Nevada Home Builders Association
for the past fourteen  years and has held  positions  with the Fair Housing Task
Force,  Development  Permit  Committee,  Community  Housing  Resource  Board and
Plumbers  Examining  Board for the City of Las Vegas and the  Citizens  Advisory
Council for Liquor and Gaming Control.

      W. Bucky Howard was appointed General manager of Arizona  Charlie's,  Inc.
and  Becker  Gaming  Group  in  January,  1997 and has  served  as  Director  of
International  Operations of Becker Gaming,  Inc. since October 1996. Mr. Howard
has been in Resort Gaming over thirty years, and has operational, marketing, and
pre-opening experience in Nevada, New Jersey and Mississippi.  Mr. Howard served
the  Hilton  Corporation  for  eleven  years in  various  capacities  up to Vice
President of Casino  Operations  in Atlantic  City.  Mr. Howard also served five
years with the Trump Organization as Vice President Casino Operations, Executive
Vice President of Operations and as President of Trump Taj Mahal. Mr. Howard was
involved in  planning,  developing,  designing,  training and  implementing  all
phases of operations.

      Paul Tomba has served AC and BGG as Food and Beverage  Director since June
1995.  Prior to his  employment  at  Arizona  Charlie's,  he served as  Beverage
Manager for Caesar's Palace and the Golden Nugget Hotel and Casino in Las Vegas.
Mr. Tomba also managed private  country clubs in the greater  Cleveland area and
has over twenty-six years experience in the food and beverage industry.

      Debra Pingul was appointed  Director of Personnel of AC in February  1991.
Prior thereto, Ms. Pingul held supervisory positions in human resources with the
Marina  Hotel and Casino  from 1985 to 1990 and  Vacation  Village  from 1990 to
1991.

      Doug Hardesty was appointed  Director of Technical Services of each of the
Nevada  subsidiaries  of BGI in April 1991.  From March 1988 to April 1991,  Mr.
Hardesty served as Operations  Officer of AC. Prior thereto,  he held managerial
positions with firms engaged in the sale and servicing of systems hardware.



Item 11.   Executive Compensation

      The  following  table  sets  forth  the  compensation  paid by AC  (unless
otherwise  indicated)  for services  rendered in all  capacities to BGI (and its
subsidiaries)  during the fiscal year ended June 30,  1997,  with respect to the
Chief  Executive  Officer of AC and all other  persons  who served as  executive
officers  of AC during the year ended June 30, 1997 and whose  aggregate  annual
compensation exceeded $100,000 for such period. No compensation has been paid to
executives by CQC for services rendered during the year ended June 30, 1997.


<TABLE>
                   Summary Compensation Table
                   --------------------------
<CAPTION>
                                        Annual Compensation
                                        -------------------
                                                                       All Other
Name and Position                     Salary          Bonus       Compensation
-----------------                     ------          -----       ------------
<S>                                 <C>            <C>            <C>
Bruce F. Becker, Chief
  Executive Officer
  and President of
  BGI and each subsidiary ....      $500,000(1)    $      0       $ 51,520(2)(3)
Ron Lurie, Director-Corporate
  Development of BGI, General
  Manager of SC and Director
  of Marketing of AC .........      $140,539(4)    $      0       $  1,587(4)
W. Bucky Howard, General
  Manager of AC, BGG and
  Director of International
  Operations at BGI ..........      $118,077       $      0       $     -
Bart Masi, General Manager
  of AC and BGG (terminated
  January 5, 1997)............      $108,000       $      0       $  2,700(3)
Duke Pettit, Director of Slot
  Operations (terminated July
  17, 1997)                         $104,030       $      0       $  3,641(3)

----------
<FN>
(1) Does not include amounts entitled to under employment agreement.  Mr. Becker
has voluntarily  postponed  scheduled  salary increases of $100,000 for calendar
year 1995,  $200,000 for calendar year 1996 and $300,000 for calendar year 1997.
These salary amounts have been accrued by BGI, but have not yet been paid to Mr.
Becker. All of Mr.Becker's compensation is paid by BGI.

(2)  Includes  $49,338 paid by BGI during the fiscal year ended June 30, 1997 in
premiums on life  insurance  held by Bruce F. Becker for the benefit of a family
trust  administered by Mr. Becker.  Such life insurance,  which has an aggregate
death benefit of $5,076,376,  has been collateral assigned to BGI such that upon
the death of Mr. Becker,  BGI shall be refunded all premiums  previously paid by
it  under  the  policy  before  the   distribution  of  benefits  to  the  named
beneficiary.

(3) BGI and each Nevada  Subsidiary  has adopted a 401(k)  defined  contribution
plan  covering  substantially  all  of its  employees.  Eligible  employees  may
contributed  up to 6% of their annual  compensation  to the plan,  up to certain
limits prescribed by the Internal Revenue Service. BGI and the Nevada subsidiary
have  each  agreed  to  contribute  an  amount  equal to 25% of each  employee's
contribution,  up to an  amount  equal  to 2% of each  employee's  compensation.
Employees  may  contribute  an additional 4% to the Plan which is not matched by
BGI or Nevada subsidiary.

(4) Mr. Lurie's compensation is paid by SC. However, 50% of such compensation is
reimbursed to SC from AC.
</FN>
</TABLE>

Compensation of Directors
-------------------------

      The  directors of BGI may receive  $2,000 for each meeting of the Board of
Directors attended.  The directors of the Operating Companies do not receive any
compensation for serving in such capacities.

Employment Agreement
--------------------

      In May 1994, BGI entered into a seven-year employment agreement with Bruce
F. Becker in his capacities as Chief Executive Officer and President.  Under the
employment agreement,  Mr. Becker is required to devote all of his business time
to the affairs of BGI and its affiliated  companies.  The agreement provides for
an annual base salary of $800,000 per year during calendar year 1997, increasing
by $100,000 each calendar year thereafter  through  December 31, 2001.  However,
for the third consecutive year, Mr. Becker has elected to postpone his scheduled
annual salary  increase.  These deferred  salary amounts,  aggregating  $450,000
through June 30, 1997,  and have been accrued by BGI, but have not yet been paid
to Mr. Becker.  Mr. Becker is also entitled to the use of an automobile and such
bonuses and other benefits as the Board of Directors may award from time to time
in its discretion.  In addition,  BGI maintains certain life insurance  coverage
referred to under Executive Compensation above.

      The  employment  agreement  provides  that if Mr.  Becker's  employment is
terminated  either (i) by BGI other than for cause or by reason of  physical  or
mental  disability,  or (ii) by Mr.  Becker for good reason,  Mr. Becker will be
entitled to a severance  payment equal to four times his then annual base salary
if such termination occurs during the first year of the agreement or three times
his then annual base salary if such  termination  occurs after the first year of
the  agreement.  Such  severance  payment  will be  payable in a lump sum within
thirty (30) days of  termination.  Under the agreement,  BGI shall have cause to
terminate Mr. Becker if he consistently  refuses to  substantially  perform,  or
engages in willful  misconduct in the substantial  performance of his duties and
obligations  under the  employment  agreement or if he  materially  breaches the
agreement.  Mr.  Becker may terminate  his  employment  for good reason if he is
assigned  by BGI to a position  of lesser or  inconsistent  authority  than that
described in the  employment  agreement  or is required to relocate  outside Las
Vegas, or if BGI fails to substantially comply with the employment agreement.

Consulting Agreements
---------------------

     BGI entered into consulting agreements with Ernest A. Becker III, Ernest A.
Becker  IV  and  Barry  W.  Becker  (the  "Consultants").  The  agreements  have
three-year  terms which  expired on May 31, 1997.  The  agreements  provided for
monthly  consulting  fees of  $12,500,  $8,334 and $8,334,  respectively.  These
agreements were renewed for additional three-year terms, however, beginning June
1, 1997 the  Consultants  have  voluntarily  postponed  receipt  of the  monthly
consulting fees. At June 30, 1997, such fees in the total amount of $29,168 have
been accrued by BGI but have not been paid to the  Consultants.  The  agreements
provide for  indemnification  of the Consultants for claims arising out of their
services  to BGI,  other than  claims  arising  from gross  negligence,  willful
malfeasance or fraud.  The Consultants are prohibited from competing with BGI or
its  affiliates or soliciting  for  employment  any person  employed or recently
employed  by BGI or its  affiliates.  Such  obligations  also  apply  beyond the
consulting period.

Compensation Committee Interlocks and Insider Participation

      None of the  board  of  directors  of BGI or its  subsidiaries  has had or
currently has a compensation  committee or other committee performing equivalent
functions. During the fiscal year ended June 30, 1997, Ernest A. Becker, III and
Bruce  F.  Becker  in  their  capacities  as  directors  of each  of the  Nevada
subsidiaries  participated  in  deliberations  concerning  compensation  of  the
executive officers of such companies.


Item 12.    Security Ownership of Certain Beneficial  Owners  and
      Management

       The Company is a wholly owned subsidiary of BGI. Accordingly,  BGI is the
sole beneficial owner of the Company's common stock.


Item 13.   Certain Relationships and Related Transactions

      Since June 1, 1994, BGI has provided  managerial  and related  services to
its subsidiaries.  BGI has entered into a management  agreement with each of the
AC,  SC and BGG (and  CQC,  which is not  expected  to have any  operations)  to
provide executive and  administrative  services in exchange for a management fee
equal to 5% of each such company's gross operating revenues (before deduction of
promotional allowances).  However, the AC Indenture will prohibit the payment of
management  fees  by  AC  until  certain  conditions  have  been  satisfied  and
thereafter in excess of specified amounts. The rate at which management fees are
to be payable  was  determined  based on the level of  management  support to be
provided by BGI to the operating companies,  the level of expense anticipated to
be incurred  by BGI in  connection  with such  support,  and the  gaming-related
experience  of the persons  expected to provide such support on behalf of Becker
Gaming and their familiarity with the operating  companies and their businesses.
Accordingly,  such fee does not necessarily reflect that which could be obtained
from an  unaffiliated  party,  which  could not be  expected to provide the same
support or to possess the same gaming-related experience or familiarity with the
operating  companies.  However,  based on its  knowledge  of similar  management
service arrangements entered into by other Las Vegas casino-hotels, such rate is
believed to be at or near the top of the range of fees customarily paid for such
services in such  market.  Due to the decision to suspend  development  of CQC's
riverboat  casino project and sell its assets,  the majority of BGI's management
and  administrative  services  are  anticipated  to  benefit  AC in the  future.
Accordingly,  in late March 1995,  BGI  transferred  approximately  40 employees
involved  in  accounting  and  administrative  functions  from BGI to AC.  These
employees were  originally  employees of AC and were  transferred to BGI in June
1994. In connection with this transfer, in October 1995, BGI temporarily reduced
the  amount  of  AC's  management  fee to a net  1.0%  of  AC's  gross  revenues
(previously  5.0% of gross  revenues) based on the reduction in services it will
receive  from BGI in the  future.  Such  temporary  reduction  remained in place
through fiscal 1997 and is not to be further modified during fiscal 1998. AC, SC
and  BGG  incurred   management   fees  of  $664,000,   $140,000  and  $518,000,
respectively, to BGI in fiscal 1997.

     AC has  issued a  limited  guaranty  of the  payment  of  principal  of and
interest on the CQC Notes.  See "Item 1.  Business - Arizona  Charlie's,  Inc. -
Claims by Trustee"  Similarly,  SC has issued a limited  guaranty in  connection
with the payment of principal of and interest on the AC Notes.

      During  fiscal  1997,  AC leased  office,  storage and laundry  space from
Charleston  Heights Shopping Center ("CHSC"),  a partnership owned by the Becker
family.  Total lease rental payments (including  insurance,  tax and common area
maintenance  payments)  of  approximately  $222,000  were  paid by AC to CHSC in
fiscal 1997.  Based on rental rates offered for  properties  which are similarly
situated and offer comparable features,  AC believes that such rental rates were
below comparable market rates.

      Each of the Nevada  subsidiaries  previously  operated as a  subchapter  S
corporation  under  the  federal  tax  laws.  As of  December  31,  1993,  the S
corporation status of each of the Nevada  subsidiaries was terminated.  Prior to
the  termination  of S  corporation  status,  each  of the  Nevada  subsidiaries
distributed   to  their   stockholders   undistributed   income  on  which  such
stockholders  had previously  paid federal income taxes equal to $5,000,000,  in
the case of AC, $3,000,000, in the case of SC, and $800,000, in the case of BGG.
The  amounts  distributed  were  loaned  back to such  companies  in full by the
stockholders.  The  AC and SC  loans  are  repayable  pursuant  to  subordinated
stockholder  notes  maturing  in 2001 and  bearing  interest  at the rate of 10%
annually,  payable monthly. However, beginning May 1, 1997 the stockholders have
voluntary  postponed the receipt of interest  associated with the AC Notes.  The
BGG loans are repayable  pursuant to notes maturing in December 1997 and bearing
interest at the rate of 10% annually,  payable monthly. In addition,  the Nevada
subsidiaries have agreed to distribute to their  stockholders cash sufficient to
satisfy the federal income tax obligations of such  stockholders  resulting from
their  ownership  interests  therein  (including  taxes  payable with respect to
income  earned  previously)  through the date of  termination  of S  corporation
status,  subject to limitations  imposed under the Indentures.  The stockholders
have filed all tax returns for the periods during which the Nevada  subsidiaries
operated as S corporations. Accordingly, the exposure of the Nevada subsidiaries
under the tax  indemnities  will be limited to taxes which may become payable in
the future with  respect to periods  through  1993 as a result of any audit of a
stockholder  return by tax authorities.  Such amounts may be material,  although
the  AC  Indenture  limits  such  payments  by AC  and  SC to  an  aggregate  of
$2,250,000.

      SC has executed  gaming machine  service  agreements  with BGG pursuant to
which SC provides gaming machine  maintenance and other services to each BGG bar
and restaurant for a fixed fee. Fees paid by BGG to SC for such services totaled
approximately  $85,000 in fiscal  1997.  The  gaming  machine  maintenance  fees
payable by BGG to SC reflect rates which  management  believes  (based on market
research  conducted on an informal basis,  from time to time, by SC) are charged
for similar services by other gaming machine service companies  operating in the
Las Vegas area.

      During 1991,  SC  purchased  the assets of a  restaurant/bar  facility for
approximately  $525,000 for use by BGG. The Company entered into an agreement to
lease (as lessor) the  facility to BGG under an agreement  which was  terminated
when the  facility was closed on April 21, 1996 and the  worthless  improvements
and equipment  were  abandoned.  The liquor license will be transferred to a new
BGG  location  currently  under  construction  which is expected to open in late
1997.

     SC  purchased  and leased to BGG's  wholly  owned  subsidiary  the personal
property used at Charlie's  Bar Down Under.  This lease calls for annual rent of
$94,392 to be paid in equal monthly installments in advance,  beginning on April
1, 1995.

      The Becker family  members have  guaranteed the payment of a $126,000 note
payable  of SC,  various  term  loans  held by SC and a term  loan  to BGG.  The
outstanding  principal  balances of the SC and BGG term loans were  $499,000 and
$828,000, respectively, as of June 30, 1997.

      Bruce F.  Becker  resides in one of Arizona  Charlie's  suites at a rental
rate of $1,520 per month payable in advance,  pursuant to a one-year lease which
commenced January 1, 1995. This lease automatically  renews for successive terms
of one-year each unless terminated.

      Bruce F.  Becker  operates a sole  proprietorship  under the name  "Becker
Vending" which places  arcade,  cigarette,  music and other vending  machines at
Arizona Charlie's, BGG's restaurants,  and several of SC's slot route locations.
AC provides  nominal  collection  and  accounting  services to Becker Vending in
connection with these machines.  None of the Nevada subsidiaries  receives or is
expected  to receive  any rental fee or other  payment  from  Becker  Vending in
connection with these arrangements. Becker Vending retains all amounts deposited
in its vending machines.  Becker Vending also sells to AC cigarettes,  candy and
similar items at wholesale prices for resale in the Arizona Charlie's gift shop.


                                     PART IV

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

     The following are filed as part of this Report:

     (a)1.     Financial Statements
          An Index to Financial Statements and Schedule appears
          at page F-1 hereof

     (b)2.     Financial Statement Schedules
          The following Financial Statement Schedules are filed
herewith:


     (a)3.     Exhibits

   2.1    Agreement of Reorganization dated November 16, 1993,
           by and among Becker Gaming, Inc. ("BGI"), Arizona
           Charlie's, Inc. ("Arizona Charlie's"), Sunset
           Coin, Inc. ("Sunset Coin"), Becker Gaming Group, Inc.
           ("Becker Gaming Group"), Capitol Queen & Casino, Inc.
           ("Capitol Queen"), Charlie's Land Company ("CLC") ,
           and each of Ernest A. Becker, III, Ernest A. Becker,
           IV, Barry W. Becker and Bruce F. Becker
           (collectively, the "Beckers").*

    3.1    Articles of Incorporation of Arizona Charlie's.*

    3.2    Amended and Restated By-Laws of Arizona Charlie's.*

    3.3    Articles of Incorporation of Sunset Coin.*

    3.4    Amended and Restated By-Laws of Sunset Coin.*

    10.1   Purchase  Agreement  dated  November  15,  1993  among  BGI,  Arizona
           Charlie's,  Capitol  Queen,  Sunset  Coin  and the  purchasers  named
           therein (the "Purchasers").*

    10.2   Indenture dated November 15, 1993 among Arizona Charlie's, as issuer,
           Sunset Coin,  as  guarantor,  and IBJ Schroder  Bank & Trust  Company
           ("IBJ"), as trustee.*

    10.3   Indenture  dated  November 15, 1993 among Capitol  Queen,  as issuer,
           Arizona Charlie's, as guarantor, and IBJ, as trustee.*

    10.4   Fee and Leasehold Deed of Trust,  Assignment of Leases and Subleases,
           Security  Agreement  and Fixture  Filing  dated  November 15, 1993 by
           Arizona  Charlie's  and CLC,  as  grantors,  to Land Title of Nevada,
           Inc., as trustee, for the benefit of IBJ, as collateral agent.*

    10.5   Security  Agreement dated November 15, 1993 between Arizona Charlie's
           and IBJ, as collateral agent.*

    10.6   Stock  Pledge  Agreement  dated  November  15, 1993  between  Arizona
           Charlie's and IBJ, as collateral agent.*

    10.7   Collateral  Agency  Agreement  dated  November 15, 1993 among Arizona
           Charlie's, CLC and IBJ, as trustee and collateral agent.*

    10.8   Disbursement  and Escrow  Agreement  dated  November  15,  1993 among
           Arizona  Charlie's and IBJ, as escrow agent,  trustee and  collateral
           agent.*

    10.9   Registration Rights Agreement dated November 15, 1993
           among Arizona Charlie's, Sunset Coin and the
           Purchasers.*

    10.10  Registration Rights Agreement dated November 15, 1993
           among Capitol Queen, Arizona Charlie's and the
           Purchasers.*

    10.11  Promissory Notes dated December 24, 1993 made by each
           of the Beckers in favor of Arizona Charlie's. *

    10.12  Tax  Indemnity  Agreement  dated  December  24,  1993  among  Arizona
           Charlie's,  Sunset Coin, Becker Gaming Group and each of the Beckers.
           Included at Exhibit G to Exhibit 2-1 hereof.*

    10.13  Form of Management  Agreement to be entered into between BGI and each
           of Arizona  Charlie's,  Capitol Queen,  Sunset Coin and Becker Gaming
           Group. Included at Exhibit I to Exhibit 2-1 hereof.*

    10.14  Form of Tax  Allocation  Agreement to be entered into between BGI and
           each of Arizona  Charlie's,  Sunset  Coin,  Becker  Gaming  Group and
           Capitol Queen. Included at Exhibit J to Exhibit 2-1 hereof.*

    10.15  Letter   Agreement  dated  September  10,  1993  among  BGI,  Arizona
           Charlie's,  Capitol  Queen and  Ladenburg,  Thalmann & Co.,  Inc., as
           placement agent.*

    10.16  Airplane lease dated April 18, 1989 between Arizona Charlie's and Las
           Vegas Auto Leasing.*

    10.17  Lease dated March 1, 1989 between CLC and Arizona Charlie's.*

    10.18  Leases  dated May 1, 1988 and  August  21,  1990  between  Charleston
           Heights Shopping Center and Arizona Charlie's.*

    10.19  Land Purchase Option Contract dated January 4, 1993 between Linda Ann
           and  Harvey L.  McCray  and  Vernon M. and  Joyce G.  Burkhalter,  as
           seller, and R.Q.  Enterprises,  as buyer; and Wire Transfer Order and
           Closing  Document dated July 26, 1993 between  Arizona  Charlie's and
           First Interstate Bank of Nevada.*

    10.20  Building  Contract dated December 10, 1993 between Arizona  Charlie's
           and Marnell Corrao & Associates.*

    10.21  First  Supplemental  Indenture  dated  January 1, 1995 among  Arizona
           Charlie's, as issuer, Sunset Coin, as guarantor, and IBJ, as trustee.

    10.22  First  Supplemental  Indenture  dated  January 1, 1995 among  Capitol
           Queen,  as issuer,  Arizona  Charlie's,  as  guarantor,  and IBJ,  as
           Trustee.

    10.23  Lease agreement between Arizona Charlie's, Inc. and
           Bruce F. Becker.
----------

* All Exhibits are  incorporated  by  reference  to the  Company's  Registration
Statement  on Form S-1  (33-75808)  declared  effective  by the  Securities  and
Exchange Commission on May 20, 1994.

     (b)  Reports on Form 8-K
          None.
--------------------------------------------------------------------------------
                           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.


                                   ARIZONA CHARLIE'S, INC.


Dated: September 26, 1997          By:  /s/ Bruce F. Becker
                                       ------------------------
                                      Bruce F. Becker, President
                                      and Chief Executive Officer


     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 in the capacities indicated on the 26th day of September, 1997.


        Signature                  Title


/s/ Bruce F. Becker                President, Chief Executive
-------------------------          Officer (Principal
Bruce F. Becker                    Executive Officer) and
                                    Director


/s/ Jerry Griffis                  Controller (Principal
-------------------------          Financial and
Jerry Griffis                      Accounting Officer


/s/ Barry W. Becker                Director
-------------------------
Barry W. Becker


/s/ Ernest A. Becker, III          Director
-------------------------
Ernest A. Becker, III


/s/ Ernest A. Becker, IV           Director
-------------------------
Ernest A. Becker, IV


     Supplemental  Information  to be Furnished  With Reports Filed  Pursuant to
Section 15(d) of the Act by  Registrants  Which Have Not  Registered  Securities
Pursuant to Section 12 of the Act

     The Company has not and does not intend to send to its security holders any
annual  report with respect to the  Registrant's  most recent fiscal year or any
proxy statement,  form of proxy or other proxy soliciting  material with respect
to a meeting of security holders.
--------------------------------------------------------------------------------


           INDEX TO FINANCIAL STATEMENTS AND SCHEDULES



ARIZONA CHARLIE'S, INC.
     Report of Independent Accountants ..............................
     Balance Sheets as of June 30, 1997 and 1996 ....................
     Statements of Operations for the Years Ended June 30, 1997,
     1996 and  1995 .................................................
     Statements of Stockholder's Equity (Deficit) for the Years
     Ended 1997, 1996 and 1995 ......................................
     Statements of Cash Flows for the Years Ended June 30, 1997,
     1996 and  1995 .................................................
     Notes to Financial Statements ..................................

SUNSET COIN, INC.
     Report of Independent Accountants ..............................
     Balance Sheets as of June 30, 1997 and 1996 ....................
     Statements of Income for the Years Ended June 30, 1997,
     1996 and 1995 ..................................................
     Statements of Stockholder's Equity for the Years Ended
     June 30, 1997, 1996 and 1995 ...................................
     Statements of Cash Flows for the Years Ended June 30, 1997,
     1996 and 1995 ..................................................
     Notes to Financial Statements ..................................




ARIZONA CHARLIE'S, INC.

     Schedule II    Valuation and Qualifying Accounts as of
                     and for the Years Ended June 30, 1997,
                1996 and 1995 ...................................

SUNSET COIN, INC.

     Schedule II    Valuation and Qualifying Accounts as of
                     and for the Years Ended June 30, 1997,
                1996 and 1995 ...................................



Schedules  other  than  those  listed  above are  omitted  because  they are not
required or are not applicable,  or because the required information is shown in
the financial statements or notes to the financial  statements.  Columns omitted
from  schedules   filed  have  been  omitted  because  the  information  is  not
applicable.

================================================================================




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

To the Board of Directors
Arizona Charlie's, Inc.


We have audited the financial statements and the financial statement schedule of
Arizona  Charlie's,  Inc. (a wholly owned  subsidiary  of Becker  Gaming,  Inc.)
listed in Item 14(a) of this Form 10-K. These financial statements and financial
statement  schedule are the  responsibility  of the  Company's  management.  Our
responsibility  is to  express  an opinion  on these  financial  statements  and
financial statement schedule based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Arizona Charlie's,  Inc. as of
June 30, 1997 and 1996, and the results of its operations and its cash flows for
each of the three  years in the period  ended June 30, 1997 in  conformity  with
generally  accepted  accounting  principles.  In addition,  in our opinion,  the
financial  statement  schedule referred to above, when considered in relation to
the  basic  financial  statements  taken as a  whole,  presents  fairly,  in all
material respects, the information required to be included therein.

The accompanying  financial  statements have been prepared assuming that Arizona
Charlie's, Inc. ("AC") will continue as a going concern. As more fully described
in  Note 2, AC is in  default  of debt  covenants,  resulting  in a  demand  for
immediate  payment  of the debt and  classification  of such  debt as  currently
payable. AC is also obligated as a guarantor under indebtedness of an affiliated
company,  and such indebtedness is also in default.  AC does not have sufficient
resources to repay the  indebtedness  or honor its guarantee on a current basis.
Management's  plans with respect to these matters are also  described in Note 2.
These matters raise  substantial  doubt about the ability of Arizona  Charlie's,
Inc. to continue as a going  concern.  The final outcome of these matters is not
presently determinable and the June 30, 1997 financial statements of Arizona
Charlie's, Inc. do not include any adjustment that might result from the outcome
of this uncertainty.


/s/ Coopers & Lybrand L.L.P.
----------------------------
Coopers & Lybrand L.L.P.


Las Vegas, Nevada
August 22, 1997, except for Note 2,
as to which the date is
September 5, 1997
================================================================================
                             ARIZONA CHARLIE'S, INC.
               (A Wholly Owned Subsidiary Of Becker Gaming, Inc.)

                                 BALANCE SHEETS
                          As Of June 30, 1997 and 1996
                             (Dollars In Thousands)
                                   ----------
================================================================================

                                     ASSETS

                                                           1997            1996
                                                       --------        --------
Current assets:

   Cash and cash equivalents....................       $  5,481        $  4,591
   Restricted cash, in escrow account...........             10              10
   Trade and other accounts receivable..........            240             473
   Receivable from related parties..............          2,665           1,539
   Inventories .................................            529             575
   Prepaid expenses ............................            985           1,118
                                                       --------        --------
      Total current assets......................          9,910           8,306
                                                       --------        --------
Property and equipment:
   Building and improvements ...................         37,490          37,488
   Furniture and equipment......................         23,916          22,575
   Land improvements ...........................          1,629           1,628
                                                       --------        --------
                                                         63,035          61,691
   Less, accumulated depreciation ..............        (18,303)        (16,218)
                                                       --------        --------
                                                         44,732          45,473
   Land ........................................            208             208
                                                       --------        --------
        Net property and equipment..............         44,940          45,681
                                                       --------        --------
Other assets:
   Receivable from related party, noncurrent....            210             987
   Deposits and other ..........................            544             460
   Notes receivable from related party .........          4,416           4,416
   Financing costs, less accumulated
     amortization of $1,923 (1997)
     and $1,366 (1996)                                    1,937           2,507
                                                       --------        --------

        Total other assets......................          7,107           8,370
                                                       --------        --------

        Total assets ...........................       $ 61,957        $ 62,357
                                                       ========        ========

<PAGE>


            LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)

                                                          1997             1996
                                                      --------         --------

Current liabilities:
  Trade accounts payable......................        $  1,047         $  1,452
  Accounts payable to related parties.........            --                  4
  Accrued expenses ...........................           2,642            2,329
  Accrued interest ...........................           4,522              994
  Management fees due Becker Gaming, Inc......           5,347            4,682
  Notes payable, current portion..............             106              110
  Notes payable to related party..............           3,150            2,250
  Current portion of
     obligations under capital leases.........              12               15
  Current portion of long-term debt ..........             464             --
  Long-term debt classified as
     current due to default
     under covenants .........................          55,000           55,000
                                                      --------         --------

         Total current liabilities............          72,290           66,836

Long-term debt, less current portion..........           1,284             --
Subordinated notes payable to prior
  stockholders ...............................           5,000            5,000
Obligations under capital leases,
  less current portion .........                            29               22
                                                      --------         --------

         Total liabilities....................          78,603           71,858
                                                      --------         --------

Commitments and contingencies

Stockholder's equity (deficit):
  Common stock, no par value, 2,500
     shares authorized, 1,000 shares
     issued and outstanding...................             469              469
  Retained earnings (deficit).................         (17,115)          (9,970)
                                                      --------         --------
         Total stockholder's equity
          (deficit).................                   (16,646)          (9,501)
                                                      --------         --------

         Total liabilities and
         stockholder's equity (deficit).......        $ 61,957         $ 62,357
                                                      ========         ========

The accompanying notes are an integral part of these financial statements.
================================================================================
                             ARIZONA CHARLIE'S, INC.
               (A Wholly Owned Subsidiary Of Becker Gaming, Inc.)

                            STATEMENTS OF OPERATIONS
                             (Dollars In Thousands)
================================================================================

                                                   Year Ended June 30,
                               ------------------------------------------------
                                             1997        1996        1995
                                             ----        ----        ----
Revenues:
  Gaming .............................   $ 47,857    $ 52,831    $ 47,466
  Food and beverage ..................     13,583      13,401      10,877
  Hotel ..............................      3,352       3,208       2,614
  Gift shop ..........................        553         590         577
  Other ..............................        923         948         682
                                         --------    --------    --------

      Gross revenues .................     66,268      70,978      62,216

Less, promotional allowances .........     (8,184)     (7,677)     (5,134)
                                         --------    --------     --------

      Net revenues ...................     58,084      63,301      57,082
                                         --------    --------    --------

Operating expenses:
  Gaming .............................     17,229      18,612      15,359
  Food and beverage ..................     12,337      12,511      11,388
  Hotel ..............................      1,390       1,413       1,377
  Gift shop ..........................        519         475         450
  Advertising and promotion ..........      4,813       4,726       3,837
  General and administrative .........     17,463      17,660      15,358
  Provision for losses on related
   party receivlables ................        220         601       1,592
  Management fees - Becker Gaming,
   Inc., net                                  664       1,396       3,099
  Rent expense paid to related party .        222         217         191
  Depreciation and amortization ......      3,568       3,491       3,373
                                         --------    --------    --------

      Total operating expenses .......     58,425      61,102      56,024
                                         --------    --------    --------
      Operating income (loss).........       (341)      2,199       1,058
                                         --------    --------    --------

Other income (expenses):
  Interest income ....................        272         286         580
  Interest expense ...................     (7,275)     (7,095)     (7,250)
  Interest capitalized ...............        -           -           676
  Other, net .........................        199          51         -
                                         --------    --------    --------
      Total other expenses ...........     (6,804)     (6,758)     (5,994)
                                         --------    --------    --------

    Net (loss)income before income tax     (7,145)     (4,559)     (4,936)

    Provision for income taxes                -           -           -
                                         --------    --------    --------

    Net (loss) income ................   $ (7,145)   $ (4,559)   $ (4,936)
                                         ========    ========    ========


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

================================================================================

                             ARIZONA CHARLIE'S, INC.
               (A Wholly Owned Subsidiary Of Becker Gaming, Inc.)
           STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT) For The Years
                       Ended June 30, 1997, 1996 And 1995
                             (Dollars In Thousands)
================================================================================

                                                           Additional
                                         Common Stock      Paid-in
                                         ------------
                                      Shares     Amount    Capital
                                      ------    -------    ------

Balances, June 30, 1994 ............   1,000    $   469      $-

 Net loss ..........................    --         --        --
                                      ------    -------    ------

Balances, June 30, 1995 ............   1,000        469      --


 Net loss ..........................    --         --        --
                                      ------    -------    ------

Balances, June 30, 1996 ............   1,000        469      --

 Net loss ..........................    --         --        --
                                      ------    -------    ------

Balances, June 30, 1997 ............   1,000    $   469      $-
                                      ======    =======    ======


                                    Retained
                                    Earnings
                                      (Deficit)    Total
                                      -------    -------

Balances, June 30, 1994 ............  $  (475)   $    (6)

 Net loss ..........................   (4,936)    (4,936)
                                      -------    -------

Balances, June 30, 1995 ............   (5,411)    (4,942)

 Net loss ..........................   (4,559)    (4,559)
                                      -------    -------

Balances, June 30, 1996 ............  $(9,970)   $(9,501)

 Net loss ..........................   (7,145)    (7,145)
                                      -------    -------

Balances, June 30, 1997 ............ $(17,115)  $(16,646)
                                      =======    =======

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

================================================================================
                             ARIZONA CHARLIE'S, INC.
               (A Wholly Owned Subsidiary Of Becker Gaming, Inc.)
                            STATEMENTS OF CASH FLOWS
                             (Dollars In Thousands)
================================================================================

                                                       Year Ended June 30,
                                                            --------
                                                    1997       1996       1995
                                                 --------   --------   --------
Cash flows from operating activities:
 Net income (loss) ............................  $ (7,145)  $ (4,559)  $ (4,936)
                                                 --------   --------   --------
 Adjustments  to  reconcile  net  income
   (loss) to net  provided  by (used by)
   operating activities:
  Provision for losses on related
   party receivables ..........................       220        601      1,592

  Depreciation and amortization ...............     3,568      3,491      3,373
  (Gain) loss on sale of equipment ............      (129)        11         (2)
(Increase) decrease in operating assets:
  Receivables .................................       233        185       (387)
  Inventories .................................        46         86       (108)
  Prepaid expenses ............................       322        241       (339)
  Deposits and other ..........................       (12)       (41)       (92)

Increase (decrease) in operating liabilities:
  Accounts payable, net of amounts
   for capital expenditures....................      (409)         3       (144)
  Accrued interest ............................     3,528        (21)       135
  Accrued expenses ............................       313        247        581
  Management fees due to Becker Gaming, Inc. ..       665      1,395      3,099
                                                 --------   --------   --------

    Total adjustments .........................     8,345      6,198      7,708
                                                 --------   --------   --------

    Net cash provided by operating activities .     1,200      1,639      2,772
                                                 --------   --------   --------

Cash flows from investing activities:
  Note receivable issued to CQC ...............      --         --       (1,200)
  Capital expenditures, net of amounts in
   accounts payable ...........................      (501)      (190)   (24,253)
  Increase in receivable from Becker Gaming,
   Inc. ........................................     (569)    (2,065)    (4,154)
  Net (additions to) reductions in restricted
    cash equivalents ..........................      --         --       26,102
  Proceeds from assets sales ..................        67         15        104
                                                 --------   --------   --------

    Net cash used in investing activities .....    (1,003)    (2,240)    (3,401)
                                                 --------   --------   --------

Cash flows from financing activities:
  Proceeds from borrowing under notes payable .       900        --       2,250
  Principal payments on notes payable .........      (193)      (208)      (199)
  Payments under capital lease obligations ....       (14)        (4)       (32)
                                                  --------   --------   --------

    Net cash provided by  (used in) financing
   activities .................................       693       (212)     2,019
                                                 --------   --------   --------
    Net increase (decrease) in cash and cash
   equivalents ................................       890       (813)     1,390

Cash and cash equivalents, beginning of
  the year ....................................     4,591      5,404      4,014
                                                 --------   --------   --------

Cash and cash equivalents, end of the year ....  $  5,481   $  4,591   $  5,404
                                                 ========   ========   ========

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


================================================================================

                             ARIZONA CHARLIE'S, INC.
               (A Wholly Owned Subsidiary Of Becker Gaming, Inc.)

                          NOTES TO FINANCIAL STATEMENTS



1.Summary Of Significant Accounting Policies:

Nature Of Operations
--------------------

Arizona Charlie's, Inc. ("AC" or the "Company") owns and operates
a casino and related hotel in Las Vegas, Nevada.

In connection with the financing transaction more fully discussed in Note 6, the
stockholders  of AC  exchanged  all of their  stock in the  Company for stock of
Becker Gaming, Inc. ("BGI") (the  "Reorganization") and, effective June 1, 1994,
AC became a wholly owned  subsidiary of BGI. BGI has no  independent  activities
other than providing  management and  administrative  services to, and exploring
and developing  business  opportunities  for its  subsidiaries,  and serves as a
holding company for AC and the following entities:

     * Capitol Queen & Casino,  Inc. ("CQC"),  a Missouri  corporation formed to
       develop a riverboat casino in Jefferson City, Missouri (the "Capitol 
       Queen").

     * Sunset Coin, Inc. ("SC"), a Nevada corporation which operates a Las Vegas
       gaming machine route and service business.

     * Becker Gaming Group ("BGG"), a Nevada  corporation  which,  together with
       its wholly owned subsidiary Innerout, Inc., owns and operates restaurants
       and bars in Las Vegas under the  "Charlie's"  name,  each of which offers
       gaming machines.


Subsequent  to the  Reorganization,  certain  overhead  expenses  of the Company
(primarily related to executive  compensation),  have been eliminated.  However,
effective  June 1, 1994,  the Company is required to pay a management fee to BGI
in connection  with  executive  services  equal to a percentage of the Company's
gross  operating  revenues.  Under the AC Indenture,  no management fees will be
paid by AC until AC has attained a specified fixed charge coverage ratio of 2.25
to 1. However, such fees accrue without interest, until paid. See Note 9 of AC's
Notes to Financial Statements.


Gaming Revenue
--------------

In accordance with industry  practice,  the Company recognizes as gaming revenue
the net win from gaming activities,  which is the difference between gaming wins
and losses.


Promotional Allowances
----------------------

The retail  value of hotel  accommodations,  food,  beverage and gift shop items
provided to  customers  without  charge is included in gross  revenues  and then
deducted as  promotional  allowances  to arrive at net  revenues.  The estimated
costs of providing such  promotional  allowances  have been classified as gaming
expenses through interdepartmental allocations, as follows:
<TABLE>
                                                Years Ended June 30,
<CAPTION>
                                          1997             1996             1995
                                          ----             ----             ----
<S>                                 <C>              <C>              <C>
Hotel .......................       $  349,000       $  261,000       $  164,000
Food and Beverage ...........        4,094,000        3,824,000        2,260,000
                                     ---------        ---------        ---------

                                    $4,443,000       $4,085,000       $2,424,000
                                    ==========       ==========       ==========
</TABLE>



Cash Equivalents And Concentration Of Credit Risk
-------------------------------------------------

The Company considers all highly liquid investments with an original maturity of
three  months or less to be cash  equivalents.  The  Company has cash on deposit
with financial institutions in excess of federally insured amounts.

Inventories
-----------

Inventories are valued at the lower of cost (first-in, first-out) or market.

Property And Equipment
----------------------

Property and equipment are stated at cost.  Maintenance  and repairs are charged
to expense when incurred.  Upon  retirement or disposal of assets,  the cost and
accumulated depreciation are eliminated from the accounts and the resulting gain
or loss is credited or charged to income, as appropriate.

Building,  building improvements and land improvements are depreciated using the
straight-line method over estimated useful lives of 5 to 40 years. Furniture and
equipment are depreciated using straight-line and declining balance methods over
estimated useful lives of 5 to 10 years.

Financing Costs
---------------

Costs  associated  with the issuance of debt are deferred and amortized over the
life of the related indebtedness using the effective interest method.

Preopening Expense
------------------

Certain preopening costs,  consisting  principally of personnel costs,  training
and other costs directly  associated  with the opening of a new  hotel-casino or
significant  expansions of the existing hotel-casino are capitalized and charged
to expense over a period not to exceed one year  following the  commencement  of
related operations. During the year ended June 30, 1994, the Company capitalized
$27,000 of preopening  costs which were amortized during the year ended June 30,
1995 after the expansion was completed. During the years ended June 30, 1997 and
1996, the Company did not capitalize any preopening costs.

Federal Income Taxes
--------------------

Effective January 1, 1994, the Company terminated its S corporation election and
adopted  Statement of Financial  Accounting  Standards No. 109,  "Accounting for
Income Taxes" ("SFAS 109").  Under SFAS 109 deferred tax assets and  liabilities
are  recognized  for  the  expected  future  tax  consequences  attributable  to
differences  between the financial statement carrying amounts of existing assets
and  liabilities  and their  respective  tax  bases.  Deferred  tax  assets  and
liabilities  are measured  using enacted tax rates  expected to apply to taxable
income in the years in which  those  temporary  differences  are  expected to be
recovered  or settled.  Under SFAS 109,  the effect on  deferred  tax assets and
liabilities  of a change in tax rates is recognized in income in the period that
includes the enactment date.

In connection  with the  Reorganization,  beginning June 1, 1994, the Company is
included in the  consolidated  federal income tax returns filed by BGI. AC's tax
allocation  is based on the amount of tax it would  incur if it filed a separate
return.

Reclassifications
-----------------

Certain amounts in the 1995 and 1996 financial statements have been reclassified
to conform with the 1997 presentation.

Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial  statements and accompanying notes.
Actual results could differ from those estimates,  particularly  with respect to
the matters discussed in Note 2.


2. CQC   Gaming   License,  Default   Under   Indebtedness,
   Management's Plans, And Going Concern:

CQC was formed to develop,  own and operate the "Capitol Queen" riverboat casino
and related land-based  facilities in Jefferson City, Missouri. On September 28,
1994, CQC was notified that its application for a gaming license was rejected by
the Missouri Gaming Commission (the "Commission").  At the time CQC was notified
of the Commission's decision,  construction of the riverboat under contract with
a shipbuilder was almost completed.  CQC had also obtained the necessary permits
for the  land-based  development  portion of the project and  performed  certain
dredging and other site preparation work. Immediately following the Commission's
decision,  management  temporarily  suspended further development of the Capitol
Queen project,  pending an appeal of the decision and legal remedies potentially
available to the Company.

On November 7, 1995,  voters in Jefferson City rejected an ordinance  permitting
riverboat gambling, reversing the vote of an earlier election in which Jefferson
City voters approved riverboat gambling.  Management  subsequently abandoned the
project  and is  currently  looking  for  alternative  uses  for the  riverboat,
including opportunities to sell or lease it to another operator.

CQC financed the Capitol Queen project  through the issuance of  $40,000,000  in
principal  amount of 12% First  Mortgage  Notes due  November 15, 2000 (the "CQC
Notes").  As of January  1,  1995,  the  indenture  governing  the CQC Notes was
amended to (i)  eliminate  CQC's  obligation  to construct  and open the Capitol
Queen and (ii) permit a two-step  purchase of the CQC Notes at 101% of principal
plus  accrued  and  unpaid  interest  from a sale  of  assets.  The  first  step
repurchase of  $20,000,000  principal  amount of the CQC Notes (plus accrued and
unpaid  interest) was completed on January 17, 1995, with unexpended  funds from
the project escrow account, and an aggregate of $20,000,000  principal amount of
the CQC Notes remained  outstanding.  However, the dates by which CQC previously
agreed  with the  holders  of the CQC Notes to effect the sale of its assets and
repurchase  the remaining  CQC Notes have passed,  and CQC is thus in default of
the amended covenants.

The remaining CQC Notes require annual interest payments of $2,400,000,  payable
in equal installments  semi-annually on May 15 and November 15. CQC was not able
to make its scheduled  interest payments of $1,200,000 on November 15, 1995, May
15, 1996,  November 15, 1996 and May 15, 1997 and AC (which has  guaranteed  the
CQC Notes as more fully described below) did not have available funds to advance
on behalf of CQC.

Concurrent with the issuance of the CQC Notes, AC completed a private  placement
debt financing of  $55,000,000  in principal  amount of 12% First Mortgage Notes
due November 15, 2000 (the "AC Notes").  The AC Notes  require  annual  interest
payments of $6,600,000,  payable in equal  installments  semi-annually on May 15
and  November  15. AC was not able to make its  scheduled  interest  payment  of
$3,300,000  on May 15,  1997 and SC (which has  guaranteed  the AC Notes as more
fully described  below) did not have available funds to advance on behalf of AC.
AC is also in  default  of  certain  covenants  under the AC Notes as more fully
described in Note 6. AC is  restricted  from selling  assets under the covenants
governing the AC Notes and management believes that access to additional capital
from other sources is restricted as result of the above-described circumstances.
AC does not have sufficient financial resources (including a guarantee of the AC
Notes by SC, as more fully  described  below) to repay the AC Notes on a current
basis and satisfy its guarantee  obligation (as more fully described below) with
respect to the CQC Notes.

The CQC Notes are  guaranteed by AC (which  guarantee is subject to release only
upon  licensing of the Capitol Queen,  which is not expected).  The AC Notes are
guaranteed by SC (which  guarantee is subject to release upon  completion of the
Expansion, which management believes has been satisfied, and the attainment of a
fixed-coverage  ratio  by AC of  2.25  to 1  following  the  completion  of  the
Expansion, which has not been satisfied). The amount and extent of AC's guaranty
of the CQC Notes is in dispute. Legal counsel has advised management that, under
the  terms of CQC  indenture  regarding  fraudulent  conveyance,  the  guarantee
liability of AC is not expected to be material.

On July 3, 1997 CQC received a notice of  acceleration  (the  "Notice") from the
trustee and collateral agent for the CQC Notes.  Pursuant to section 6.02 of the
indenture  governing the CQC Notes,  due to certain  violations of the indenture
(as  more  fully  described  above),  all  of  the  outstanding  CQC  Notes  are
immediately  due and  payable  together  with all  accrued  and unpaid  interest
thereon.

On September 5, 1997, AC received a notice of acceleration  from the trustee and
collateral  agent for the AC Notes.  Pursuant to section  6.02 of the  indenture
governing  the AC Notes,  due to certain  violations  of the  indenture (as more
fully  described in Note 6), all of the outstanding AC Notes are immediately due
and payable together with all accrued and unpaid interest thereon.

CQC continues to market its riverboat assets to prospective  buyers.  Management
of the Company, AC and CQC are currently undergoing discussions with an informal
committee  representing  the  holders  of  the  AC  Notes  and  CQC  Notes  (the
"Bondholder  Committee")  regarding  a  proposed  restructuring  plan.  Based on
current  market  conditions,  management  does not expect that CQC will generate
sufficient  funds  through  the  sale of its  assets  to  repurchase  all of the
outstanding CQC Notes. The proposed  restructuring plan therefore  contemplates,
amongst other terms and conditions,  (i)  liquidation of CQC's remaining  assets
for the benefit of the CQC  bondholders,  (ii) a limited  cash  payment by AC as
full and complete satisfaction of AC's guaranty of the CQC Notes, and (iii) AC's
issuance of a reduced amount of new notes as full and complete  satisfaction  of
the existing AC Notes.  However,  no  satisfactory  offers for the riverboat are
currently  available,  and no agreement  has been  reached  with the  Bondholder
Committee regarding the proposed restructuring plan. Accordingly,  these matters
raise  substantial doubt about the ability of AC to continue as a going concern.
The final outcome of these matters is not  presently  determinable  and the June
30, 1997  financial  statements of AC do not include any  adjustment  that might
result from the outcome of this uncertainty.



3.Supplemental Cash Flow Information:

The following are  supplemental  disclosures  of cash flow  information  for the
years ended June 30, 1997, 1996 and 1995:


<TABLE>
<CAPTION>
                                               1997         1996         1995
                                               ----         ----         ----
<S> ..................................   <C>          <C>          <C>
Interest paid, net of amounts
  capitalized ........................   $3,747,000   $7,116,000   $7,115,000
                                         ==========   ==========   ==========

Capitalized lease obligations
  incurred ...........................   $   17,000   $   34,000   $    9,000
                                         ==========   ==========   ==========
Assets acquired through issuance of
  long-term debt ................ ....   $1,748,000   $     --     $     --
                                         ==========   ==========   ==========
Net transfer of assets and related
  liabilities from Becker Gaming, Inc.   $     --     $     --     $   25,000
                                         ==========   ==========   ==========
</TABLE>

4.Accrued Expenses:

Major classes of accrued  expenses  consist of the following as of June 30, 1997
  and 1996:

<TABLE>
<CAPTION>
                                                1997         1996
                                                ----         ----

     <S>                                  <C>          <C>
     Wages payable and accrued salaries   $  824,000   $  811,000
     Accrued vacation .................      336,000      306,000
     Group insurance ..................      447,000      352,000
     Gaming taxes .....................      221,000      239,000
     Payroll and other taxes ..........      356,000      405,000
     Charlie Card slot club liability .      221,000            -
     Progressive slot and table games .
      liability .......................      124,000       88,000
     Other accrued expenses ...........      113,000      128,000
                                             -------      -------
                                          $2,642,000   $2,329,000
                                          ==========   ==========
</TABLE>


5.Notes Payable:

Notes payable consist of the following as of June 30, 1997 and 1996:
<TABLE>
<CAPTION>
                                                           1997         1996
                                                           ----         ----
<S>                                                  <C>          <C>
 Related parties:
      Notes payable to SC with interest at 5.56%
      uncollateralized and due May 1998 ............ $2,250,000   $2,250,000

      Note payable to SC with interest at 4.50%
      uncollateralized and due January, 1998 .....      900,000         -

 Nonrelated parties:
      5.96% note payable in monthly
      installments of $21,616, including interest,
      through December, 1997, uncollateralized ....  $  106,000   $  110,000
                                                     ----------   ----------

                                                      3,256,000    2,360,000

                   Less current portion ...........  (3,256,000)  (2,360,000)

                                                     $    -       $     -
                                                     ==========   ==========
</TABLE>

6.Long-Term Debt:

Long-term debt consists of the following as of June 30, 1997 and 1996:
<TABLE>
<CAPTION>
                                                      1997          1996
                                                      ----          ----
<S>                                            <C>           <C>
12.75% note payable with interest and
     principle due in monthly installments
     through May, 2002 collateralized by
     various slot equipment of AC and
     personal guarantees of the
     stockholders BGI ......................   $ 1,540,000   $     -

Othernotes  payable due in monthly  principle  
     only  installments  through June,
     1998 collateralized by slot
     machine equipment of the company ......       208,000         -

12%  First  Mortgage  Notes Due November 15, 
     2000 (the "AC Notes") with interest
     payable semiannually classified as 
     currently payable due to defaults under
     covenants (see below) .................    55,000,000    55,000,000
                                                ----------    ----------
                                                56,748,000    55,000,000

                    Less current portion ...   (55,464,000)  (55,000,000)

                                               $ 1,284,000   $     -
                                               ===========   ============
</TABLE>


On November 18, 1993, the Company completed a private placement of the AC Notes.
The  offering  generated  net  proceeds  of  approximately   $33,684,000  (after
deducting  debt  financing  costs and  approximately  $16,791,000  used to repay
principal  and accrued  interest to a bank which was due and payable on November
18,  1993).  The AC Notes are  guaranteed  by SC (which  guarantee is subject to
release upon  completion of the  Expansion  which  management  believes has been
satisfied and the attainment of a fixed coverage ratio by the Company of 2.25 to
1, following the completion of the Expansion,  which has not been satisfied) and
are  collateralized  by a first mortgage on  substantially  all of assets of the
Company, including the Expansion.

As of June 30,  1997,  AC is in  default  of certain  debt  covenants  under the
Indenture  governing  the AC Notes.  These  covenant  violations  include  (i) a
failure  to meet a minimum  Fixed  Charge  Coverage  ratio,  as  defined  in the
Indenture;  (ii)  advances by AC to Becker  Gaming,  Inc.  which exceed  amounts
allowed for under the Indenture  (which advances remain  outstanding at June 30,
1997);  (iii)  beginning  in the fourth  quarter of fiscal 1997,  exceeding  the
amount of new indebtedness allowed for under the Indenture;  (iv) beginning with
the quarter  ending  December 31, 1995, AC has not met the Minimum  Tangible Net
Worth Ratio of 1.5 to 1.0, as defined in the Indenture;  and (v) AC did not make
its required  semi-annual  interest  payment of  $3,300,000  on May 15, 1997. In
addition,  beginning with the quarter  ending  December 31, 1995, AC has not met
the Minimum Tangible Net Worth requirement  defined in the Indenture.  Under the
terms  of the  Indenture,  AC is  technically  required  to  offer  to buy  back
$33,000,000  of the  outstanding AC Notes at June 30, 1997 due to the failure to
meet this covenant,  increasing by $5,500,000  each fiscal  quarter.  AC has not
made such  offer and does not  intend  to do so while the  discussions  with the
Bondholder  Committee  are in  process.  As a  result  of these  defaults  under
covenants  and demand for payment  made by the  Trustee,  the AC Notes have been
classified  as  currently  payable  in the  accompanying  financial  statements.
Management's plans are more fully described in Note 2.

The Indenture governing the AC Notes limits the use of the net proceeds from the
offering to fund the cost of the  Expansion.  The proceeds were placed in escrow
with a trustee pending draw- downs for qualifying  project  expenditures and are
classified as restricted cash, in escrow account, in the accompanying  financial
statements. The AC Notes are not subject to mandatory redemption,  except upon a
change of control,  decline in tangible net worth, or certain assets sales,  all
as defined in the  Indenture.  The Company has the option to redeem the AC Notes
at a premium of 106%  beginning on November 15, 1997,  declining to par value on
November 15, 1999.

The Indenture contains covenants that, among other things,  limit the ability of
the Company and, in certain cases,  SC, to pay dividends or management  fees, or
incur additional  indebtedness.  The Indenture also requires the Expansion to be
completed in a specified manner and time frame,  which  management  believes has
been achieved.

In connection with AC's guarantee of the CQC Notes, the Indenture  governing the
CQC Notes  imposes  certain  restrictive  covenants  on the  Company,  including
minimum cash flow and net worth  requirements  and  restrictions  on  additional
borrowings and distributions of earnings.

Maturities of long-term debt at June 30, 1997 (including the AC Notes which have
been classified as current) are as follows:


<TABLE>
<S>                     <C>
      1998              $55,464,000
      1999                  270,000
      2000                  304,000
      2001                  348,000
      2002                  362,000
Thereafter                      -
                        -----------

                        $56,748,000
                        ===========
</TABLE>


7.Income Taxes:

For the fiscal years ended June 30, 1997,  1996 and 1995,  the Company  incurred
net operating  losses for federal income tax purposes,  and  accordingly,  these
financial statements do not include a provision for federal income taxes.

The components  included in determining the provision for income taxes are shown
below for the years ended June 30, 1997, 1996 and 1995:

<TABLE>
<CAPTION>
                                             1997           1996           1995
                                             ----           ----           ----
<S>                                   <C>            <C>            <C>
Tax provision at federal income tax
     statutory rate ...............   $(2,429,000)   $(1,550,000)   $(1,678,000)

Increase (decrease) in taxes
     resulting from:
     Unrecognized tax benefit from
     net operating losses .........     2,373,000      1,489,000      1,633,000
     Other ........................        56,000         61,000         45,000
                                           ------         ------         ------

     Income tax provision             $      --      $      --      $      --
                                      ===========    ===========    ===========
</TABLE>


Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes,  and the amounts used for income tax purposes. The major components of
deferred  tax  liabilities  and  assets  as of June 30,  1997  and 1996  were as
follows: <TABLE> <CAPTION>
                                                  1997           1996
                                                  ----           ----
Liabilities
-----------
<S>                                        <C>            <C>
Depreciation ...........................   $   960,000    $   542,000
                                           -----------    -----------


Assets
------
Allowances for bad debts ...............       820,000        745,000
Federal net operating loss carryforwards     5,836,000      3,119,000
                                             ---------      ---------

         Total deferred tax assets .....     6,656,000      3,864,000

Valuation allowance ....................    (5,696,000)    (3,322,000)
                                            ----------     ----------

         Net deferred taxes ............   $      --      $      --
                                           ===========    ===========
</TABLE>

As of June 30, 1997, the Company had a federal net operating  loss  carryforward
of approximately $17,165,000 which expires between 2009 and 2012.

8.Leases And Commitments:

The Company has entered into capital lease agreements whereby the Company leases
various equipment under three-and five-year leases which expire at various dates
through 2001.

Property and  equipment  includes the  following  property  leased under capital
leases as of June 30, 1997 and 1996:

<TABLE>
<CAPTION>
                                    1997        1996
                                    ----        ----
<S>                             <C>         <C>
Equipment ...................   $ 60,000    $ 43,000
Less accumulated depreciation     (9,000)     (3,000)
                                  ------      ------

                                $ 51,000    $ 40,000
                                ========    ========
</TABLE>


The Company leases office space under a 10-year  operating lease,  which expires
in 1998, from Charleston  Heights  Shopping Center  ("CHSC"),  a company related
through common ownership, as more fully described in Note 9.

Future  minimum  lease  payments,  by year and in the  aggregate,  under capital
leases and  noncancellable  operating  leases with initial or remaining terms of
one year or more consist of the following at June 30, 1997:

<TABLE>
<CAPTION>
                                                 Capital Lease  Operating Leases
                                                 -------------  ----------------
<S>                                                    <C>          <C>
1998                                                   15,000       $226,000
1999                                                   15,000           --
2000                                                   14,000           --
2001                                                    4,000           --
----                                                    -----          -----

       Total minimum lease payments ..........       $ 48,000       $226,000
                                                                    ========

Less amount representing interest ............         (7,000)
                                                        -----
       Present value of net minimum
        lease payments .......................         41,000

Less current portion .........................        (12,000)
                                                      -------

       Obligations under capital leases              $ 29,000
                                                     ========
</TABLE>

Aggregate  rental  expense under  operating  leases for the years ended June 30,
1997, 1996 and 1995 was $222,000, $217,000 and $191,000, respectively.

The  following  balances due to or from related  parties  existed as of June 30,
1997 and 1996. The identified related parties are stockholders of the Company or
affiliated companies related through common ownership.

<TABLE>
                                  June 30, 1997
================================================================================
<CAPTION>
                                   Current     Noncurrent      Notes
                               Receivables    Receivables    Receivable
                               -----------    -----------   -----------
<S>                            <C>            <C>           <C>
Former Stockholders of the
Company .....................  $    22,000    $   165,000          --
BGI .........................    2,584,000           --     $ 4,416,000
Sunset Coin .................      (63,000)          --            --
Becker Vending ..............      (15,000)          --            --
Becker Enterprises ..........        1,000           --            --
CQC .........................    1,213,000           --       1,200,000
BGG:
    Charlie's Lakeside ......        5,000           --            --
    Charlie's Bar ...........       16,000           --            --
    Cantina Charlie's .......       19,000           --            --
    Cariba Charlie's ........       26,000         45,000          --
    Charlie's Saloon ........       11,000           --            --
    Charlie's Down Under ....       59,000           --            --

                               -----------    -----------   -----------
Total .......................    3,878,000        210,000     5,616,000

Less:  Allowance for doubful
        collection of amounts
        due from CQC ........   (1,213,000)          --      (1,200,000)
                               -----------    -----------   -----------


                               $ 2,665,000    $   210,000   $ 4,416,000
                               ===========    ===========   ===========
</TABLE>
<TABLE>
<CAPTION>
                                   Management
                                    Fee and                  Subordinated
                                    Accounts      Notes        Notes
                                    Payable      Payable      Payable
                                    ----------   ----------   ----------
<S>                                <C>          <C>          <C>
Former Stockholders of the
Company .........................   $     --     $     --     $5,000,000
BGI .............................    5,347,000         --           --
Sunset Coin .....................         --      3,150,000         --
Becker Vending ..................         --           --           --
Becker Enterprises ..............         --           --           --
CQC .............................         --           --           --
BGG:
    Charlie's Lakeside ..........         --           --           --
    Charlie's Bar ...............         --           --           --
    Cantina Charlie's ...........         --           --           --
    Cariba Charlie's ............         --           --           --
    Charlie's Saloon ............         --           --           --
    Charlie's Down Under ........         --           --           --

                                    ----------   ----------   ----------
Total ...........................    5,347,000    3,150,000    5,000,000

Less:  Allowance for doubful
        collection of amounts
        due from CQC ............         --           --           --

                                    ----------   ----------   ----------
                                    $5,347,000   $3,150,000   $5,000,000
                                    ==========   ==========   ==========
</TABLE>
<TABLE>
                                  June 30, 1996
================================================================================
<CAPTION>
                                     Current        Noncurrent       Notes
                                    Receivables     Receivables    Receivable
                                    -----------    -----------   -----------

<S>                                 <C>            <C>           <C>
Former Stockholders of the
Company ..........................  $    14,000    $   165,000   $      --
BGI ..............................    1,400,000        747,000     4,416,000
Sunset Coin ......................       47,000           --            --
Becker Vending ...................         --             --            --
Becker Enterprises ...............        1,000           --            --
CQC ..............................      993,000           --       1,200,000
BGG:
    Charlie's Lakeside ...........       (7,000)          --            --
    Charlie's Bar ................       10,000           --            --
    Cantina Charlie's ............       11,000           --            --
    Cariba Charlie's .............       13,000         75,000          --
    Charlie's Saloon .............        6,000           --            --
    Charlie's Down Under .........       44,000           --            --
                                    -----------    -----------   -----------
Total ............................    2,532,000        987,000     5,616,000
Less:  Allowance for doubful
        collection of amounts
        due from CQC .............     (993,000)          --      (1,200,000)
                                    -----------    -----------   -----------
                                    $ 1,539,000    $   987,000   $ 4,416,000
                                    ===========    ===========   ===========
</TABLE>
<TABLE>
<CAPTION>

                                     Management Fee             Subordinated
                                      and Accounts    Notes        Notes
                                         Payable     Payable      Payable
                                      ----------   ----------   ----------

<S>                                   <C>          <C>          <C>
Former Stockholders of the
Company ...........................   $    4,000   $     --     $5,000,000
BGI ...............................    4,682,000         --           --
Sunset Coin .......................         --     $2,250,000         --
Becker Vending ....................         --           --           --
Becker Enterprises ................         --           --           --
CQC ...............................         --           --           --
BGG:
    Charlie's Lakeside ............         --           --           --
    Charlie's Bar .................         --           --           --
    Cantina Charlie's .............         --           --           --
    Cariba Charlie's ..............         --           --           --
    Charlie's Saloon ..............         --           --           --
    Charlie's Down Under ..........         --           --           --

                                      ----------   ----------   ----------
Total .............................    4,686,000    2,250,000    5,000,000

Less:  Allowance for doubful
        collection of amounts
        due from CQC ..............         --           --           --
                                      ----------   ----------   ----------


                                      $4,686,000   $2,250,000   $5,000,000
                                      ==========   ==========   ==========
</TABLE>


CHSC owns the land on which the  Company's  administrative  offices  are located
and,  prior to the  Reorganization,  CLC owned  the land on which the  Company's
operations  are  located.  Rent  expense  paid to CHSC and CLC and  included  in
results of operations of the Company was $222,000, $217,000 and $191,000 for the
years ended June 30, 1997, 1996 and 1995, respectively.  The rental fees include
the cost of insurance, taxes and common area maintenance on the land.

Receivables from BGG, stockholders of the Company and BGI bear interest at 8.0%,
4.5% and 6.0%, respectively.  Interest income from related parties was $265,000,
$245,000  and  $168,000  for the  years  ended  June 30,  1997,  1996 and  1995,
respectively.

In  anticipation  of  the  January  1,  1994  termination  of  the  Company's  S
corporation election,  on December 24, 1993, the Company distributed  $5,000,000
to its stockholders,  representing previously taxed,  undistributed income. This
distribution  was immediately  loaned back to the Company by the stockholders in
the form of subordinated notes payable, which bear interest at an annual rate of
10%, payable monthly, with the entire principal amount due on January 1, 2001.

During the years ended June 30, 1995 and 1997, the Company  borrowed  $2,250,000
and $900,000,  respectively  from SC for general  working capital  purposes.  As
described in Note 5 these  obligations are due in 1998 with interest  payable at
5.56% and 4.50%, respectively.

Interest expense  incurred under related party notes was $651,000,  $633,000 and
$550,000 for the years ended June 30, 1997, 1996 and 1995,  respectively.  As of
June 30, 1997 and 1996 accrued  interest  expense  under related party notes was
$397,000 and $169,000, respectively.

In May, 1995, CQC borrowed $1,200,000 from AC in order to have funds to make the
semi-annual interest payment due on the CQC Notes. The borrowing was executed as
an  uncollateralized  note payable to AC due May, 1996 with interest at the rate
of  5.56%.  Due to the  current  financial  condition  of  CQC,  management  has
determined  that  collectibility  of the note, and of other advances of $301,000
(1995),   $692,000  (1996)  and  $220,000  (1997)  made  to  CQC,  is  doubtful.
Accordingly, provisions were made to fully reserve the advances and note payable
and losses  have been  recorded  in the  accompanying  financial  statements  as
payments under guarantee obligations.

The Company has advanced to BGI an aggregate of approximately $6,364,000 to fund
BGI's  operating  expenses from June 1994 through June 1997 of which  $4,416,000
represented  notes receivable that are interest bearing and have been classified
as noncurrent  based on  management's  expectation  for the timing of repayments
from BGI. At June 30, 1997, accrued interest  receivable on the interest bearing
portion of the advances to BGI totaled $636,000. The matters described in Note 2
raise substantial doubt about the ability of BGI's principal  subsidiaries (and,
thus BGI) to continue as a going concern. Accordingly, management of the Company
believes it is reasonably possible that a portion, or the entire balance, of the
notes  receivable from BGI will be  uncollectible.  However,  an estimate of the
loss cannot  presently  be  determined  and no  adjustment  has been made to the
carrying value or classification of the notes receivable at June 30, 1997.

At June 30,  1997,  the Company  owed BGI  approximately  $5,347,000  in accrued
management fees. Under the terms of the indenture  governing the AC Notes, these
fees  cannot be paid to BGI until a specified  fixed  charge  coverage  ratio is
achieved.

Due to the decision to suspend development of CQC's riverboat casino project and
sell its assets,  the majority of BGI's management and  administrative  services
are  anticipated to benefit AC in the future.  Accordingly,  in late March 1995,
BGI  transferred   approximately   40  employees   involved  in  accounting  and
administrative  functions  from  BGI  to AC.  These  employees  were  originally
employees  of  AC  and  were   transferred  to  BGI  in  June  1994,   when  the
Reorganization  became effective.  In connection with this transfer,  in October
1995, the Company  temporarily reduced the amount of the BGI management fee to a
net 1.0% of AC's gross revenues (previously 5.0% of gross revenues) based on the
reduction  in services it will  receive  from BGI in the  future.  Such  reduced
management fees continue to be in effect at June 30, 1997.

The Company's  president operates a sole  proprietorship  under the name "Becker
Vending" which places  arcade,  cigarette,  music and other vending  machines at
Arizona  Charlie's.  The Company  provides  nominal  collection  and  accounting
services to Becker Vending in connection with these  machines.  The Company does
not receive any rental fee or other  payment from Becker  Vending in  connection
with these  agreements.  Becker  Vending  retains all amounts  deposited  in its
vending machines. Becker Vending also sells to the Company cigarettes, candy and
similar items for resale in the Arizona Charlie's gift shop.


10.Contingencies:

The  Company  is subject to various  litigation  and claims  which  arise in the
ordinary  course  of  its  business.   In  the  opinion  of  management,   after
consultation with legal counsel,  the disposition of all such pending litigation
and  claims  will  not  have a  material  effect  on the  Company's  results  of
operations, cash flows, or financial position.

11.    Defined Contributions Plan:

The Company has adopted a 401(k) Defined Contribution Plan (the "Plan") covering
substantially all of its employees.  Eligible employees may contribute up to 10%
of their annual compensation to the Plan, up to certain limits prescribed by the
Internal  Revenue Service.  The Company matches 25% of each eligible  employee's
contributions up to a maximum of 6% of their individual  earnings.  In addition,
the Company  contributes an amount equal to 2% of each  participant's  earnings.
The Plan went into effect July 1, 1990.

The Company  recorded  charges  for  contributions  of  $548,000,  $495,000  and
$395,000 for the years ended June 30, 1997, 1996 and 1995, respectively.


12.  Fair Value of Financial Instruments:

The  estimated  fair  value of the  Company's  financial  instruments  have been
determined by the Company using  available  market  information  and appropriate
valuation  methodologies.  The  carrying  amounts of cash and cash  equivalents,
accounts  receivable,  accounts  payable,  capital lease  obligations  and notes
payable   approximate  their  respective  fair  values  due  to  the  short-term
maturities and approximate market interest rates of these instruments.

Management is unable to determine a fair value for the  outstanding  $55,000,000
principal  amount of 12% First  Mortgage  Notes due November 15, 2000 of Arizona
Charlie's, Inc. (the "AC Notes") or the outstanding $20,000,000 principal amount
($17,908,000  carrying  amount at June 30, 1997) of 12% First Mortgage Notes due
November 15, 2000 of Capitol Queen and Casino, Inc. (the "CQC Notes"), which are
guaranteed  by AC. As of June 30,  1997 the  effective  interest  rate of the AC
Notes  was 12%.  It is not  practicable  to  determine  the fair  value of these
financial   instruments  due  to  the  debt  covenant   violations  and  related
uncertainties  involved  in  negotiations  with the  holders of AC Notes and CQC
Notes, as more fully discussed in Note 2.

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


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


To the Board of Directors
Sunset Coin, Inc.


We have audited the financial statements and the financial statement schedule of
Sunset Coin, Inc. (a wholly owned  subsidiary of Becker Gaming,  Inc.) listed in
Item 14(a) of this Form 10-K. These financial statements and financial statement
schedule are the responsibility of the Company's management.  Our responsibility
is to express an opinion on these financial  statements and financial  statement
schedule based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of Sunset Coin, Inc. as of June
30, 1997 and 1996, and the results of its operations and its cash flows for each
of the  three  years in the  period  ended  June  30,  1997 in  conformity  with
generally  accepted  accounting  principles.  In addition,  in our opinion,  the
financial  statement  schedule referred to above, when considered in relation to
the  basic  financial  statements  taken as a  whole,  presents  fairly,  in all
material respects, the information required to be included therein.

The accompanying financial statements and financial statement schedule have been
prepared  assuming that Sunset Coin,  Inc. will continue as a going concern.  As
discussed in Note 2 to the financial  statements,  the Company is obligated as a
guarantor of certain of the  indebtedness of Arizona  Charlie's,  Inc. ("AC"), a
company affiliated through common ownership, and such indebtedness is in default
of certain of its covenants  and demand has been made for  immediate  payment of
the debt. AC is currently  negotiating a restructuring of this  indebtedness and
management's  plans  are  described  in Note 2.  Should  AC be  unsuccessful  in
modifying  this  indebtedness,  the Company may be required to then  satisfy its
guarantee  obligation.  The Company does not have sufficient resources available
to satisfy such  obligation.  These  matters raise  substantial  doubt about the
ability of Sunset Coin,  Inc. to continue as a going concern.  The final outcome
of these matters is not presently  determinable  and the June 30, 1997 financial
statements of Sunset Coin,  Inc. do not include any adjustment that might result
from the outcome of this uncertainty.


/(s)/ Coopers & Lybrand L.L.P.
------------------------------
Coopers & Lybrand L.L.P.

Las Vegas, Nevada
August 22, 1997, except for Note 2,
as to which the date is
September 5, 1997
================================================================================

                                SUNSET COIN, INC.
               (A Wholly Owned Subsidiary Of Becker Gaming, Inc.)

                                 BALANCE SHEETS
                          As Of June 30, 1997 And 1996
                             (Dollars In Thousands)
================================================================================

                       ASSETS
                                                             1997          1996
                                                          -------       -------

Current assets:
  Cash .............................................      $   707       $ 1,122
  Current portion of notes receivable, net .........          222           117
  Notes receivable from related party ..............        3,150         2,250
  Advances to related parties ......................          312           111
  Other receivables ................................           27           105
  Interest receivable from related party ...........          313           169
  Prepaid expenses .................................           45            46
                                                          -------       -------
      Total current assets .........................        4,776         3,920
                                                          -------       -------
Property and equipment:

  Building and leasehold improvements ..............          174           174
  Furniture, fixtures and equipment ................        3,068         2,885
                                                          -------       -------

                                                            3,242         3,059
  Less, accumulated depreciation ...................       (1,604)       (1,370)
                                                          -------       -------
         Net property and equipment ................        1,638         1,689
                                                          -------       -------

Notes receivable, less current portion, net ........           18           194
Other assets, less accumulated amortization
  of $37 (1997) and $24 (1996) .....................           75            88
                                                          -------       -------

      Total other assets ...........................           93           282
                                                          -------       -------

      Total assets .................................      $ 6,507       $ 5,891
                                                          =======       =======


  LIABILITIES AND STOCKHOLDER'S EQUITY
                                                                 1997       1996
                                                               ------     ------

Current liabilities:
  Trade accounts payable .................................     $   13     $   44
  Accrued expenses .......................................         39         55
  Accrued taxes payable to related party .................        779        553
  Current portion of long- term debt .....................        322        279
                                                               ------     ------
        Total current liabilities ........................      1,153        931
                                                               ------     ------

Long-term liabilities:
   Long-term debt, less current portion ..................        305        502
   Subordinated notes payable to
     prior stockholders ..................................      3,000      3,000
                                                               ------     ------

      Total liabilities ..................................      4,458      4,433
                                                               ------     ------

Commitments and contingencies


Stockholder's equity:
  Common stock, no par value, 2,500 shares
   authorized, 400 shares issued and outstanding .........         27         27
  Retained earnings ......................................      2,022      1,431
                                                               ------     ------

      Total stockholder's equity .........................      2,049      1,458
                                                               ------     ------

      Total liabilities and stockholder's
      equity .............................................     $6,507     $5,891
                                                               ======     ======


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

================================================================================
                                SUNSET COIN, INC.
               (A Wholly Owned Subsidiary Of Becker Gaming, Inc.)

                              STATEMENTS OF INCOME
                             (Dollars In Thousands)
================================================================================

                                                     Year Ended
                                                      June 30,
                                      ----------------------------------------
                                           1997          1996        1995
                                      -----------   -----------  -----------
Revenues:
  Slot route:
    From locations controlled by
      related parties .............       $2,424        $2,370       $2,331
    Other .........................          126           153          279

  Slot service fees:
    From related parties ..........           85            93           77
    Other .........................           32            33           55
                                      -----------   -----------   -----------
         Total revenues ...........        2,667         2,649        2,742

Operating expenses:
  Slot route and service ..........        1,350         1,311        1,112
  General and administrative ......           51            86          103
  Management fee -
    Becker Gaming, Inc. ...........          140           137          150
  Depreciation and amortization ...          288           298          249
                                      -----------   -----------   -----------
         Total operating
           expenses ...............        1,829         1,832        1,614
                                      -----------   -----------   -----------

         Operating income .........          838           817        1,128
                                      -----------   -----------   -----------

Other income (expense):
  Interest income .................          191           171          146
  Interest expense ................         (366)         (398)        (356)
  Rental and other income .........          153           102          101
  Net gain (loss)on sales of
    equipment .....................            1          (115)         (13)
                                      -----------   -----------   -----------
         Total other income
           (expense) ..............          (21)         (240)        (122)
                                      -----------   -----------   -----------
         Income before
           income taxes ...........          817           577        1,006

Provision for income taxes ........         (226)         (196)        (318)
                                      -----------   -----------   -----------
         Net income ...............         $591          $381         $688
                                      ===========   ===========   ===========


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

================================================================================

                                SUNSET COIN, INC.
               (A Wholly Owned Subsidiary Of Becker Gaming, Inc.)

                        STATEMENT  OF  STOCKHOLDER'S  EQUITY For The Years Ended
                June 30, 1997, 1996 And 1995
                             (Dollars In Thousands)
================================================================================


                                                         Common
                                                          Stock
                                           -----------------------------------
                                                      Shares         Amount
                                                      ------         ------



Balances, June 30, 1994 ................                 400         $   27


  Net income ..........................                 --             --
                                                      ------         ------

Balances, June 30, 1995 ................                 400             27


  Net income ...........................                --             --
                                                      ------         ------

Balances, June 30, 1996 ................                 400             27
                                                      ------         ------

  Net income ..........................                 --             --
                                                      ------         ------

Balance, June 30, 1997 .................                 400         $   27
                                                      ======         ======



                                                            Retained
                                                            Earnings     Total
                                                             -------    -------


Balances, June 30, 1994 ..................................   $   362    $   389


  Net income ............................................        688        688
                                                             -------    -------

Balances, June 30, 1995 ..................................     1,050      1,077


  Net income .............................................       381        381
                                                             -------    -------

Balances, June 30, 1996 ..................................     1,431      1,458
                                                             -------    -------

  Net income ............................................        591        591
                                                             -------    -------

Balance, June 30, 1997 ...................................   $ 2,022    $ 2,049
                                                             =======    =======


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

================================================================================
                                SUNSET COIN, INC.
               (A Wholly Owned Subsidiary of Becker Gaming, Inc.)

                            STATEMENTS OF CASH FLOWS
                             (Dollars In Thousands)
================================================================================

                                                         Year Ended June 30,
                                                  -----------------------------

                                                     1997       1996       1995
                                                  -------    -------    -------
Cash flows from operating activities:
  Net income ...................................  $   591    $   381    $   688
                                                  -------    -------    -------
  Adjustments  to  reconcile  net  income  to net  cash  provided  by  operating
    activities:
    Provision for losses on notes receivable ...     --           44        44
    Depreciation and amortization ..............      288        298       249
    Net loss on sales of equipment .............       (1)       115        13

  (Increase) decrease in operating assets:
     Other receivables .........................       78         (3)       (5)
     Interest receivable from related party ....     (144)      (125)      (44)
     Prepaid expenses ..........................        1       --          (2)
     Other assets ..............................     --          (6)       (59)

  Increase (decrease)in operating liabilities:
     Accounts payable ..........................      (31)       (25)       (6)
     Accrued expenses ..........................      (16)       128       158
     Accrued taxes payable to related ..........      226        196       102
                                                  -------    -------    -------

        Total adjustments ......................      401        622       450
                                                  -------    -------    -------

        Net cash provided by operating
         activities ............................      992      1,003     1,138
                                                  -------    -------    -------
Cash flows from investing activities:
  Capital expenditures .........................      (63)      (208)   (1,142)
  Proceeds from sales of equipment .............       19         12        26
  Increase in related parties notes receivable .     (900)        --    (2,250)
  Increase (decrease) in advances to
   related parties .............................     (201)       (72)       96
  Issuance of notes receivable .................     --         --         (25)
  Repayments of notes receivable ...............       71         88       161
                                                  -------    -------    -------

        Net cash provided by (used in)
         investing activities ..................   (1,074)      (180)   (3,134)
                                                  -------    -------    -------
Cash flows from financing activities:
  Proceeds from notes payable ..................     --          109       738
  Principal payments on notes payable ..........     (333)      (316)     (176)
                                                   -------    -------   -------
        Net cash used (provided)
         in financing activities ...............     (333)      (207)      562
                                                  -------    -------    -------
        Net increase in cash ...................     (415)       616    (1,434)

Cash, beginning of year ........................    1,122        506     1,940
                                                  -------    -------    -------
Cash, end of year ..............................  $   707    $ 1,122    $  506
                                                  =======    =======    =======

Supplemental cash flow disclosures:

 Interest paid .................................  $   395    $   395    $  352
                                                  =======    =======    =======
 Assets acquired through issuance of
   long-term debt ..............................  $   180    $    69    $  --
                                                  =======    =======    =======

 Income taxes paid .............................  $  --      $  --      $   102
                                                  =======    =======    =======

 Assets acquired by forgiveness of
  accounts receivable ..........................  $  --      $    49    $  --
                                                  =======    =======    =======


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

================================================================================


                                SUNSET COIN, INC.
               (A Wholly Owned Subsidiary Of Becker Gaming, Inc.)

                          NOTES TO FINANCIAL STATEMENTS




1.Summary Of Significant Accounting Policies:

Nature Of Operations
--------------------

Sunset Coin,  Inc. ("SC" or the  "Company")  operates a slot route in Las Vegas,
Nevada. The Company owns slot machines which it places in licensed locations. In
addition, the Company provides slot machine maintenance services to other owners
of slot machines pursuant to service  agreements.  At June 30, 1997, the Company
had route and service agreements with 32 slot locations which have between 4 and
35 slot machines each.

Effective June 1, 1994, the  stockholders  of SC exchanged all of their stock in
the Company for stock of Becker Gaming, Inc. ("BGI") (the "Reorganization"), and
SC became a wholly  owned  subsidiary  of BGI. BGI has no  independent  business
activities other than providing  management and administrative  services to, and
exploring and  developing  business  opportunities  for, its  subsidiaries,  and
serves as a holding company for SC and the following entities:

     *    Arizona Charlie's, Inc.  ("AC"), a Nevada corporation which
       operates a Las Vegas hotel and casino.

     *    Capitol Queen & Casino, Inc. ("CQC"), a Missouri corporation
       formed to develop a riverboat casino in Jefferson City, Missouri
       (the "Capitol Queen").

     * Becker Gaming Group ("BGG"),  a Nevada  corporation  which (together with
       its  wholly  owned   subsidiary,   Innerout,   Inc.)  owns  and  operates
       restaurants  and bars in Las Vegas under the  "Charlie's"  name,  each of
       which offers gaming machines.

Effective  June 1, 1994,  the Company pays a management fee to BGI in connection
with executive and  administrative  services equal to 5% of the Company's  gross
operating revenues.


Revenue
-------

The primary source of revenue is from slot route  participation  agreements with
unaffiliated  locations  in which  the  Company  recognizes  as slot  revenue  a
predetermined  percentage  (operator's  share) of the net win from Company-owned
machines at the slot locations.  In accordance with industry  practice,  net win
from slot  activities  consists of the slot drop less  jackpots  and fills.  The
percentage  of the net win that the  Company and the slot  locations  receive is
determined by individual participation agreements between the parties.

In addition,  the Company also generates revenue under slot service  agreements.
Under  the  agreements,  the  Company  receives  a fixed  fee and  certain  cost
reimbursements in exchange for maintaining proprietor-owned slot machines.

The Company's participation agreements and slot service agreements range between
1 and 9 years in length and expire, subject to renewal, at various dates through
2003.  At June 30, 1997,  221  (approximately  85%) of the machines  operated or
serviced by the Company were installed at unaffiliated  locations  controlled by
the stockholders of BGI (as lessor), through restrictive lease provisions.

Property And Equipment, And Depreciation
----------------------------------------

Property and equipment are stated at cost. Expenditures for additions,  renewals
and betterments are capitalized and expenditures for repairs and maintenance are
charged to expense as incurred.  Upon retirement or disposal of assets, the cost
and accumulated  depreciation are eliminated from the accounts and the resulting
gain or loss is  credited  or charged to income.  Depreciation  is  computed  by
either the straight-line or declining balance method over estimated useful lives
of 5 to 10 years for  furniture,  fixtures and  equipment  or, for buildings and
leasehold  improvements,  the lesser of the useful  life or the lease term which
range from 5 to 40 years.

Cash Equivalents And Concentration Of Credit Risk
-------------------------------------------------

The Company considers all highly liquid investments with an original maturity of
three  months or less to be cash  equivalents.  The  Company has cash on deposit
with financial institutions in excess of federally insured amounts.


Income Tax Status
-----------------

Effective January 1, 1994, the Company terminated its S corporation election and
adopted  Statement of Financial  Accounting  Standards No. 109,  "Accounting for
Income Taxes" ("SFAS 109").  Under SFAS 109 deferred tax assets and  liabilities
are  recognized  for  the  expected  future  tax  consequences  attributable  to
differences  between the financial statement carrying amounts of existing assets
and  liabilities  and their  respective  tax  bases.  Deferred  tax  assets  and
liabilities  are measured  using enacted tax rates  expected to apply to taxable
income in the years in which  those  temporary  differences  are  expected to be
recovered  or settled.  Under SFAS 109,  the effect on  deferred  tax assets and
liabilities  of a change in tax rates is recognized in income in the period that
includes the enactment date.

In connection  with the  Reorganization,  beginning June 1, 1994, the Company is
included in the  consolidated  federal income tax returns filed by BGI. SC's tax
allocation  is based on the amount of tax it would  incur if it filed a separate
return.

Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial  statements and accompanying notes.
Actual results could differ from those estimates,  particularly  with respect to
the matters described in Notes 2 and 3.

Reclassifications
-----------------

Certain amounts in the 1995 and 1996 financial statements have been reclassified
to conform with the 1997 presentation.


2. Guarantee Obligation, Management's Plans, and Going Concern:

SC has guaranteed the payment of interest and  $55,000,000  principal  amount of
12% First Mortgage Notes due November 15, 2000 issued by AC (the "AC Notes"). AC
is in default of certain  covenants  under the AC Notes as of June 30, 1997, and
on September 5, 1997 AC received a notice of  acceleration  from the trustee and
collateral  agent  for the AC  Notes,  and all of the  outstanding  AC Notes are
immediately  due and  payable  together  with all  accrued  and unpaid  interest
thereon. In addition, AC has guaranteed the payment of interest and principal of
notes  payable  issued by CQC,  (the  amount and extent of which  guaranty is in
dispute) of which $20,000,000 principal amount are outstanding at June 30, 1997.
CQC is a  development  stage company which has abandoned its project to develop,
own and operate a riverboat  casino,  and is  currently  attempting  to sell its
assets to prospective  buyers.  Based on current market  conditions,  management
does not expect that CQC will generate  sufficient funds through the sale of its
assets to repurchase all of the outstanding CQC Notes. A proposed  restructuring
plan therefore contemplates, amongst other terms and conditions, (i) liquidation
of CQC's remaining assets for the benefit of the CQC bondholders, (ii) a limited
cash payment by AC as full and complete  satisfaction  of AC's  guarantee of the
CQC Notes,  and (iii) AC's issuance of a reduced amount of new notes as full and
complete  satisfaction of the existing AC Notes. However, no satisfactory offers
for the  riverboat are  currently  available,  and no agreement has been reached
with  the  holders  of the  AC  Notes  and  CQC  Notes  regarding  the  proposed
restructuring plan.

Should AC be unable to complete  its  restructuring  plan,  it will not have the
financial  resources  to repay the AC Notes and honor its  guarantee  obligation
under the CQC Notes.  The  Company  would thus  likely be  required to honor its
guarantee  obligation of the AC Notes,  and the Company does not have sufficient
resources  to  satisfy  such  obligation.   Accordingly,   these  matters  raise
substantial  doubt about the ability of SC to continue as a going  concern.  The
final outcome of these matters is not  presently  determinable  and the June 30,
1997 financial  statements of SC do not include any adjustment that might result
from the outcome of this uncertainty.


3. Related-Party Transactions:

In  anticipation  of  the  January  1,  1994  termination  of  the  Company's  S
corporation election,  on December 24, 1993, the Company distributed  $3,000,000
to its stockholders,  representing previously taxed,  undistributed income. This
distribution  was immediately  loaned back to the Company by the stockholders in
the form of subordinated notes payable, which bear interest at an annual rate of
10%, payable  monthly,  with the entire principal amount due on January 1, 2001.
Interest  expense  incurred by SC under the notes payable to prior  shareholders
was $300,000,  $300,000 and $300,000 for the years ended June 30, 1997, 1996 and
1995, respectively.

The payment of the SC stockholder notes is subordinated to any payments required
to be made by SC under its guarantee of the AC Notes.

The Company is involved in numerous other  transactions  with companies  related
through common  ownership.  Such  related-party  transactions  are summarized as
follows:

<TABLE>
Arizona Charlie's, Inc.
-----------------------
<CAPTION>
                                                                        June 30,
                                                           1997             1996
                                                          ----             ----
<S>                                                <C>              <C>
Uncollateralized notes receivable from AC
    (interest at 5.56% and 4.50%)due May 1998
    and Janaury, 1998 respectively ...........     $ 3,150,000      $ 2,250,000
                                                   ===========      ===========
Interest receivable from AC ..................         313,000          169,000
                                                       =======          =======
Payables to  AC ..............................            -             (46,000)
                                                       =======          =======
Receivables from AC ..........................          67,000             -
                                                       =======          =======
</TABLE>


The  uncollateralized  notes receivable from AC result from advances made by the
Company to AC for general working capital purposes. Due to the present financial
condition of AC, as described in Note 2,  management of the Company  believes it
is  reasonably  possible  that a portion,  or the entire  balance,  of the notes
receivable  from AC will be  uncollectible.  However,  an  estimate  of the loss
cannot  presently be determined  and no adjustment has been made to the carrying
value or  classification  of the notes  receivable  at June 30,  1997.  Interest
earned by SC on the notes receivable from AC was $144,000,  $125,000 and $44,000
for the years ended June 30,  1997,  1996 and 1995,  respectively.  The interest
receivable  from AC and  payables to AC are  included in other  receivables  and
advances to related parties, respectively.

<TABLE>

Becker Gaming Group
-------------------
<CAPTION>
                                                                        June 30,
                                                           1997             1996
                                                           ----             ----
<S>                                                   <C>              <C>
Advances to BGG ...............................       $ 235,000        $ 149,000
                                                      =========        =========
</TABLE>


The  Company  has  executed  slot  service  agreements  with  each  of  the  BGG
restaurant/bar  locations  under which SC provides slot machine  maintenance and
other  services for a fixed fee. Fees paid by BGG to SC under the agreements are
included in slot service fee revenue in the  accompanying  financial  statements
and totaled approximately  $85,000,  $93,000 and $77,000 in 1997, 1996 and 1995,
respectively.

During  1991,  SC  purchased  the  assets  of  a  restaurant/bar   facility  for
approximately  $525,000 for use by BGG. The Company entered into an agreement to
lease  (as  lessor)  the  facility  (d.b.a.  Charlie's  Saloon)  to BGG under an
agreement  which was  terminated  when the  facility was closed due to loss of a
third-party  lease on April 21,  1996.  In  connection  with the  closing of the
facility,  certain leasehold improvements and equipment were abandoned,  and the
Company recognized a loss of $101,000 in 1996 representing the net book value of
the related  assets.  The liquor  license  with net book value of $60,000 is the
only remaining  asset from the closed  facility and will be transferred to a new
BGG location which is anticipated to open in late 1997.

Total lease  payments for the years ended June 30, 1997,  1996 and 1995 included
as rental  income in the  accompanying  financial  statements  amounted to $-0-,
$64,000  and  $89,000,  respectively.  The total  cost of  depreciation  expense
related to the Charlie's Saloon facility included in the accompanying  financial
statements  of Sunset Coin totaled $-0-,  $17,000 and $22,000 in 1997,  1996 and
1995, respectively.

In 1995, SC purchased and leased  personal  property to be used by BGG in one of
its bar operations (d.b.a.  Charlie's Bar Down Under). The purchase was financed
with  long-term  debt, as more fully  described in Note 5. The net investment in
the assets leased to Charlie's Down Under as of June 30, 1997 and 1996 is listed
below:

<TABLE>
<CAPTION>
                                                           1997            1996
                                                           ----            ----
<S>                                                   <C>             <C>
Building and improvements .....................       $ 174,000       $ 174,000
Furniture, fixtures and equipment .............         550,000         550,000
                                                        -------         -------
                                                        724,000         724,000
Less, accumulated depreciation ................        (138,000)        (76,000)
                                                       --------        --------

                                                      $ 586,000       $ 648,000
                                                      =========       =========
</TABLE>


On April 1, 1995,  Charlie's Bar Down Under (the Lessee)  entered into a 10 year
lease  agreement  with SC for the  above  property  at an annual  lease  cost of
$95,000.  BGG did not make any  rental  payments  under the lease  from the time
Charlie's  Down Under  opened  through  March 31,  1996,  and the  rentals  were
forgiven,  without recourse,  by the Company. Due to the related-party nature of
the above transaction, SC recognized no income (as lessor) or loss through March
31, 1996 in the  accompanying  financial  statements for this  agreement.  Total
lease  payments  for the years ended June 30,  1997 and 1996  included as rental
income in the accompanying  financial statements amounted to $95,000 and $24,000
respectively.

The terms of the Charlie's Down Under lease require BGG to pay all taxes, normal
maintenance  and  insurance  on the  facility.  The total  cost of  depreciation
expense  related  to the  Charlie's  Bar Down  Under  facility  included  in the
accompanying financial statements of SC totaled $61,000, $61,000 and $15,000 for
the years ended June 30, 1997, 1996 and 1995 respectively.

<TABLE>
Becker Gaming, Inc.
-------------------
<CAPTION>
                                                                        June 30,
                                                         1997               1996
                                                        ----               ----
<S>                                                   <C>                <C>
Advances to BGI ...........................           $7,000             $8,000
                                                      ======             ======
Tax provisions payable to BGI (Note 6) ....         $779,000           $553,000
                                                    ========           ========
</TABLE>



SC pays  management  fees to BGI at 5% of the gross gaming  revenues,  effective
with the  Reorganization  on June 1, 1994. Total management fees included in the
accompanying financial statements were $140,000,  $137,000 and $150,000 in 1997,
1996 and 1995, respectively.


4. Notes Receivable:

Notes receivable  consist of loans to various  proprietors who have entered into
slot route  agreements  with the Company.  Such advances are  primarily  used to
finance long-term facility improvements to the slot locations and are as follows
at June 30, 1997 and 1996: <TABLE> <CAPTION>
                                                           1997           1996
                                                           ----           ----
<S>                                                   <C>            <C>
Prime plus 2.5% note receivable,
due in weekly payments of $675
including interest through August
1998, collateralized by assets of
the related slot location ...................         $  47,000      $  75,000

10% note receivable,  due in weekly payments 
of $650 including  interest through
January 2003,
paid-in full in July, 1997 ..................           157,000        175,000

Other collateralized and  uncollateralized  
notes with varying interest rates up
to prime plus 2.5%, due at various
dates through December 2003 .................            36,000        149,000
                                                        -------        -------

                                                        240,000        399,000
     Allowance for doubtful accounts ........              -           (88,000)
                                                        -------        -------

                                                        240,000        311,000
          Less, current maturities ..........          (222,000)      (117,000)
                                                       --------       --------

                                                      $  18,000      $ 194,000
                                                      =========      =========
</TABLE>


5. Long-Term Debt:

Long-term debt consists of the following at June 30, 1997 and 1996:
<TABLE>
<CAPTION>
                                                           1997         1996
                                                           ----         ----
<S>                                                   <C>          <C>
Prime plus 1.5%,  $1.5 million  revolving
line of credit  available  through June 1994,  (line  expired and not  renewed);
amounts  outstanding under the line of credit at June 30, 1995 were converted to
a term note payable with interest and  principal due monthly  through June 1998,
collateralized by substantially all of the assets of SC and personal  guarantees
of the stockholders of Becker
Gaming, Inc. ......................................   $  33,000    $ 113,000

Prime plus 1.5%,  term note payable  with  interest  and  principal  due monthly
through  January 1, 2001,  collateralized  by security  agreement dated July 15,
1994 and a right to lien without notice on all property and deposit  accounts of
SC Borrowings made under a non-revolving line
of credit agreement (see below) ...................     115,000      162,000

Prime plus 2.0%,  term note payable  with  interest  and  principal  due monthly
through April 23, 2000,  collateralized  by a security  agreement dated July 15,
1994 and a right to lien without notice on all property and eposits  accounts of
SC. Borrowings made under a non-revolving
line of credit agreement (see below) ..............     192,000      262,000

Prime plus 2.0%,  term note payable  with  interest  and  principal  due monthly
through April 23, 2000,  collateralized  by a security  agreement dated July 15,
1994 and a right to lien without notice on all property and deposit  accounts of
SC. Borrowings made under a non-revolving line of credit
agreement (see below) .............................      88,000      119,000

Prime plus 1.5%,  term note payable  with  interest  
and  principal  due monthly through April 10, 2001,  
collateralized  by security  agreement dated 
October 2, 1995 and a right to lien without notice 
on all property and deposit  accounts of SC. 
Borrowings made under a non-revolving line of credit
agreement (see below) .............................      73,000      102,000

Other  notes  payable due in monthly  installments  
including  interest  through April, 1998 
collateralized by slot machine equipment of the
Company and BGG ...................................     126,000       23,000
                                                         ------       ------

                                                        627,000      781,000
       Less, current portion ......................    (322,000)    (279,000)
                                                       --------     --------

                                                      $ 305,000    $ 502,000
                                                      =========    =========
</TABLE>


In July 1994,  the  Company  entered  into an  agreement  with a bank for a $1.2
million  non-revolving line of credit.  Each advance was evidenced by a separate
promissory  note with a maturity  date not  exceeding 66 months from the date of
the respective advance. The Company was able to request advances through October
28,  1995 at which  time the  Company's  right to  receive  advances  under  the
agreement was terminated until the defaults under the AC Notes and CQC Notes are
cured.  Advances under the agreement bear interest at rates ranging from 1.5% to
2.0% plus the bank's prime rate.

The $1.2 million  non-revolving  line of credit includes an acceleration  clause
which would cause the full amount of the obligation to become due on demand if a
material  adverse  change  occurs  in the  SC's  financial  condition,  business
operations, ownership or management.


Maturities of long-term debt at June 30, 1997 are as follows:
<TABLE>
<S>                 <C>                           <C>
                    1998                          $322,000
                    1999                           180,000
                    2000                           120,000
                    2001                             5,000
                    ----                             -----

                                                  $627,000
                                                  ========
</TABLE>

6. Income Taxes:

The  components of the income tax provision  are  summarized  for June 30, 1997,
1996 and 1995 as follows:
<TABLE>
<CAPTION>
                                           1997       1996       1995
                                           ----       ----       ----

Current:
<S>                                    <C>        <C>        <C>
   Federal .........................   $226,000   $196,000   $318,000
Deferred:
   Federal .........................       --         --         --
                                       --------   --------   --------

          Total income tax provision   $226,000   $196,000   $318,000
                                       ========   ========   ========
</TABLE>


The components  included in determining the provision for income taxes are shown
below:
<TABLE>
<CAPTION>
                                       1997         1996         1995
                                    ---------    ---------    ---------
<S>                                 <C>          <C>          <C>
Tax provision at federal
  income tax statutory rate .....   $ 285,000    $ 202,000    $ 342,000

Other ...........................     (59,000)      (6,000)     (24,000)
                                    ---------    ---------    ---------

        Income tax provision
         per statements of income   $ 226,000    $ 196,000    $ 318,000
                                    =========    =========    =========
</TABLE>



Differences between the carrying amounts of assets and liabilities for financial
reporting  purposes,  and the amounts used for income tax purposes were nominal.
Accordingly, deferred taxes have not been recognized.


7. Leases and Commitments:

Future minimum operating lease commitments at June 30, 1997, are as follows:

<TABLE>
<S>                        <C>                    <C>
                           1998                   $35,200
                           1999                    33,200
                           2000                    11,200
                           2001                     9,700
                           2002                     5,200
                                                   ------

                                                 $ 94,500
                                                 ========
</TABLE>

Aggregate rent expense was $46,000,  $40,000 and $38,000 in 1997, 1996 and 1995,
respectively.


8. Contingencies:

The  Company  is subject to various  litigation  and claims  which  arise in the
ordinary  course  of  its  business.   In  the  opinion  of  management,   after
consultation with legal counsel,  the disposition of all such pending litigation
and  claims  will  not  have a  material  effect  on the  Company's  results  of
operations, cash flows, or financial position.

9.   Employee Benefit Plans:

The Company  participates  in a 401(k)  Defined  Contribution  Plan (the "Plan")
sponsored by AC which covers substantially all employees of SC. Participants may
contribute  up to 10% of their annual  compensation  to the Plan,  up to certain
limits  prescribed by the Internal Revenue  Service.  The Company matches 25% of
each eligible employee's  contribution up to a maximum of 6% of their individual
earnings.  In addition,  the Company  contributes  an amount equal to 2% of each
participant's earnings. The Plan went into effect July 1, 1990.

The Company recorded charges for  contributions of $21,000,  $19,000 and $15,000
for the years ended June 30, 1997, 1996 and 1995, respectively.


10.Fair Value of Financial Instruments:

The  estimated  fair  value of the  Company's  financial  instruments  have been
determined by the Company using  available  market  information  and appropriate
valuation  methodologies.  The  carrying  amounts of cash and cash  equivalents,
accounts  receivable,  accounts  payable,  capital lease  obligations  and notes
approximate fair values due to the short-term  maturities and the  approximately
market interest rates of these instruments.


--------------------------------------------------------------------------------
<TABLE>
                                                                     SCHEDULE II

                             ARIZONA CHARLIE'S, INC.
                        VALUATION AND QUALIFYING ACCOUNTS

                For The Years Ended June 30, 1997, 1996 And 1995

<CAPTION>
                                                                       Additions
                                                          ----------------------
                                             Balance at  Charged to   Charged to
                                             Beginning   Costs and    Other
               Description                   of Year     Expenses     Accounts
               -----------                   -------     --------     --------

<S>                                        <C>          <C>          <C>
Allowance for doubtful accounts:

  Year ended June 30, 1997 ..............  $2,193,000   $  220,000   $     --
                                            ==========   ==========   ==========
  Year ended June 30, 1996 ..............  $1,592,000   $  601,000   $     --
                                            ==========   ==========   ==========

  Year ended June 30, 1995 ..............  $     --     $1,592,000   $     --
                                            ==========   ==========   ==========
</TABLE>
<TABLE>
<CAPTION>
                                                            Balance at
                                                            End of
               Description                     Deductions   Year
               -----------                     ----------   ----
<S>                                            <C>          <C>
Allowance for doubtful accounts:

  Year ended June 30, 1997 .............       $     --     $2,413,000
                                               ==========   ==========

  Year ended June 30, 1996 .............       $     --     $2,193,000
                                               ==========   ==========

  Year ended June 30, 1995 .............       $     --     $1,592,000
                                               ==========   ==========
</TABLE>
<TABLE>

Deferred Tax Asset Valuation Allowance:
<S>                                        <C>          <C>          <C>
  Year ended June 30, 1997 ..............  $3,322,000   $     --     $2,374,000
                                            ==========   ==========   ==========

  Year ended June 30, 1996 ..............  $1,840,000   $     --     $1,482,000
                                            ==========   ==========   ==========

  Year ended June 30, 1995 ..............  $  213,000   $     --     $1,627,000
                                            ==========   ==========   ==========
</TABLE>
<TABLE>

Deferred Tax Asset Valuation Allowance:
<S>                                            <C>          <C>
  Year ended June 30, 1997 .............       $     --     $5,696,000
                                               ==========   ==========

  Year ended June 30, 1996 .............       $     --     $3,322,000
                                               ==========   ==========

  Year ended June 30, 1995 .............       $     --     $1,840,000
                                               ==========   ==========
</TABLE>

--------------------------------------------------------------------------------
<TABLE>
                                                                     SCHEDULE II

                                SUNSET COIN, INC.

              VALUATION AND QUALIFYING ACCOUNTS For The Years Ended
                          June 30, 1997, 1996 And 1995



                                                             Additions
                                                      ------------------------
<CAPTION>
                                        Balance at    Charged to    Charged to
                                        Beginning     Costs and     Other
                 Description            of Year       Expenses      Accounts
--------------------------------------  -----------   -----------   -----------

Allowance for doubtful accounts
<S>                                     <C>           <C>           <C>
 Year ended June 30, 1997 ............  $    88,000   $      --     $      --
                                        ===========   ===========   ===========

 Year ended June 30, 1996 ............  $    44,000   $    44,000   $      --
                                        ===========   ===========   ===========

 Year ended June 30, 1995 ............  $      --     $    44,000   $      --
                                        ===========   ===========   ===========
</TABLE>
<TABLE>
<CAPTION>
                                                     Balance at
                                                      End of
                 Description            Deductions    Year
--------------------------------------  -----------   --------
<S>                                     <C>           <C>
Allowance for doubtful accounts

 Year ended June 30, 1997 ............  $    88,000   $   --
                                        ===========   ========

 Year ended June 30, 1996 ............  $      --     $ 88,000
                                        ===========   ========

 Year ended June 30, 1995 ............  $      --     $ 44,000
                                        ===========   ========
</TABLE>

--------------------------------------------------------------------------------
                          EXHIBIT


    2.1    Agreement of Reorganization dated November 16, 1993,
           by and among Becker Gaming, Inc. ("BGI"), Arizona
           Charlie's, Inc. ("Arizona Charlie's"), Sunset
           Coin, Inc. ("Sunset Coin"), Becker Gaming Group, Inc.
           ("Becker Gaming Group"), Capitol Queen & Casino, Inc.
           ("Capitol Queen"), Charlie's Land Company ("CLC") ,
           and each of Ernest A. Becker, III, Ernest A. Becker,
           IV, Barry W. Becker and Bruce F. Becker
           (collectively, the "Beckers").*

    3.1    Articles of Incorporation of Arizona Charlie's.*

    3.2    Amended and Restated By-Laws of Arizona Charlie's.*

    3.3    Articles of Incorporation of Sunset Coin.*

    3.4    Amended and Restated By-Laws of Sunset Coin.*

    10.1   Purchase  Agreement  dated  November  15,  1993  among  BGI,  Arizona
           Charlie's,  Capitol  Queen,  Sunset  Coin  and the  purchasers  named
           therein (the "Purchasers").*

    10.2   Indenture dated November 15, 1993 among Arizona Charlie's, as issuer,
           Sunset Coin,  as  guarantor,  and IBJ Schroder  Bank & Trust  Company
           ("IBJ"), as trustee.*

    10.3   Indenture  dated  November 15, 1993 among Capitol  Queen,  as issuer,
           Arizona Charlie's, as guarantor, and IBJ, as trustee.*

    10.4   Fee and Leasehold Deed of Trust,  Assignment of Leases and Subleases,
           Security  Agreement  and Fixture  Filing  dated  November 15, 1993 by
           Arizona  Charlie's  and CLC,  as  grantors,  to Land Title of Nevada,
           Inc., as trustee, for the benefit of IBJ, as collateral agent.*

    10.5   Security  Agreement dated November 15, 1993 between Arizona Charlie's
           and IBJ, as collateral agent.*

    10.6   Stock  Pledge  Agreement  dated  November  15, 1993  between  Arizona
           Charlie's and IBJ, as collateral agent.*

    10.7   Collateral  Agency  Agreement  dated  November 15, 1993 among Arizona
           Charlie's, CLC and IBJ, as trustee and collateral agent.*

    10.8   Disbursement  and Escrow  Agreement  dated  November  15,  1993 among
           Arizona  Charlie's and IBJ, as escrow agent,  trustee and  collateral
           agent.*

    10.9   Registration Rights Agreement dated November 15, 1993
           among Arizona Charlie's, Sunset Coin and the
           Purchasers.*

    10.10  Registration Rights Agreement dated November 15, 1993
           among Capitol Queen, Arizona Charlie's and the
           Purchasers.*

    10.11  Promissory Notes dated December 24, 1993 made by each
           of the Beckers in favor of Arizona Charlie's. *

    10.12  Tax  Indemnity  Agreement  dated  December  24,  1993  among  Arizona
           Charlie's,  Sunset Coin, Becker Gaming Group and each of the Beckers.
           Included at Exhibit G to Exhibit 2-1 hereof.*

    10.13  Form of Management  Agreement to be entered into between BGI and each
           of Arizona  Charlie's,  Capitol Queen,  Sunset Coin and Becker Gaming
           Group. Included at Exhibit I to Exhibit 2-1 hereof.*

    10.14  Form of Tax  Allocation  Agreement to be entered into between BGI and
           each of Arizona  Charlie's,  Sunset  Coin,  Becker  Gaming  Group and
           Capitol Queen. Included at Exhibit J to Exhibit 2-1 hereof.*

    10.15  Letter   Agreement  dated  September  10,  1993  among  BGI,  Arizona
           Charlie's,  Capitol  Queen and  Ladenburg,  Thalmann & Co.,  Inc., as
           placement agent.*

    10.16  Airplane lease dated April 18, 1989 between Arizona Charlie's and Las
           Vegas Auto Leasing.*

    10.17  Lease dated March 1, 1989 between CLC and Arizona Charlie's.*

    10.18  Leases  dated May 1, 1988 and  August  21,  1990  between  Charleston
           Heights Shopping Center and Arizona Charlie's.*

    10.19  Land Purchase Option Contract dated January 4, 1993 between Linda Ann
           and  Harvey L.  McCray  and  Vernon M. and  Joyce G.  Burkhalter,  as
           seller, and R.Q.  Enterprises,  as buyer; and Wire Transfer Order and
           Closing  Document dated July 26, 1993 between  Arizona  Charlie's and
           First Interstate Bank of Nevada.*

    10.20  Building  Contract dated December 10, 1993 between Arizona  Charlie's
           and Marnell Corrao & Associates.*

    10.21  First  Supplemental  Indenture  dated  January 1, 1995 among  Arizona
           Charlie's, as issuer, Sunset Coin, as guarantor, and IBJ, as trustee.

    10.22  First  Supplemental  Indenture  dated  January 1, 1995 among  Capitol
           Queen,  as issuer,  Arizona  Charlie's,  as  guarantor,  and IBJ,  as
           Trustee.

    10.23  Lease agreement between Arizona Charlie's, Inc. and
           Bruce F. Becker.