================================================================================
                       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, 1996

                                       OR

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

              THE SECURITIES EXCHANGE ACT of 1934 [NO FEE REQUIRED]

            For the transition period from            to

                         Commission file number 33-75808

                             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, 1996 was $0. The
         number of shares of the Registrant's Common Stock
                outstanding as of September 15, 1996 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.

            The Registrant meets the conditions set forth in General
          Instructions (J)(1)(a) and (b) of Form 10-K and is therefore
           filing this Form 10-K with the permitted reduced disclosure
                                     format.

================================================================================
                                     PART I

Item 1.    Business

      Arizona  Charlie's,  Inc.  ("AC" or the  "Company")  owns and  operates  a
locals-oriented  casino-hotel  by the same  name  ("Arizona  Charlie's")  in Las
Vegas,  Nevada.  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, 1996, 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  1,600  gaming  machines  and 26 table games
(blackjack,  craps,  roulette,  Caribbean Stud, Let It Ride,  mini- baccarat and
poker),  a 92-seat race and sports book, and a 400-seat  bingo parlor,  which is
operated on the second floor.

      Over 80% 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, 1996, approximately 84.4% of gaming revenues was attributable to gaming
machine  play  and  9.2% of  gaming  revenues  was  generated  by  table  games.
Approximately  16.9 % of its gaming machines are devoted to five dollar,  dollar
and  half-dollar  play and  approximately  83.1% 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  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, 1996 and 1995 averaged  86.9% and 84.3%,  respectively,  at
average  daily rates of $39.81 and $37.27 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 four 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.  Two specialty  restaurants,  Chin's,  which
offers  gourmet  Chinese  cuisine  and  the  Yukon  Grille,   an  American-style
steakhouse, with 100 seats each, attract guests interested in a more upscale and
varied  dining  experience.  The  restaurants  are designed to help attract more
casino patrons interested in higher stakes machines and games. 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 four  restaurants.  The Sourdough
Cafe and the Wild West  Buffet  offer  quality  food and  service at  affordable
prices,  while the Yukon  Grille and Chin's offer an upscale  dining  experience
that is preferred by select casino  patrons.  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,
nationally-televised  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,  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.

      Employees. As of August 31, 1995, the Company employed approximately 1,280
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 $217,000.

     AC, as the  original  lessee,  is  contingently  obligated to pay the lease
costs of  certain  transportation  assets,  including  a jet  airplane  held and
operated by AC's parent, Becker Gaming, Inc.
("BGI").


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


                 Arizona Charlie's, Inc. Selected Financial Data

                              Years Ended June 30,
                  (amounts in thousands, except per share data)
<TABLE>
<CAPTION>
                                                 1996         1995         1994
                                             --------     --------     --------
<S>                                          <C>          <C>          <C>
Income Statement Data:
  Operating revenues ....................    $ 63,301     $ 57,082     $ 46,447
  Operating income ......................       2,199        1,058        5,105
  Net income (loss) .....................      (4,559)      (4,936)       1,134
  Net income (loss) per share (1) .......      (4,559)      (4,936)       1,134

Other Data:
  Interest expense, net of amounts
   capitalized ..........................       7,095        6,574        4,763
  Capital expenditures ..................         190       24,253       11,379
  Distributions to stockholders (2) .....        --           --          5,317


Balance Sheet Data:
  Unrestricted cash and cash
   equivalents ..........................    $  4,591     $  5,404     $  4,014
  Cash in escrow account restricted
   for construction .....................          10           10        3,613
  Total assets ..........................      62,357       65,273       67,915
  Long-term obligations (3)
      Long-term debt (4) (5) ............       5,000       60,000       60,000
      Capitalized lease obligation ......          22            4            1
  Stockholder's equity (deficit) ........      (9,501)      (4,942)          (6)
</TABLE>

<TABLE>
<CAPTION>
                                                              1993          1992
                                                           -------       -------

<S>                                                        <C>           <C>
Income Statement Data:
  Operating revenues ...............................       $45,880       $42,278
  Operating income .................................         6,032         4,262
  Net income (loss) ................................         4,585         2,551
  Net income (loss) per share (1) ..................         4,585         2,551

Other Data:
  Interest expense, net of amounts
   capitalized .....................................         1,440         1,877
  Capital expenditures .............................         1,067           924
  Distributions to stockholders (2) ................         2,140         2,400



Balance Sheet Data:
  Unrestricted cash and cash equivalents ...........       $ 3,528       $ 3,225
  Cash in escrow account restricted for
   construction ....................................          --            --
  Total assets .....................................        27,184        26,896
  Long-term obligations (3)
   Long-term debt (4) (5) ..........................          --          16,976
   Capitalized lease obligation ....................           778         1,089
  Stockholder's equity (deficit) ...................         5,953         3,508
</TABLE>

----------
(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, 1996. 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 and 1992,  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 of (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,  $55,000 of AC Notes was  classified  as current due to
      certain technical 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.



                    Sunset Coin, Inc. Selected Financial Data

                              Years Ended June 30,

                  (amounts in thousands, except per share data)

<TABLE>
<CAPTION>
                                                    1996        1995        1994
                                                    ----        ----        ----
<S>                                               <C>         <C>         <C>
Income Statement Data:
  Operating revenues .......................      $2,649      $2,742      $2,859
  Operating income .........................         817       1,128       1,333
  Net income ...............................         381         688       1,010
  Net income per share (1) .................         952       1,720       2,525

Other Data:
  Interest expense, net of amounts
   capitalized .............................         398         352         190
  Capital expenditures .....................         208       1,142         232
  Distribution to stockholders (2) .........        --          --         3,280



Balance Sheet Data:
  Unrestricted cash and cash
   equivalents .............................      $1,122      $  506      $1,940
  Total assets (3) .........................       5,891       5,349       3,845
  Long-term obligations (4)
      Long-term debt (5) ...................       3,502       3,664       3,220
      Capitalized lease obligations ........        --            28          85
  Stockholders' equity .....................       1,458       1,077         389
</TABLE>

<TABLE>
<CAPTION>
                                                                 1993       1992
                                                               ------     ------
<S>                                                            <C>        <C>
Income Statement Data:
     Operating revenues ..................................     $2,959     $2,539
     Operating income ....................................      1,382      1,234
     Net income ..........................................      1,408      1,223
     Net income per share (1) ............................      3,520      3,057

Other Data:
     Interest expense, net of amounts capitalized ........         67         57
     Capital expenditures ................................        297        490
     Distribution to stockholders (2) ....................        940        560



Balance Sheet Data:
     Unrestricted cash and cash equivalents ..............     $  854     $  441
     Total assets (3) ....................................      3,270      3,134
     Long-term obligations (4)
         Long-term debt (5) ..............................        364        486
         Capitalized lease obligations ...................        205        276
     Stockholders' equity ................................      2,659      2,191
</TABLE>

----------
(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, 1996. A total of 25,000 shares of common stocks 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 $2,250 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)  Excluded   current  maturities.   See  "Notes  to  Financial
      Statements_Sunset Coin, Inc._Long-Term Debt."
(5)  At June 30,  1996,  $279,000  of SC debt was  classified  as Current  Notes
     Payable.



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,
                                         1996      1995      1994
                                         ----      ----      ----
           <S>                         <C>       <C>       <C>

           Hotel .........             $  261    $  164    $  119
           Food & Beverage              3,824     2,260     2,005
                                        -----     -----     -----
                                       $4,085    $2,424    $2,124
                                       ======    ======    ======
</TABLE>


      On November 18, 1993, the Company 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.  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." AC 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 unconditionally
and fully  guaranteed  the payment of all  principal  of and interest on the CQC
Notes.  CQC  currently  does not have any means to pay amounts  owing on the CQC
Notes. 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 the Company 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>
<CAPTION>

                              Results of Operations

                              Years Ended June 30,
                             (dollars in thousands)

                                         1996        1995         1994
                                         ----        ----         ----
<S>                                  <C>         <C>         <C>
Revenues:
   Gaming ........................   $ 52,831    $ 47,466    $ 38,955
   Food/beverage .................     13,204      10,647       8,459
   Hotel .........................      3,208       2,614       1,219
   Bowling .......................       --          --           251
   Gift Shop .....................        590         577         535
   Management fees from Affiliates       --          --           281
   Other (1) .....................      1,145         912         399
         --                             -----         ---         ---
Gross revenues ...................     70,978      62,216      50,099
Less, promotional allowances (2) .     (7,677)     (5,134)     (3,652)
                             --        ------      ------      ------
   Net revenues ..................     63,301      57,082      46,447

   Total operating expenses ......     61,102      56,024      41,342
                                       ------      ------      ------
   Total operating income ........   $  2,199    $  1,058    $  5,105
                                     ========    ========    ========
</TABLE>
-----------
(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.


      Comparison  of fiscal  years ended June 30, 1996,  1995 and 1994.  Despite
increased  revenues for fiscal 1996 and fiscal 1995, results from operations for
both periods were lower than the prior year as the result of increased operating
expenses,  primarily due to additional slot promotion  expenses,  payments under
its  guarantee  of the CQC Notes,  management  fees,  and the  addition of staff
personnel,  equipment and related operating expenses transferred to AC from BGI.
The increased  revenues for fiscal 1996 reflect a full year of  operations  with
expanded casino-hotel  facilities,  while the increased revenues for fiscal 1995
reflect a partial year of operations with the expanded 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.

      The Company's net revenues  increased to $63,301,000 for fiscal 1996, from
$57,082,000 for fiscal 1995 and $46,447,000 for fiscal 1994. Operating expenses,
including  depreciation  and  amortization,  increased to $61,102,000 for fiscal
1996, from  $56,024,000 and $41,342,000 for the two preceding fiscal years. As a
result,  operating  income for fiscal 1996 was $2,199,000,  with a corresponding
net operating  margin of 3.5%.  Operating income for fiscal 1995 and fiscal 1994
was $1,058,000 and $5,105,000,  respectively, resulting in operating margins for
such years of 1.9% and 11.0%.  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 the Company. The increase in operating
expenses  and  resulting  decline in operating  margin for fiscal 1995  resulted
principally  from costs  attributable  to the CQC Notes  guarantee  ($1,592,000,
including  the  write-off of advances  which were used by CQC to pay interest on
the CQC Notes),  and increased  salaries and wages reflecting  higher department
staffing  requirements,  increased  advertising  and  promotional  cost  and the
additional  expense of a management fee payable to BGI. Other increased expenses
for  fiscal  1995  include  additional  depreciation  and  amortization  expense
resulting from the addition of the new assets created in the Expansion.

      For fiscal 1996, the Company had total gaming revenues of $52,831,000,  as
compared to $47,466,000 and $38,955,000 for fiscal 1995 and 1994,  respectively.
The  increases  (11.3% and 21.8% for  fiscal  1996 and 1995,  respectively)  are
primarily  attributable  to  increases in gaming  machine  revenues of 11.1% and
21.0% for such years to $44,612,000 and $40,140,000  from $33,173,000 for fiscal
1994.  The increase for fiscal 1996 is primarily the result of increased  levels
of play by patrons in  response  to  additional  slot  promotional  events.  The
increase for fiscal 1995  reflects the  additional  revenue  generated  from 665
gaming  machines  added  during  that  year.  Revenues  from  table  games  were
$4,872,000,   $4,829,000  and  $4,070,000  for  fiscal  1996,   1995  and  1994,
respectively.  The table games  revenue  increase  for fiscal  1995  reflects an
increase of five table games in that year. Other gaming revenues,  consisting of
revenues from bingo, poker and the race and sports book,  increased by 34.0% and
45.8% for fiscal 1996 and 1995  respectively,  to $3,346,000 for fiscal 1996 and
$2,497,000  for fiscal 1995 from  $1,713,000 for fiscal 1994. The increases were
largely a result of the added pari- mutual race facilities and increased  sports
book revenues from the expanded race and sports book facility.  For fiscal 1996,
1995 and 1994,  84.4%,  84.6% and 85.2%,  respectively,  of gaming revenues were
attributable  to  gaming  machine  play,  compared  to 9.2%,  10.2%  and  10.4%,
respectively, attributable to table games and 6.3%, 5.2% and 4.4%, respectively,
attributable to other gaming revenues.

      Food and beverage revenues increased 24.0% to $13,204,000 for fiscal 1996,
after increasing 25.9% to $10,647,000 for fiscal 1995 from $8,459,000 for fiscal
1994.  The fiscal 1996 increase is 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. The
fiscal 1995 increase resulted from the addition of two specialty restaurants,  a
delicatessen and a remodeled coffee shop during the second and third quarters of
fiscal 1995
     Hotel revenues increased to $3,208,000 for fiscal 1996, from $2,614,000 and
$1,219,000 for fiscal 1995 and 1994, respectively. The 22.7% increase for fiscal
1996 is the result of an increase in average  occupancy rate from 84.3% to 86.9%
and an  increase  in the  average  room rate from  $37.27 to $39.81.  The 114.4%
increase  for  fiscal  1995 is  attributable  to the  opening  of 150 new  rooms
(including eight suites) in the new hotel tower in September 1994.

      With the  elimination  of the bowling  alley in December  1993,  AC had no
bowling revenues for fiscal years 1996 and 1995, compared to $251,000 for fiscal
1994.  Gift shop revenues  increased 2.3% to $590,000 in fiscal 1996 and 7.9% to
$577,000 in fiscal 1995 due  primarily to the  remodeling  and  expansion of the
gift shop  area,  which was  reopened  in January  1995.  Also,  other  revenues
increased  $233,000 or 25.6% during  fiscal 1996 and  $513,000 or 128.6%  during
fiscal 1995 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  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.  Gaming expenses increased by 31.5% to $15,359,000 for fiscal
1995 from  $11,681,000  for fiscal 1994.  The higher  levels of expense  reflect
additional staffing  associated with the expansion of gaming facilities.  Gaming
expenses  represented 35.2%, 32.4% and 30.0% of gaming revenues for fiscal 1996,
1995 and 1994,  respectively.  Management  anticipates  that  these  costs  will
stabilize as a percentage  of revenue in fiscal 1997 as the expanded  facilities
are  expected to generate  higher  customer  volumes and  efficiencies  from the
Expansion are expected to be realized.

     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  which  comprise
approximately  33.0% of the  Company's  total  work  force.  Food  and  beverage
expenses  increased  35.7% to  $11,388,000  for fiscal 1995 from  $8,389,000 for
fiscal 1994 due primarily to the additional staffing  requirements for the newly
remodeled coffee shop, new specialty restaurants, new delicatessen, and expanded
buffet room.

      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.
Hotel expenses  increased to $1,377,000 for fiscal 1995 from $714,000 for fiscal
1994 due  primarily  to  additional  staffing  required by the new hotel  tower.
However,  net  contribution by the hotel  department  (hotel revenues less hotel
operating  expenses)  improved to $1,795,000 for fiscal 1996 from $1,237,000 for
fiscal 1995 and $505,000 for fiscal 1994.

      Other departmental  expenses increased by 5.6% to $475,000 for fiscal 1996
from $450,000 for fiscal 1995 due to increased  costs of inventory  items in the
gift shop,  combined with normal salary and wage increases.  Other  departmental
expenses decreased by 46.7% to $450,000 for fiscal 1995 from $845,000 for fiscal
1994 due primarily to the scale-down and termination of bowling operations.

      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.  The  airplane  was sold in July  1996.  Other
general and  administrative  expenses included payments made on behalf of CQC in
the amount of $601,000 for fiscal 1996 compared to  $1,592,000  for fiscal 1995.
The Company accrued management fees payable to BGI of $1,396,000, $3,099,000 and
$188,000  for fiscal  1996,  1995 and 1994,  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 AC. In connection with this transfer, in October 1995, the
Company 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.

      General and administrative  expenses increased by 10.7% to $15,358,000 for
fiscal 1995 from  $13,867,000 for fiscal 1994 due to additional  staffing in the
cage, security, data processing,  entertainment, porter, engineering, accounting
and  transportation  departments.  Personnel in these  departments were added to
support the expanded  facility.  As a percentage  of net  revenues,  general and
administrative  expenses were 27.9%,  26.9% and 29.9% for fiscal 1996,  1995 and
1994 respectively.

      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 "locals"  casinos opened in western Las
Vegas in fiscal 1995,  including Texas Station and Santa Fe Casino.  Advertising
and  promotion  expenses  were  $3,837,000  for  fiscal  1995,  as  compared  to
$3,093,000  for fiscal  1994.  The  increase  of  $744,000,  or 24.1%,  reflects
increased  newspaper  and  television  advertising  undertaken  to  gain  market
recognition for the newly expanded facility. Management anticipates that it will
maintain  advertising  expenditures  at the 1996  level  in  order  to  continue
attracting  customers  and to promote the  entertainment  events in its expanded
facilities.

      Depreciation and amortization  expense increased by 3.5% to $3,491,000 for
fiscal 1996 from  $3,373,000 for fiscal 1995.  This increase is  attributable to
additional  depreciation  expense  associated with the newer  expansion  assets.
Depreciation  and  amortization  expense  increased by 51.8% to  $3,373,000  for
fiscal 1995 from  $2,222,000  for fiscal 1994.  The increase is due primarily to
additional depreciation expenses associated with the new expansion assets placed
in service.

      The Company had other  expenses (net of other  income) of  $6,758,000  for
fiscal 1996  compared to  $5,994,000  and  $3,971,000  for fiscal years 1995 and
1994.  The fiscal 1996 increase of $764,000 is due to a reduction of capitalized
interest in the amount of $676,000 and a decrease of interest income of $294,000
partially offset by a decrease of interest expense in the amount of $155,000 and
a decrease in other income of $51,000. For fiscal 1995, the increased expense of
$2,023,000 is attributable to an increase in interest expense from $5,223,000 to
$7,250,000, due primarily to the AC Notes, which were outstanding for all of the
fiscal 1995 but less than eight months for fiscal 1994.

     Income Taxes

     As a result  of the  termination  of its  election  to be  treated  as an S
corporation,  the Company 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,  the Company 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 the Company.  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,  the
Company  generated a net operating loss for income tax purposes of approximately
$9,174,000. Due to low operating margins and high interest cost and depreciation
costs,  management  does not anticipate  that the Company will generate  taxable
income in the foreseeable future.


   Liquidity and Capital Resources

<TABLE>
<CAPTION>
                                         As of or for the years ended June 30,

                                            1996        1995        1994
                                            ----        ----        ----
<S>                                     <C>         <C>         <C>
Cash and cash equivalents ...........   $  4,591    $  5,404    $  4,014
Working capital (deficit) (1) .......    (58,530)      2,920       2,511

Cash provided by operating activities      1,639       2,772       5,876
Cash used for investing activities ..     (2,240)     (3,401)    (37,180)
Cash provided by (used for)
  financing activities ..............       (212)      2,019      31,790
</TABLE>

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


      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 operating  income,  prior to  consideration  of management fees and
other non-cash items, and changes in operating assets and operating liabilities.
For fiscal,  1995, cash provided by operating activities decreased to $2,772,000
from  $5,876,000 for fiscal 1994. The decrease is  attributable to a decrease in
net income of $6,070,000  for fiscal 1995 which was  partially  offset by (i) an
increase in operating  assets of $926,000 for fiscal 1995 compared to a decrease
in operating assets of $874,000 for fiscal 1994,  reflecting primarily increases
in pre-paid  gaming  taxes and other  receivables  for fiscal  1995,  (ii) a net
increase in operating  liabilities  of $3,671,000 for fiscal 1995 compared to an
increase of $1,669,000  for fiscal 1994,  due to the accrual of management  fees
payable  to  BGI  and  interest  on the AC  Notes,  and  (iii)  an  increase  in
depreciation and amortization expense of $1,151,000 for fiscal 1995.

     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.  In fiscal 1994,  approximately  $26,112,000  in
proceeds remained in a restricted escrow account to fund Expansion construction.
Pending such use, amounts held in the restricted escrow account were invested in
interest  bearing  securities.  See  "Notes to  Financial  Statements  - Arizona
Charlie's,  Inc. - Long-Term Debt." In fiscal 1995, cash flows used in investing
activities  for  fiscal  1995  includes  $24,253,000  of  capital  expenditures,
virtually all of which relates to the Expansion.

      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 an  decrease  in  principal
payments on notes and an increase in payments  under capital lease  obligations.
Financing  activities  for fiscal 1995 reflect  proceeds from loans from related
parties in the amount of $2,250,000, and principal payments of notes.

      The  Company  is  currently  in  technical  default  under  the  Indenture
governing the AC Notes because it 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 the Company in excess of the amounts  permitted to be
so advanced  under the Indenture.  As a result of such defaults,  the holders of
25% or more in  principal  amount  of the  Notes  may  cause  the AC Notes to be
accelerated,  in which event they would  become  immediately  due and payable in
full. The Company does not have and is not expected to have the resources to pay
the AC Notes if they are accelerated.

      The AC Notes are  reflected  as a current  liability at June 30, 1995 as a
result of the above defaults. The Company's long-term obligations, approximately
$5,022,000 at June 30, 1996,  consist of the  stockholder  notes and capitalized
equipment 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.  In  addition,  the Company is  expected  to have  annual  capital
expenditure requirements of approximately $600,000.

      In addition, AC has a substantial contingent obligation resulting from its
guarantee of the CQC Notes,  an aggregate of $20,000,000 in principal  amount of
which remain outstanding. 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,  AC will be
obligated under its guarantee of the CQC Notes to fund the shortfall.

      Moreover,  because it has not yet effected the sale of its assets,  CQC is
in default of the Indenture governing the CQC Notes. As a result, the holders of
25% or more in  principal  amount of the CQC Notes may cause the CQC Notes to be
accelerated,  in which event they would  become  immediately  due and payable in
full. If the CQC Notes were to be accelerated,  CQC would not be able to pay the
outstanding  CQC Notes without an infusion of capital,  which is not expected to
be  available.  AC would then be  obligated  under its  guarantee to pay the CQC
Notes but is not  expected  to have the  resources  to satisfy  such  obligation
should it  materialize.  A default by AC under its guarantee would also give the
holders  of 25% or more in  principal  amount  of the AC Notes  the  ability  to
accelerate  the AC Notes.  If the AC Notes  and the CQC  Notes are  accelerated,
substantial doubt exists about AC'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  management  believes  that,  assuming the AC Notes and CQC
Notes are not  accelerated,  it has sufficient funds to meet its projected needs
for  financing  of  existing  operations  and to service  its debt  obligations.
However,  the Company's  ability to obtain  capital,  should it be required,  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."

      To  date,  casino  revenues  at  Arizona  Charlie's  (and  for  Las  Vegas
generally)  have  continued  to grow  despite  the spread of  legalized  gaming.
Moreover,  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 two additional locations owned  by
unrelated parties. See "Item 1. Business - Sunset Coin, Inc." and
"Notes  to  Financial Statements - Sunset Coin,  Inc.  -  Related
Party Transactions."

      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 its guarantee of the AC Notes.

<TABLE>
<CAPTION>
                              Results of Operations


                                                         Years ended June 30,
                                                        (dollar in thousands)

                                                    1996        1995        1994
                                                    ----        ----        ----
<S>                                               <C>         <C>         <C>
Revenues:

Gaming machine route:
   Participation contracts .................      $2,294      $2,535      $2,496
   Spaces leases ...........................         229          75         212
                                                     ---          --         ---
Total gaming machine revenues ..............       2,523       2,610       2,708
Gaming machine services fees ...............         126         132         151
                                                     ---         ---         ---
Total revenues .............................      $2,649      $2,742      $2,859
                                                  ======      ======      ======

Operating income:

Gaming machine route:
   Participation contracts .................      $  713      $1,043      $1,164
   Spaces leases ...........................          71          30          99
                                                      --          --          --
Total gaming machine route expenses ........         784       1,073       1,263
Gaming machine services fees ...............          33          55          70
                                                      --          --          --
Total operating income .....................      $  817      $1,128      $1,333
                                                  ======      ======      ======
</TABLE>



      During  fiscal  1996,  two  participation  locations  were added,  and one
participation contract was converted to a more favorable space lease contract. A
new BGG bar, Charlie's Down Under was opened in April 1995 and paid service fees
to SC for all of fiscal 1996. However, in April 1996, another BGG bar, Charlie's
Saloon,  was  closed  resulting  in the  loss by SC of a  participation  service
agreement.

      Comparison  of Fiscal  Years  Ended  June 30,  1996,  1995 and 1994.  SC's
results of  operations  declined for fiscal 1996  compared to fiscal  1995.  The
decrease in operating income was substantially a result of the increased payroll
and related  costs needed to increase  security  measures for the  protection of
slot  technicians  and cash on hand in response to a recent  increase in related
crime activity in the Las Vegas area.

      While  revenues  decreased  by 3.4% to  $2,649,000  for  fiscal  1996 from
$2,742,000  for fiscal 1995,  operating  expenses,  including  depreciation  and
amortization,  increased by 13.5% to $1,832,000 for fiscal 1996 from  $1,614,000
for fiscal 1995.  This  resulted in an overall  decrease in operating  income of
27.6% to $817,000  from  $1,128,000,  and a decline in net  operating  margin to
30.8% for fiscal  1996 from 41.1% for fiscal  1995.  A smaller  decrease  in net
operating  margin was experienced for fiscal 1995 to 41.1% from 46.6% for fiscal
1994,  during  which period  revenues  decreased  by 4.1% and  operating  income
decreased by 15.4%.

      The  decrease in  revenues  for fiscal 1996 is due to a decrease in gaming
machine route revenues of 3.3% to $2,523,000 for fiscal 1996 from $2,610,000 for
fiscal 1995.  Such revenues also decreased 3.6% for fiscal 1995 from  $2,708,000
for fiscal 1994.  Gaming machine  service fee revenue  decreased 4.6% for fiscal
1996 to $126,000 from $132,000 for fiscal 1995,  following a 12.6%  decrease for
fiscal 1995 from $151,000 for fiscal 1994.  The decrease in gaming machine route
revenues  reflects the net loss of 26 slot  machines  within the gaming  machine
route  between  June  30,  1995 and June 30,  1996,  most of which  includes  15
machines operated at the former Charlie's Saloon. SC operated 27 route locations
for  fiscal  1996  and  26  route  locations  in  fiscal  1995  and  1994,  with
approximately 265, 267 and 279 machines included in the route at June 30 of such
fiscal years, respectively. Revenues from the locations controlled by the Becker
family were  $2,370,000,  $2,331,000 and $2,333,000 for fiscal years 1996,  1995
and 1994,  respectively.  Fees from BGG  accounted  for  approximately  $93,000,
$77,000 and $71,000 of gaming  machine  service fees for fiscal  1996,  1995 and
1994, respectively.  The increase in gaming machine service fees for fiscal 1996
reflects  the net effect of the  additional  contract  at  Charlie's  Down Under
during the full fiscal year of 1996,  partially  offset by the lost  service fee
contract at Charlie's Saloon in April, 1996.

     Gaming machine route and service expenses  increased by 17.9% to $1,311,000
for fiscal 1996 from $1,112,000 for fiscal 1995.  This increase,  which consists
primarily  of payroll and  related  taxes and  benefits,  follows an increase of
13.0% for fiscal 1995 from fiscal 1994 expense of $984,000.  As a percentage  of
revenues,  route and service  expenses  increased  to 49.5% for fiscal 1996 from
40.6% and 34.4% for fiscal 1995 and for fiscal 1994,  respectively.  General and
administrative expenses decreased 16.5% for fiscal 1996 to $86,000 from $103,000
for fiscal 1995,  after a  significant  decrease of 22.0% from fiscal 1994.  The
decrease for fiscal 1996 was the result of reduced expense associated with poker
giveaways,  due to  conversions of certain  traditional  video poker machines to
bonus poker machines. Management fees paid by SC to related parties decreased by
8.7% to $137,000 for fiscal 1996 from  $150,000 for fiscal 1995 and $102,000 for
fiscal  1994.  Effective  June 1,  1994,  a  management  fee of 5% of SC's gross
revenue  was paid to BGI,  as opposed to the lower flat  monthly  fee paid to AC
prior to that date.  Management fees paid to BGI in fiscal 1996 totaled $137,000
compared to $150,000  for fiscal 1995.  Depreciation  and  amortization  expense
increased  by 19.7% to $298,000  for fiscal 1996 from  $249,000 for fiscal 1995,
following a decrease of 19.2% from  $308,000  for fiscal  1994.  The increase in
depreciation  was due to the addition of bonus poker gaming  machines  placed in
service for fiscal 1996, net of slot machines sold.

      SC had other  expense  (net of other  income) of $240,000 for fiscal 1996,
$122,000 for fiscal 1995 and  $136,000  for fiscal  1994.  The increase in other
expense is the result of a loss due to a write-off  of equipment  and  leasehold
improvements  deemed  worthless when Charlie's Saloon was abandoned on April 21,
1996.

     Income Taxes

     As a result  of the  termination  of its  election  to be  treated  as an S
corporation,  SC became  liable 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 1996, no estimated  income tax payments
were paid. In fiscal 1995 and fiscal 1994, SC made estimated income tax payments
of $102,000 and $187,000 for the  respective  time periods.  These payments were
based upon an anticipated  effective  federal income tax rate  approximating the
statutory rate of 34%.

     Liquidity and Capital Resources

      For fiscal  1996,  cash  provided by  operating  activities  decreased  to
$1,003,000  from  $1,139,000 for fiscal 1995 and $1,458,000 for fiscal 1994. The
decrease in fiscal 1996 is attributable to a $307,000  decrease in net income, a
$49,000 increase in depreciation and  amortization,  offset by the net effect of
decreases in receivables  and increases in payables.  Cash provided by operating
activities for fiscal 1995 decreased  from 1994 by $319,000,  attributable  to a
$322,000  decrease  in net  income,  a  $59,000  decrease  in  depreciation  and
amortization,  a $29,000  decrease in provision  for losses on notes  receivable
recorded during the period as partially offset by an increase in receivables and
payables.

      Cash flows used in  investing  activities  were  $180,000 for fiscal 1996,
which includes $208,000 in capital  expenditures and $72,000 in loans to related
parties  including  loans to AC that were  utilized  to pay  interest  on the AC
Notes.  SC's  proceeds  from the  sale of  fixed  assets  were  $12,000  and the
repayment of a note receivable were $88,000.

      Cash flows  from  financing  activities  for  fiscal  1996 were  $207,000,
reflecting proceeds from notes payable of $109,000, offset by principal payments
on notes of $316,000.

      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
guarantee  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 technical  default under the  Indenture  governing the AC
Notes, the AC Notes could be accelerated. See "Arizona Charlie's, Inc._Liquidity
and Capital  Resources." In such event, AC is not expected to have the resources
to pay the AC Notes.  In addition,  AC is expected to have  liability  under its
guarantee  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,
would have liability under its guarantee, and such liability would likely exceed
the amount which it could immediately  support.  Accordingly,  substantial doubt
exists about SC's ability to continue as a going  concern if the AC Notes or CQC
Notes  are  accelerated  if CQC is  unable  to sell its  assets.  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-24 hereof and page F-25 through
F- 43 hereof, respectively.

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

     Not Applicable.

                             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 27, 1996          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 27th day of September, 1996.


        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, 1996 and 1995
     Statements of Operations  for the Years Ended June 30, 1996,  1995 and 1994
     Statements of Stockholder's Equity (Deficit) for the Years Ended 1996, 1995
     and 1994 Statements of Cash Flows for the Years Ended June 30, 1996,
          1995 and  1994
     Notes to Financial Statements

SUNSET COIN, INC.
     Report of  Independent  Accountants  Balance Sheets as of June 30, 1996 and
     1995 Statements of Income for the Years Ended June 30, 1996,
          1995 and 1994
     Statements of Stockholder's Equity for the Years Ended
          June 30, 1996, 1995 and 1994
     Statements of Cash Flows for the Years Ended June 30, 1996,
          1995 and 1994
     Notes to Financial Statements




ARIZONA CHARLIE'S, INC.

     Schedule II    Valuation and Qualifying Accounts as of
                    and for the Years Ended June 30, 1996,
                    1995 and 1994

SUNSET COIN, INC.

     Schedule II    Valuation and Qualifying Accounts as of
                    and for the Years Ended June 30, 1996,
                    1995 and 1994



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, 1996 and 1995, and the results of its operations and its cash flows for
each of the three  years in the period  ended June 30, 1996 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 the  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 and  management's  plans 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, 1996 financial statements of the Arizona
Charlie's, Inc. do not include any adjustment that might result from the outcome
of this uncertainty.





Las Vegas, Nevada
August 9, 1996

================================================================================
                             ARIZONA CHARLIE'S, INC.

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

                                  BALANCE SHEET
                          As Of June 30, 1996 and 1995
                             (Dollars In Thousands)
                                   ----------
================================================================================


                                     ASSETS

                                                           1996            1995
                                                       --------        --------
Current assets:

   Cash and cash equivalents....................       $  4,591        $  5,404
   Restricted cash, in escrow account...........             10              10
   Trade and other accounts receivable..........            473             658
   Receivable from related parties..............          1,539             820
   Notes receivable from related party..........             --           4,416
   Inventories .................................            575             661
   Prepaid expenses ............................          1,118           1,162
                                                       --------        --------
      Total current assets......................          8,306          13,131
                                                       --------        --------
Property and equipment:
   Building and improvements ...................         37,488          37,485
   Furniture and equipment......................         22,575          22,609
   Land improvements ...........................          1,628           1,628
                                                       --------        --------
                                                         61,691          61,722
   Less, accumulated depreciation ..............        (16,218)        (13,572)
                                                       --------        --------
                                                         45,473          48,150
   Land ........................................            208             208
                                                       --------        --------
        Net property and equipment..............         45,681          48,358
                                                       --------        --------
Other assets:
   Receivable from related party, noncurrent....            987             240
   Deposits and other ..........................            460             551
   Notes receivable from related party .........           --             4,416
   Financing costs, less accumulated
     amortization of $1,366 (1996)
     and $880 (1995)                                      2,507           2,993
                                                       --------        --------

        Total other assets......................          8,370           3,784
                                                       --------        --------

        Total assets ...........................       $ 62,357        $ 65,273
                                                       ========        ========



            LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)

                                                          1996             1995
                                                      --------         --------
Current
liabilities:
  Trade accounts payable......................        $  1,452         $  1,449
  Construction accounts payable ..............            --
  Accounts payable to related parties.........               4                3
  Accrued expenses ...........................           3,323            3,097
  Management fees due Becker Gaming, Inc......           4,682            3,287
  Notes payable...............................             110              121
  Notes payable to related party..............           2,250            2,250
  Current portion of
     obligations under capital leases.........              15                4
  Long-term debt classified as
     current due to default
     under covenants .........................          55,000             --
                                                      --------         --------

         Total current liabilities............          66,836           10,211

Long-term debt, less current portion..........           --              55,000
Subordinated notes payable to prior
  stockholders ...............................           5,000            5,000
Obligations under capital leases,
  less current portion .........                            22                4
                                                      --------         --------

         Total liabilities....................          71,858           70,215
                                                      --------         --------

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).................          (9,970)          (5,411)
                                                      --------         --------
         Total stockholder's equity
          (deficit).................                    (9,501)          (4,942)
                                                      --------         --------

         Total liabilities and
         stockholder's equity (deficit).......        $ 62,357         $ 65,273
                                                      ========         ========

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,
                               ------------------------------------------------
                                             1996        1995        1994
Revenues:
  Gaming .............................   $ 52,831    $ 47,466    $ 38,955
  Food and beverage ..................     13,204      10,647       8,459
  Hotel ..............................      3,208       2,614       1,219
  Bowling ............................       -            -           251
  Gift shop ..........................        590         577         535
  Management fee from affiliates .....       -            -           281
  Other ..............................      1,145         912         399
                                         --------    --------    --------

      Gross revenues .................     70,978      62,216      50,099

Less, promotional allowances .........     (7,677)     (5,134)     (3,652)
                                         --------    --------    --------

      Net revenues ...................     63,301      57,082      46,447
                                         --------    --------    --------

Operating expenses:
  Gaming .............................     18,612      15,359      11,681
  Food and beverage ..................     12,511      11,388       8,389
  Hotel ..............................      1,413       1,377         714
  Bowling ............................        -           -           387
  Gift shop ..........................        475         450         458
  Advertising and promotion ..........      4,726       3,837       3,093
  General and administrative .........     17,660      15,358      13,867
  Payments under guarantee obligation         601       1,592         -
  Management fee - Becker Gaming, Inc.      1,396       3,099         188
  Rent expense paid to related party .        217         191         343
  Depreciation and amortization ......      3,491       3,373       2,222
                                         --------    --------    --------

      Total operating expenses .......     61,102      56,024      41,342
                                         --------    --------    --------
      Operating income ...............      2,199       1,058       5,105
                                         --------    --------    --------

Other income (expenses):
  Interest income ....................        286         580         769
  Interest expense ...................     (7,095)     (7,250)     (5,223)
  Interest capitalized ...............                    676         460
  Other, net .........................         51         -            23

      Total other expenses ...........     (6,758)     (5,994)     (3,971)
                                         --------    --------    --------

    Net (loss)income before income tax     (4,559)     (4,936)      1,134

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

    Net (loss) income ................   $ (4,559)   $ (4,936)   $  1,134
                                         ========    ========    ========


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, 1996, 1995 And 1994
                             (Dollars In Thousands)
================================================================================

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

Balances, June 30, 1993 ............   1,000    $ 1,513        $-

 Distributions to stockholders .....
 Reclassification of undistributed
     earnings to additional paid-in
     capital upon termination of S
     corporation election ..........    --         --         732
 Contribution of land from
     Becker Gaming, Inc. ...........    --         --         208
 Forgiveness of receivable from
     Charlie's Land Company in
     connection with the
     Reorganization ................    --         --        (729)
 Net transfer of certain assets
     and liabilities to Becker
     Gaming, Inc. as part of
     the Reorganization ............    --       (1,044)     (211)
 Net income ........................    --         --        --
                                      ------    -------    ------

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      $-
                                      ======    =======    ======


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

Balances, June 30, 1993 ............  $ 4,440    $ 5,953

 Distributions to stockholders .....   (5,317)    (5,317)
 Reclassification of undistributed
     earnings to additional paid-in
     capital upon termination of S
     corporation election ..........     (732)      --
 Contribution of land from
     Becker Gaming, Inc. ...........     --          208
 Forgiveness of receivable from
     Charlie's Land Company in
     connection with the
     Reorganization ................     --         (729)
 Net transfer of certain assets
     and liabilities to Becker
     Gaming, Inc. as part of
     the Reorganization ............     --       (1,255)
 Net income ........................    1,134      1,134
                                      -------    -------

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)
                                      =======    =======

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,
                                                            --------
                                                    1996       1995       1994
                                                 --------   --------   --------
Cash flows from operating activities:
 Net income (loss) ............................  $ (4,559)  $ (4,936)  $  1,134
                                                 --------   --------   --------
 Adjustments  to  reconcile  net  income
   (loss) to net  provided  by (used by)
   operating activities:
  Provision for losses on related
   party receivables ..........................       601      1,592       --

  Depreciation and amortization ...............     3,491      3,373      2,222
  (Gain) loss on sale of equipment ............        11         (2)       (23)
(Increase) decrease in operating assets:
  Receivables .................................       185       (387)       408
  Inventories .................................        86       (108)        33
  Prepaid expenses ............................       241       (339)       433
  Deposits and other ..........................       (41)       (92)      --

Increase (decrease) in operating liabilities:
  Accounts payable, net of amounts
   for capital ................................         3       (144)       633
   expenditures
  Accrued expenses ............................       226        716        848
  Management fees due to Becker Gaming, Inc. ..     1,395      3,099        188
                                                 --------   --------   --------

    Total adjustments .........................     6,198      7,708      4,742
                                                 --------   --------   --------

    Net cash provided by operating activities .     1,639      2,772      5,876
                                                 --------   --------   --------

Cash flows from investing activities:
  Note receivable issued to CQC ...............      --       (1,200)      --

  Capital expenditures, net of amounts in
   accounts payable ...........................      (190)   (24,253)   (11,379)
  Increase in receivable from Becker Gaming,
   Inc ........................................    (2,065)    (4,154)      (300)

  Net (additions to) reductions in restricted
    cash equivalents ..........................      --       26,102    (26,112)

  Proceeds from assets sales ..................        15        104        269
  Deposits and other ..........................      --         --          342
                                                 --------   --------   --------

    Net cash used in investing activities .....    (2,240)    (3,401)   (37,180)
                                                 --------   --------   --------

Cash flows from financing activities:
  Proceeds from notes payable, net of
   financing costs ............................      --         --       51,105

  Proceeds from subordinated notes payable to .      --         --        5,000
   stockholders
  Proceeds from borrowing under notes payable .      --        2,250       --
  Principal payments on notes payable .........      (208)      (199)   (17,421)

Payments under capital lease obligations ......        (4)       (32)      (848)
  Distributions to former stockholders ........      --         --       (5,317)
  Payment of liability for Charlie's Land
   Company ....................................      --         --         (729)
                                                 --------   --------   --------

    Net cash provided by  (used in) financing
   activities .................................      (212)     2,019     31,790
                                                 --------   --------   --------
    Net increase (decrease) in cash and cash
   equivalents ................................      (813)     1,390        486

Cash and cash equivalents, beginning of
  the year ....................................     5,404      4,014      3,528
                                                 --------   --------   --------

Cash and cash equivalents, end of the year ....  $  4,591   $  5,404   $  4,014
                                                 ========   ========   ========

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:

     o    Capitol Queen & Casino, Inc. ("CQC"), a Missouri corporation
       in the development stage of construction of a riverboat casino in
       Jefferson City, Missouri (the "Capitol Queen").

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

     o 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.

As a part of the  Reorganization  described  above,  the following  transactions
occurred:

     o The  stockholders  of BGI caused the ownership of the land underlying and
       adjacent to Arizona  Charlie's  to be  transferred  to the  Company  from
       Charlie's  Land  Company  ("CLC"),  an entity  also then owned by the BGI
       stockholders.  The land was first  conveyed to BGI by CLC in exchange for
       BGI stock and then  contributed by BGI to AC at its historical cost basis
       of  approximately  $208,000.  Concurrent  with the  transfer of land,  AC
       forgave  $729,000 due the Company  from CLC which arose in November  1993
       when the Company  paid-off CLC's mortgage on the land in contemplation of
       the Reorganization.

    o    Certain property and equipment, consisting of aircraft and
       boats with a net book value of approximately $5,254,000, accounts
       payable relating to such property and equipment of  approximately
       $252,000, and related encumbrances in the form of capital lease
       obligations totaling approximately $3,900,000, were transferred
       from AC to BGI.  In addition, certain prepaid expenses totaling
       approximately $153,000 were transferred from AC to BGI.  Such
       prepaid expenses consisted primarily of insurance related to
       certain personnel who were transferred from the Company to BGI in
       connection with the Reorganization.  The net effect of the above
       transactions was to transfer net assets with a historical book
       value of approximately $1,255,000.

The forgiveness of  indebtedness  from CLC and the transfer of net assets to BGI
are reflected as  distributions  to  stockholders in the Company's June 30, 1994
Statement of Stockholder's Equity
(Deficit).

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
payable by AC until completion of AC's ongoing  expansion  project and such time
as AC has  attained  a  specified  fixed  charge  coverage  ratio  of 2.25 to 1.
However,  such fees  accrue  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>
<CAPTION>
                                             Years Ended June 30,
                                             --------------------
                                         1996      1995      1994
                                         ----      ----      ----
           <S>                         <C>        <C>      <C>
           Hotel .........             $  261    $  164    $  119
           Food & Beverage              3,824     2,260     2,005
                                        -----     -----     -----

                                       $4,085    $2,424    $2,124
                                       ======    ======    ======
</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-in  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 cost, training and
other  costs  directly  associated  with  the  opening  of 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, 1996 and
1995, the Company did not capitalize any preopening costs.

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

Prior to January 1, 1994,  the Company was taxed under Section 1362  (Subchapter
S) of the Internal  Revenue  Code,  which  provides  that,  in lieu of corporate
income taxes,  the stockholders  are taxed on their  proportionate  share of the
Company's taxable income or loss.  Therefore,  these financial statements do not
include any provision or liability  for  corporate  income taxes for the periods
prior to December 31, 1993.

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
included the enactment position or results of operations.

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, except the Company does not receive any benefit from carrybacks to prior
years.

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

Certain amounts in the 1994 and 1995 financial statements have been reclassified
to conform with the 1996 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:

AC has  guaranteed  the payment of principal and interest of 12% First  Mortgage
Notes due November 15, 2000 issued by CQC, of which $20,000,000 principal amount
and $2,400,000 in past-due  accrued  interest are  outstanding at June 30, 1996.
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  ultimately  determined to
abandon 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 and
$1,200,000  on May 15,  1996 and AC did not have  available  funds to advance on
behalf of CQC. AC is also in default of certain covenants under its indebtedness
(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 a
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  in Note 6) to repay the AC Notes on a current  basis and  satisfy its
guarantee  obligation  with  respect to the CQC Notes.  In  connection  with the
decision  to  abandon  the  project,  CQC had  entered  into an  Asset  Purchase
Agreement  dated April 10, 1995,  for the sale of its assets to Aerie  Riverboat
Casinos of  Missouri,  Inc.  at a purchase  price of  $18,000,000,  which  price
exceeded the carrying value of the CQC assets.  However, the consummation of the
Aerie purchase  agreement was subject to the satisfaction of several  conditions
which could not be satisfied  timely,  including,  among others,  that Jefferson
City consent to the assignment of its Development Agreement with CQC, that Aerie
be found  preliminarily  suitable to hold a Missouri  Gaming  license,  and that
riverboat  gaming is legally  permitted  in  Jefferson  City.  As a result,  the
agreement with Aerie was terminated  without  penalty when the December 31, 1995
expiration date passed.

CQC  continues  to  market  its  riverboat  assets  to  prospective  buyers  and
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
the issuance of additional  AC Notes to fulfill AC's  guarantee  obligation  for
remaining  principal and accrued  interest of the CQC Notes after  applying sale
proceeds.  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,
1996 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, 1996, 1995 and 1994:

<TABLE>
<CAPTION>
                                               1996         1995         1994
                                               ----         ----         ----
<S>                                      <C>          <C>          <C>
Interest paid, net of amounts
  capitalized ........................   $7,116,000   $7,115,000   $3,883,000
                                         ==========   ==========   ==========

Capitalized lease obligations
  incurred ...........................   $   34,000   $    9,000   $3,650,000
                                         ==========   ==========   ==========

Net transfer of assets and
  liabilities to Becker Gaming, Inc. .   $     --     $     --     $1,255,000
                                         ==========   ==========   ==========
Contribution of land to AC from
  Becker Gaming, Inc. ................   $     --     $     --     $  208,000
                                         ==========   ==========   ==========
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, 1996
  and 1995:

<TABLE>
<CAPTION>
                                             1996         1995
                                             ----         ----
     <S>                                  <C>          <C>
     Wages payable and accrued salaries   $  811,000   $  703,000
     Accrued vacation .................      306,000      251,000
     Group insurance ..................      352,000      300,000
     Gaming taxes .....................      239,000      260,000
     Payroll and other taxes ..........      405,000      381,000
     Progressive slot liability .......       88,000       94,000
     Other accrued expenses ...........      128,000       93,000
     Accrued interest .................      994,000    1,015,000
                                             -------    ---------

                                          $3,323,000   $3,097,000
                                          ==========   ==========
</TABLE>


5.Notes Payable:

Notes payable consist of the following as of June 30, 1996 and 1995:

<TABLE>
<CAPTION>
                                                           1996         1995
                                                           ----         ----
<S>                                                  <C>          <C>
 Related parties:
      Notes payable to SC with interest at 5.56%
      uncollaterized and due May 1997 ............   $2,250,000   $2,250,000

 Nonrelated parties:
      5.96% note payable in monthly
      installments of $22,352, including interest,
      through January, 1997, uncollateralized ....   $  110,000   $  121,000
                       -----                         ----------   ----------

                   Total notes payable ...........   $2,360,000   $2,371,000
                                                     ==========   ==========
</TABLE>




6.Long-Term Debt:

Long-term debt consists of the following as of June 30, 1996 and 1995:

<TABLE>
<CAPTION>
                                                      1996          1995
                                                      ----          ----
<S>                                            <C>           <C>
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
                                               ===========   ===========
</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 issue costs of  approximately  $16,294,000  and $497,000 used to
repay principal and accrued interest,  respectively, 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,  1996,  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,  and (ii) advances by AC to Becker Gaming,  Inc. which exceed amounts
allowed for under the Indenture.  Such advances  remain  outstanding at June 30,
1996. In addition,  beginning with the quarter ending  December 31, 1995, AC has
not met the Minimum Tangible Net Worth requirement, defined in the AC Indenture.
Under the terms of the  Indenture,  AC is  technically  required to offer to buy
back $11,000,000 of the outstanding AC Notes at June 30, 1996 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,  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 (the "Indenture") 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.


7.Income Taxes:

During the period from January 1, 1994 (the  effective  termination  date of the
Company's S  corporation  election)  to June 30,  1994 and for the fiscal  years
ended June 30, 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, 1996, 1995 and 1994:

<TABLE>
<CAPTION>
                                             1996           1995           1994
                                             ----           ----           ----
<S>                                   <C>            <C>            <C>
Tax provision at federal income tax
     statutory rate ...............   $(1,550,000)   $(1,678,000)   $   386,000
Income tax liability borne by
     stockholders during period of
     S corporation status .........          --             --         (538,000)
Increase (decrease) in taxes
     resulting from:
     Unrecognized tax benefit from
     net operating losses .........     1,489,000      1,633,000        122,000
     Other ........................        61,000         45,000         30,000
                                           ------         ------         ------

              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,  1996  and 1995  were as
follows:

<TABLE>
<CAPTION>
                                                  1996           1995
                                                  ----           ----

<S>                                        <C>            <C>
Liabilities
Depreciation ...........................   $   542,000    $      --
                                           -----------    -----------

Assets

Allowances for bad debts ...............       745,000        541,000
Federal net operating loss carryforwards     3,119,000      1,292,000
Other ..................................          --            7,000
                                           -----------    -----------

         Total deferred tax assets .....     3,864,000      1,840,000

Valuation allowance ....................    (3,322,000)    (1,840,000)
                                            ----------     ----------

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

As of June 30, 1996, the Company had a federal net operating  loss  carryforward
of approximately $9,174,000 which expires between 2009 and 2011.

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 2000.

Property and  equipment  includes the  following  property  leased under capital
leases as of June 30, 1996 and 1995:

<TABLE>
<CAPTION>
                                    1996        1995
<S>                               <C>         <C>
Equipment ...................   $ 43,000    $ 67,000
Less accumulated depreciation     (3,000)    (23,000)
                                  ------     -------

                                $ 40,000    $ 44,000
                                ========    ========
</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, 1996:

<TABLE>
<CAPTION>
                                                 Capital Lease  Operating Leases
                                                 -------------  ----------------
<S>                                                  <C>            <C>
1997                                                   15,000        242,000
1998                                                   11,000        226,000
1999                                                   11,000           --
2000                                                   10,000           --
                                                       ------        ------

       Total minimum lease payments ..........       $ 47,000       $468,000
                                                                    ========

Less amount representing interest ............         10,000
                                                       ------
       Present value of net minimum
        lease payments .                               37,000

Less current portion .........................         15,000
                                                       ------
       Obligations under capital leases,
        noncurrent                                   $ 22,000
                                                     ========
</TABLE>



The total  rental  expense  under  operating  leases is as follows for the years
ended June 30, 1996, 1995 and 1994:

<TABLE>
<CAPTION>
                                    1996       1995       1994
                                    ----       ----       ----
<S>                              <C>        <C>        <C>
Noncancellable airplane hangar
     and equipment leases ....   $   --     $   --     $110,000
Land and office leases .......    217,000    191,000    344,000
                                  -------    -------    -------
                                 $217,000   $191,000   $454,000
                                 ========   ========   ========
</TABLE>



9.Related-Party Transactions:

<TABLE>
<CAPTION>

The  following  balances due to or from related  parties  existed as of June 30,
1996 and 1995. The identified realted parties are stockholders of the Company or
affiliated companies related through common ownership.


                                             June 30, 1996
                                             -------------
                                   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 and                  Subordinated
                                    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>



<TABLE>
<CAPTION>
                                  June 30, 1995
 -------------------------------------------------------------------------------


                                     Current        Noncurrent       Notes
                                    Receivables     Receivables    Receivable
                                    -----------    -----------   -----------
<S>                                 <C>            <C>           <C>
Former Stockholders of the
Company ..........................  $    25,000    $   165,000          --
BGI ..............................      608,000           --     $ 4,416,000
Sunset Coin ......................      103,000           --            --
Becker Vending ...................       10,000           --            --
Becker Enterprises ...............        1,000           --            --
CQC ..............................      392,000           --       1,200,000
BGG:
    Charlie's Lakeside ...........       (7,000)          --            --
    Charlie's Bar ................        6,000           --            --
    Cantina Charlie's ............        9,000           --            --
    Cariba Charlie's .............       11,000         75,000          --
    Charlie's Saloon .............       12,000           --            --
    Charlie's Down Under .........       42,000           --            --
                                    -----------    -----------   -----------
Total ............................    1,212,000        240,000     5,616,000
Less:  Allowance for doubful
        collection of amounts
        due from CQC .............     (392,000)          --      (1,200,000)
                                    -----------    -----------   -----------
                                    $   820,000    $   240,000   $ 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 ...........................   $    3,000         --     $5,000,000
BGI ...............................    3,287,000         --           --
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 .............................    3,290,000    2,250,000    5,000,000

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


                                      $3,290,000   $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  $217,000,  $191,000 and $343,000,  for
the years  ended June 30,  1996,  1995 and 1994,  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 $245,000,
$168,000  and  $64,000  for the  years  ended  June 30,  1996,  1995  and  1994,
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.

Interest expense incurred under related-party  notes was $508,000,  $507,000 and
$266,000 for the years ended June 30, 1996, 1995 and 1994, 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) and  $692,000  (1996) 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 loaned to BGI an aggregate of  approximately  $4,416,000 to fund
BGI's  operating  expenses from June 1994 through  March 1995.  The advances are
interest  bearing and have been classified as non-current  based on Management's
expectation for the timing of repayments from BGI. At June 30, 1996, the Company
owed BGI approximately $4,682,000 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.

Included in other revenues is income from  management  and  accounting  services
performed  by the Company for SC and BGG of $281,000 for the year ended June 30,
1994.

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  $495,000,  $395,000  and
$350,000 for the years ended June 30, 1996, 1995 and 1994, 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
($17,526,000  carrying  amount at June 30, 1996) of 12% First Mortgage Notes due
November 15, 2000 of Capitol Queen and Casino, Inc. (the "CQC Notes"), which are
guaranteed  by AC. 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, 1996 and 1995, and the results of its operations and its cash flows for each
of the  three  years in the  period  ended  June  30,  1996 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 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 under indebtedness
of  Arizona  Charlie's,   Inc.  ("AC"),  a  company  affiliated  through  common
ownership,  and such  indebtedness  is in default of covenants.  AC is currently
negotiating a  restructuring  of its  indebtedness  and  management's  plans are
described in Note 2. Should AC be  unsuccessful  in modifying the  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, 1996 financial statements of the Sunset Coin, Inc.
do not  include  any  adjustment  that  might  result  from the  outcome of this
uncertainty.

As  discussed  in  Note 3 to the  financial  statements,  AC  owes  the  Company
approximately  $2,250,000 resulting from advances made by the Company to AC. Due
to the financial condition of AC, as described above,  management of the Company
believes it is reasonably  possible that a portion of the notes  receivable from
AC will be uncollectible.  However,  an estimate of the loss cannot presently be
determined.




Las Vegas, Nevada
August 9, 1996

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

                                 BALANCE SHEETS

                          As Of June 30, 1996 And 1995
                             (Dollars In Thousands)
================================================================================
                                     ASSETS

                                                             1996          1995
                                                          -------       -------

Current assets:
  Cash .............................................      $ 1,122       $   506
  Current portion of notes receivable, net .........          117           175
  Notes receivable from related party ..............        2,250         2,250
  Other receivables ................................          274           146
  Prepaid expenses .................................           46            46
                                                          -------       -------
      Total current assets .........................        3,809         3,123
                                                          -------       -------
Property and equipment:

  Building and leasehold improvements ..............          174           461

  Furniture, fixtures and equipment ................        2,885         2,984
                                                          -------       -------

                                                            3,059         3,445
  Less, accumulated depreciation ...................       (1,370)       (1,710)
                                                          -------       -------
         Net property and equipment ................        1,689         1,735
                                                          -------       -------

Notes receivable, less current portion, net ........          194           267
Advances to related parties ........................          111            86
Other assets, less accumulated amortization
  of $24 (1996) and $19 (1995) .....................           88           138
                                                          -------       -------

      Total other assets ...........................          393           491
                                                          -------       -------

      Total assets .................................      $ 5,891       $ 5,349
                                                          =======       =======


                      LIABILITIES AND STOCKHOLDER'S EQUITY

                                                                 1996       1995
                                                               ------     ------

Current liabilities:
  Trade accounts payable .................................     $   44     $   69
  Accrued expenses .......................................        608        284
  Current portion of long- term debt .....................        279        255
                                                               ------     ------
        Total current liabilities ........................        931        608
                                                               ------     ------

Long-term liabilities:
   Long-term debt, less current portion ..................        502        664
   Subordinated notes payable to
     prior stockholders ..................................      3,000      3,000
                                                               ------     ------

      Total liabilities ..................................      4,433      4,272
                                                               ------     ------

Commitments and contingencies


Stockholder's equity:
  Common stock, no par value, 2,500 shares
   authorized, 400 shares issued and outstanding .........         27         27
  Retained earnings ......................................      1,431      1,050
                                                               ------     ------

      Total stockholder's equity .........................      1,458      1,077
                                                               ------     ------

      Total liabilities and stockholder's
      equity .............................................     $5,891     $5,349
                                                               ======     ======

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,
                                      ----------------------------------------
                                           1996          1995        1994
                                      -----------   -----------  -----------
Revenues:
    Slot route:
       From locations controlled by       $2,370        $2,331       $2,333
related parties
       Other                                 153           279          375
    Slot service fees:
       From related                           93            77           71
parties
       Other                                  33            55           80
                                      -----------   -----------  -----------

         Total revenues                    2,649         2,742        2,859

Operating expenses:
    Slot route and service                 1,311         1,112          984
    General and                               86           103          132
administrative
    Management fee - Arizona                                             88
Charlie's, Inc.                                -             -
    Management fee -                         137           150           14
Becker Gaming, Inc.
    Depreciation and                         298           249          308
amortization
                                      -----------   -----------  -----------

       Total operating                     1,832         1,614        1,526
expenses
                                      -----------   -----------  -----------

       Operating income                      817         1,128        1,333
                                      -----------   -----------  -----------

Other income (expense):
    Interest income                          171           146           62
    Interest expense                       (398)         (356)        (189)
    Rental and other                         102           101
income                                                                    -
    Net loss on sales of                   (115)          (13)          (9)
equipment
                                      -----------   -----------  -----------

       Total other income                  (240)         (122)        (136)
(expense)
                                      -----------   -----------  -----------

       Income before                         577         1,006        1,197
income taxes

Provision for income taxes                 (196)         (318)        (187)
                                      -----------   -----------  -----------

       Net income                           $381          $688       $1,010
                                      ===========   ===========  ===========

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, 1996, 1995 And 1994

                             (Dollars In Thousands)
================================================================================


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



Balances, June 30, 1993 ................                 400         $   34


  Distributions to stockholders ........                --             --

  Adjustment to retained earnings to
   reflect the termination of  S
   corporation election ................                --               (7)


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

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


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

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

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

Balance, June 30, 1996 .................                 400         $   27
                                                      ======         ======



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


Balances, June 30, 1993 ..................................   $ 2,625    $ 2,659


  Distributions to stockholders ..........................    (3,280)    (3,280)

  Adjustment to retained earnings to
   reflect the termination of  S
   corporation election ..................................         7       --


   Net income ............................................     1,010      1,010
                                                             -------    -------

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


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

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

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

Balance, June 30, 1996 ...................................   $ 1,431    $ 1,458
                                                             =======    =======

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,
                                                   -----------------------------

                                                     1996       1995       1994
                                                  -------    -------    -------
Cash flows from operating activities:
  Net income ...................................  $   381    $   688    $ 1,010
                                                  -------    -------    -------
  Adjustments  to  reconcile  net  income
    to net  cash  provided  by  operating
    activities:
    Provision for losses on notes receivable ...       44         44         15
    Depreciation and amortization ..............      298        249        308
    Net loss on sales of equipment .............      115         13          9
    (Increase) decrease in operating assets
     Other receivables .........................     (128)       (49)        50
     Prepaid expenses ..........................     --           (2)        11
     Other assets ..............................       (6)       (59)      --
    Increase (decrease) in operating liabilities:
     Accounts payable ..........................      (25)        (6)        70
     Accrued expenses ..........................      324        260        (15)
                                                  -------    -------    -------

        Total adjustments ......................      622        450        448
                                                  -------    -------    -------

        Net cash provided by operating
         activities ............................    1,003      1,138      1,458
                                                  -------    -------    -------
Cash flows from investing activities:
  Capital expenditures .........................     (208)    (1,142)      (232)
  Proceeds from sales of equipment .............       12         26        209
  Decrease (increase) in advances to
   related parties .............................      (72)    (2,154)        48
  Issuance of notes receivable .................     --          (25)      (321)
  Repayments of notes receivable ...............       88        161        415
                                                  -------    -------    -------

        Net cash provided by (used in)
         investing activities ..................     (180)    (3,134)       119
                                                  -------    -------    -------
Cash flows from financing activities:
  Proceeds from notes payable ..................      109        738       --
  Principal payments on notes payable ..........     (316)      (176)      (211)
  Proceeds from subordinated notes payable
   to stockholders .............................     --         --        3,000
  Distributions to prior stockholders ..........     --         --       (3,280)
                                                  -------    -------    -------
        Net cash used in financing activities ..     (207)       562       (491)
                                                  -------    -------    -------
        Net increase (decrease) in cash ........      616     (1,434)     1,086

Cash, beginning of year ........................      506      1,940        854
                                                  -------    -------    -------
Cash, end of year ..............................  $ 1,122    $   506    $ 1,940
                                                  =======    =======    =======

Supplemental cash flow disclosures:

 Interest paid .................................  $   395    $   352    $   190
                                                  =======    =======    =======

 Assets acquired by incurring notes payable ..    $    69    $  --      $  --
                                                  =======    =======    =======

 Income taxes paid .............................  $  --      $   102    $   187
                                                  =======    =======    =======

 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
                                   ----------


                  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, 1996, the Company
had route and service agreements with 26 slot locations which have between 4 and
35 slot machines each.

In connection with the financing transaction more fully discussed in Note 8, the
stockholders  of SC  exchanged  all of their  stock in the  Company for stock of
Becker Gaming, Inc. ("BGI") (the "Reorganization"),  and effective June 1, 1994,
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:

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

     o     Capitol Queen & Casino, Inc. ("CQC"), a Missouri corporation
       in the development stage of construction of a riverboat casino in
       Jefferson City, Missouri (the "Capitol Queen").

     o 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.

Prior to the Reorganization,  certain services to the Company (primarily related
to  executive  compensation,   accounting  personnel,  administration  and  data
processing expenses) were provided by AC and charged to the Company at an amount
which approximated cost. However,  effective June 1, 1994, this arrangement with
AC was terminated  (although AC will continue to provide certain  administrative
services to SC) and the Company  became  subject to the payment of a  management
fee 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, 1996,  254  (approximately  90%) 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;  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.

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

Prior to 1994,  the Company was taxed under Section 1362  (Subchapter  S) of the
Internal  Revenue Code,  which provides that, in lieu of corporate income taxes,
the stockholders are taxed on their proportionate share of the Company's taxable
income  or loss.  Therefore,  these  financial  statements  do not  include  any
provision  or liability  for  corporate  income  taxes for the periods  prior to
December 31, 1993.

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.  The adoption of SFAS 109 did not have a material
impact on the Company's financial position or results of operations.

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,  except the Company  does not receive any benefit  from  carry-backs  to
prior years.

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.


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, 1996.  In
addition,  AC has  guaranteed  the payment of interest  and  principal  of notes
payable issued by CQC, of which $20,000,000  principal amount are outstanding at
June 30, 1996.  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  (i) the  modification  of
covenants under the AC Notes to cure the current  defaults and (ii) the issuance
of  additional  AC Notes to fulfill  AC's  guarantee  obligation  for  remaining
principal and accrued  interest of the CQC Notes after  applying sale  proceeds.
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 the  Company to  continue  as a going
concern.  The final outcome of these matters is not presently  determinable  and
the June 30,  1996  financial  statements  of the  Company  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 $150,000 for the years ended June 30, 1996, 1995 and
1994, 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>
<CAPTION>
Arizona Charlie's, Inc.
-----------------------                                           June 30,
                                                          1996             1995
                                                          ----             ----
<S>                                                <C>              <C>
Uncollateralized notes receivable from AC
    (interest at 5.56%) due May 1997 .........     $ 2,250,000      $ 2,250,000
                                                   ===========      ===========
Interest receivable from AC ..................         169,000           44,000
                                                       =======           ======
Payables to  AC ..............................         (46,000)         (98,000)
                                                       =======          =======
</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 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, 1996. Interest earned by SC on the notes receivable
from AC was $125,000,  $44,000 and $-0- for the years ended June 30, 1996,  1995
and 1994,  respectively.  The interest receivable from AC and payables to AC are
included in other receivables and advances to related parties, respectively.

Prior to the Reorganization,  AC provided accounting, general and administrative
services  for the  Company.  Additionally,  AC has and will  continue to provide
security  personnel,  and  safeguard  the coin and  currency  used in SC's route
operations.

In connection with these  services,  the Company paid AC management fees $88,000
for the year ended June 30, 1994.

<TABLE>
<CAPTION>
Becker Gaming Group
-------------------
                                                                        June 30,
                                                           1996             1995
                                                           ----             ----
<S>                                                   <C>              <C>
Advances to BGG ...............................       $ 149,000        $ 194,000
                                                      =========        =========
</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  $93,000,  $77,000 and $71,000 in 1996, 1995 and 1994,
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  from the  closed  facility  will be
transferred  to a new BGG location  which is  anticipated to open in early 1997.
The net  investment in the assets leased to BGG for Charlie's  Saloon as of June
30, 1996 and 1995 is listed below:

<TABLE>
<CAPTION>
                                                           1996            1995
                                                           ----            ----
<S>                                                   <C>             <C>
Building and improvements .....................       $    --         $ 335,000
Furniture, fixtures and equipment .............            --           130,000
Liquor license ................................          60,000          60,000
                                                         ------          ------
                                                         60,000         525,000
Less, accumulated depreciation ................            --          (342,000)
                                                       --------        --------

                                                      $  60,000       $ 183,000
                                                      =========       =========
</TABLE>


The terms of the Charlie's  Saloon lease  required BGG to pay all taxes,  normal
maintenance  and  insurance on the  facility,  and  provided  for annual  rental
payments to Sunset Coin of $89,000, until the closing date of April 21, 1996.

BGG did not make any rental  payments  under the lease  from the time  Charlie's
Saloon opened,  through June 30, 1994,  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  in 1994 in the
accompanying  financial statements for this agreement.  Total lease payments for
the  years  ended  June 30,  1996 and 1995  included  as  rental  income  in the
accompanying financial statements amounted to $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
$17,000, $22,000 and $58,000 in 1996, 1995 and 1994, 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 6. The net investment in
the assets leased to Charlie's Down Under as of June 30, 1996 and 1995 is listed
below:

<TABLE>
<CAPTION>
                                                          1996             1995
                                                          ----             ----
<S>                                                  <C>              <C>
Building  and improvements ...................       $ 174,000        $ 126,000
Furniture, fixtures and equipment ............         550,000          550,000
                                                       -------          -------
                                                       724,000          676,000
Less, accumulated depreciation ...............         (76,000)         (15,000)
                                                       -------          -------
                                                     $ 648,000        $ 661,000
                                                     =========        =========
</TABLE>


On April 1, 1995,  Charlie's  Bar Down Under (the  Lessee)  entered into a 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 period from April 1, 1996 through June 30, 1996 included in the
accompanying financial statements of Sunset Coin totaled $24,000.

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  and $15,000 for the
years ended June 30, 1996 and 1995, respectively.

<TABLE>
<CAPTION>
Becker Gaming, Inc.
-------------------
                                                                        June 30,
                                                         1996               1995
                                                        ----               ----
<S>                                                   <C>              <C>
Advances to BGI ...........................           $8,000               --
                                                      ======
Management fees payable ...................             --             $(10,000)
                                                                       ========
</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 $137,000,  $150,000 and $14,000 in 1996,
1995 and 1994, respectively.


4.      Other Receivables:

Other  receivable  at June  30,  1996  and  1995  consist  of  uncollateralized,
non-interest bearing short-term advances to various proprietors who have entered
into slot route agreements with the Company.


5. 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, 1996 and 1995:

<TABLE>
<CAPTION>
                                                           1996           1995
                                                           ----           ----
<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 ..........     $  75,000      $ 101,000

10% note receivable,  due in weekly payments of $650 including  interest through
January 2003, personally guaranteed by a stockholder of the related slot
location ...........................                    175,000        190,000

Other collateralized and  uncollateralized  notes with varying interest rates up
to prime plus 2.5%, due at various
dates through December 2003 ........                    149,000        195,000
                                                        -------        -------

                                                        399,000        486,000
     Allowance for doubtful accounts                    (88,000)       (44,000)
                                                        -------        -------

                                                        311,000        442,000
          Less, current maturities                     (117,000)      (175,000)
                                                       --------       --------

                                                      $ 194,000      $ 267,000
                                                      =========      =========
</TABLE>




6. Long-Term Debt:

Long-term   debt   consists  of  the  following  at  June  30,  1996  and  1995,
respectively:


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, 1994 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. ......................................   $ 113,000    $ 199,000

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) ...................     162,000      214,000

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) ..............     262,000      331,000

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) .............................     119,000      147,000

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) .............................     102,000         --

Other notes payable due in monthly installments
including interest through June 1996 collateralized
by slot machine equipment of the Company and BGG ..      23,000       28,000
                                                         ------       ------

                                                        781,000      919,000
       Less, current portion ......................    (279,000)    (255,000)
                                                       --------     --------

                                                      $ 502,000    $ 664,000
                                                      =========    =========


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 or ownership or management.

<TABLE>
<CAPTION>
Maturities of long-term debt at June 30, 1996 are as follows:

                    <S>                           <C>
                    1997                          $279,000
                    1998                           210,000
                    1999                           177,000
                    2000                           115,000
                    ----                           -------
                                                  $781,000
                                                  ========
</TABLE>


7. Income Taxes:

The  components of the income tax provision  are  summarized  for June 30, 1996,
1995 and 1994 as follows:

<TABLE>
<CAPTION>
                                           1996       1995       1994
                                           ----       ----       ----
<S>                                    <C>        <C>        <C>
Current:
   Federal .........................   $196,000   $318,000   $187,000
Deferred:
   Federal .........................       --         --         --
                                       --------   --------   --------

          Total income tax provision   $196,000   $318,000   $187,000
                                       ========   ========   ========
</TABLE>



The  components included in determining the provision for income taxes are shown
     below:

<TABLE>
<CAPTION>
                                         1996         1995         1994
                                    ---------    ---------    ---------
<S>                                 <C>          <C>          <C>
Tax provision at federal
  income tax statutory rate .....   $ 202,000    $ 342,000    $ 407,000
Income tax liability borne
  by stockholders during period
  of S corporation status .......        --           --       (220,000)

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

        Income tax provision
         per statements of income   $ 196,000    $ 318,000    $ 187,000
                                    =========    =========    =========
</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.


8. Commitments:

Future minimum operating lease commitments at June 30, 1996, are as follows:

<TABLE>
<CAPTION>
                           <S>                    <C>
                           1997                   $40,600
                           1998                    40,600
                           1999                    38,600
                           2000                    16,600
                           2001                    15,100
                                                   ------

                                                 $151,500
                                                 ========
</TABLE>


Aggregate rent expense was $40,000, $38,000 and $103,000 in 1996, 1995 and 1994,
respectively.


9. 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.

10.  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 $19,000,  $15,000 and $15,000
for the years ended June 30, 1996, 1995 and 1994, respectively.


11.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>
<CAPTION>

                                   SCHEDULE II

                             ARIZONA CHARLIE'S, INC.

                        VALUATION AND QUALIFYING ACCOUNTS

                For The Years Ended June 30, 1996, 1995 And 1994


                                                                       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, 1996 ..............  $1,592,000   $  601,000   $     --
                                            ==========   ==========   ==========
  Year ended June 30, 1995 ..............  $     --     $1,592,000   $     --
                                            ==========   ==========   ==========

  Year ended June 30, 1994 ..............  $     --     $     --     $     --
                                            ==========   ==========   ==========



Deferred Tax Asset Valuation Allowance:

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

  Year ended June 30, 1995 ..............  $  213,000   $     --     $1,627,000
                                            ==========   ==========   ==========

  Year ended June 30, 1994 ..............  $     --     $     --     $  213,000
                                            ==========   ==========   ==========
</TABLE>

<TABLE>
<CAPTION>
                                                            Balance at
                                                            End of
               Description                     Deductions   Year
               -----------                     ----------   ----

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

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

  Year ended June 30, 1995 .............       $     --     $1,592,000
                                               ==========   ==========

  Year ended June 30, 1994 .............       $     --     $     --
                                               ==========   ==========



Deferred Tax Asset Valuation Allowance:

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

  Year ended June 30, 1995 .............       $     --     $1,840,000
                                               ==========   ==========

  Year ended June 30, 1994 .............       $     --     $  218,000
                                               ==========   ==========
</TABLE>

<TABLE>
<CAPTION>

                                   SCHEDULE II

                                SUNSET COIN, INC.

                        VALUATION AND QUALIFYING ACCOUNTS

                For The Years Ended June 30, 1996, 1995 And 1994



                                                                       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, 1996 ............  $    44,000   $    44,000   $      --
                                        ===========   ===========   ===========

 Year ended June 30, 1995 ............  $      --     $    44,000   $      --
                                        ===========   ===========   ===========

 Year ended June 30, 1994 ............  $   150,000   $    14,689   $      --
                                        ===========   ===========   ===========
</TABLE>

<TABLE>
<CAPTION>
                                                      Balance at
                                                      End of
                 Description            Deductions    Year
--------------------------------------  -----------   --------
<S>                                     <C>           <C>
Allowance for doubtful accounts

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

 Year ended June 30, 1995 ............  $      --     $ 44,000
                                        ===========   ========

 Year ended June 30, 1994 ............  $   164,689   $   --
                                        ===========   ========
</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.