================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 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]



                         Commission file number 33-76368

                               BECKER GAMING, INC.


            NEVADA                            88-0303849
          (State or other jurisdiction of    (I.R.S. employer
          incorporation or organization)     identification no.)

                           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:
                          Common Stock, $.01 par value
                                (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 10,000,000.

                       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-1 (33-76368).
================================================================================
                             PART I


Item 1.    Business

Becker Gaming, Inc.
-------------------

      Becker  Gaming, Inc. ("BGI" or the "Company") serves  as  a
holding  company  for the Becker family gaming interests.   BGI's
operating  subsidiaries include Arizona Charlie's,  Inc.  ("AC"),
Sunset  Coin, Inc. ("SC") and Becker Gaming Group, Inc.  ("BGG"),
each of which is  a Nevada corporation wholly owned by BGI.   The
Company also wholly owns Capitol Queen & Casino, Inc. ("CQC"),  a
Missouri  corporation, the assets of which are being offered  for
sale  pursuant  to  a  proposed  debt  restructuring  plan.   See
"Capitol  Queen & Casino, Inc." BGI does not expect to engage  in
any  business  other than providing management and administrative
services to its existing and future operating subsidiaries.

      AC  owns  and  operates  a  locals-oriented  casino-hotel  named  "Arizona
Charlie's  Hotel-Casino" ("Arizona Charlie's") in Las Vegas, Nevada. SC owns and
operates a gaming machine route in the Las Vegas, Nevada area. BGG, directly and
through its subsidiary, Innerout, Inc., owns and operates five restaurants under
the  "Charlie's"  name in the Las Vegas  area.  CQC was  organized  to  develop,
construct,  own and operate the Capitol  Queen  riverboat  casino (the  "Capitol
Queen") in Jefferson City, Missouri, which project has been abandoned.

       Management fees are payable to the Company by its  subsidiaries at a rate
of 5% of the gross revenues of each such  subsidiary.  However,  management fees
payable by AC are restricted by the Indenture  governing the 12% First Mortgages
due November 15, 2000 of AC (the "AC Indenture"  and "AC Notes,"  respectively).
Under the AC Indenture,  no  management  fees will be payable by AC until AC has
attained a specified fixed charge coverage ratio of 2.25 to 1 and any management
fees which are paid by AC may not exceed $5,000,000 in any fiscal year. Although
CQC is similarly restricted under the Indenture governing its 12% First Mortgage
Notes  due  November  15,  2000  (the  "CQC  Indenture"  and  the  "CQC  Notes,"
respectively),  such  restrictions  are expected to be of no effect  because CQC
will not open the Capitol Queen or pay any management  fees to the Company.  See
"Capitol Queen & Casino, Inc." As a result of the AC Indenture restrictions,  AC
has not paid and does not anticipate that it will be permitted to pay management
fees before  fiscal 1998.  Any fees which become  payable  under the  management
agreement  with  the  Company  but  which  may not be paid  as a  result  of the
restrictions  contained in the AC Indenture,  will be accrued until paid. 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. In connection with this transfer, in October 1995, the
Company  temporarily  reduced the amount of AC's management fee to a net 1.0% of
AC's gross revenues  (previously  5.0% of gross revenues) based on the reduction
in services it will receive from BGI in the future.  See Note 9 of AC's Notes to
Financial Statements.

      The  Company  had  made  certain   commitments  in  connection   with  the
acquisition of the rights to develop the Capitol Queen in Jefferson City,  which
commitments  are  subject to CQC  becoming  licensed by the State of Missouri to
open  and  operate  the  Capitol  Queen,  and  some of which  rights  have  been
terminated.  See "Capitol Queen & Casino,  Inc." Because CQC's application for a
gaming license in Missouri was denied and later withdrawn,  such commitments are
no longer in effect.


Arizona Charlie's, Inc.
-----------------------

     General

      The Becker family opened Arizona Charlie's in April 1988 as a full-service
casino-hotel  geared toward the Las Vegas locals  market.  Arizona  Charlie's is
situated  on  a  12.5-acre  site  located  prominently  on a  major  north-south
thoroughfare  in an  established  retail  and  residential  neighborhood  in the
western  metropolitan  area of Las Vegas.  A 60-foot  high neon sign  located in
front of the facility provides Arizona Charlie's high visibility.

      AC 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,  AC 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."

       AC  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, AC 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.  AC 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.  AC 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 a
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.  AC 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.  AC 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.  AC has focused  added
marketing  emphasis on the appeal of its entertainment  programming.  The larger
showroom  enables AC to present  better-recognized  musical acts,  charge higher
cover  prices  and  attract  more  gaming  customers.  The  availability  of two
showrooms  allows AC to present more and varied  entertainment.  The banquet and
meeting  space has  enabled  AC 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.

     Business Strategy

      AC's  strategy  focuses on  attracting  Las Vegas  residents,  principally
retirees and  employees of local  businesses,  who visit the casino on a regular
basis.  These patrons,  in contrast to the  vacationers and  conventioneers  who
frequent the Las Vegas Strip,  prefer a friendlier,  more casual  environment to
the large crowds,  extravagance and less intimate atmosphere associated with the
Strip casinos.  Accordingly,  AC attempts to attract locals and achieve customer
loyalty by creating a more personal and relaxed,  yet  full-service,  atmosphere
with an emphasis on value pricing.  Since the  Expansion,  AC has also increased
its marketing efforts toward non-local customers.

      Management's  efforts to create a friendly  and relaxed  atmosphere  begin
with its  employees.  AC strives to instill  in each  employee a  commitment  to
service  excellence.  Employees are trained to recognize and acknowledge regular
customers on a first-name basis.  Employees are continually informed of upcoming
events  and are  trained  to be  responsive  to  customer  inquiries  about  new
promotions.  The high  level  of  personal  interaction  between  employees  and
customers leads to improved employee morale that in turn further  contributes to
the pleasant atmosphere.

      Casino  operations  are geared  toward  the tastes of the local  customer.
Arizona Charlie's emphasizes video poker machines,  which local customers prefer
to other gaming machines because video poker offers longer playing times per bet
and more interactive features. In addition, AC's video poker machines are set at
higher payout rates than other gaming machines in the casino. As a result, based
on data  compiled  and  published by state  gaming  regulators,  payout rates at
Arizona  Charlie's  are believed by  management to be higher than those at other
Las Vegas  casinos  generally.  In  addition,  unlike its  primary  competitors,
Arizona Charlie's does not operate a computerized "slot club" tracking and award
system,  but instead rewards and tracks players through  personal contact by the
casino's  employees.  Player bonuses are paid in cash on the casino floor, which
patrons  find  appealing,  as opposed to  crediting  points to a slot club card.
Moreover,  casino operations at Arizona Charlie's are continually  monitored and
adjustments  are  made  from  time  to  time to  accommodate  changing  customer
interests.  In  particular,  AC regularly  upgrades  its gaming  machines as new
models  are  developed  to  provide  its  customers  with the  latest  games and
features.  The casino also offers double-deck,  hand-dealt blackjack that allows
the players to handle their cards,  creating more player involvement in the game
and the potential for more frequent payouts.  Arizona  Charlie's  recently added
the new  table  games  Let It  Ride,  Caribbean  Stud  and  Mini-Baccarat  which
management  believes  have become  increasingly  popular with local  players.  A
three-table  poker  room has also  helped to  attract  local  regulars.  Arizona
Charlie's  also features a bingo parlor which  management  believes,  though not
directly  profitable,  is an effective marketing tool because it attracts locals
on a regular basis who also engage in other gaming activities. Bingo contributes
to  the  casino's  overall  informal  and  friendly   atmosphere.   Finally,   a
company-owned  shuttle bus service provides free scheduled  pick-up and drop-off
service for local customers, particularly the elderly. Management believes that,
as a result of its  efforts  to gear  casino  operations  to the tastes of local
customers  and to  provide a more  personal  approach,  the  casino has become a
social gathering place for the surrounding communities.

      AC provides  complimentary food and beverages to valued casino patrons and
has expanded  this  practice  since the  Expansion.  While AC issues credit to a
small portion of its customers, it does so judiciously,  resulting in an average
provision for doubtful accounts of less than 1% of gaming revenues over the past
several years. Since the Expansion, AC has implemented,  among a number of other
new  marketing  programs,  efforts  designed to attract  more credit  customers.
However,  management  continues  to  maintain  stringent  controls on its credit
policy  and thus does not  expect  its  provision  for  doubtful  accounts  as a
percentage of gaming revenues to increase significantly.

     Marketing Strategy

      General. AC promotes the casino through special events, television, radio,
print and  billboard  advertising,  direct  mail,  video poker  specials and its
popular,  trademarked "Paycheck Poker" check-cashing  promotion.  Paycheck Poker
which many of AC's  competitors have imitated,  involves a no-fee  check-cashing
service and the distribution of free scratch-game  prize cards. Other promotions
successfully employed by AC include hand paid jackpots on video poker, which are
supplemental  to the machine payout,  and special event  promotions on holidays.
These  marketing tools have enabled AC to fill the casino  consistently  without
employing  expensive bus, coupon book or road-flier  promotions commonly used by
other  casinos in Las Vegas.  Arizona  Charlie's has also marketed the casino on
the basis of its  reputation  among  locals for  promoting  professional  boxing
events and entertaining country music and classic rock performances.

      AC's marketing  strategy is geared  principally to attract locals who will
visit  the  casino on a repeat  basis for  entertainment  and  relaxation.  AC's
ability to continue  to draw these  players  will be  critical to its  long-term
success.  In addition,  management  expects  that the  Expansion  has  generally
enabled it to further increase  revenues through the broadening of its marketing
programs which have include more  invited-guest  events,  increased house credit
(currently  issued on a very limited basis), a greater number of performances by
better-recognized musical groups, and slot tournaments.  The upgraded facilities
and enhanced amenities provided by the Expansion,  along with expanded marketing
efforts,  have assisted AC in attracting  the leisure  traveler,  special casino
customer and selected meeting group customers.

     Local  Residents.  AC  markets  primarily  to  the  local  resident  gaming
customer. AC relies heavily on Arizona Charlie's location,  its favorable casino
odds, its modestly  priced food and beverage  facilities  and its  entertainment
programming to attract  local-resident  patrons.  AC markets to local  residents
through local print and billboard  advertising,  participation  in community and
other public  activities,  and in-house  promotions  and  programs,  such as its
no-fee   check-cashing   promotion.   Arizona   Charlie's   also  benefits  from
word-of-mouth  endorsements  from local  residents.  AC continues to develop new
in-house promotions designed to enhance the image of Arizona Charlie's.

      Leisure  Travelers.  The leisure  travel  segment of the Las Vegas  gaming
customer  market  consists of persons who are not affiliated with groups and who
make  their  reservations  directly  with the hotel of their  choice or  through
independent  travel  agents.  Currently,  this segment  represents  only a small
portion of Arizona Charlie's customer base.  Management believes,  nevertheless,
that its affordably priced hotel rooms and off-Strip  location are attractive to
a  portion  of the  leisure  travel  segment  and  that  Arizona  Charlie's  has
significant  development  potential in this area. The Company believes that many
repeat visitors who perceive Las Vegas  residents as discerning,  value-oriented
consumers of hotel and gaming  facilities  will be favorably  influenced  by the
hotel's popularity among locals. AC's management  believes,  further,  that once
first-time  visitors  experience  the value,  quality  and  friendly  atmosphere
offered by Arizona Charlie's, many of those visitors become repeat customers. AC
anticipates that it will periodically (as hotel occupancy  projections  dictate)
utilize print media,  billboards and radio to advertise in Southern  California,
and, to a lesser extent,  in other leisure travel markets such as Arizona,  Utah
and Idaho.

      Special Casino Customers.  The special casino customer segment is composed
of frequent gaming customers known to AC. AC monitors the profiles of its repeat
customers and offers complimentary or reduced-rate  lodging,  food and beverages
to the more  active of these  customers.  AC  identifies  and tracks the play of
these  customers  through the  issuance of a special  guest card and by means of
personal  management   contact.   The  card  is  presented  by  the  guest  when
participating  in gaming  activities  or dining at Arizona  Charlie's,  enabling
company  employees  to deliver  personalized  service.  Credit play is also made
available for qualified  customers in the discretion of management  based on the
player's  gaming and credit  history.  The  Expansion of Arizona  Charlie's  has
enabled AC to market the casino more effectively to credit customers who require
certain amenities that AC can now provide.

      Selected  Banquet and Meeting Groups.  With the creation of  approximately
15,000 square feet of banquet facilities and meeting rooms in the Expansion,  AC
has expanded its  marketing  efforts  within this segment with respect to groups
anticipated  to have a  generous  amount of time to  participate  in gaming  and
entertainment  activities,  such as  meeting  participants  whose  meetings  are
scheduled  for only a portion of the day. AC does not market to  conventions  or
large-scale  meetings.  AC's marketing department maintains data, makes contacts
and develops relationships with outside selected meeting planners.

     Market & Competition

      Las Vegas Market. The large and expanding Las Vegas gaming market includes
both local residents and visitors.  Arizona Charlie's draws principally from the
local resident market and to a limited,  but growing,  extent attracts  visiting
business and vacation travelers.

      Located in southern  Nevada's Clark County,  Las Vegas is the largest city
in Nevada,  with a local  population that has grown  dramatically  over the past
decade.  Further  population  increases are expected in coming  years,  based on
published  growth  projections  for  southern  Nevada.  Much of the  recent  and
anticipated  population  growth in Las Vegas may be  attributed to the growth of
the local gaming  industry,  which has drawn and is expected to draw people from
other  regions who are looking for  employment.  Arizona  Charlie's  attracts as
customers many employees of other casino properties, and expects to benefit from
the influx of people looking for employment,  many of whom will likely choose to
reside in the growing  neighborhoods to the west of and near Arizona  Charlie's.
Arizona  Charlie's  will also  benefit  from the  growth of these  neighborhoods
resulting  from the  increased  influx of retirees who move to Las Vegas for its
favorable  climate,  relatively  low  cost  of  living  and  wide  selection  of
entertainment activities.

     Within  its  principal  market,   AC  derives   substantially  all  of  its
casino-hotel  business from customers  residing in the  immediately  surrounding
neighborhoods.  The outer areas of this geographic market have experienced, more
than any other area of Las Vegas, a growing residential base, most significantly
to the west of Arizona Charlie's.

      Although AC does not emphasize the visitor market,  its marketing  efforts
toward that market have increased and the growth of the local gaming industry as
a whole contributes to the growth of Arizona Charlie's customer base. Therefore,
the level of Las Vegas  visitor  traffic has had an indirect  effect on AC. With
increased  visitor  traffic and the growth of the local  population,  gaming has
been a strong  and  growing  business  in Las  Vegas.  The Las Vegas  market has
historically   achieved   significant   growth  despite  adverse   economic  and
competitive  events  during the past  decade,  including  the  expansion  of the
Laughlin,  Nevada market 90 miles south of Las Vegas,  the  introduction  of the
California  lottery in 1985,  the growth in gaming in Atlantic  City, New Jersey
and the introduction of riverboat, dockside and Indian gaming and other forms of
legalized  gaming.  More recently,  as a result of the increased  popularity and
public acceptance of gaming,  Las Vegas has sought to increase its popularity as
a destination resort. An increasing number of casinos have developed  non-gaming
entertainment  to draw visitors and their  families to Las Vegas.  These include
major casino-hotel projects recently completed on or near the Strip, such as the
MGM Grand,  Luxor,  Treasure  Island,  Circus  Circus' Grand Slam Canyon,  Monte
Carlo,  and others  currently under  development  such as New York, New York and
Bellagio.  These projects are expected to expand the Las Vegas gaming market and
economy,  increase  the  local  population  and,  therefore,   increase  Arizona
Charlie's customer base.

      Competition. AC competes for many of its local gaming customers with other
casino-hotels  located in the  western  area of Las Vegas and,  to a much lesser
extent,  with other  casino-hotel  operations  located off the Strip.  Competing
locals casinos include  principally the Palace Station,  Gold Coast,  Rio, Santa
Fe, Fiesta (opened in December  1994) and Texas Station  (opened in August 1995)
casino-hotels,  all but one of which  is  larger  than and each of which  offers
similar, if not greater,  amenities than those offered by Arizona Charlie's. The
Fiesta and Texas Station continue to have a negative impact on the slot revenues
of Arizona  Charlie's,  however,  management  believes  this is  temporary as AC
competes with these facilities on the basis of the desirability of its location,
its high payout rates,  personalized approach,  Paycheck Poker check cashing and
other  promotions in the casino,  the comfort and value of its  restaurants  and
hotel rooms,  and the excitement,  variety and value of its  entertainment.  See
"Business Strategy."

      AC believes that because of restrictive  zoning laws,  water rights issues
and other factors (including the ownership of surrounding parcels of land by the
Becker family), no new competing  facilities are likely to be developed within a
two-mile  radius of Arizona  Charlie's.  As a result,  AC believes  that Arizona
Charlie's  is well  positioned  geographically  to take  advantage  of its focus
market.

     To the extent AC seeks to develop significant  leisure travel business,  it
will compete with other  casino-hotel  operations  located not only in Las Vegas
but in the Laughlin and Reno-Lake Tahoe areas of Nevada and with state-sponsored
lotteries,  off-track  wagering,  card parlors,  riverboat and dockside  gaming,
Indian gaming ventures and other forms of legalized gaming.

Sunset Coin, Inc.
-----------------

      Operations. Since 1980, SC has operated a gaming machine route business in
the Las Vegas,  Nevada area, which at August 16, 1995 consisted of approximately
280  coin-operated  gaming  devices in 28  locations.  The machines are owned or
leased by SC and placed in locations owned by others,  primarily  retail outlets
in shopping centers,  taverns,  restaurants and convenience stores. SC generally
shares the net win with the property  owner,  although in 3 locations SC retains
all income  generated  by its  machines and pays a fixed space rental fee to the
property owner. Approximately 254 of SC's machines are installed at 26 locations
controlled by the Becker family, and the associated contracts are expected to be
renewed as a matter of general  course.  As of September  15, 1995,  the average
remaining life of contracts with other locations was approximately 5 years.

      In  addition  to its gaming  machine  route,  SC derives  income from fees
earned pursuant to gaming machine service contracts with locations which operate
their own gaming machines.  SC provides  24-hour  maintenance and other services
for which it  charges  a fixed  rate per month per  machine.  SC  currently  has
service contracts with six locations consisting of an aggregate of approximately
130  machines,  including  a  total  of  115  machines  located  at  BGG's  five
restaurants.

      In order to open a new route  location,  SC must be  licensed  to  operate
gaming machines at the site or, in the case of a revenue-sharing  agreement, the
location  operator  must be  licensed.  Typically,  it takes  120 to 180 days to
obtain  the  requisite   licenses  and  to  complete  the   necessary   facility
improvements  to accommodate  the gaming  machines,  resulting in a delay in the
generation  of route  revenues  following  the execution of a contract for a new
route  location.  The opening of a route  location  generally  requires  capital
improvements,  a portion of which may be funded,  typically as a loan, by SC. SC
relies  on cash  from  operations  to fund the  capital  improvements  and other
operational  costs.  See  "Item  7.  Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operations -
  Sunset Coin, Inc. - Liquidity and Capital  Resources." New locations typically
experience  an initial  stabilization  period,  during which SC  determines  the
appropriate number (subject to regulatory limits) and mix of gaming machines and
implements certain of its start-up marketing programs.

      Competition.  SC's gaming machine route operation competes on the basis of
its  machines  and its service.  Unlike many other  operators,  SC uses only new
equipment with the latest  technologies.  These machines are believed to be more
attractive  to gaming  customers  than  older  machines  and,  as a result,  are
expected  by gaming  machine  route site  owners to  generate  more  income.  In
addition,  SC supports its  machines  with 24-hour  service,  providing  change,
jackpot payments and repair assistance, as needed. SC relies in part on customer
referrals  and  expansions by its customers  into  additional  locations for new
business.  SC also actively  solicits  business from other gaming  machine route
locations having  contracts with  competitors that are scheduled to expire,  and
from retail outlets in new shopping centers and restaurants. The availability of
sites held by the Becker  family-controlled  entities  also  provides  SC with a
competitive  advantage.  The terms of the contracts (and extensions and renewals
thereof)  entered into by SC with its customers  are  determined on the basis of
private  negotiation  and do not  involve  participation  in public  competitive
bidding processes.

      Notwithstanding  SC's  ability to generate  profits in recent  years,  the
operation of a gaming machine route in Nevada is a highly  competitive  business
and that  competition  continues to  intensify.  Many of SC's  competitors  have
significantly  greater financial resources and manage  substantially more gaming
machines.   Competitors  often  provide  substantial  financial  inducements  to
prospective  customers,  some of which SC is not financially able to offer. Such
inducements  include  long-term  commitments,  guarantees and leases in favor of
owners of local establishments,  substantial advance deposits, payments of lease
rentals  in  advance  and  loans for  buildings  and  tenant-improvement  costs.
Although SC has  historically  generated  sufficient new contracts to offset the
loss of old ones,  its  revenues  decreased  in fiscal 1996 and fiscal 1995 as a
result  of a net loss of  contracts  and due to  increased  competition  and the
increased  sophistication  and  bargaining  power of customers.  There can be no
assurance that SC will be able to obtain new gaming  machine route  contracts or
renew or extend its existing  contracts on their  expiration or termination,  or
that, if renewed or extended, the terms will be as favorable to SC. See "Item 7.
Management's  Discussion  and  Analysis of Financial  Conditions  and Results of
Operations - Sunset Coin, Inc. - Results of Operations."

Becker Gaming Group
-------------------

     Operations.  BGG  currently  owns  and  operates  five  restaurant  and bar
facilities (including one through its subsidiary,  Innerout,  Inc.) in Las Vegas
under the "Charlie's"  name,  each of which offers limited  gaming.  BGG's first
restaurant was opened in late 1986, the next four facilities were opened between
1988 and 1991,  and the sixth was opened in April 1995.  However,  one facility,
Charlie's  Saloon & Gambling Hall, was closed due to the expiration of its lease
in April 1996. Three of the restaurants-"Charlie's Bar," "Cantina Charlie's" and
"Charlie's  Bar  Down   Under"-emphasize   lower-priced  menus  in  an  informal
environment, and two more upscale locations-"Charlie's Lakeside Bar & Grill" and
"Cariba  Charlie's,"-feature  more  formal  dining  and a greater  selection  of
dishes.

     BGG expects to continue exploring expansion  opportunities in the Las Vegas
area  and has  identified  a  suitable  location  for a new  restaurant  and bar
facility  scheduled  to open in early  1997.  BGG's  ability to open  additional
restaurants  depends  on,  among  other  factors,   locating  acceptable  sites,
negotiating  favorable  leases,  securing  appropriate  government  permits  and
approvals,  obtaining  liquor  licenses,  and recruiting and training  qualified
restaurant management personnel.

     BGG depends on gaming for a large  percentage  of its revenues and a larger
percentage of its profits,  particularly at Charlie's Bar, Cantina Charlie's and
Charlie's  Bar Down  Under,  where food and  beverage  operations  have not been
directly profitable.  Accordingly, the menus at Charlie's Bar, Cantina Charlie's
and Charlie's Bar Down Under are priced and include food selections  designed to
attract   casual  diners   interested  in  gaming   entertainment.   Unlike  the
lower-priced  facilities,  Charlie's  Lakeside and Cariba Charlie's are operated
with the  intention of generating  profit both from food and beverage  sales and
from gaming activity.  To that end, these restaurants feature a better selection
of dishes and wines to attract customers  interested  principally in a memorable
dining  experience.  Charlie's  Lakeside  and  Charlie's  Bar  Down  Under  hold
nonrestricted  gaming licenses allowing them to operate  thirty-five video poker
machines with poker promotions and large progressive  jackpots.  BGG employs the
same state-of-the-art  gaming machines and liberal pay-out approach made popular
at Arizona Charlie's.

       BGG strives to maintain  consistency in each of its  restaurants  through
the careful  training and  supervision of its  personnel.  The management of BGG
also closely monitors the tastes of the customers of each of its restaurants and
makes  menu and  other  changes  to  accommodate  these  tastes.  BGG  maintains
financial and accounting controls for each of its restaurants through the use of
centralized accounting and management information systems.

      Competition.  The  restaurant  and food service  industry in the Las Vegas
area is highly  competitive  and  fragmented.  There are many of restaurant  and
other food and beverage service  operations that compete directly and indirectly
with BGG. BGG competes  with these  restaurants  on the basis of its  reasonable
pricing, quality food, focused menus and gaming entertainment.  In addition, BGG
employs  seasonal  print and direct mail  advertising  and  conducts  some local
restaurant  promotions.  Many of BGG's competitors,  however, have significantly
greater  financial  resources  and  higher  sales  volume  than  BGG  does.  The
restaurant  business  is  often  affected  by  changes  in  consumer  taste  and
discretionary  spending  priorities,   national,   regional  or  local  economic
conditions,  demographic  trends,  consumer  confidence in the economy,  traffic
patterns,  weather conditions,  employee availability,  and the type, number and
location of competing  restaurants.  Any change in these factors could adversely
affect BGG.  Factors such as inflation and  increased  food,  liquor,  labor and
other employee  compensation  costs could also adversely affect BGG.  Management
believes  its  ability to compete  effectively  will  continue  to depend on its
ability to offer quality food for moderate prices in unique dining environments.

Capitol Queen & Casino, Inc.
----------------------------

      CQC was formed to develop,  construct,  own and operate the Capitol  Queen
riverboat casino in Jefferson City, Missouri,  where it was granted a three-year
exclusive franchise by the city pursuant to a Riverfront  Development  Agreement
dated as of September 1, 1992 (the  "Development  Agreement"),  subject to state
licensing  to  operate  a  gaming  facility.   CQC  commenced   development  and
construction work on the Capitol Queen in November 1993. Such work was suspended
in August and September 1994 for the reasons  discussed below.  CQC's riverboat,
the construction of which was completed, is being stored by the builder. Funding
for the Capitol  Queen project had been raised in November 1993 through the sale
of the CQC Notes and the concurrent  sale of common stock  purchase  warrants by
the Company, which contributed the net proceeds therefrom to CQC.

      On September 28, 1994, the Missouri Gaming  Commission (the  "Commission")
denied, without investigative review, CQC's application for a gaming license and
prohibited  CQC from  reapplying for a license for two years.  The  Commission's
ruling  was  based on a  finding  that  CQC  failed  to  disclose  material  and
substantive information on its gaming license application relating to a Purchase
Agreement  dated  September  20,  1993,  pursuant  to which BGI  agreed to issue
promissory notes aggregating $5,925,000 in principal amount to various people in
Missouri  in  consideration  for  development   services  provided  by  them  in
connection with the Capitol Queen project.  The Purchase Agreement was rescinded
by the parties in early 1995.

      CQC believes its Missouri application was complete and accurate. Moreover,
CQC fully disclosed the existence and terms of the Purchase  Agreement,  as well
as the services rendered by the persons to be compensated,  in  post-application
filings and communications with the Missouri Gaming Commission's staff. CQC also
disclosed these matters to the Nevada gaming  authorities,  who investigated and
conducted public hearings on these and other issues relating to applications for
licenses and approvals,  all of which were unanimously granted to the Company in
May 1994. The Nevada gaming  authorities  most recently  reexamined the issue in
connection  with Becker  Gaming  Group and  Innerout,  Inc.'s  applications  for
licenses at Charlie's Bar Down Under,  which were  unanimously  granted in March
1995.  CQC's then audited  financial  statements and public documents filed with
the  Securities  and  Exchange  Commission,  all of which were  submitted to the
Missouri Gaming  Commission,  also made these disclosures.  Management  believes
that, based on the foregoing,  the  Commission's  ruling was and remains without
basis.  Accordingly,  CQC  challenged  the  ruling  through  administrative  and
judicial channels,  which challenges have been largely successful.  See "Item 3.
Legal Proceedings".

       Notwithstanding  its efforts to seek redress of the Commission's  ruling,
in  December  1994,  CQC,  with the  approval  of the  holders of the CQC Notes,
adopted a two-step  plan (the  "Repayment  Plan") to repay the CQC Notes and any
accrued and unpaid interest thereon.  The first step,  effected in January 1995,
involved the repurchase of $20,000,000 principal amount of the CQC Notes and the
payment of accrued and unpaid  interest  thereon with proceeds then remaining in
the Capitol Queen project escrow account. The second step of the Repayment Plan,
not yet effected,  required CQC, by March 31, 1995, to sell its riverboat,  land
site and other  projects  assets and to use the net proceeds  realized  upon the
sale of such assets to offer to repurchase additional CQC Notes.

     CQC has  actively  marketed  its  riverboat  and other  assets for sale and
continues to do so.  Notwithstanding  CQC's failure to effect the second step of
the Repayment  Plan to date, the holders of the CQC Notes have not indicated any
current intention to exercise any remedies they may have under the CQC Indenture
or otherwise as a result of such default.  Under the CQC Indenture,  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. An aggregate of $20,000,000 principal amount of CQC Notes are outstanding.
If CQC Notes were to be accelerated,  CQC (and Arizona Charlie's, Inc. ("AC"), a
sister company which has unconditionally and fully guaranteed the payment of the
CQC  Notes)  would  not be able to pay such CQC  Notes,  absent a large  capital
infusion, which is not expected to be available.

      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.   Because  CQC's
Development  Agreement  with  Jefferson  City was entered  into  pursuant to the
earlier ordinance permitting riverboat gambling,  the Company believes that as a
matter of law the 1995 election does not affect the validity of the  Development
Agreement.  To avoid the cost and  uncertainty of litigation,  however,  CQC and
Jefferson  City in June 1996  entered  into an  agreement  pursuant to which the
Development  Agreement was rescinded and Jefferson City refunded $300,000 of the
$400,000 CQC had paid to the City pursuant to the Agreement.

Employees

     As of August 31,  1996,  the Company  employed  only one person,  its chief
executive officer.  Approximately 40 other Company employees were transferred to
the employ of AC in March 1995 in connection  with the suspension of activity at
CQC. As of August 1, 1996, AC employed  approximately 1,242, SC employed 28, and
BGG  employed  approximately  189.  As of August 1, 1996,  CQC had no  employees
(other then its sole  executive  officer).  None of the  foregoing  employees is
employed pursuant to collective bargaining or other union arrangements.
Management believes 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 (collectively,  the "Nevada Act"), and (ii) various local regulation.
The gaming operations of the Company and its Nevada  subsidiaries are subject to
the  licensing  and  regulatory  control of the Nevada  Gaming  Commission  (the
"Nevada  Commission"),  the Nevada  State  Gaming  Control  Board  (the  "Nevada
Board"),  the Clark County Liquor and Gaming  Licensing Board (the "Clark County
Board"), the City of Las Vegas and other local jurisdictions (collectively,  the
"Nevada Gaming Authorities").

      The laws,  regulations  and  supervisory  procedures  of the Nevada Gaming
Authorities  are based on declarations of public policy that are concerned with,
among other things:  (i) the  prevention of unsavory or unsuitable  persons from
having  a direct  or  indirect  involvement  with  gaming  at any time or in any
capacity;  (ii) the  establishment  and  maintenance of  responsible  accounting
practices and procedures;  (iii) the maintenance of effective  controls over the
financial  practices  of  licensees,  including  the  establishment  of  minimum
procedures  for  internal  fiscal  affairs  and the  safeguarding  of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities;  (iv) the prevention of cheating and
fraudulent  practices;  and (v)  providing a source of state and local  revenues
through  taxation and  licensing  fees.  Changes in such laws,  regulations  and
procedures  could have an adverse effect on the gaming  operations of the Nevada
subsidiaries.

      The Company and its Nevada subsidiaries are required to be licensed by the
Nevada Gaming  Authorities to engage in gaming  activities.  The gaming licenses
require  the  periodic  payment of fees and taxes and are not  transferable.  No
person may become a stockholder  of, or receive any  percentage of profits from,
the Nevada subsidiaries  without first obtaining licenses and approvals from the
Nevada Gaming Authorities. The Company and its Nevada subsidiaries have obtained
from the Nevada Gaming Authorities the various registrations, approvals, permits
and licenses required to engage in gaming activities in Nevada.

     The Nevada Gaming  Authorities  may  investigate  any  individual who has a
material  relationship with, the Company or its Nevada subsidiaries to determine
whether the individual is suitable or should be licensed as a business associate
of a gaming  licensee.  Officers,  directors  and certain key  employees of such
companies must file applications  with the Nevada Gaming  Authorities and may be
required  to be licensed or found  suitable  by the Nevada  Gaming  Authorities.
Others who are actively and directly  involved in gaming  activities may also be
required to be licensed or found suitable by the Nevada Gaming Authorities.  The
Nevada Gaming  Authorities  may deny an application  for licensing for any cause
they deem reasonable.  A finding of suitability is comparable to licensing,  and
both require submission of detailed personal and financial  information followed
by a  thorough  investigation.  The  applicant  for  licensing  or a finding  of
suitability  must pay all the costs of the  investigation.  Changes in  licensed
positions must be reported to the Nevada Gaming  Authorities  and in addition to
their  authority  to  deny  an  application  for a  finding  of  suitability  or
licensure,  the Nevada  Gaming  Authorities  have  jurisdiction  to disapprove a
change in corporate position.

      The  Company and its Nevada  subsidiaries,  would be required to sever all
relationships  with any officer,  director,  or key employee who refuses to file
the appropriate  applications  or is found  unsuitable for licensing or denied a
license  by the Nevada  Gaming  Authorities,  whose  licensing  and  suitability
decisions are not subject to judicial review.

       Substantially all material loans, leases, sales of securities and similar
financing  transactions  by the  Company  and its  Nevada  subsidiaries  must be
reported to, or approved by, the Nevada Commission.

      If it were determined  that the Company or any of its Nevada  subsidiaries
had violated the Nevada Act,  that  Company's  gaming  license could be limited,
conditioned,  suspended or revoked, subject to compliance with certain statutory
and regulatory procedures. In addition, the company and the individuals involved
could be subject to substantial fines for each separate  violation of the Nevada
Act at the discretion of the Nevada  Commission.  Further, a supervisor could be
appointed by the Nevada  Commission to operate the company's  gaming  properties
and, under certain  circumstances,  earnings  generated  during the supervisor's
appointment  (except for the  reasonable  rental value of the  company's  gaming
properties) could be forfeited to the State of Nevada. Limitation,  conditioning
or suspension of any gaming  license or the  appointment  of a supervisor  could
(and revocation of any gaming license would) materially  adversely affect gaming
operations.

      The Company and AC are  registered  publicly  traded  companies  under the
Nevada Act and as such are subject to the  provisions  applicable to "registered
corporations." The Nevada Act requires any person who acquires more than 5% of a
registered  corporation's  voting  securities to report the  acquisition  to the
Nevada  Commission.  The registered  corporation is also required to report such
acquisitions. The Nevada Act requires that beneficial owners of more than 10% of
a registered  corporation's voting securities apply to the Nevada Commission for
a finding of  suitability  if, and within 30 days  after,  the  chairman  of the
Nevada  Board  mails a written  notice  requiring  such  filing.  Under  certain
circumstances,  an "institutional investor," as defined in the Nevada Act, which
acquires  more  than  10%,  but not  more  than  15%,  of the  Company's  voting
securities  may apply to the Nevada  Commission  for a waiver of such finding of
suitability  if such  institutional  investor  holds the voting  securities  for
investment purposes only. An institutional  investor shall not be deemed to hold
voting  securities for investment  purposes  unless the voting  securities  were
acquired  and are held in the  ordinary  course of business as an  institutional
investor  and not for the  purpose  of  causing,  directly  or  indirectly,  the
election of a majority of the members of the board of  directors of the Company,
any change in the Company's corporate charter, bylaws,  management,  policies or
operations of the Company, or any of its gaming affiliates,  or any other action
which the Nevada  Commission finds to be inconsistent with holding the Company's
voting securities for investment purposes only.  Activities which are not deemed
to be inconsistent with holding voting  securities for investment  purposes only
include:  (i)  voting  on all  matters  voted on by  stockholders;  (ii)  making
financial  and  other  inquiries  of  management  of the type  normally  made by
securities analysts for informational  purposes and not to cause a change in its
management,  policies  or  operations;  and (iii) such other  activities  as the
Nevada Commission may determine to be consistent with such investment intent. If
the  beneficial  holder of voting  securities  who must be found  suitable  is a
corporation,  partnership  or  trust,  it  must  submit  detailed  business  and
financial  information  including a list of beneficial  owners. The applicant is
required to pay all costs of investigation.

      The Company has issued common stock purchase  warrants (the "Warrants") to
certain  institutional   investors.   The  Warrants  do  not  constitute  voting
securities for purposes of the Nevada Act.  Nonetheless,  the Company may redeem
the  Warrants  at  their  then  fair  market  value in the  event  that (i) such
redemption is required by the Nevada Gaming Authorities,  (ii) the Nevada Gaming
Authorities require the termination of any Warrant or (iii) the ownership of the
Warrants by a Warrantholder would materially impair the issuance of or result in
the  imposition  of a material  burden on any  gaming,  liquor or other  license
required for the  operations  of the Company or any of its Nevada  subsidiaries.
Further,  the Common Stock issuable on exercise of the Warrants will  constitute
voting  securities and,  accordingly,  Warrantholders  that become owners of the
outstanding  Common Stock on exercise of their  Warrants  will be subject to the
suitability requirements.

      Each beneficial  holder of the voting securities of a Nevada licensee that
is not a registered  publicly traded company under the Nevada Act, regardless of
the number of shares owned, must file an application, be investigated,  and have
his suitability as a beneficial holder of such voting securities determined. The
applicant  must pay all costs of  investigation  incurred  by the Nevada  Gaming
Authorities in conducting any such investigation.

      The Company has been registered or found suitable,  as the case may be, to
own the common stock of each of the Nevada subsidiaries.

      Any person who fails or refuses to apply for a finding of suitability or a
license  within  thirty  days  after  being  ordered  to  do so  by  the  Nevada
Commission,  may be found unsuitable.  The same  restrictions  apply to a record
owner if the record  owner,  after  request,  fails to identify  the  beneficial
owner. Any stockholder  found unsuitable and who holds,  directly or indirectly,
any  beneficial  ownership  of  the  common  stock  of a  gaming  licensee  or a
registered  corporation  beyond such period of time as may be  prescribed by the
Nevada  Commission may be guilty of a criminal  offense.  The gaming licensee or
registered  corporation  will be subject  to  disciplinary  action if,  after it
receives  notice that a person is unsuitable to be a stockholder  or to have any
other  relationship  with it, the company  (i) pays that person any  dividend or
interest  on voting  securities  of the  company,  (ii)  allows  that  person to
exercise,  directly or indirectly, any voting right conferred through securities
held by that  person,  (iii) pays  remuneration  in any form to that  person for
services  rendered or otherwise,  or (iv) fails to pursue all lawful  efforts to
require such unsuitable  person to relinquish his voting  securities for cash at
fair market value.  Additionally,  the Clark County Board has taken the position
that it has the authority to approve all persons owning or controlling the stock
of any corporation controlling a gaming licensee.

      The Nevada  Commission may, in its  discretion,  require the holder of any
debt  security  of  a  gaming  licensee  or a  registered  corporation  to  file
applications,  be investigated and be found suitable to own the debt security of
a  gaming  licensee  or a  registered  corporation.  If  the  Nevada  Commission
determines  that a person is unsuitable to own such  security,  then pursuant to
the Nevada Act, the gaming licensee or registered corporation can be sanctioned,
including the loss of its licenses and approvals,  if without the prior approval
of the Nevada  Commission,  it: (i) pays to the unsuitable  person any dividend,
interest,  or  other  distribution  (ii)  recognizes  any  voting  right  by the
unsuitable  person in connection the such securities;  (iii) pays the unsuitable
person  remuneration  in any form;  or (iv) makes any payment to the  unsuitable
person by way of principal,  redemption,  conversion,  exchange, liquidation, or
similar transaction.

      The Company and its Nevada  subsidiaries  are required to maintain current
stock ledgers in Nevada which the Nevada Gaming  Authorities  may examine at any
time.  If any  securities  are held in trust  by an agent or by a  nominee,  the
record holder may be required to disclose the identity of the  beneficial  owner
to the Nevada Gaming Authorities. Failure to make such disclosure may be grounds
for finding the record  holder  unsuitable.  Each  company is required to render
maximum  assistance in  determining  the identity of any beneficial  owner.  The
Nevada  Commission  has the power to and has required  the Nevada  subsidiaries'
stock certificates to bear legends indicating that the securities are subject to
the Nevada Act.

      The Company is not permitted to make a public  offering of its  securities
without  the prior  approval  of the  Nevada  Commission  if the  securities  or
proceeds  therefrom  are  intended to be used to  construct,  acquire or finance
gaming  facilities in Nevada,  or to retire or extend  obligations  incurred for
such  purposes.  Any such approval,  if granted,  does not constitute a finding,
recommendation  or approval by the Nevada  Commission  or the Nevada Board as to
the  accuracy or  adequacy of the  prospectus  or the  investment  merits of the
securities offered. Any representation to the contrary is unlawful.

     A change in  control  of a  registered  publicly  traded  company,  whether
through  merger,  consolidation,  stock or  asset  acquisitions,  management  or
consulting  agreements,  or any act or  conduct  by a person  whereby he obtains
control,  may not occur  without the prior  approval  of the Nevada  Commission.
Entities  seeking to acquire control of a corporation  subject to the Nevada Act
must first satisfy a variety of stringent  standards imposed by the Nevada Board
and  Nevada  Commission.  The Nevada  Commission  may also  require  controlling
stockholders,  officers and  directors of the entity  seeking  control,  and any
other  persons  having  material   relationships  or  involvement  with,  to  be
investigated  and  licensed  as part of the  approval  process  relating  to the
transaction.

      The Nevada  legislature  has  declared  that some  corporate  acquisitions
opposed by management,  repurchases of voting  securities and corporate  defense
tactics  affecting Nevada gaming licensees and registered  corporations that are
affiliated  with those  operations  may be  injurious  to stable and  productive
corporate  gaming.  The Nevada Commission has established a regulatory scheme to
ameliorate  the  potentially  adverse  effects of these  business  practices  on
Nevada's  gaming  industry  and to  advance  Nevada's  policy to: (i) assure the
financial  stability of corporate  gaming operators and their  affiliates;  (ii)
preserve the beneficial  aspects of conducting  business in the corporate  form;
and  (iii)  promote  a  neutral  environmental  for the  orderly  governance  of
corporate affairs.  In certain  circumstances,  approvals are, required from the
Nevada Commission before a regulated company can make exceptional repurchases of
voting  securities  above  the  current  market  price  and  before a  corporate
acquisition  opposed  by  management  can be  consummated.  The  Nevada Act also
requires  prior approval of a plan of  recapitalization  proposed by a regulated
company's  board of directors in response to a tender offer made directly to the
corporation's   stockholders  for  the  purpose  of  acquiring  control  of  the
corporation.

      License fees and taxes,  computed in various ways depending on the type of
gaming or  activity  involved,  are  payable  to the State of Nevada  and to the
counties and cities in which the Nevada  licensees'  operations  are  conducted.
Depending  on the  particular  fee or tax  involved,  these  fees and  taxes are
payable  either  monthly,  quarterly or annually and are based on either:  (i) a
percentage of the gross  revenues  received;  (ii) the number of gaming  devices
operated;  or (iii) the number of table games operated.  A casino  entertainment
tax is also  paid by  casino  operators  where  entertainment  is  furnished  in
connection with the selling of food or refreshments.

      Any person who is licensed, required to be licensed, registered,  required
to be registered, or is under common control with such persons, and who proposes
to become involved in a gaming venture outside of Nevada ("foreign gaming") must
deposit and maintain with the Nevada Board,  a revolving  fund of $10,000 to pay
the Board's expenses of investigating the  participation in foreign gaming.  The
revolving  fund is subject to  increase or  decrease  at the  discretion  of the
Nevada Commission.  Thereafter, such persons are required to comply with certain
reporting   requirements   imposed  by  the  Nevada  Act,  and  are  subject  to
disciplinary  action by the Nevada Commission if they knowingly violate any laws
of the foreign jurisdiction pertaining to the foreign gaming operation,  fail to
conduct the foreign gaming operation in accordance with the standards of honesty
and integrity  required of Nevada gaming  operations,  engage in activities that
are  harmful to the State of Nevada or its ability to collect  gaming  taxes and
fees, or employ a person in the foreign  operation who has been denied a license
or finding of suitability in Nevada on the grounds of unsuitability.

Item 2.    Properties

       BGI does not directly own or lease any real property,  but owns or leases
certain transportation assets (principally a corporate jet) which had originally
been acquired to facilitate management of the CQC operation in Missouri.  AC, as
the original  lessee,  is contingently  obligated to pay the lease costs of such
assets.  On July 26, 1996,  BGI sold the  corporate  jet and retired the related
lease obligation.

     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,  AC 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.

     SC currently owns all 254 of the gaming machines included in its route. The
machines  are  located   primarily  in  retail  outlets  in  shopping   centers,
restaurants,  taverns and  convenience  stores  owned by others.  SC also leases
approximately  32 gaming machines  operated by BGG, which  reimburses SC for the
full amount of lease payments made by SC on such machines.

      All of BGG's five restaurants are held pursuant to long-term leases.  Four
of the leases are with lessors owned in whole or part by Becker family  members.
The  newest  restaurant,   Charlie's  Bar  Down  Under,  was  constructed  by  a
partnership  including  several Becker family members and their relatives,  with
interior  improvements  constructed by SC. BGG's subsidiary  leases the building
and land from the  partnership and the furniture,  fixtures,  and equipment from
SC.  Although BGG believes that its  obligations  with respect to leases entered
into with Becker family entities  reflect market terms and rates,  Becker family
members may have  potential  conflicts  of interests  in  connection  with these
leases. See "Item 13. Certain Relationships and Related Transactions."

      CQC owns a site located  across the Missouri  River from the State capitol
in Jefferson City, Missouri,  on which CQC had intended to construct the Capitol
Queen Square.  The site,  which was originally 80 acres,  currently  consists of
approximately  65 to 75 acres as a result  of land  lost to the  Missouri  River
during  major  flooding  in the  Midwest  in 1993 and  1994.  CQC has  completed
construction of a riverboat  casino that was to be located  adjacent to the land
site.  The  riverboat  vessel  is  approximately  218 feet long and 62 feet wide
providing  approximately  26,000  square  feet  of  interior  space  for  up  to
approximately 1,600 passengers.

      Although  it has not  determined  to do so, the Company is  exploring  the
possibility of conducting or participating  in gaming  operations in Long Beach,
Mississippi.  In connection  therewith,  the Company has entered into short-term
lease and land purchase  option  agreements  with the city of Long Beach and the
other local property owners. In addition,  the Company's executive officers have
applied  to the  Mississippi  Gaming  Commission  for  preliminary  findings  of
suitability.  However,  casino gaming is not currently  authorized in Long Beach
and its  legalization  has been  rejected by the voters on  previous  occasions.
Accordingly,  there can be no assurance  that gaming will be permitted  there in
the future. In addition, the Company does not intend to engage in any new gaming
project  without the prior  agreement of the holders of the AC Notes and the CQC
Notes, particularly since the Capitol Queen might be utilized in such a project.
No assurance can be given that the Company would be able to reach agreement with
the  noteholders  with  respect  to any new  project.  In the event the  Company
determines  not to proceed  with the  development  of a gaming  facility in Long
Beach, it may attempt to sell any rights it has acquired.  Long Beach is located
on the Mississippi Gulf Coast to the west of the Gulfport/Biloxi area.

Item 3.    Legal Proceedings

      BGI,  CQC,  and the  Nevada  Operating  Companies  are  parties to various
lawsuits relating to routine matters incidental to their respective  businesses,
in addition to the litigation  discussed below.  Based on the amounts and issues
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 results of operations,  cash flows, or financial condition of BGI,
CQC, or the Nevada Operating Companies.

     On October 31,  1994,  CQC and BGI  petitioned  the Cole  County,  Missouri
Circuit  Court in  Jefferson  City for a writ of  mandamus  with  respect to the
ruling of the  Missouri  Gaming  Commission.  In response to the  petition,  the
Circuit Court issued an order declaring that by denying CQC's  application for a
riverboat  gaming  license  without  first  conducting an  investigation  and by
deliberating  in a closed session,  the Missouri Gaming  Commission had violated
Missouri  gaming and open meeting  laws.  The Circuit Court issued a preliminary
writ of mandamus  declaring  the  Commission's  decision  void and  ordering the
Commission to immediately commence a full investigation and thereafter to act on
CQC's application. The Circuit Court ordered the Commission to show cause within
30 days why the preliminary writ should not be made permanent.

      In response to the Circuit  Court's  order to show cause,  the  Commission
filed two actions,  both unsuccessful,  in the Missouri Court of Appeals for the
Western District.  On November 16, 1994, the Commission  petitioned the Court of
Appeals for a writ of prohibition against the Circuit Court,  contending,  among
other things,  that CQC was not entitled to judicial  relief  because it had not
exhausted  its  administrative  remedy  of an  evidentiary  hearing  before  the
Commission.  The  Court  of  Appeals  initially  issued  a  preliminary  writ of
prohibition  staying further  proceedings in the Circuit Court.  However,  in an
opinion  issued  on April 18,  1995,  the Court of  Appeals  concluded  that its
preliminary  writ of prohibition  had been  improvidently  granted,  quashed the
preliminary  writ,  and denied the  Commission's  request for a permanent  writ,
relegating the Commission to its remedies in the Circuit Court.  On December 13,
1994, the Commission  also filed an appeal of the Circuit  Court's order to show
cause.  On  December  23, CQC moved to dismiss the appeal on the ground that the
preliminary  writ of  mandamus  was  not a final  order  and  therefore  was not
appealable.  On January 5, 1995,  the Court of Appeals  granted CQC's motion and
dismissed the appeal.

      On June 26, 1995, the Circuit Court issued a peremptory  (permanent)  writ
of mandamus similar to the preliminary  writ,  declaring the Commission's  order
void and  ordering the  Commission  to proceed  with an  investigation  of CQC's
application  "with all  deliberate  speed."  On July 21,  1995,  the  Commission
appealed the Circuit  Court's  decision to the Missouri Court of Appeals for the
Western District, and on April 30, 1996, a three-judge panel of that Court ruled
that  mandamus  was not the proper  vehicle  for  challenging  the  Commission's
decision.  The Court of Appeals ruled that CQC may obtain  judicial  review only
after an  administrative  proceeding.  The Court of Appeals  also ruled that the
Missouri statutes did not prohibit the Commission from denying a license without
conducting an  investigation,  and that the claim that the Commission  broke its
promise not to deny a license without first investigating  should be raised in a
breach of contract action, not a mandamus petition. The Court of Appeals did not
address the merits;  that is, it did not decide  whether  the  Commission  acted
arbitrarily  or whether its decision was  justified or a breach of its promises.
While CQC has asked the  Missouri  Supreme  Court to review the Circuit  Court's
decision,  its ruling had  immediate  consequences  for two  reasons.  First,  a
Missouri  Circuit  Court in a  separate  action  (discussed  below)  voided  the
Commission's  decision for the independent  reason that it was made in violation
of Missouri's open meeting law.  Second,  after the decision in the open meeting
law case, CQC notified the Commission that it was withdrawing its application.

      On  November  1, 1994,  concurrent  with its  efforts  to obtain  judicial
relief,  CQC  (with  BGI as a  co-party)  requested  an  administrative  hearing
pursuant to the Missouri  gaming  statutes,  under which a denied  applicant may
request an evidentiary  hearing before a Commission  appointed  hearing officer.
The hearing officer's  decision is subject to review by the Commission,  and the
Commission's  decision is in turn  subject to judicial  review.  The  Commission
filed an answer on November 29,  alleging,  among other things,  that CQC is not
entitled to an administrative hearing because CQC had not been investigated.  On
December  22,  because the  Commission  had not  appointed a hearing  officer or
otherwise responded to CQC's request for a hearing,  CQC moved the Commission to
appoint a hearing  officer and establish a procedural  schedule.  The Commission
did not  respond to this  motion.  However,  in March  1995,  CQC's  counsel was
notified  by a member  of the  Commission's  staff  that he had  been  appointed
hearing officer in the case. Because this person appears to have participated in
the staff's  recommendation  that CQC's license be denied, CQC moved on March 31
for  the  appointment  of  an  impartial,   independent  hearing  officer.   The
Commission's attorney filed a response in opposition to this motion on April 12,
but the  Commission  has not responded to it.  Instead,  on August 10, 1995, the
hearing officer issued an order  proclaiming his ability to proceed  impartially
and  purporting  to deny the motion.  On April 30,  1996,  the  hearing  officer
reversed himself,  recused himself,  and asked the Commission to appoint another
hearing officer. To date, the Commission has not acted on this request.  Hearing
dates have been vacated by  stipulation,  and, after the Circuit  Court's orders
voiding the Commission's decision appeared to make the administrative proceeding
premature,  the hearing was  postponed  indefinitely.  The  withdrawal  of CQC's
application has since rendered the administrative hearing moot.

      On March 23, 1995, the Missouri Attorney General filed misdemeanor charges
against CQC and Bruce Becker  alleging they knowingly  made false  statements on
CQC's gaming  license  application.  CQC and Mr.  Becker  vehemently  denied the
charges and launched a vigorous defense. On July 25, 1995, the Circuit Court for
St. Louis  County,  Missouri,  dismissed  the charges,  ruling that they did not
state an offense,  that the Attorney General lacked authority to bring them, and
that they were filed after the statute of limitations  had expired.  On July 28,
1995, the Attorney  General filed an appeal in the Missouri Court of Appeals for
the Eastern District. CQC's and Bruce Becker's motions to dismiss the appeals as
untimely filed were summarily denied on August 14, 1995. On April 16, 1996, in a
2-1  decision,  a panel of the  Missouri  Court of Appeals  reversed the Circuit
Court's  dismissal.  The Missouri  Supreme Court has exercised its discretion to
review the case. The case has been briefed and the court is expected to schedule
arguments  in the next few  months.  These  charges  are not  expected to have a
material adverse effect on BGI or CQC.

      On March 24, 1995,  CQC filed an action against the Commission in the Cole
County,  Missouri,  Circuit  Court,  alleging that the  Commission  had violated
Missouri's  open meeting law by  deliberating in a closed session before issuing
its decision denying CQC's license.  The petition requested an order voiding the
Commission's  decision.  On March 27,  1995,  as a  protective  measure  against
possible  arguments  that  Cole  County  is not the  proper  venue,  CQC filed a
substantively  identical action in the St. Louis County Circuit Court. In April,
the Commission filed answers to both complaints denying that it had violated the
open  meeting law. On June 1, 1995,  CQC moved for summary  judgment in the Cole
County  case.  In  its  response,   the  Commission  stated  that  it  "did  not
deliberately  intend to circumvent"  the open meeting law but had deliberated in
closed session based on erroneous advice of counsel.  The Commission argued that
the closed session could  nevertheless be justified  under statutory  exceptions
allowing  agencies to meet privately with their lawyers to discuss  confidential
information  and  litigation.  The  Circuit  Court  heard the motion for summary
judgment on December 19, 1995. In an order issued on April 23, 1996, the Circuit
Court rejected the Commission's  arguments and granted CQC's motion, ruling that
the Commission had violated the open meeting law and declaring the  Commission's
order to be void. The  Commission did not appeal the decision,  and the time for
doing so has expired.  Therefore,  the decision declaring the Commission's order
to be void is final.  As a result,  notwithstanding  the other  related  actions
discussed  above,  there  no  longer  exists  any  denial  of  licenses  by  the
Commission.


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

      None.


                             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.  There are five  holders  of the  Common  Stock.  See "Item 12.  Security
Ownership  of Certain  Beneficial  Owners and  Management."  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.  The Company's ability
to pay cash  dividends  in the future will  depend on the receipt of  management
fees from its subsidiaries,  the payment of which by AC and CQC is restricted by
the AC Indenture and CQC Indenture, respectively.

Item 6.    Selected Financial Data


          Becker Gaming, Inc. and Subsidiaries Selected Financial Data
                              Years Ended June 30,
                  (amounts in thousands, except per share data)

<TABLE>
<CAPTION>
                                                      1996       1995
                                                    --------    -------
<S>                                                 <C>            <C>
Income Statement Data:
  Operating revenues ............................   $ 76,037       $ 69,079
  Operating income ..............................      4,742          4,467
  Income (loss) before extraordinary item .......    (11,227)        (7,640)
  Extraordinary item-loss on early retirement
    of debt (8) .................................       --             --
  Net income (loss) .............................    (11,227)       (11,729)
  Income (loss) per share before extraordinary
    item ........................................      (1.12)         (0.76)
  Extraordinary item-loss on early retirement
    of debt (8) .................................       --            (0.41)
  Net income (loss) per share (1)(2).............      (1.12)         (1.17)
  Pro forma data (reflecting change in tax status
    of subsidiaries) (7)
    Net income (loss) ...........................       --             --
    Net income (loss) per share of common
      stock .....................................       --             --

Other Data:
 Interest expense, net of amounts capitalized ...   $ 10,584       $ 12,022
 Capital expenditures ...........................        544         27,382
 Distributions to stockholders (3) ..............       --             --
</TABLE>

<TABLE>
<CAPTION>
                                                     1994      1993       1992
                                                     ----      ----       ----
<S>                                              <C>         <C>       <C>
Income Statement Data:
  Operating revenues ........................... $ 57,085    $ 55,776  $ 51,670
  Operating income .............................    6,334       7,745     5,898
  Income (loss) before extraordinary item ......   (1,566)      6,152     3,978
  Extraordinary item- loss on early retirement
    of debt (8) ................................   (4,089)       --        --
  Net income (loss) ............................   (1,566)      6,152     3,978
  Income (loss) per share before extraordinary
    item .......................................    (0.17)       0.65      0.42
  Extraordinary item- loss on early retirement
    of debt (8) ................................     --          --        --
  Net income (loss) per share (1)(2)............    (0.17)       0.65      0.42
  Pro forma data (reflecting change in tax
    status of subsidiaries) (7)
    Net income (loss) ..........................     (803)      4,030     2,625
    Net income (loss) per share of common
      stock ....................................    (0.08)       0.43      0.28


Other Data:
  Interest expense, net of amounts capitalized . $  8,530    $  1,621  $  2,150
  Capital expenditures .........................   22,945       1,437     1,735
  Distributions to stockholders (3) ............    9,533       3,220     2,960
</TABLE>

<TABLE>
<CAPTION>
                                                  1996        1995
                                                  ----        ----
<S>                                           <C>         <C>
Balance Sheet Data:
     Unrestricted cash and cash equivalents   $  6,745    $  6,657
     Cash in escrow account restricted for
         construction .....................         40          40
     Total assets .........................     75,477      84,786
     Long-term obligations (4)
         Long-term debt (5)(6) ............      9,330      64,593
         Capitalized lease obligations (9)         197       2,001
     Stockholders' equity (deficit) .......    (17,997)     (6,770)
</TABLE>

<TABLE>
<CAPTION>
                                                 1994       1993       1992
                                                 ----       ----       ----
<S>                                           <C>        <C>        <C>
Balance Sheet Data:
     Unrestricted cash and cash equivalents   $  6,455   $  4,747   $  3,902
     Cash in escrow account restricted for
         construction .....................     51,041       --         --
     Total assets .........................    116,860     32,893     32,709
     Long-term obligations (4)
         Long-term debt (5)(6) ............     64,251      1,496     18,695
         Capitalized lease obligations (9)       3,174        899      1,292
     Stockholders' equity (deficit) .......      4,959      9,574      6,642
</TABLE>
----------
(1)  The number of shares used in the  computation of earnings  (loss) per share
     of common  stock for the year ended June 30,  1996 and 1995 was  10,000,000
     and  9,509,956  for the year  ended June 30,  1994.  Such  amount  does not
     include  2,500,000  shares issuable upon exercise of the Warrants since the
     inclusion  of such shares  would be  anti-dilutive  (decrease  the loss per
     share).
(2)  The number of shares used in the  computation of earnings  (loss) per share
     of common stock for each of the two years in the period ended June 30, 1993
     was 9,466,071.
(3)  Because  AC, SC and BGG  elected to be treated as S  corporations  prior to
     January 1, 1994,  a  substantial  portion of their net income in past years
     was  distributed  to their  stockholders.  In December 1993, AC, SC and BGG
     distributed  $5,000,  $3,000 and $800,  respectively,  of previously  taxed
     retained earnings to their stockholders.  These amounts were loaned back to
     AC, SC and BGG in exchange for stockholder notes. Effective January 1, 1994
     AC, SC and BGG terminated their S corporation elections.  The ability of AC
     and SC to pay dividends is restricted under the AC Indenture.
(4)  Excludes current maturities.
(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.
(6)  At June 30, 1995 and 1994,  long-term debt includes the $55,000 of AC Notes
     and $8,000 of  subordinated  stockholder  notes. At June 30, 1996, 1995 and
     1994,  $17,526,  $17,118  and  $33,164,  respectively  of CQC Notes (net of
     unamortized   original  issue  discount  of  $2,474,   $2,882  and  $6,836,
     respectively) was classified as current due to anticipated default. At June
     30, 1996,  $55,000 of the AC Notes was classified as current due to certain
     technical  defaults  of the AC  Indenture.  See  Notes 2 and 9 of  Notes to
     Consolidated Financial Statements.
(7)  Pro forma net income  and pro forma net  income  per share of common  stock
     reflect  adjustments  to income taxes  assuming that the  termination  of S
     corporation  elections  of the  Company's  subsidiaries  (AC,  SC and  BGG)
     occurred as of the  beginning of the  earliest  period  presented.  The pro
     forma  adjustments  reflect income taxes at an effective rate of 34 percent
     through  December  31, 1992 and a 35 percent  effective  rate  beginning on
     January  1, 1993.  The pro forma net loss for the year ended June 30,  1994
     assumes the utilization of a carryback  operating loss to prior years,  and
     the  ability  to offset  taxable  losses of  certain  subsidiaries  against
     taxable income of others in the consolidated group.
(8)  During 1995, CQC retired  $20,000,000  principal amount of the CQC Notes at
     101% of such  principal  amount  plus  accrued  and  unpaid  interest.  CQC
     incurred an extraordinary loss of approximately $4,089,000,  reflecting the
     premium paid to retire the debt of $200,000  and the  write-off of related,
     unamortized  debt issue costs and original  issue discount in the aggregate
     of $3,889,000. No tax benefit was available or recognized.
(9)  At June 30, 1996 approximately $1,900 of capitalized lease obligations were
     classified  as current  and the related  obligations  were paid off in July
     1996 with  proceeds  from the sale of the  related  assets.  See Note 15 of
     Notes to Consolidated Financial Statements.



                 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         38
</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.



             Capitol Queen and Casino, Inc. Selected Financial Data

                              Years Ended June 30,

                  (amounts in thousands, except per share data)

<TABLE>
<CAPTION>
                                                               1996         1995
                                                              ----         ----
<S>                                                       <C>          <C>
Income Statement Data:
     Operating revenues ..............................    $   --       $   --

     Operating loss ..................................      (4,996)      (1,388)
     Net loss before extraordinary item ..............      (7,785)      (5,386)
     Extraordinary item-loss early retirement
         of debt (1) .................................        --         (4,089)
     Net loss ........................................      (7,785)      (9,475)
     Net loss per share before extraordinary item ....     (77,850)     (53,860)
     Extraordinary item-loss on early
         retirement of debt ..........................        --        (40,890)
     Net loss per share (2) ..........................     (77,850)     (94,750)

Other Data:
     Interest expenses, net of amounts capitalized ...       2,789        4,608
     Capital expenditures ............................        --          1,724



Balances Sheet Data:
     Unrestricted cash and cash equivalents ..........    $   --       $     45

     Cash in restricted escrow account ...............          30           30
     Total assets ....................................       8,449       12,986
     Long-term obligations (3) .......................        --           --
     Stockholders' equity (deficit) (4) ..............     (14,058)      (6,273)
</TABLE>

<TABLE>
<CAPTION>
                                                               1994         1993
                                                              ----         ----
<S>                                                       <C>          <C>
Income Statement Data:
     Operating revenues ..............................    $   --       $   --

     Operating loss ..................................      (7,094)        --
     Net loss before extraordinary item ..............      (9,530)        --
     Extraordinary item-loss early retirement
         of debt (1) .................................        --           --
     Net loss ........................................      (9,530)        --
     Net loss per share before extraordinary item ....     (95,300)        --
     Extraordinary item-loss on early
         retirement of debt ..........................        --           --
     Net loss per share (2) ..........................     (95,300)        --

Other Data:
     Interest expenses, net of amounts capitalized ...       3,091         --
     Capital expenditures ............................      11,212         --



Balances Sheet Data:
     Unrestricted cash and cash equivalents ..........    $     33     $   --

     Cash in restricted escrow account ...............      24,929         --
     Total assets ....................................      37,412         --
     Long-term obligations (3) .......................        --           --
     Stockholders' equity (deficit) (4) ..............       3,202         --
</TABLE>

----------
(1)   During 1995, CQC retired $20,000 principal amount of the CQC notes at 101%
      of such principal amount plus accrued and unpaid interest. CQC incurred an
      extraordinary loss of approximately $4,089, reflecting the premium paid to
      retire the debt of $200 and the  write-off  of related,  unamortized  debt
      issue costs and original issue discount in the aggregate of $3,889. No tax
      benefit was available or recognized.
(2)   The number of shares used in the  computation  of loss per share of common
      stock  was 100 for each of the four  years in the  period  ended  June 30,
      1996.  Common stock of 1,000 shares were  authorized at a $1.00 par value,
      but 100 shares were issued and outstanding.
(3)  At June 30, 1996, 1995 and 1994, $17,526, $17,118 and $33,164, respectively
     of CQC notes (net unamortized original issue discount of $2,474, $2,882 and
     $6,836, respectively) was classified as current due to CQC's default of the
     Indenture governing the CQC Notes.
(4)  The  ability of CQC to pay dividends is restricted under the
      CQC Indenture.


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

     BGI  serves  as  a  holding  company  for,  and  provides   management  and
administrative  services to, the Becker  family  gaming  interests.  BGI has not
engaged in any business other than providing such management and  administrative
services to its subsidiaries.

      BGI is currently  receiving  payment for management  fees from SC and BGG,
and is accruing management fees from AC until such time as such fees may be paid
under the  Indenture  governing  the AC Notes.  BGI does not  expect to  receive
management  fee income from CQC as a result of the events in Missouri  adversely
affecting CQC's efforts to become licensed to conduct  riverboat  gaming in that
State.  As a result of these  developments,  CQC has  adopted a plan to sell its
assets and business.  See "Item 1. Business - Capitol Queen & Casino,  Inc." and
"Notes to Financial Statements - Capitol Queen & Casino, Inc."

      As a result of the events  adversely  impacting  CQC's ability to complete
and open the Capitol  Queen (See "Item 1.  Business - Capitol  Queen and Casino,
Inc."), significant doubt exists about the ability of CQC to continue as a going
concern.  Similar  doubt  exists with  respect to AC and SC as a result of their
guarantees  of the CQC  Notes  and the AC  Notes,  respectively.  AC, SC and CQC
represent  the  Company's  principal  subsidiaries,  from  which it  anticipated
receiving management fee income and, accordingly,  substantial doubt also exists
about  BGI's  ability to continue as a going  concern.  See "Notes to  Financial
Statements  - Becker  Gaming,  Inc. - Missouri  Gaming  License,  Default  Under
Indebtedness, Management's Plans, and Going Concern.


Arizona Charlie's, Inc.
-----------------------

     General

      AC'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.  AC generally  views its  non-casino
operations  as  complementary  to its core casino  operations.  Accordingly,  it
utilizes  entertainment  primarily  as a  casino  marketing  tool.  Further,  AC
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.  AC 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>
                                        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, AC issued of $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.  AC, 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, AC 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 AC in full
in exchange for subordinated  stockholder  notes in the principal amount of such
distributions,  which AC stockholder  notes bear interest payable monthly at the
annual  rate of 10.0% and  mature  in  January  2001.  See  "Notes to  Financial
Statements - Arizona Charlie's, Inc. - Related Party Transactions."

                              Results of Operations

                              Years Ended June 30,
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                          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.

      AC'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 AC. 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, AC 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 reflect 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 AC'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.

      AC 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,  AC is liable  (as part of the BGI  consolidated  group) for income
taxes  on  income  earned  from  and  after  January  1,  1994.  Prior  to  such
termination,  AC did not incur or pay income taxes but  distributed  cash to its
stockholders in amounts  sufficient to pay their income tax liability in respect
to income of AC. See "Notes to Financial  Statements - Arizona  Charlie's,  Inc.
Summary of  Significant  Accounting  Policies - Income  Taxes;  - Related  Party
Transactions."  Since  terminating its S corporation  status, AC generated a net
operating loss for income tax purposes of approximately  $9,174,000.  Due to low
operating margins and high interest cost and depreciation costs, management does
not anticipate that AC 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.

      AC 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, AC 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. AC 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.  AC's  long-term  obligations,   approximately
$5,022,000 at June 30, 1996,  consist of the  stockholder  notes and capitalized
equipment  leases.  AC has annual interest  expense  aggregating  $6,600,000 and
$500,000 with respect to the AC Notes and the stockholder  notes,  respectively.
In addition,  AC 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".

     AC'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,  AC'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 AC
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 AC'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 AC'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 AC 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 AC 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

     AC 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."

      SC has  unconditionally  and fully guaranteed the payment of the principal
of and interest on the AC Notes, until such time as AC obtains a specified fixed
charge  coverage  ratio.  AC does not anticipate  that it will obtain such fixed
charge  coverage  ratio in the  foreseeable  future.  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 and the repayment of a note
receivable were $12,000 and $88,000, respectively.

      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.

     Apart from its anticipated  obligation  with respect to the AC Notes,  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.  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.


Capitol Queen & Casino, Inc.
----------------------------

     Analysis of  Development  Stage  Activities for the period January 20, 1993
(the date of inception) through June 30, 1996

      CQC was  organized  on January  20,  1993 for the  purpose of  developing,
constructing,  owning and operating the Capitol Queen.  Since  inception,  CQC's
activities  have been  limited  to, in  addition  to the  financing  transaction
described below, the acquisition of a land site in Jefferson City,  Missouri and
the rights to develop the Capitol Queen thereon, the preparation and prosecution
of  applications  to become  licensed to own and  operate  the Capitol  Queen in
Missouri and for all other required  permits and approvals,  the  preparation of
preliminary design plans, drawings and budgets for the project,  construction of
a riverboat vessel and other pre-opening  development  activities.  As of August
1994, CQC suspended the development of the Capitol Queen,  other than completion
of the  riverboat.  As a result of a September  28, 1994 ruling by the  Missouri
Gaming Commission denying CQC's license application, CQC subsequently terminated
the Capitol Queen project and is currently  marketing its assets for sale.  Such
assets include its riverboat and the Jefferson City land site.

      As of January 1, 1995,  the CQC  Indenture  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 with funds remaining in the project escrow account and the net proceeds
from a sale of assets. The repurchase of $20,000,000 principal amount of the CQC
Notes (plus  accrued and unpaid  interest  thereon) was completed on January 17,
1995 with funds from the project escrow account at a total cost of  $20,200,000.
At June 30, 1996,  approximately  $30,000  remained in the 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.

      The CQC Notes outstanding  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 each of
November 15, 1995 and May 15, 1996. AC does not have available  funds to advance
on behalf of CQC. The management of AC and CQC are currently in discussions with
an  informal  committee  representing  the holders of the AC Notes and CQC Notes
regarding a proposed  restructuring plan. However, an agreement has not yet been
reached.

     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. "Aerie" at a
purchase price of $18,000,000.  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 the  Development  Agreement,  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 to any party when the expiration date of December 31,
1995 passed.  CQC is actively  marketing  its  riverboat  assets to  prospective
buyers.

      During the period from  inception  through  June 30,  1996,  CQC had total
operating expenses of $13,478,000 consisting primarily of an abandonment loss of
$10,426,000  arising from the denial of the company's  license  application  and
management's subsequent decision to terminate the Capitol Queen project and sell
its assets. At June 30, 1996, CQC wrote-down the cost of the riverboat assets to
their net  realizable  value based on estimates  provided by a  shipbuilder  and
marine  brokers  which  resulted in an  abandonment  loss of  $4,392,000  in the
current  fiscal  year.  Also  included in operating  expenses  are  amortization
expense of $1,341,000 associated with debt issue costs and $1,711,000 of project
development  costs.  For the same period,  CQC incurred  $11,171,000 of interest
cost, of which $683,000 was capitalized by CQC as required by generally accepted
accounting  principles,  as  part  of the  riverboat  construction.  CQC  earned
interest income of $1,265,000 for the period from inception to June 30, 1996.

Liquidity and Capital Resources

      For the period from  inception  through  June 30,  1996,  net cash used by
development  stage  activities  was  $5,246,000.  Cash flows  used by  investing
activities for the period was $13,920,000 which included  $12,936,000 of capital
expenditures related to the construction of the riverboat and acquisition of the
Jefferson  City land  site.  At August  31,  1996,  CQC had  expended a total of
approximately  $21,400,000 on the  development  and  construction of the Capitol
Queen.

      CQC's  obligations  consist of the $20,000,000 in principal  amount of the
outstanding CQC Notes.  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.  Moreover,  CQC because it has not yet effected the sale of its assets,
is in default of the CQC Indenture.  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. CQC
is not  expected  to engage  in any  activities  after  the sale of its  assets,
although it may  continue  to pursue  legal  relief  with  respect to the injury
caused by the ruling of Missouri  Gaming  Commission.  The cost of pursuing such
relief is expected to be borne by BGI.


Item 8.   Financial Statements and Supplementary Data

      The Index to Financial  Statements  and Schedules  appear at pages F-1 and
F-2 hereof, the Report of Registrant's  Independent  Accountants appears at page
F-3 hereof, and the Consolidated  Financial Statements and Notes to Consolidated
Financial  Statements of the Registrant  appear at page F-4 through F-31 hereof.
The Financial  Statements  and Notes to Financial  Statements for AC, SC and CQC
appear at page F-32 through F-89 hereof.

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

     Not Applicable


                            PART III

Item 10.   Directors and Executive Officers of the Registrant

      The  following  table sets forth certain  information  with respect to the
directors and executive officers of BGI and each of its subsidiaries.

<TABLE>
<CAPTION>

      Name           Age              Position(s) Held
      ----           ---              ----------------
<S>                  <C>    <C>
Bruce F. Becker      45     Chairman, President, Chief Executive
                            Officer of BGI and each subsidiary,
                            Treasurer and Secretary of BGI,
                            Treasurer and Vice-President of CQC
                            and Sole Officer and Director of
                            Innerout, Inc.
Barry W. Becker      51     Assistant Secretary and Director of
                            BGI,  Secretary and Director of each
                            Nevada subsidiary and Secretary of
                            CQC
Ron Lurie            55     Director of Corporate Development of
                            BGI, General Manager of SC and
                           Director of Marketing of AC
Jerry Griffis        40     Chief Financial Officer of BGI and
                          Controller of each subsidiary
Mark Lerner          46     General Counsel of BGI and each
                                   subsidiary
Ernest A. Becker     77     Director of BGI and each Nevada
III                         subsidiary and
                            Treasurer  of each  Nevada  subsidiary,  other  than
                            Innerout, Inc.
Ernest A. Becker     53     Director of BGI and Vice President
IV                          and Director of each Nevada
                            subsidiary, other than Innerout, Inc.
Bart Masi            52     General Manager of AC and BGG
Paul Tomba           48     Food and Beverage Manager of AC and
                            BGG
Debra Pingul         38     Director of Personnel of each Nevada
                                   subsidiary
Doug Hardesty        44     Director of Technical Services of
                             each Nevada subsidiary
</TABLE>


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

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

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

      Jerry Griffis has served as Chief Financial  Officer of BGI and Controller
of CQC since their  respective  dates of  inception,  and as  Controller  of the
Nevada   subsidiaries   since  February  1989.   Prior  to  joining  the  Nevada
subsidiaries,  Mr. Griffis was employed as a Certified Public Accountant.  Prior
thereto, Mr. Griffis acted as Assistant Controller for the Silver Slipper Casino
from 1981 to 1983 and the Frontier Hotel & Casino from 1979 to 1981. Mr. Griffis
is a CPA and a member of the Nevada Society of CPA's and the American  Institute
of Certified Public Accountants.
      Mark Lerner joined BGI and subsidiaries as general counsel in August 1994.
Prior thereto,  he was a partner with Jones,  Jones, Close & Brown, a Nevada law
firm with  offices  in Las Vegas and Reno,  where  since  1987 he had  practiced
primarily in the areas of gaming and  administrative  law. From 1983 to 1987, he
was a deputy in the gaming  division of the Nevada  Attorney  General's  office,
serving as counsel to the Nevada  Gaming  Commission  and State  Gaming  Control
Board. Mr. Lerner was admitted to the Nevada bar in 1980.

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

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

      Bart Masi was appointed  General  Manager of AC and BGG in September 1994.
Prior thereto,  Mr. Masi was General Manager and Marketing  Director of Southern
Wine & Spirits of Nevada from May 1975 through  August  1994.  Mr. Masi has over
twenty-six  years managerial  experience and has been serving the hotel,  casino
and gaming industry in Nevada for twenty-six years.

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

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

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


Item 11.   Executive Compensation

      The following table sets forth the compensation paid by BGI (including its
subsidiaries)   for  services  rendered  in  all  capacities  to  BGI  (and  its
subsidiaries)  during the fiscal year ended June 30,  1996,  with respect to the
Chief  Executive  Officer of BGI and all other  persons who served as  executive
officers of BGI during the year ended June 30, 1996 and whose  aggregate  annual
compensation exceeded $100,000 for such period. No compensation has been paid to
executives by CQC for services rendered during the year ended June 30, 1996.

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                               Annual Compensation
                                                -------------------

                                    All Other
Name and Position                     Salary          Bonus       Compensation
-----------------                     ------          -----       ------------
<S>                                 <C>            <C>            <C>
Bruce F. Becker, Chief
  Executive Officer
  and President of
  BGI and each subsidiary ....      $500,000(1)    $      0       $ 60,763(1)(2)
                                                                             (3)
Bart Masi, General Manager
  of AC and BGG ..............      $180,692       $      0       $  4,050(3)
Mark Lerner, General Counsel
  of BGI and each subsidiary
                                    $150,577       $      0       $ 10,123(3)
Ron Lurie, Director-Corporate
  Development of BGI, General
  Manager of SC and Director
  of Marketing of AC .........      $140,539       $      0       $ 14,751(3)
</TABLE>

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

(2)  Includes  $49,341 paid by BGI during the fiscal year ended June 30, 1996 in
premiums on life  insurance  held by Bruce F. Becker for the benefit of a family
trust  administered by Mr. Becker.  Such life insurance,  which has an aggregate
death benefit of $5,076,376,  has been collateral assigned to BGI such that upon
the death of Mr. Becker,  BGI shall be refunded all premiums  previously paid by
it  under  the  policy  before  the   distribution  of  benefits  to  the  named
beneficiary.

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


Compensation of Directors

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

Employment Agreement

      In May 1994, BGI entered into a seven-year employment agreement with Bruce
F. Becker in his capacities as Chief Executive Officer and President.  Under the
employment agreement,  Mr. Becker is required to devote all of his business time
to the affairs of BGI and its affiliated  companies.  The agreement provides for
an annual base salary of $700,000 per year during calendar year 1996, increasing
by $100,000 each calendar year thereafter  through  December 31, 2001.  However,
for the second  consecutive  year,  Mr.  Becker  has  elected  to  postpone  his
scheduled  annual salary  increase.  These deferred salary amounts,  aggregating
$300,000, each of 1995, and have been accrued by BGI, but have not yet been paid
to Mr. Becker.  Mr. Becker is also entitled to the use of an automobile and such
bonuses and other benefits as the Board of Directors may award from time to time
in its discretion.  In addition,  BGI maintains certain life insurance  coverage
referred to under Executive Compensation above.

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

Consulting Agreements

     BGI entered into consulting agreements with Ernest A. Becker III, Ernest A.
Becker  IV  and  Barry  W.  Becker  (the  "Consultants").  The  agreements  have
three-year  terms  expiring May 31,  1997.  The  agreements  provide for monthly
consulting  fees of $12,500,  $8,334 and $8,334,  respectively.  The  agreements
provide for  indemnification  of the Consultants for claims arising out of their
services  to BGI,  other than  claims  arising  from gross  negligence,  willful
malfeasance or fraud.  The Consultants are prohibited from competing with BGI or
its  affiliates or soliciting  for  employment  any person  employed or recently
employed  by BGI or its  affiliates.  Such  obligations  also  apply  beyond the
consulting period.

Compensation Committee Interlocks and Insider Participation

      None of the  board  of  directors  of BGI or its  subsidiaries  has had or
currently has a compensation  committee or other committee performing equivalent
functions. During the fiscal year ended June 30, 1995, Ernest A. Becker, III and
Bruce  F.  Becker  in  their  capacities  as  directors  of each  of the  Nevada
subsidiaries  participated  in  deliberations  concerning  compensation  of  the
executive officers of such companies.


Item 12.    Security Ownership of Certain Beneficial  Owners  and
      Management

      The following table sets forth as of September 1, 1995 certain information
with respect to beneficial ownership of shares of BGI's Common Stock by (i) each
person  known by BGI to be a  beneficial  owner of more  than 5  percent  of the
outstanding  shares of Common Stock,  (ii) each of BGI's  directors,  (iii) each
executive  officer  named in the  summary  compensation  Table under the caption
"Executive Compensation" and (iv) all directors and officers as a group.

<TABLE>
<CAPTION>
Name and Address (1)               Amount and Nature(2)    Percentage of
of Beneficial Owner             of Beneficial Ownership    Shares Outstanding
-------------------             -----------------------    ------------------
<S>                                          <C>              <C>
 Ernest A. Becker, III ....                   3,611,134        36.11%
 Bruce F. Becker ..........                   2,761,275        27.61%
 Ernest A. Becker, IV .....                   1,546,831        15.47%
 Barry W. Becker ..........                   1,546,831        15.47%
 Bart Masi ................                           0         0.00%
 Mark Lerner ..............                           0         0.00%
 Ron Lurie ................                           0         0.00%
 Charlie's Land Company (3)                     533,929         5.34%
 The Putnam Companies (4) .                     800,000(5)      7.41%
 All officers and directors
  as a group (6) ..........                  10,000,000       100.00%
</TABLE>

----------
(1)  The address of each of the Becker family  members,  Charlie's  Land Company
     and Messrs.  Masi,  Lerner and Lurie is 740 South  Decatur  Boulevard,  Las
     Vegas, Nevada 89107. The address of The Putnam Companies is One Post Office
     Square, Boston, Massachusetts 02109.
(2)  BGI  believes  that the  persons  named in the table  have sole  voting and
     investment  power with respect to all shares of Common  Stock  beneficially
     owned by them.
(3)  Charlie's  Land  Company  is  a Nevada  general  partnership
     owned, directly and indirectly, by the Becker family members
     in  the  following  percentages: Ernest  A.  Becker,  III  -
       44.29%; Bruce F. Becker - 15.34%; Ernest A. Becker,  IV  -
       15.34%; Barry W. Becker - 15.34%; and Alvernie Apartments,
     Inc.  -  9.69%. Alvernie Apartments, Inc. is  owned  by  the
     Becker family as follows: Ernest A. Becker, III and Betty W.
     Becker,  as joint tenants - 60.1%; Bruce F. Becker -  13.3%;
     Ernest A. Becker, IV - 13.3%; and Barry W. Becker - 13.3%.
(4)  Includes Warrants held by several different investment trusts and/or mutual
     funds which have a common corporate owner.
(5)  Represents  shares of the Common Stock which may be acquired by such person
     within  sixty  (60)  days from the date of this  report  upon  exercise  of
     Warrants.  BGI's knowledge with respect to the ownership of its Warrants is
     based on information provided by BGI's warrant agent.
(6)  Includes shares owned  beneficially  by (a) Bruce F. Becker,  (b) the other
     Becker family  members  identified  above,  and (c) Charlie's Land Company,
     which is owned by the Becker family as set forth in footnote 3 above.


Item 13.   Certain Relationships and Related Transactions

      Since June 1, 1994,  the  Company  has  provided  managerial  and  related
services  to its  subsidiaries.  The  Company  has  entered  into  a  management
agreement  with each of the AC, SC and BGG (and CQC,  which is not  expected  to
have any  operations)  to  provide  executive  and  administrative  services  in
exchange for a management fee equal to 5% of each such company's gross operating
revenues (before deduction of promotional allowances). However, the AC Indenture
will prohibit the payment of management fees by AC until certain conditions have
been  satisfied  and  thereafter  in excess of specified  amounts.  See "Item 1.
Business  - Becker  Gaming,  Inc." The rate at which  management  fees are to be
payable was determined  based on the level of management  support to be provided
by the Company to the operating  companies,  the level of expense anticipated to
be  incurred  by  the  Company  in  connection   with  such  support,   and  the
gaming-related  experience  of the persons  expected to provide  such support on
behalf of Becker Gaming and their  familiarity with the operating  companies and
their businesses.  Accordingly, such fee does not necessarily reflect that which
could be obtained  from an  unaffiliated  party,  which could not be expected to
provide the same  support or to possess the same  gaming-related  experience  or
familiarity  with the operating  companies.  However,  based on its knowledge of
similar  management  service  arrangements  entered  into  by  other  Las  Vegas
casino-hotels,  such rate is  believed  to be at or near the top of the range of
fees customarily  paid for such services in such market.  Due to the decision to
suspend  development of CQC's riverboat casino project and sell its assets,  the
majority of BGI's  management  and  administrative  services are  anticipated to
benefit AC in the  future.  Accordingly,  in late March  1995,  BGI  transferred
approximately 40 employees involved in accounting and  administrative  functions
from BGI to AC. In connection  with this transfer,  in October 1995, the Company
temporarily  reduced  the  amount of AC's  management  fee to a net 1.0% of AC's
gross revenues  (previously  5.0% of gross  revenues)  based on the reduction in
services  it will  receive  from BGI in the future.  AC incurred  and SC and BGG
incurred  and  paid,  management  fees of  $1,396,000,  $137,000  and  $592,000,
respectively, to the Company in fiscal 1996.

      Due to the  decision  to suspend  development  of CQC's  riverboat  casino
project  and sell its  assets,  the  majority of the  Company's  management  and
administrative  services are  anticipated  to benefit AC.  Accordingly,  in late
March 1995, the Company  transferred  approximately 40 of its employees involved
in  accounting  and  administrative   functions  to  AC.  These  employees  were
originally  employees  of AC and were  transferred  to the Company in June 1994.
Effective  October  1, 1995,  an amount  equal to 4% of the  consolidated  gross
revenues  of  the  Company  will  be  returned  to AC  for  the  accounting  and
administrative  functions  that AC now  provides  for the benefit of each of the
Company's subsidiaries as mentioned above.

      AC has fully and  unconditionally  guaranteed  the payment of principal of
and interest on the CQC Notes.  See "Item 1.  Business - Capitol Queen & Casino,
Inc."  Similarly,  SC has fully and  unconditionally  guaranteed  the payment of
principal  of and  interest  on the AC Notes  until  such time as AC  achieves a
specified fixed charge coverage ratio.

      During  fiscal  1996,  AC leased  office,  storage and laundry  space from
Charleston  Heights Shopping Center ("CHSC"),  a partnership owned by the Becker
family.  Total lease rental payments (including  insurance,  tax and common area
maintenance  payments)  of  approximately  $217,000  were  paid by AC to CHSC in
fiscal 1996.  Based on rental rates offered for  properties  which are similarly
situated and offer comparable features,  AC believes that such rental rates were
below comparable market rates.

      Each of the Nevada  subsidiaries  previously  operated as a  subchapter  S
corporation  under  the  federal  tax  laws.  As of  December  31,  1993,  the S
corporation status of each of the Nevada  subsidiaries was terminated.  Prior to
the  termination  of S  corporation  status,  each  of the  Nevada  subsidiaries
distributed   to  their   stockholders   undistributed   income  on  which  such
stockholders  had previously  paid federal income taxes equal to $5,000,000,  in
the case of AC, $3,000,000, in the case of SC, and $800,000, in the case of BGG.
The  amounts  distributed  were  loaned  back to such  companies  in full by the
stockholders.  The  AC and SC  loans  are  repayable  pursuant  to  subordinated
stockholder  notes  maturing  in 2001 and  bearing  interest  at the rate of 10%
annually,  payable  monthly.  The BGG  loans  are  repayable  pursuant  to notes
maturing in  December  1996 and  bearing  interest at the rate of 10%  annually,
payable monthly. In addition,  the Nevada subsidiaries have agreed to distribute
to their  stockholders  cash  sufficient  to  satisfy  the  federal  income  tax
obligations  of such  stockholders  resulting  from  their  ownership  interests
therein  (including  taxes  payable  with respect to income  earned  previously)
through the date of termination of S corporation status,  subject to limitations
imposed under the Indentures.  The  stockholders  have filed all tax returns for
the periods  during which the Nevada  subsidiaries  operated as S  corporations.
Accordingly,  the exposure of the Nevada  subsidiaries under the tax indemnities
will be limited to taxes which may become  payable in the future with respect to
periods  through  1993 as a result of any audit of a  stockholder  return by tax
authorities. Such amounts may be material, although the AC Indenture limits such
payments by AC and SC to an aggregate of $2,250,000.

      SC has executed  gaming machine  service  agreements  with BGG pursuant to
which SC provides gaming machine  maintenance and other services to each BGG bar
and restaurant for a fixed fee. Fees paid by BGG to SC for such services totaled
approximately  $93,000 in fiscal  1996.  The  gaming  machine  maintenance  fees
payable by BGG to SC reflect rates which  management  believes  (based on market
research  conducted on an informal basis,  from time to time, by SC) are charged
for similar services by other gaming machine service companies  operating in the
Las Vegas area.

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

      BGG leases several of its properties from  partnerships  controlled by the
Becker  family  members.  Cantina  Charlie's  is leased at current  annual  rent
(including property taxes) of approximately $118,000,  subject to cost of living
increases,  pursuant to an agreement scheduled to expire in 1998, unless renewed
by BGG for up to an  additional 25 years.  The  Charlie's  Lakeside site is held
pursuant to a ground lease at current annual rent (including  property taxes) of
approximately $39,000,  subject to cost of living increases. The ground lease is
scheduled  to expire in 2006 but may be extended by BGG for up to an  additional
20 years.  BGG  operates  Charlie's  Bar pursuant to a lease  requiring  current
rental payments  (including  property taxes) of approximately  $37,000 per year,
subject to cost of living increases.  The lease expired in October 1995, and was
renewed by BGG for an additional three years.  Charlie's Bar Down Under, a 4,400
square-foot  building is leased for an annual rent of $145,320  payable in equal
monthly  installments.  The lease term commenced on February 1, 1995 and expires
on January 31, 2005, with options to extend for three  additional  terms of five
years each.  Management  believes,  based on its experience and knowledge of the
commercial  leasing  market in and around Las Vegas,  that the foregoing  leases
reflect market terms and rates.

      During 1992, SC purchased for  approximately  $123,000,  and resold to BGG
for the same price, gaming machines for use in two BGG restaurants.  At June 30,
1996, BGG had repaid the full amounts owed on the gaming machines to SC.

     SC  purchased  and leased to BGG's  wholly  owned  subsidiary  the personal
property used at Charlie's  Bar Down Under.  This lease calls for annual rent of
$145,000 to be paid in equal monthly installments in advance, beginning on April
1, 1995.

      The Becker family  members have  guaranteed the payment of a $272,000 note
payable  of SC,  various  term  loans  held by SC and a term  loan  to BGG.  The
outstanding  principal  balances of the SC and BGG term loans were  $757,000 and
$930,000, respectively, as of June 30, 1996.

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

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

                             PART IV

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

     The following are filed as part of this Report:

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

     (a)2.     Financial Statement Schedules
          An index to Financial Statement Schedules appears at
page F-2 hereof:

     (a)3.     Exhibits

<TABLE>
<CAPTION>
         <S>        <C>
         3.1        Articles of  Incorporation of the Company.*
         3.2        By-Laws of the Company.*
         4.1        Indenture  dated November 15, 1993 among Arizona  Charlie's,
                    as issuer, Sunset Coin, as guarantor,  and IBJ Schroder Bank
                    & Trust  Company  ("IBJ"),  as trustee,  as amended by First
                    Supplemental Indenture dated January 1, 1995.*
         4.2        Indenture  dated November 15, 1993 among Capitol  Queen,  as
                    issuer,  Arizona  Charlie's,  as  guarantor,   and  IBJ,  as
                    trustee,  as amended by First  Supplemental  Indenture dated
                    January 1, 1995.*
         10.1       Form of amended Warrant Agreement among the Company and the
                    purchasers named therein (the "Purchasers").*
         10.2       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.*
         10.3       Deed of Trust, Assignment of Leases, Security Agreement and
                    Fixture Filing dated November 15, 1993 by Capitol Queen, as
                    grantor, to Charles W. Riley, as trustee, for the benefit of
                    IBJ, as collateral agent.*
         10.4       Form of First Preferred Ship Mortgage  Securing an Indenture
                    between  Capitol  Queen  and  IBJ.*  10.5  Form of  Security
                    Agreements  dated  November 15, 1993 between each of Arizona
                    Charlie's and Capitol Queen and IBJ, as collateral agent.*
         10.6       Form of Stock  Pledge  Agreements  dated  November  15, 1993
                    between each of Arizona Charlie's and Capitol Queen and IBJ,
                    as collateral agent.*
         10.7       Form of Collateral  Agency Agreement dated November 15, 1993
                    among  Arizona  Charlie's,  CLC  and  IBJ,  as  trustee  and
                    collateral  agent and  between  Capitol  Queen  and IBJ,  as
                    trustee and collateral agent.*
         10.8       Promissory Notes dated December 24, 1993 made by each of the
                    Beckers in favor of Arizona Charlie's.*
         10.9       Promissory Notes dated December 24, 1993 made by each of the
                    Beckers  in favor  of  Sunset  Coin.*  10.10  Tax  Indemnity
                    Agreement  dated December 24, 1993 among Arizona  Charlie's,
                    Sunset Coin, Becker Gaming Group and each of the Beckers.*
         10.11      Registration Rights Agreements dated as of May 31, 1994
                    among the Company and each of the Beckers.*
         10.12      Form of  Management  Agreements  dated  as of May  31,  1994
                    between the Company and each of Arizona  Charlie's,  Capitol
                    Queen, Sunset Coin and Becker Gaming Group.*
         10.13      Form of Tax Allocation  Agreements  dated as of May 31, 1994
                    between the Company  and each of Arizona  Charlie's,  Sunset
                    Coin, Becker Gaming Group and Capitol Queen.*
         10.14      Form of Consulting Agreements dated as of May 31, 1994
                    between the Company and each of Ernest A. Becker, III,
                    Ernest A. Becker, IV and Barry W. Becker.*
         10.15      Employment  Agreement  dated as of May 31, 1994  between the
                    Company and Bruce F. Becker.* 10.16 Stockholders  Agreements
                    dated as of May 31, 1994 among each of the  Beckers.*  10.17
                    Leases  dated  May 1,  1988  and  August  21,  1990  between
                    Charleston Heights Shopping Center and Arizona Charlie's.*
         10.18      Ground Lease dated December 1, 1986 between Becker
                    Investment Company and Becker Family Trust No. 2 and Becker
                    Gaming Group; Assignment dated September 16, 1987 assigning
                    the interest of Becker Investment Company and Becker Family
                    Trust No. 2 to Lakeside Partners.*
         10.19      Lease dated  August 12, 1986 between  Fremont West  Shopping
                    Center and Becker Gaming  Group.* 10.20 Lease dated July 27,
                    1988 between Becker Investment Co. and Becker Gaming Group.*
                    10.21 Lease dated  September  19,  1994  between  Weddington
                    Investment Partnership and Innerout, Inc.* 10.22 Lease dated
                    March 24, 1995 between Sunset Coin, Inc. and Innerout, Inc.*
                    10.23 Lease agreement  between Arizona  Charlie's,  Inc. and
                    Bruce F. Becker.*
         10.24      Aircraft Purchase Agreement dated July 1, 1996 between
                    Arizona Charlie's and Limerick Holdings, LLC.
         21.1       Subsidiaries of the Company.
         27.1       Financial Data Schedule
</TABLE>
-----------
* Incorporated by reference to the Company's  Registration Statement on Form S-1
(33-76368)  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.


                                   BECKER GAMING, 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.

<TABLE>
<CAPTION>
        Signature                  Title
        ---------                  -----
<S>                                <C>
/s/Bruce F. Becker                 President, Chief Executive
--------------------------         Officer (Principal
Bruce F. Becker                    Executive Officer) and Director


/s/Jerry Griffis                   Chief Financial Officer
--------------------------         (Principal Financial
Jerry Griffis                      and 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
</TABLE>




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

BECKER GAMING, INC. AND SUBSIDIARIES
     Report of Independent Accountants
     Consolidated  Balance  Sheets  as of June 30,  1996  and 1995  Consolidated
     Statements of Operations for the Years Ended
      June 30, 1996, 1995 and 1994
     Consolidated  Statements of  Stockholders'  Equity  (Deficit) for the Years
      Ended June 30, 1996, 1995 and 1994
     Consolidated Statements of Cash Flows for the Years Ended
     June 30, 1996, 1995 and 1994
     Notes to Consolidated Financial Statements

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

CAPITOL QUEEN & CASINO, INC.
     Report of Independent Accountants
     Balance Sheets as of June 30, 1996 and 1995
     Statements  of Loss  Incurred  During the  Development  Stage for the Years
      Ended June 30,  1996,  1995 and 1994 and for the period  from  January 20,
      1993 (the date of inception) through June 30, 1996
     Statements of  Stockholder's  Equity (Deficit) for the Years Ended June 30,
      1996,  1995 and 1994 and for period  from  January  20,  1993 (the date of
      inception) through June 30, 1996
     Statements  of Cash Flows for the Years  Ended June 30,  1996 1995 and 1994
      and for the period from January 20, 1993 (the date of  inception)  through
      June 30, 1996
     Notes to Financial Statements




               INDEX TO FINANCIAL STATEMENT SCHEDULES



Schedule I          Condensed Financial Information of the
                    Company as of and for the Years Ended June 30, 1996,
                    1995 and 1994

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


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


CAPITOL QUEEN & CASINO, 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
Becker Gaming, Inc. and Subsidiaries


We  have  audited  the  consolidated  financial  statements  and  the  financial
statement schedules of Becker Gaming, Inc. and Subsidiaries listed in Item 14(a)
of this Form 10-K. These financial  statements and financial statement schedules
are the  responsibility of the Company's  management.  Our  responsibility is to
express  an  opinion  on these  financial  statements  and  financial  statement
schedules 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 consolidated  financial  position of Becker Gaming,
Inc. and Subsidiaries as of June 30, 1996 and 1995, and the consolidated results
of their  operations  and their  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  schedules
referred to above, when considered in relation to the basic financial statements
taken as a whole,  present  fairly,  in all material  respects,  the information
required to be included therein.

The accompanying  financial  statements have been prepared  assuming that Becker
Gaming,  Inc. will continue as a going concern.  As more fully described in Note
2,  certain  of the  Company's  principal  subsidiaries  are in  default of debt
covenants,  resulting in the  classification of such debt as currently  payable.
The Company and its  subsidiaries do not have sufficient  resources to repay the
indebtedness  on a current basis and  management's  plans are also  described in
Note 2. These matters raise substantial doubt about the ability of the Company's
principal  subsidiaries  (and thus, 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.


Las Vegas, Nevada
August 9, 1996

================================================================================
                      BECKER GAMING, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                          As Of June 30, 1996 And 1995
                             (Dollars In Thousands)
================================================================================
                                     ASSETS
                                                            1996           1995
                                                         -------        -------
Current assets:
   Cash and cash equivalents .....................       $ 6,745        $ 6,657
   Restricted cash, in escrow account.............            40             40
   Trade and other accounts receivable............           626          1,088
   Current portion of receivables from
   related parties................................            33             33
   Inventories ...................................           729            852
   Prepaid expenses ..............................         1,244          1,318
   Current portion of notes receivable............           153            233
   Assets held for sale...........................         3,233             --
                                                         -------        -------
     Total current assets.........................        12,803         10,221
                                                         -------        -------
Property and equipment:
   Land improvements..............................         1,628          1,628

   Building and improvements......................        38,282         38,566
   Leasehold improvements.........................           983          1,098
   Furniture and equipment........................        27,773         27,927
                                                         -------        -------
                                                          68,666         69,219
   Less, accumulated depreciation.................       (19,078)       (16,648)
                                                         -------        -------
                                                          49,588         52,571


   Land ..........................................           208            208
                                                         -------        -------
       Net property and equipment.................        49,796         52,779
                                                         -------        -------
Other assets:

   Assets held for sale...........................         7,754         15,987
   Notes receivable, less
   current portion, net...........................           472            502
   Receivables from related parties,
   less current portion...........................           165            165
   Deposits and other.............................         1,375          1,411
   Financing costs, net...........................         3,112          3,721
                                                         -------        -------
       Total other assets.........................        12,878         21,786
                                                         -------        -------

       Total assets                                     $ 75,477        $84,786
                                                         =======        =======


                  LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)

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

Current liabilities:
  Trade accounts payable .......................        $ 1,761         $ 2,028
  Accrued expenses .............................          6,409           3,674
  Notes payable ................................            110             121
  Current portion of
   subordinated notes payable to
   stockholders ................................            800             800
  Current portion of long term debt ............            381             356
  Long-term debt classified as
   current due to default under
   covenants, net of unamortized
   original issue discount of
   $2,474 (1996)and $2,882 (1995) ..............         72,526          17,118
  Current portion of obligations under
  capital leases ...............................          1,960             865
                                                   ------------    ------------
        Total current liabilities ..............         83,947          24,962

Long-term debt, less current portion ...........          1,330          56,593
Subordinated notes payable to
  stockholders, less current portion ...........          8,000           8,000
Obligations under capital leases, less
current portion ................................            197           2,001
                                                   ------------    ------------
        Total liabilities ......................         93,474          91,556
                                                   ------------    ------------
Commitments and  contingencies

Stockholders'
equity (deficit):
  Common stock, $.01 par value, 20,000,000
    shares authorized, 10,000,000 shares
    issued outstanding .........................           100             100
  Preferred stock, $1 par value, 5,000,000
    shares authorized, none issued and
    outstanding ................................           --              --
  Additional paid-in capital ...................          9,006           9,006
  Retained earnings (deficit) ..................        (27,103)        (15,876)
                                                   ------------    ------------

        Total stockholders' equity (deficit) ...        (17,997)         (6,770)
                                                   ------------    ------------

        Total liabilities and
        stockholders' equity (deficit) .........       $ 75,477       $  84,786

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

The  accompanying  notes  are  integral  part of  these  consolidated  financial
statements.
================================================================================
                      BECKER GAMING, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  (Dollars In Thousands, Except Per Share Data)
================================================================================

                                                        Year Ended June 30,
                                          --------------------------------------
                                                 1996         1995         1994
                                          -----------  -----------  -----------
Revenues:
   Gaming ..............................    $  62,377   $   56,773    $  47,303
   Food and beverage ...................       18,010       14,670       12,292
   Hotel ...............................        3,208        2,614        1,219
   Bowling .............................         --           --            251
   Gift shop ...........................          590          577          535
   Other ...............................        1,210          972          438
                                          -----------  -----------  -----------
       Gross revenues ..................       85,395       75,606       62,038
Less, promotional allowances ...........       (9,358)      (6,527)      (4,953)
                                          -----------  -----------  -----------
       Net revenues ....................       76,037       69,079       57,085
Operating expenses:
   Gaming ..............................       21,923       19,039       13,560
   Food and beverage ...................       16,787       14,318       12,535
   Hotel ...............................        1,413        1,377          714
   Bowling .............................         --           --            387
   Gift shop ...........................          475          450          458
   Advertising and promotion ...........        4,831        3,948        3,093
   General and administrative ..........       21,053       20,571       15,804
   Rent expense paid to  related party .          411          470          344
   Depreciation and amortization .......        4,402        4,439        3,856
                                          -----------  -----------  -----------
       Total operating expenses ........       71,295       64,612       50,751
                                          -----------  -----------  -----------
       Operating income ................        4,742        4,467        6,334
                                          -----------  -----------  -----------
Other income(expenses):
   Loss on disposal of assets ..........         (438)        --           --
   Abandonment losses and write-downs
     of assets  held for sale ..........       (4,503)        --           (492)
   Development costs ...................         (504)      (1,186)        --
   Interest income .....................          101        1,171        1,452
   Interest expense ....................      (10,584)     (12,698)      (9,673)
   Interest capitalized ................         --            676        1,143
   Other, net ..........................          (41)         (70)          10
                                          -----------  -----------  -----------
       Total other income (expense) ....      (15,969)     (12,107)      (7,560)
                                          -----------  -----------  -----------
       Income (loss) before income taxes
        and extraordinary item .........      (11,227)      (7,640)      (1,226)
Provision for income taxes .............         --           --           (340)
                                          -----------  -----------  -----------
       Income (loss) before
        extraordinary item .............      (11,227)      (7,640)      (1,566)
                                          -----------  -----------  -----------

   Extraordinary item-loss on early
    retirement of debt (no income
    tax benefit available) .............         --         (4,089)        --
                                          -----------  -----------  -----------

Net income (loss)
                                           $  (11,227)  $  (11,729)  $   (1,566)
                                          ===========  ===========  ===========

Net income (loss) per common share:
   Income (loss) before
    extraordinary item .................   $    (1.12)  $    (0.76)  $    (0.17)

   Extraordinary item-loss on
    early retirement of debt ...........         --          (0.41)        --
                                          -----------  -----------  -----------

Net income (loss) per share of
 common stock ..........................   $    (1.12)  $    (1.17)  $    (0.17)
                                          ===========  ===========  ===========

Weighted average common shares
 outstanding ...........................   10,000,000   10,000,000    9,509,956
                                          ===========  ===========  ===========

Pro forma data (reflecting
change in tax status
of subsidiaries):
       Income tax  benefit .............                             $      423
                                                                    ===========

       Net income (loss) ...............                             $     (803)
                                                                    ===========

       Net income (loss) per share
       of common stock .................                             $    (0.08)
                                                                    ============

The  accompanying  notes  are  integral  part of  these  consolidated  financial
statements.
================================================================================
                      BECKER GAMING, INC. AND SUBSIDIARIES

            CONSOLIDATED  STATEMENT OF  STOCKHOLDER'S  EQUITY  (DEFICIT) For The
                Years Ended June 30, 1996, 1995 And 1994
                             (Dollars In Thousands)
================================================================================


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


Balances, June  30, 1993 ..................    9,466,071       $ 95

Issuance of warrants to purchase common
   stock, net of issuance cost ............         --           --

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

Reclassification of undistributed earnings
   to additional paid-in capital upon
   termination of S corporation election ..         --           --

Contribution of land from Charlie's Land
   Company in connection with the
   Reorganization .........................      533,929           5
Forgiveness of receivable from Charlie's
   Land Company in connection with the
   Reorganization .........................         --           --

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

Balances, June 30, 1994 ...................   10,000,000          100

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

Balances, June 30, 1995 ...................   10,000,000          100

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

Balances, June 30, 1996 ...................   10,000,000   $      100
                                              ==========   ==========



                                                            Preferred Stock
                                                  ------------------------------
                                                                 Shares   Amount
                                                              ------   -----


Balances, June  30, 1993 ..................................     --     $--

Issuance of warrants to purchase common
   stock, net of issuance cost ............................     --      --

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

Reclassification of undistributed earnings
   to additional paid-in capital upon
   termination of S corporation election ..................     --      --

Contribution of land from Charlie's Land
   Company in connection with the
   Reorganization .........................................     --      --

Forgiveness of receivable from Charlie's
   Land Company in connection with the
   Reorganization .........................................     --      --

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

Balances, June 30, 1994 ...................................     --      --

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

Balances, June 30, 1995 ...................................     --      --

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

Balances, June 30, 1996 ...................................     --     $--
                                                              ======   =====




                                                 Additional   Retained
                                                   Paid-In    Earnings
                                                   Capital    (Deficit)   Total
                                                 ----------  ---------- --------


Balances, June  30, 1993 ....................   $ 1,722      $ 7,757     $ 9574

Issuance of warrants to purchase common
   stock, net of issuance cost ..............     7,005         --        7,005

Distributions to stockholders ...............      --         (9,533)    (9,533)

Reclassification of undistributed earnings
   to additional paid-in capital upon
   termination of S corporation election ....       805         (805)      --

Contribution of land from Charlie's Land
   Company in connection with the
   Reorganization ...........................       203         --          208

Forgiveness of receivable from Charlie's
   Land Company in connection with the
   Reorganization ...........................      (729)        --         (729)

Net loss ....................................      --         (1,566)    (1,566)
                                                           ---------   --------
Balances, June 30, 1994 .....................     9,006       (4,147)     4,959

Net loss ....................................      --        (11,729)   (11,729)
                                                           ---------   --------

Balances, June 30, 1995 .....................     9,006      (15,876)    (6,770)

Net loss ....................................      --        (11,227)   (11,227)
                                                           ---------   --------

Balances, June 30, 1996 .....................  $  9,006    $ (27,103)  $(17,997)
                                             ==========    ==========   ========

The  accompanying  notes  are  integral  part of  these  consolidated  financial
statements.
================================================================================
                      BECKER GAMING, INC. AND SUBSIDIARIES

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

                                                         Year Ended June 30,
                                              ----------------------------------
                                                      1996       1995      1994
                                                     -----      -----     -----
Cash flows from operating activities:
   Net (loss) income ..........................   $(11,227)  $(11,729) $ (1,566)
                                                  --------   --------  --------
Adjustments  to reconcile  net (loss)
income to net cash  provided by (used in)
 operating activities:
    Depreciation and amortization .............      4,402      4,439     3,856
    Amortization of original issue
     discount and other .......................        408        834       991
    Provision for losses on receivables .......         44         44      --
    Write-downs of assets held for sale .......      4,942       --        --
    Net (gain) loss on sale of equipment ......        119         87       (10)
    Abandonment loss ..........................       --         --         492
    Loss on early retirement of debt ..........       --        4,089      --

(Increase) decrease in operating assets:
    Receivables ...............................        159       (646)       82
    Receivables from related parties ..........       --          135       (62)
    Inventories ...............................        123       (158)       25
    Prepaid expenses ..........................        333       (363)      442
    Deposits and other assets .................        (86)      (146)     --

Increase (decrease) in operating liabilities:
    Accounts payable, net of amounts for
     capital expenditures .....................        (54)       169     1,063
    Accrued expenses ..........................      2,766        407     1,519
                                                  --------   --------  --------
        Total adjustments .....................     13,156      8,891     8,398
                                                  --------   --------  --------
        Net cash provided by (used in)
        operating activities ..................      1,929     (2,838)    6,832
                                                  --------   --------  --------

Cash flows from investing activities:
  Capital expenditures, net of
   construction accounts payable ..............       (544)   (27,382)  (22,945)
  Proceeds from sale of equipment .............         37        792       475
  Net (additions to) reductions in
   restricted cash equivalents ................       --       51,001   (51,041)
  Issuance of note receivable .................       --          (33)     (321)
  Payments of notes receivable ................        104        243       468
  Increase in deposits and other assets .......       (113)       (36)     (238)
                                                  --------   --------  --------
      Net cash provided by (used in)
      investing activities ....................       (516)    24,585   (73,602)
                                                  --------   --------  --------

Cash flows from financing activities:
  Proceeds from borrowing under note payable ..        109        738        16
  Payments under notes payable ................       (625)   (20,676)     (530)
  Payments under capital lease obligations ....       (809)    (1,607)   (1,011)
  Payments under development agreements .......       --         --         (92)
  Proceeds from issuance of First
   Mortgage Notes, net of financing cost ......       --         --      81,771
  Payments under long-term debt ...............       --         --     (17,219)
  Proceeds from issuance of subordinated
   notes payable to stockholders ..............       --         --       8,800
  Distributions to stockholders ...............       --         --      (9,533)
  Proceeds from issuance of warrants of
   purchase common stock, net of issuance costs       --         --       7,005
  Payments on mortgage indebtedness associated
   with land contributed by related party .....       --         --        (729)
                                                  --------   --------  --------
      Net cash (used in) provided by
      financing activities ....................     (1,325)   (21,545)   68,478
                                                  --------   --------  --------
      Net increase in cash and cash
      equivalents .............................         88        202     1,708
  Cash and cash equivalents, beginning
   of year ....................................      6,657      6,455     4,747
                                                  --------   --------  --------
 Cash and cash equivalents, end of year
                                                  $  6,745   $  6,657  $  6,455
                                                  ========   ========  ========


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

--------------------------------------------------------------------------------
                      BECKER GAMING, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   ----------

     1.   Summary Of Significant Accounting Policies:

     Basis Of Presentation
     ---------------------

     Becker  Gaming, Inc. ("Becker Gaming" or the "Company")  was
     incorporated on June 24, 1993 for the purpose of serving  as
     a holding company for 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").  CQC currently
       has no significant operations other than to market and sell its
       riverboat and other assets..

     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.

     In November 1993, the Company issued  2,989,537  shares of common stock for
     all of the outstanding common stock of CQC. At the time of the transaction,
     CQC was wholly owned and controlled by the stockholders of the Company.

     On June 1, 1994,  the  stockholders  of AC, SC and BGG  (collectively,  the
     "Nevada Gaming Entities") exchanged all of their stock for 6,476,534 shares
     of  Becker  Gaming  stock.  This  transaction  was a  part  of a  corporate
     reorganization  (the  "Reorganization")  which  had  been  contemplated  in
     connection  with the private  placement  debt  financing,  which is further
     discussed in Note 9.

     Each of the above  transactions  was accounted for at historical  cost in a
     manner  similar  to  a  pooling  of  interests   since  they  involved  the
     combination of entities under common  control.  Accordingly,  the Company's
     consolidated  financial statements have been restated for all periods prior
     to  the  combination  to  include  the  financial  positions,   results  of
     operations  and  cash  flows  of  CQC  and  the  Nevada  Gaming   Entities.
     Adjustments  have  been  made  to  the  Company's   consolidated  financial
     statements  to  eliminate  the impact of  intercompany  transactions  which
     occurred prior to the combination.


     Principles Of Consolidation
     ---------------------------

     The consolidated  financial  statements include the accounts of the Company
     and its subsidiaries.  All intercompany balances and transactions have been
     eliminated in consolidation.

     Revenue
     -------

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

     The  primary   source  of  gaming   revenue  for  SC  is  from  slot  route
     participation agreements with unaffiliated locations in which SC recognizes
     as slot revenue a predetermined  percentage  (operator's  share) of the net
     win from  SC-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 SC and the slot
     locations  receive is  determined by  individual  participation  agreements
     between the parties.

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

     SC'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,  approximately  254 (90%) of the machines
     operated  or  serviced  by SC  were  installed  at  unaffiliated  locations
     controlled  by the  stockholders  of BGI (as lessor),  through  restrictive
     lease provisions.

     Gaming  revenues  from  slot  route and  service  agreements  at  locations
     controlled by the  stockholders  of BGI amounted to $2,370,000,  $2,331,000
     and  $2,333,000  in  the  years  ended  June  30,  1996,   1995  and  1994,
     respectively.

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

     The retail value of hotel  accommodations,  food and  beverage  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 .......................       $  261,000       $  164,000       $  119,000
Food and Beverage ...........        4,833,000        3,813,000        3,410,000
                                     ---------        ---------        ---------

                                    $5,094,000       $3,977,000       $3,529,000
                                    ==========       ==========       ==========
</TABLE>


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

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

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

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

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

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

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


     Preopening Costs
     ----------------

     Certain  preopening  costs,  consisting  principally  of  personnel  costs,
     training  and other  costs  directly  associated  with the  opening  of new
     hotel-casino  or significant  expansions of the existing  hotel-casino  are
     being  capitalized  and will be  charged  to  expense  over a period not to
     exceed one year following the  commencement of related  operations.  During
     the years ended June 30, 1996, 1995 and 1994, the Company capitalized $-0-,
     $31,000 and $70,000 respectively, of preopening costs.

     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.

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

     The Company  accounts  for income  taxes in  accordance  with  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 Company  adopted SFAS
     109 in 1994.  The impact of  adoption  was not  material  to the  Company's
     financial position or results of operations.

     Prior to January 1, 1994,  AC, SC and BGG were  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 a 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 for those  subsidiaries.
     Effective  January  1, 1994 AC,  SC & BGG  terminated  their S  corporation
     elections  and  adopted  SFAS  109.  The  adoption  of  SFAS  109 by  these
     subsidiaries  was not  material  to the  Company's  financial  position  or
     results of operations.

     In connection with the  Reorganization  described above,  beginning June 1,
     1994,  AC, SC and BGG are included in the  consolidated  federal income tax
     returns filed by BGI. Their tax  allocations are based on the amount of tax
     they would incur if they filed separate returns, except they do not receive
     any benefit from carrybacks to prior years.

     Net  income  (loss)  per share of  common  stock is  computed  based on the
     weighted average number of shares of common stock and dilutive common stock
     equivalents  outstanding  during the period.  Common stock equivalents were
     not  included  in the  computation  of loss per common  share for the years
     ended  June  30,  1996,  1995  and 1994 as their  effect  would  have  been
     antidilutive.

     Pro Forma Information
     ---------------------

     The  consolidated  pro forma provision for income taxes for the years ended
     June 30, 1994 and the related pro forma net income and pro forma net income
     per share of common stock,  reflect  adjustments  to income taxes  assuming
     that the termination of S corporation status of the Company's  subsidiaries
     (AC, SC and BGG) occurred as of July 1, 1993.

     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  more fully  described in Notes 2
     and 3.

2.   Missouri   Gaming   License,  Default  Under   Indebtedness,
     Management's Plans, and Going Concern:

     CQC was formed to develop,  own and operate the "Capitol  Queen"  riverboat
     casino and related land-based  facilities in Jefferson City,  Missouri.  On
     September  28, 1994,  CQC was notified  that its  application  for a gaming
     license was rejected by the Missouri Gaming Commission (the  "Commission").
     At the time CQC was notified of the Commission's decision,  construction of
     the riverboat under contract with a shipbuilder was almost  completed.  CQC
     had also  obtained the  necessary  permits for the  land-based  development
     portion  of the  project  and  performed  certain  dredging  and other site
     preparation  work.   Immediately   following  the  Commission's   decision,
     Management  temporarily  suspended further development of the Capitol Queen
     project,  pending an appeal of the decision and legal remedies  potentially
     available to the Company.  Costs  associated  with the  development  of the
     project  which  had  been  deferred  during  the  development   stage  were
     written-off in the fourth quarter of the fiscal year ended June 30, 1994.

     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  (which  has
     guaranteed  the CQC Notes as more fully  described  in Note 9) 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 9).  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 9) 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.  As more fully  described  in Note 3, a further  write-down  in the
     carrying  value of the  riverboat was  recognized in the fourth  quarter of
     1996,  after the election in Jefferson  City,  the  expiration of the Aerie
     contract, and due to deteriorating market conditions.

     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 the
     Company's  principal  subsidiaries (and, thus 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.   Construction Project And Related Contingencies:

     Capitol Queen Project
     ---------------------

     The Capitol  Queen  project,  as  originally  contemplated  by CQC,  was to
     include  the  riverboat,  dockside  facilities,   restaurants  and  related
     ancillary  facilities  to be built on land  acquired by the Company in July
     1993.  As a result  of the  decision  to  abandon  the  project,  all costs
     associated   with  the  design  and  development  of  the  facilities  were
     written-off in the fourth  quarter of the Company's 1994 fiscal year,  with
     the exception of the historical cost of the land and related dredging.

     The Company had contracted with  shipbuilder to construct the Capitol Queen
     riverboat.  The total  cost of the  riverboat  was  $11,892,000,  including
     construction  period interest and other costs. During the fourth quarter of
     the year ended June 30,  1996,  based on  deteriorating  market  conditions
     after the expiration of the Aerie contract,  the Company  recognized a loss
     of  $4,392,000  and  wrote-down  the  carrying  value of the  riverboat  to
     $7,500,000.  Such  revised  carrying  value  represents  management's  best
     estimate of the  riverboat's  current net realizable  value in a cash sale,
     based on  information  obtained  from  shipbuilders,  marine  brokers,  and
     purchase offers made to the Company from third parties.

     Jefferson City Development Agreement
     ------------------------------------

     CQC  acquired  the  franchise  rights to operate the Capitol  Queen under a
     development  agreement  with  the City of  Jefferson  City,  Missouri  (the
     "Development Agreement"), beginning September 1, 1993 for a period of seven
     years.  CQC's rights and obligations  under the Development  Agreement were
     contingent  upon receiving a gaming license which,  until the occurrence of
     the events described in Note 2, management believed was probable.

     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.  Because CQC's
     Development  Agreement with Jefferson City was entered into pursuant to the
     earlier ordinance permitting riverboat gambling,  the Company believes that
     as matter of law the 1995  election  does not  affect the  validity  of the
     Development  Agreement.  However,  to avoid  the cost  and  uncertainty  of
     litigation,  CQC and Jefferson  City in June 1996 entered into an agreement
     pursuant to which the  Development  Agreement  was  rescinded and Jefferson
     City refunded  $300,000 of the $400,000 CQC had originally paid to the City
     under the Development Agreement.


     Other Development Agreements
     ----------------------------

     As discussed  below,  the Company and CQC have each entered into additional
     agreements in connection with the development of the Capitol Queen project,
     which have been  terminated  as a result of the  decision  by the  Missouri
     Gaming Commission.

     In January 1993,  prior to  incorporation,  the  stockholders of CQC agreed
     that, upon being licensed in Missouri to own and operate the Capitol Queen,
     CQC  would  issue  shares  of its  common  stock to three  individuals  who
     assisted the then existing  stockholders  of CQC in obtaining the rights to
     develop the Capitol Queen (the "CQC Stock Agreement"). The aggregate amount
     of  stock  subject  to the CQC  Stock  Agreement  represents  5.25%  of the
     outstanding  common stock of CQC, and was subject to increase to 8.25% if a
     convention  center  required  under  the  Development   Agreement  was  not
     constructed on land  controlled by the parties to the CQC Stock  Agreement.
     CQC has the option to repurchase  any or all of such stock,  except for 25%
     held by one individual,  for a period of three years from their issuance at
     an aggregate purchase price equal to $750,000 ($1,200,000 if the additional
     shares were issued). In addition to the above requirements of the CQC Stock
     Agreement,  CQC also agreed to pay a lump-sum fee of $350,000 to two of the
     above  individuals  after  receiving  a  license  and the  commencement  of
     operations of the Capitol Queen.

     At the time CQC was  awarded  the  Development  Agreement,  and  until  the
     occurrence of the events  described in Note 2,  management  believed it was
     probable it would  receive a gaming  license in Missouri.  Accordingly,  to
     reflect the CQC Stock Agreement,  the Company recorded a minority  interest
     in subsidiary  subscribed of $788,000  (using the $750,000 value  described
     above for 5.0% of the stock to  determine  the value of the  remaining  25%
     interest),  recorded  amounts  payable under the agreement for $350,000 and
     recorded a corresponding  total charge of $1,138,000 to development  costs,
     to be amortized over the life of the Development Agreement.  As a result of
     the decision by the Missouri  Gaming  Commission and the abandonment of the
     Capitol  Queen  project,  management  believes that it has been relieved of
     these  obligations.   Accordingly,   the  subscribed  stock,  the  $350,000
     liability  and  the  related  deferred  costs  (net  of  amortization  from
     September 1, 1993 to June 30, 1994) were  written-off in the fourth quarter
     of fiscal 1994.

     In September 1993,  Becker Gaming agreed that it would  repurchase  certain
     rights to acquire equity in CQC (the "Repurchase  Agreement")  which it had
     previously granted to various parties (the "Sellers"). The Sellers assisted
     Becker Gaming and CQC, through the Becker Gaming stockholders, in obtaining
     the  approval to develop,  own and operate the Capitol  Queen in  Jefferson
     City. Under the terms of the Repurchase Agreement,  Becker Gaming agreed to
     pay the Sellers an aggregate amount of $5,925,000,  payable in installments
     through  July 1, 1997 and  bearing  interest at 10% per annum from the date
     the Capitol  Queen opens for  business.  Becker  Gaming also agreed that if
     prior to maturity,  the Company proposed to sell any of its common stock in
     an underwritten  public offering,  the Sellers may accept registered shares
     in lieu of the payments required based on the public offering price of such
     shares (less any  underwriters'  discount)  subject to certain  underwriter
     limitations.

     The  Repurchase  Agreement  provided  that in the  event  the  development,
     ownership  or operation of a riverboat  gaming  business in Jefferson  City
     becomes  unlawful  or CQC is  declined  a gaming  license,  the  Repurchase
     Agreement  becomes  null and void.  At the time Becker  Gaming  entered the
     Repurchase  Agreement,  and until the occurrence of the events described in
     Note 2, the  Company  believed it was  probable  it would  receive a gaming
     license in Missouri.  Accordingly,  the Company  recorded a liability under
     the Repurchase  Agreement and the related present value of the costs to the
     Sellers of  $5,232,000  was  recorded as deferred  development  costs to be
     amortized over the life of the Development Agreement.

     As a result of the  decision  by the  Missouri  Gaming  Commission  and the
     abandonment  of the Capitol Queen project,  Becker Gaming  believes that it
     has been  relieved  of its  obligations  under  the  Repurchase  Agreement.
     Accordingly,  the liability to the Sellers and the related  deferred  costs
     (net  of  amortization  from  September  1,  1993 to June  30,  1994)  were
     written-off in the fourth quarter of fiscal 1994.

     In  addition  to the above,  in the  fourth  quarter  of fiscal  1994,  CQC
     wrote-off  other  previously  capitalized  expenditures  of $1,375,000  and
     wrote-off  capitalized  preopening expenses of $340,000 associated with the
     development of the Capitol Queen project.


4.   Related-Party Transactions:

     In  anticipation  of the January 1, 1994  termination  of the S corporation
     elections  by AC,  BGG  and  SC,  on  December  24,  1993  AC,  BGG  and SC
     distributed  $5,000,000,  $800,000 and $3,000,000,  respectively,  to their
     stockholders,  representing  previously taxed,  undistributed  income. This
     distribution  was  immediately  loaned  back  to  AC,  BGG  and  SC by  the
     stockholders in the form of subordinated notes payable. The AC and SC notes
     bear interest at an annual rate of 10%,  payable  monthly,  with the entire
     principal  amount due on January 1, 2001. The BGG notes bear interest at an
     annual rate of 10%, payable monthly with the entire principal amount due in
     December 1996.  Prior to the  transaction,  the Company borrowed funds from
     its  stockholders as described in Note 9. Interest  expense  incurred under
     stockholder notes was $898,000,  $887,000, and $456,000 for the years ended
     June 30, 1996,  1995 and 1994,  respectively.  The Company also has various
     receivables from its  stockholders,  totaling $198,000 at June 30, 1996 and
     1995. The receivables are unsecured and bear interest at a rate of 4.5% per
     annum.

     As part of the  Reorganization,  in June 1994, the stockholders also caused
     the ownership of the land underlying AC's hotel and casino facilities to be
     transferred to the Company from Charlie's Land Company  ("CLC"),  an entity
     also owned by the Becker Gaming  stockholders.  The land was first conveyed
     to Becker  Gaming by CLC in exchange  for 533,929  shares of Becker  Gaming
     stock and then  contributed  by Becker Gaming to AC. The Company has valued
     the stock issued to CLC using the BGI stockholders' historical basis of the
     land  ($208,000),  due to the  related  party  nature  of the  transaction.
     Concurrent  with the  contribution  of the CLC land,  the  Company  forgave
     $729,000  due from CLC which arose when AC paid-off  CLC's  mortgage on the
     land  in   contemplation   of  the   Reorganization.   The  forgiveness  of
     indebtedness  from  CLC  has  been  reflected  as  a  distribution  to  the
     stockholders in the 1994 financial statements.

     The  Company's  subsidiary  BGG has a  number  of  leases  of land on which
     certain of its  operations  are located.  These  leases are with  companies
     related to Becker Gaming  through  common  ownership.  Total rental expense
     under these  leases  amounted to  $437,000,  $314,000  and $229,000 for the
     years ended June 30, 1996, 1995 and 1994, respectively.


     Charleston  Heights  Shopping  Center  ("CHSC") an entity also owned by the
     Becker Gaming stockholders, owns the land on which certain of the Company's
     administrative  offices are located and, prior to the  Reorganization,  CLC
     owned the land on which AC'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.

     The  Company's  president  operates  a sole  proprietorship  under the name
     "Becker  Vending" which places arcade,  cigarette,  music and other vending
     machines  at AC and SC and BGG  locations.  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 AC cigarettes,  candy and similar items for resale in
     the AC gift shop.

5.   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 .......      $ 7,922,000      $12,005,000      $ 6,096,000
                                   ===========      ===========      ===========

Income taxes paid ...........      $                $   338,000      $   340,000
                                   ===========      ===========      ===========

Capitalize lease
  obligations incurred ......      $   166,000      $   222,000      $ 3,694,000
                                   ===========      ===========      ===========
</TABLE>


6.   Notes Receivable:

     Notes receivable  consist of loans to various  proprietors who have entered
     into slot  route  agreements  with SC.  Such  loans are  primarily  used to
     finance  long-term  facility  improvements  to  the  slot  locations,   are
     collateralized  by  related  assets of the  proprietors'  facilities,  bear
     interest at rates up to prime plus 2.5%,  and are due in varying  weekly or
     monthly installments through 2003.

7.   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 salaries .................        $1,100,000        $  769,000
Accrued vacation ...........................           306,000           255,000
Group insurance ............................           352,000           300,000
Gaming taxes ...............................           250,000           273,000
Payroll and other taxes ....................           405,000           445,000
Progressive slot liability .................           100,000           102,000
Accrued interest (including
  past-due interest of CQC
  in the amount of $2,400,000) .............         3,354,000         1,374,000
Other accrued expenses .....................           542,000           156,000
                                                    ----------        ----------

                                                    $6,409,000        $3,674,000
                                                    ==========        ==========
</TABLE>



8.   Notes Payable:

     Notes   payable  as  of  June  30,  1996  and  1995   consist  of  a  5.96%
     uncollateralized note payable in monthly installments of $22,532, including
     interest, through January 1997.



9.   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 semi-annually, collateralized by the assets of AC and
 guaranteed by SC (A) ....................       $ 55,000,000    $ 55,000,000

12% First  Mortgage Notes Due November 15, 2000 (the "CQC  Notes")with  interest
 payable  semi-annually,  collateralized  by the assets of CQC and guaranteed by
 AC, less unamortized original issue discount of $2,474,000 (1996)
 and $2,882,000 (1995)(A) ....................     17,526,000      17,118,000

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,  collaterlized by substantially all of
 the assets of SC and personal
 guarantees of the Company's stockholders ....        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 all property and deposit accounts of SC
 Borrowings were made under a $1.2 million non-revolving line of
 credit agreement of SC (B) ..................        162,000         214,000

Prime plus 2.0%,  term note payable  with  interest  and  principal  due monthly
 through April 23, 2000  collaterlized  by a security  agreement  dated July 15,
 1994 and right to lien without notice all property and deposits accounts of SC.
 Borrowings were made under a $1.2 million non-revolving line credit
 agreement of SC (B) .........................        262,000         331,000

Prime plus 2.0%,  term note payable  with  interest  and  principal  due monthly
 through May 9, 2000  collaterlized by a security  agreement dated July 15, 1994
 and right to lien without  notice all  property  and  deposits  accounts of SC.
 Borrowings were made under a $1.2 million non-revolving line credit
 agreement of SC (B) .........................        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 all  property and deposit  accounts of
 SC. Borrowings made under a $1.2 million non-revolving line of
 credit agreement of SC (B) ..................        102,000            --

Prime  plus  1.6% note  payable,  due in  monthly  installments  of $7,450  plus
 interest through April 2004,  collateralized  by the assets of the stockholders
 of the Company and
 substantially all assets owned by BGG .......        930,000       1,030,000

Other notes payable ..........................         23,000          28,000
                                                 ------------    ------------

                                                   74,237,000      74,067,000
  Less current portion (including
   the CQC and AC Notes which have
   been classified as current) ...............    (72,907,000)    (17,474,000)
                                                 ------------    ------------

                                                 $  1,330,000    $ 56,593,000
                                                 ============    ============
</TABLE>


(A)  On November 18, 1993,  CQC completed a private  placement debt financing of
     the CQC  Notes.  The  offering  generated  net  proceeds  of  approximately
     $30,666,000 (after deducting original issue discount of $7,500,000 and debt
     issue costs). Interest on the CQC Notes is payable semiannually and the CQC
     Notes mature on November 15, 2000.

     The CQC Notes are  guaranteed by AC (which  guarantee is subject to release
     only upon  licensing of the Capitol  Queen,  which is not expected) and are
     collateralized  by a first mortgage on  substantially  all of the assets of
     the Capitol Queen project.  The CQC Notes have been classified as currently
     payable  at June 30,  1996 and 1995 due to  anticipated  acceleration  upon
     default and management's  plans to negotiate a payoff of the  indebtedness,
     as more fully  described in Note 2. The Company  incurred an  extraordinary
     loss of  $4,089,000  in 1995  reflecting a $200,000  premium paid to retire
     $20,000,000  principal  amount of the debt and the  write-off  of  related,
     unamortized original issue discount and financing costs in the aggregate of
     $3,889,000.

     Also on November 18, 1993, AC completed a private  placement debt financing
     of the AC Notes.  The  offering  generated  net  proceeds of  approximately
     $33,684,000 (after deducting debt issue costs and approximately $16,924,000
     and $497,000 used to repay principal and interest,  respectively, to a bank
     which  was  due  and  payable).   Interest  on  the  AC  Notes  is  payable
     semiannually and the AC Notes mature on November 15, 2000. The AC Notes are
     guaranteed by SC (which  guarantee is subject to release upon completion of
     the  Expansion,  which  management  believes  has been  satisfied,  and the
     attainment  of a  fixed-coverage  ratio by AC of 2.25 to 1,  following  the
     completion  of the  expansion,  which  has  not  been  satisfied)  and  are
     collateralized  by a first mortgage on  substantially  all of the assets of
     AC, 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 discussion's 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.

     Concurrent  with the placement of the CQC and AC Notes,  Becker Gaming sold
     warrants (the "Warrants") exercisable for 2,500,000 shares of Becker Gaming
     common  stock for net  proceeds of  $7,005,000  (after  deducting  issuance
     costs). The gross proceeds from the sale of the Warrants of $7,500,000 were
     contributed  to CQC.  The  Warrants  are  exercisable  at June 30, 1994 and
     continue to be  exercisable  up to and  including  November 15,  2000.  The
     exercise price of $.01 per warrant and the number of shares of common stock
     issuable upon exercise of the Warrants are subject to adjustment in certain
     circumstances.

     The Indenture  governing the CQC Notes (the "CQC Indenture") limits the use
     of the net proceeds  from the offering and the sale of the Warrants to fund
     the cost of the development and  construction of the Capitol Queen project.
     The  proceeds  were  placed in  escrow  with a  trustee  pending  draws for
     qualifying project expenditures. As more fully explained in Note 2, certain
     of the proceeds were used in January 1995 in connection with the first step
     of the plan to repay  the CQC  Notes.  The CQC  Notes  are not  subject  to
     mandatory   redemption,   except  upon  a  change  of  control,   or  other
     circumstances as defined in the Indenture. CQC has the option to redeem the
     CQC Notes at a premium of 106% beginning on November 15, 1997, declining to
     par value on November  15,  1999.  If prior to November  15,  1997,  Becker
     Gaming  consummates an initial public offering of its common stock, CQC may
     also redeem the CQC Notes, at a premium of 108%.

     The CQC Indenture  contains  covenants that, among other things,  limit the
     ability of CQC and, in certain  cases,  AC, to pay  dividends or management
     fees, or incur  additional  indebtedness.  At June 30, 1996,  CQC had a net
     deficit of approximately $14,000,000.

     The indenture governing the AC Notes (the "AC 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  drawdowns  for
     qualifying project expenditures.  The AC Notes are not subject to mandatory
     redemption, except upon a change of control, decline in tangible net worth,
     or certain  asset  sales,  all as defined in the AC  Indenture.  AC 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 AC Indenture  contains  covenants that,  among other things,  limit the
     ability of AC and, in certain  cases,  SC, to pay  dividends or  management
     fees,  or incur  additional  indebtedness.  At June 30, 1996  approximately
     $1,500,000 of SC net assets were restricted by such Indenture covenants; AC
     had a net deficit of  approximately  $9,500,000  at June 30,  1996.  The AC
     Indenture also requires the Expansion to be completed in a specified manner
     and time frame, which management believes has been achieved.

(B)  In July 1994 SC 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. SC was able to request advances through October 28,
     1995 at which time SC's right to receive advances under  the
     agreement  was  terminated until the  defaults  under  other
     indebtedness  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 SC's financial
     condition, business operations or ownership or management.



     Maturities of long-term debt at June 30, 1996  (including the CQC Notes and
     AC Notes which have been classified as current) are as follows:

<TABLE>
<CAPTION>

<S>                     <C>
      1997              $72,907,000
      1998                  312,000
      1999                  278,000
      2000                  216,000
      2001                  102,000
Thereafter                  422,000
                        -----------
                        $74,237,000
                        ===========
</TABLE>


10.  Income Taxes:

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

<TABLE>
<CAPTION>
<S>                                         <C>           <C>           <C>

                                                  1996          1995        1994
                                                  ----          ----        ----
Current:
   Federal .............................    $     --      $     --      $340,000

Deferred:
   Federal .............................          --            --          --
                                               ------        ------      ------

        Total income tax provision .....    $     --      $     --      $340,000
                                               ======        ======     ========
</TABLE>



     The components  included in determining  the provision for income taxes for
     the years ended June 30, 1996, 1995 and 1994, net of  extraordinary  items,
     are shown below:

<TABLE>
<CAPTION>
                                               1996           1995         1994
                                               ----           ----         ----
<S>                                     <C>            <C>          <C>
Tax provision (benefit) at federal
 income tax statutory rate ...........  $(3,817,000)   $(2,598,000) $  (417,000)

Income tax liability borne by
 stockholders during period of S
 corporation status ..................         --             --       (866,000)

Increase (decrease) in taxes resulting from:
 Unrecognized tax benefit from net
  operating losses ...................    3,677,000      2,525,000    1,418,000
 Future deductible amounts arising
  from abandonment of assets .........         --             --        175,000
 Other ...............................      140,000         73,000       30,000
                                            -------         ------       ------

 Income tax provision ................  $      --      $      --    $   340,000
                                            =======        =======  ===========
</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 ................................   $   863,000    $   221,000

Assets:

Federal net operating loss carryforwards ....     7,320,000      5,564,000
Accrued interest expense ....................       918,000           --
Valuation allowances for assets held for sale     1,643,000           --
Bad debt expense ............................        30,000           --
Other .......................................          --             --
                                                  ---------      ---------
    Total deferred tax assets ...............     9,911,000      5,564,000
                                                  ---------      ---------

Valuation allowance .........................    (9,048,000)    (5,343,000)
                                                 ----------     ----------

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

   As of June 30, 1996 the Company had a federal net operating loss carryforward
   of approximately $21,529,000 which expires between 2009 and 2011.


11.  Leases And Commitments:

     The Company has entered into capital lease  agreements  whereby the Company
     leases various equipment under three-,  five-,  seven-, and ten-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 ...................          $ 4,201,000         $ 4,969,000
Less accumulated depreciation             (672,000)           (643,000)
                                       -----------         -----------

                                       $ 3,529,000         $ 4,326,000
                                       ===========         ===========
</TABLE>


     The Company also leases  various other  equipment  under  operating  leases
     which expire in varying years through 2001.

     The Company  leases  office space under a 10-year  operating  lease,  which
     expires in 1998, from CHSC, as more fully described in Note 4.

     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 (refer to
     Note 13 regarding pay-off of a portion of the obligation subsequent to June
     30, 1996):

<TABLE>
<CAPTION>
                                       Capital Leases    Operating Leases
                                       --------------    ----------------
<S>                                     <C>               <C>
1997                                    $2,073,000        $  773,000
1998                                       129,000           718,000
1999                                        53,000           379,000
2000                                        17,000           302,000
2001                                          --             301,000
Thereafter ........................            --           1,274,000
                                          ---------         ---------

Total minimum lease payments ......      $2,272,000        $3,747,000
                                         ==========        ==========


  Less amount representing interest         115,000

   Present value of net
    minimum lease payments ........       2,157,000

  Less current portion ............       1,960,000

  Obligations under capital lease .      $  197,000
                                         ==========
</TABLE>

     The total rental expense included in operations for operating leases during
     the years ended June 30,  1996,  1995 and 1994 was  $694,000,  $617,000 and
     $792,000, respectively.


12.  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.

13.  Defined Contribution 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 $560,000,  $449,000 and
     $405,000 for the years ended June 30, 1996, 1995 and 1994, respectively.

14.  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"). 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 the
     AC Notes and CQC Notes, as more fully discussed in Note 2.

15.  Subsequent Event:

     On July 26, 1996, the Company sold its corporate  aircraft for net proceeds
     of approximately  $3,200,000 and retired a related obligation under capital
     lease of  approximately  $1,800,000.  During the fourth quarter of the year
     ended June 30, 1996,  the Company  recognized a write-down  in the carrying
     value of the aircraft of  approximately  $440,000 based upon the difference
     between the carrying value and the contracted  sales price. The aircraft is
     classified  as an asset held for sale at June 30, 1996 in the  accompanying
     financial statements.

                       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.


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

To the Board of Directors
Capitol Queen & Casino, Inc.


We have audited the financial statements and the financial statement schedule of
Capitol  Queen & Casino,  Inc. (a  development  stage company and 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 Capitol Queen & Casino, Inc. as
of June 30, 1996 and 1995, and its loss incurred  during the  development  stage
and its cash  flows for each of the three  years in the  period  ended  June 30,
1996,  and for the period from January 20, 1993 (the date of inception)  through
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 Capitol
Queen & Casino,  Inc. will continue as a going concern.  As more fully described
in  Note  2,  the  Company  is  in  default  of  debt  covenants,  resulting  in
classification  of such debt as  currently  payable.  The Company  does not have
sufficient  resources to repay its indebtedness and management's  plans are also
described in Note 2. These matters raise  substantial  doubt about the Company's
ability 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.




Las Vegas, Nevada
August 9, 1996

================================================================================
                          CAPITOL QUEEN & CASINO, INC.


                (A     Development  Stage Company And 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 and cash equivalents .......................       $  --         $    45

   Restricted cash, in escrow account ..............            30            30
                                                           -------       -------

      Total current assets .........................            30            75
                                                           -------       -------


Other assets:
  Assets held for sale .............................         7,754        12,146

  Financing costs, net of accumulated
    amortization of $312 (1996) and
    and $212 (1995), respectively ..................           605           705
  Deposits and other assets ........................            60            60
                                                           -------       -------

      Total other assets ...........................         8,419        12,911
                                                           -------       -------


       Total assets ................................       $ 8,449       $12,986
                                                           =======       =======



                  LIABILITIES & STOCKHOLDER'S EQUITY(DEFICIT)


                                                               1996         1995
                                                          --------     --------
Current liabilities:
Accounts payable .....................................    $   --       $    142
Accrued interest .....................................       2,775          395
Advances from related parties ........................       1,006          404
Notes payable to related parties .....................       1,200        1,200
Long-term debt classified as current due to
    default under covenants, net of unamortized
    original issue discount of $2,474 (1996)
    and $2,882 (1995) ................................      17,526       17,118
                                                          --------     --------
        Total current liabilities ....................      22,507       19,259
                                                          --------     --------
        Total liabilities ............................      22,507       19,259
                                                          --------     --------

Commitments and contingencies


Stockholder's equity (deficit):
  Common stock, $1.00 par value, 1,000 shares
   authorized, 100 shares issued and outstanding .....        --           --
  Additional paid-in capital .........................      12,732       12,732
  Deficit accumulated during development stage .......     (26,790)     (19,005)
                                                          --------     --------
        Total stockholder's equity (deficit) .........     (14,058)      (6,273)
                                                          --------     --------

       Total liabilities and stockholder's
        equity(deficit) ..............................    $  8,449     $ 12,986
                                                          ========     ========

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


================================================================================
                          CAPITOL QUEEN & CASINO, INC.

                 (A Development Stage Company And A Wholly Owned
                            Subsidiary Of Becker Gaming, Inc.)

            STATEMENTS OF LOSS INCURRED DURING THE DEVELOPMENT STAGE
                             (Dollars In Thousands)
================================================================================
                                 For The Period
                                January 20, 1993
                                  (The Date Of
                                   Inception)
                                                                         Through
                                           Year Ended June 30,          June 30,
                                       1996        1995        1994        1996
                                   --------    --------    --------    --------


Revenues .......................   $   --      $   --      $   --      $   --

Operating expenses:
 Amortization of financing
  and other costs ..............        100         202       1,039       1,341
 Abandonment losses and
 write-downs of assets held
 for sale ......................      4,392        --         6,034      10,426
 Development costs .............        504       1,186          21       1,711
                                   --------    --------    --------    --------
     Total operating expenses ..      4,996       1,388       7,094      13,478
                                   --------    --------    --------    --------

Operating loss .................     (4,996)     (1,388)     (7,094)    (13,478)

Other income (expenses):
 Interest income ...............       --           610         655       1,265
 Interest expense ..............     (2,789)     (4,608)     (3,774)    (11,171)
 Interest capitalized ..........       --          --           683         683
                                   --------    --------    --------    --------
Total other expenses ...........     (2,789)     (3,998)     (2,436)     (9,223)
                                   --------    --------    --------    --------

Net loss before
 extraordinary item ............     (7,785)     (5,386)     (9,530)    (22,701)

Extraordinary item:
 Loss on early retirement
  of debt (no income tax
  benefit available) ...........       --        (4,089)       --        (4,089)
                                   --------    --------    --------    --------

Net loss .......................   $ (7,785)   $ (9,475)   $ (9,530)   $(26,790)
                                   ========    ========    ========    ========

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

================================================================================
                          CAPITOL QUEEN & CASINO, INC.

                 (A Development Stage Company And A Wholly Owned
                       Subsidiary Of Becker Gaming, Inc.)

                   STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT)

                      For The Period From January 20, 1993
                  (The Date Of Inception) Through June 30, 1996
              And For The Years Ended June 30, 1996, 1995 And 1994

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

                                                   Common Stock
                                         --------------------------------

                                      Shares      Amount         Subscribed
                                    -----------   -----------    -----------

Balances, January 20,
  1993 (the date of inception) ...         --     $-             $-
Issuance of common stock .........          100          --             --
                                    -----------   -----------    -----------

Balances, June 30, 1993 ..........          100          --             --

Cash contribution from Becker
  Gaming, Inc. relating to sale
  of warrants ....................         --            --             --
Common stock subscribed ..........         --            --              788
Contribution by Becker Gaming,
  Inc. relating to liability
  incurred under development
  agreement ......................         --            --             --
Write-off of common stock
  subscribed due to abandonment
  of development project .........         --                           --

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

Balances, June 30, 1994 ..........          100          --             --

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

Balances, June 30, 1995 ..........          100          --             --
                                    -----------   -----------    -----------

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

Balances, June 30, 1996 ..........          100   $-             $-
                                    ===========   ===========    ===========


                                                                         Deficit
                                                                     Accumulated
                                              Additional             During The
                                               Paid-In              Development
                                               Capital      Stage       Total
                                               --------    --------    --------

Balances, January 20,
  1993 (the date of inception) .............       $-          $-          $-
Issuance of common stock ...................       --          --          --
                                               --------    --------    --------

Balances, June 30, 1993 ....................       --          --          --

Cash contribution from Becker
  Gaming, Inc. relating to sale
  of warrants ..............................      7,500        --         7,500
Common stock subscribed ....................       --          --           788
Contribution by Becker Gaming,
  Inc. relating to liability
  incurred under development
  agreement ................................      5,232        --         5,232
Write-off of common stock
  subscribed due to abandonment
  of development project ...................       (788)       --          (788)

Net loss ...................................       --        (9,530)     (9,530)
                                               --------    --------    --------

Balances, June 30, 1994 ....................     12,732      (9,530)      3,202

Net loss ...................................       --        (9,475)     (9,475)
                                               --------    --------    --------

Balances, June 30, 1995 ....................     12,732     (19,005)     (6,273)
                                               --------    --------    --------

Net loss ...................................       --        (7,785)     (7,785)
                                               --------    --------    --------

Balances, June 30, 1996 ....................   $ 12,732    $(26,790)   $(14,058)
                                               ========    ========    ========

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

                          CAPITOL QUEEN & CASINO, INC.

          ( A Development Stage Company And A Wholly Owned Subsidiary
                            Of Becker Gaming, Inc.)


                            STATEMENTS OF CASH FLOWS

                      (Dollars In For The Period Thousands)
                                January 20, 1993
                               ------------------
================================================================================

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

                                                  1996        1995        1994
                                              --------    --------    --------
Cash flows from development stage activities:
  Net loss ................................   $ (7,785)   $ (9,475)   $ (9,530)
                                              --------    --------    --------
  Adjustments to reconcile net loss
   to net cash used in development
   stage activities:
  Amortization of financing and other costs        100         202       1,039
  Amortization of original issue discount .        408         834         665
  Abandonment losses and write-downs of
   assets held for sale ...................      4,392        --         6,034
  Extraordinary loss on retirement of debt        --         4,089        --
  Increase(decrease) in accounts payable
   and accruals, net of amounts for
   capital expenditures ...................      2,238        (216)        765
  Increase in advances from related
    party payable .........................        602         392        --
                                              --------    --------    --------
        Total adjustments .................      7,740       5,301       8,503
                                              --------    --------    --------
        Net cash used in development
         stage activities .................        (45)     (4,174)     (1,027)
                                              --------    --------    --------

Cash flows from investing activities:
  Capital expenditures, net of
   construction accounts payable ..........       --        (1,724)    (11,212)
  Deposits and other assets ...............       --            12         (72)
  Capitalization of preopening costs ......       --          --          (340)
  Development costs .......................       --          --          (553)
  Net (additions to) reductions in
   restricted cash equivalents ............       --        24,898     (24,929)
                                              --------    --------    --------
       Net cash provided by (used in)
        investing activities ..............       --        23,186     (37,106)
                                              --------    --------    --------

Cash flows from financing activities:
  Principal payments on First Mortgage
   Notes ..................................       --       (20,200)       --
  Proceeds from issuance of First
   Mortgage Notes, net of financing costs .       --          --        30,666
  Proceeds from borrowings under
   notes payable to related parties .......       --         1,200        --
  Equity contribution from Becker
   Gaming, Inc.relating to sale of
   warrants ...............................       --          --         7,500
                                              --------    --------    --------
       Net cash (used in) provided by
        financing activities ..............       --       (19,000)     38,166
                                              --------    --------    --------

       Net increase (decrease) in cash
        and cash equivalents ..............        (45)         12          33

Cash and cash equivalents, beginning
  of period ...............................         45          33        --
                                              --------    --------    --------

Cash and cash equivalents, end of period ..   $   --      $     45    $     33
                                              ========    ========    ========
Supplemental cash flow disclosures:
  Interest paid, net of amounts capitalized   $   --      $  4,020    $  1,787
                                              ========    ========    ========
  Original issue discount that did not
   affect cash ............................   $   --      $   --      $  7,500
                                              ========    ========    ========
  Equity contribution by Becker Gaming that
   did not affect cash ....................   $   --      $   --      $  5,232
                                              ========    ========    ========



                                     (The Date Of Inception)Through June 30,
                                     ---------------------------------------

                                                      1996
                                                  --------
Cash flows from development stage activities:
  Net loss ....................................   $(26,790)
                                                  --------
  Adjustments to reconcile net loss
   to net cash used in development
   stage activities:
  Amortization of financing and other costs ...      1,341
  Amortization of original issue discount .....      1,907
  Abandonment losses and write-downs of
   assets held for sale .......................     10,426
  Extraordinary loss on retirement of debt ....      4,089
  Increase(decrease) in accounts payable
   and accruals, net of amounts for
   capital expenditures .......................      2,787
  Increase in advances from related
    party payable .............................        994
                                                  --------
        Total adjustments .....................     21,544
                                                  --------
        Net cash used in development
         stage activities .....................     (5,246)
                                                  --------

Cash flows from investing activities:
  Capital expenditures, net of
   construction accounts payable ..............    (12,936)
  Deposits and other assets ...................        (60)
  Capitalization of preopening costs ..........       (340)
  Development costs ...........................       (553)
  Net (additions to) reductions in
   restricted cash equivalents ................        (31)
                                                  --------
       Net cash provided by (used in)
        investing activities ..................    (13,920)
                                                  --------

Cash flows from financing activities:
  Principal payments on First Mortgage
   Notes ......................................    (20,200)
  Proceeds from issuance of First
   Mortgage Notes, net of financing costs .....     30,666
  Proceeds from borrowings under
   notes payable to related parties ...........      1,200
  Equity contribution from Becker
   Gaming, Inc.relating to sale of
   warrants ...................................      7,500
                                                  --------
       Net cash (used in) provided by
        financing activities ..................     19,166
                                                  --------

       Net increase (decrease) in cash
        and cash equivalents ..................       --

Cash and cash equivalents, beginning of period        --
                                                  --------

Cash and cash equivalents, end of period ......   $   --
                                                  ========
Supplemental cash flow disclosures:
  Interest paid, net of amounts capitalized ...   $  5,807
                                                  ========
  Original issue discount that did not
   affect cash ................................   $  7,500
                                                  ========
  Equity contribution by Becker Gaming that did
       not affect cash ........................   $  5,232
                                                  ========

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


                          CAPITOL QUEEN & CASINO, INC.
           (A Development Stage Company And A Wholly Owned Subsidiary
                             Of Becker Gaming, Inc.

                          NOTES TO FINANCIAL STATEMENTS
                                   ----------


1.   Summary Of Significant Accounting Policies:

     Basis Of Presentation
     ---------------------

     Capitol Queen & Casino, Inc. ("CQC" or the "Company"),  a development stage
     company, was incorporated in Missouri on January 20, 1993, and had acquired
     a  franchise  from  the  City  of  Jefferson  City,  Missouri  to  develop,
     construct,  own and  operate a  riverboat  casino  (the  "Capitol  Queen"),
     subject to state  licensure.  the Company has  abandoned  the Capitol Queen
     project,  as more fully described in Note 2.  Subsequent to  incorporation,
     the stockholders of the Company  exchanged all of the outstanding  stock of
     the Company for common stock of a Nevada  holding  company,  Becker Gaming,
     Inc.  ("BGI"),  in a tax-free  exchange.  BGI is wholly owned by the Becker
     family  and  serves as a  holding  company  for the  Becker  family  gaming
     interests, which include CQC and the following wholly owned subsidiaries:

     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.

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

     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.

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

     Property  and  equipment   are  recorded  at  cost  and  include   interest
     capitalized  during the  construction  period.  The Company's  policy is to
     compute  depreciation  using the straight-line  method. No depreciation has
     been recorded while the Company is in the development stage.


     Debt Issue Costs
     ----------------

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

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

     The Company  accounts  for income  taxes in  accordance  with  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 Company  adopted SFAS
     109 at inception (January 20, 1993).

     The  Company is  included in the  consolidated  federal  income tax returns
     filed by BGI.  CQC'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
     benefits 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,
     particularly with respect to the matters described in Notes 2 and 3.

2.   Missouri   Gaming   License,  Default  Under   Indebtedness,
     Management's Plans, and Going Concern:

     CQC was formed to develop,  own and operate the "Capitol  Queen"  riverboat
     casino and related land-based  facilities in Jefferson City,  Missouri.  On
     September  28, 1994,  CQC was notified  that its  application  for a gaming
     license was rejected by the Missouri Gaming Commission (the "Commission").
     At the time CQC was notified of the Commission's

     decision,  construction  of the riverboat under contract with a shipbuilder
     was almost  completed.  CQC had also obtained the necessary permits for the
     land-based  development  portion  of  the  project  and  performed  certain
     dredging  and  other  site  preparation  work.  Immediately  following  the
     Commission's decision, Management temporarily suspended further development
     of the Capitol Queen  project,  pending an appeal of the decision and legal
     remedies  potentially  available to the Company.  Costs associated with the
     development of the project which had been deferred  during the  development
     stage were  written-off in the fourth quarter of the fiscal year ended June
     30, 1994.

     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  (which  has
     guaranteed  the CQC Notes as more fully  described  in Note 4) did not have
     available funds to advance on behalf of CQC. Further,  Management  believes
     that AC does  not  have  sufficient  financial  resources  to  satisfy  its
     guarantee obligation with respect to the CQC Notes, particularly because AC
     is in default of  covenants  under  indebtedness  AC (the "AC  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.  As more fully  described  in Note 3, a further  write-down  in the
     carrying  value of the  riverboat was  recognized in the fourth  quarter of
     1996,  after the election in Jefferson  City,  the  expiration of the Aerie
     contract, and due to deteriorating market conditions.

     CQC  continues to market its  riverboat  assets to  prospective  buyers and
     Management is 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 CQC
     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.   Construction Project And Related Contingencies:

     Capitol Queen Project
     ---------------------

     The Capitol Queen project, as originally  contemplated by the Company,  was
     to include the  riverboat,  dockside  facilities,  restaurants  and related
     ancillary  facilities  to be built on land  acquired by the Company in July
     1993.  As a result of the decision to  discontinue  the project,  all costs
     associated  with the design and  development of the facilities were written
     off in the fourth  quarter of the  Company's  1994  fiscal  year,  with the
     exception of the  historical  cost of the land and the riverboat  which was
     reclassified to assets held for sale.

     The Company had  contracted  with a  shipbuilder  to construct  the Capitol
     Queen riverboat. The total cost of the riverboat was $11,892,000, including
     construction period interest and other assets. During the fourth quarter of
     the year ended June 30,  1996,  based on  deteriorating  market  conditions
     after the expiration of the Aerie contract,  the Company  recognized a loss
     of $  $4,392,000  and  wrote-down  the carrying  value of the  riverboat to
     $7,500,000.  Such  revised  carrying  value  represents  management's  best
     estimate of the  riverboat's  current net realizable  value in a cash sale,
     based on  information  obtained  from  shipbuilders,  marine  brokers,  and
     purchase offers made to the Company from third parties.


     Jefferson City Development Agreement
     ------------------------------------

     The Company  acquired  the  franchise  rights to operate the Capitol  Queen
     under a development  agreement  with the City of Jefferson  City,  Missouri
     (the "Development Agreement"),  beginning September 1, 1993 for a period of
     seven years.  The Company's  rights and  obligations  under the Development
     Agreement were contingent upon receiving a gaming license which,  until the
     occurrence  of the events  described  in Note 2,  management  believed  was
     probable.

     On  November  7, 1995,  voters in  Jefferson  City  rejected  an  ordinance
     permitting  riverboat  gambling,  reversing the vote an earlier election in
     which  Jefferson City voters  approved  riverboat  gambling.  Because CQC's
     Development  Agreement with Jefferson City was entered into pursuant to the
     earlier ordinance permitting riverboat gambling,  the Company believes that
     as matter of law the 1995  election  does not  affect the  validity  of the
     Development  Agreement.  However,  to avoid  the cost  and  uncertainty  of
     litigation,  CQC and Jefferson  City in June 1996 entered into an agreement
     pursuant to which the  Development  Agreement  was  rescinded and Jefferson
     City refunded  $300,000 of the $400,000 CQC had originally paid to the City
     under the Development Agreement.

     Other Development Agreement
     ---------------------------

     As discussed  below,  the Company and BGI have each entered into additional
     agreements in connection with the development of the Capitol Queen project,
     which have been  terminated  as a result of the  decision  by the  Missouri
     Gaming Commission.

     In January 1993,  prior to  incorporation,  the stockholders of the Company
     agreed that, upon being licensed in Missouri to own and operate the Capitol
     Queen,  the  Company  would  issue  shares  of its  common  stock  to three
     individuals  who assisted the then existing  stockholders of the Company in
     obtaining  the  rights  to  develop  the  Capitol  Queen  (the  "CQC  Stock
     Agreement").  The  aggregate  amount  of  stock  subject  to the CQC  Stock
     Agreement  represents 5.25% of the outstanding common stock of the Company,
     and was  subject to  increase to 8.25% if the  convention  center  required
     under the  Development  Agreement was not constructed on land controlled by
     the  parties  to the CQC Stock  Agreement.  The  Company  has the option to
     repurchase any or all of such stock, except for 25% held by one individual,
     for a period of three years from issuance at an aggregate purchase price of
     $750,000  ($1,200,000 if the additional shares were issued). In addition to
     the above requirements of the CQC Stock Agreement,  the Company also agreed
     to pay a lump-sum  fee of  $350,000 to two of the above  individuals  after
     receiving  a license  and the  commencement  of  operations  of the Capitol
     Queen.

     At the time CQC was  awarded  the  Development  Agreement,  and  until  the
     occurrence of the events  described in Note 2, the Company  believed it was
     probable it would  receive a gaming  license in Missouri.  Accordingly,  to
     reflect the CQC Stock Agreement,  CQC recorded subscribed stock of $788,000
     (using  the  $750,000  value  described  above  for  5.0% of the  stock  to
     determine  the  value of the  remaining  25%  interest),  recorded  amounts
     payable under the agreement for $350,000 and recorded a corresponding total
     charge of $1,138,000 to development costs, to be amortized over the life of
     the  Development  Agreement.  As a result of the  decision by the  Missouri
     Gaming  Commission  and  the  abandonment  of the  Capitol  Queen  project,
     management  believes  that  it has  been  relieved  of  these  obligations.
     Accordingly,  the subscribed stock, the $350,000  liability and the related
     deferred  costs (net of  amortization  from  September  1, 1993 to June 30,
     1994) were written-off in the fourth quarter of fiscal 1994.

     In  September  1993,  the  Company's  parent,  BGI,  agreed  that it  would
     repurchase  certain  rights  to  acquire  equity  in CQC  (the  "Repurchase
     Agreement")  which  it had  previously  granted  to  various  parties  (the
     "Sellers").  The  Sellers  assisted  BGI and the  Company,  through the BGI
     stockholders,  in obtaining  the  approval to develop,  own and operate the
     Capitol  Queen  in  Jefferson  City.  Under  the  terms  of the  Repurchase
     Agreement, BGI agreed to pay the Sellers an aggregate amount of $5,925,000,
     payable in  installments  through July 1, 1997 and bearing  interest at 10%
     per annum from the date the  Capitol  Queen  opens for  business.  BGI also
     agreed that if prior to  maturity,  BGI  proposed to sell any of its common
     stock in an underwritten public offering, the Sellers may accept registered
     shares in lieu of the payments  required based on the public offering price
     of  such  shares  (less  any  underwriters  discount)  subject  to  certain
     underwriter limitations.

     The  Repurchase  Agreement  provided  that in the  event  the  development,
     ownership  or operation of a riverboat  gaming  business in Jefferson  City
     becomes  unlawful  or CQC is  declined  a gaming  license,  the  Repurchase
     Agreement  becomes  null and void.  At the time BGI entered the  Repurchase
     Agreement,  and until the occurrence of the events described in Note 2, the
     Company  believed  it was  probable  it would  receive a gaming  license in
     Missouri. Accordingly, the assumption of the liability under the Repurchase
     Agreement  was treated as an  additional  investment in CQC by BGI, and the
     related  present  value  of the  costs to the  Sellers  of  $5,232,000  was
     recorded as deferred development costs to be amortized over the life of the
     Development Agreement.

     As a result of the  decision  by the  Missouri  Gaming  Commission  and the
     abandonment  of the Capitol  Queen  project,  BGI believes that it has been
     relieved of its obligations  under the Repurchase  Agreement.  Accordingly,
     the deferred costs under the Repurchase Agreement (net of amortization from
     September 1, 1993 to June 30, 1994) were  written-off in the fourth quarter
     of fiscal 1994.

     In  addition  to the above,  in the  fourth  quarter  of fiscal  1994,  CQC
     wrote-off previously capitalized expenditures of $1,375,000 and capitalized
     pre-opening  expenses of $340,000  associated  with the  development of the
     Capitol Queen project.


4.   Long-Term Debt:

     On November  18,  1993,  the Company  completed  a private  placement  debt
     financing of $40,000,000  principal  amount of 12% First Mortgage Notes Due
     November 15, 2000 (the " CQC Notes").  The offering  generated net proceeds
     of approximately  $30,666,000  (after deducting  original issue discount of
     $7,500,000  and  debt  issue  costs).  Interest  on the  Notes  is  payable
     semi-annually.  The Notes are guaranteed by AC (which  guarantee is subject
     to release only upon licensing of the Capitol Queen, which is not expected)
     and are  collateralized  by a first  mortgage on  substantially  all of the
     assets of the  Company.  The CQC Notes have been  classified  as  currently
     payable at June 30, 1996 due to anticipated  acceleration  upon default and
     management's plans to negotiate a payoff of the indebtedness, as more fully
     described in Note 2.

     As also  described  in Note 2, the Company was unable to make the  interest
     payments  due under the CQC Notes on November  15,  1995 and May 15,  1996.
     Such past due interest in the amount of $2,400,000  has been accrued in the
     accompanying financial statements.

     As of January 1, 1995, CQC's obligations under the Indenture  governing the
     CQC Notes were  amended  with the  requisite  consent of the holders of the
     holders of the CQC Notes.  CQC's previous  obligations to complete and open
     the  Capitol  Queen have been  eliminated  and CQC has agreed to a two-step
     plan to repay the CQC  Notes.  The first  step,  which was  consummated  on
     January 17, 1995,  involved the repurchase of $20,000,000  principal amount
     of the CQC Notes at 101% of such  principal  amount plus accrued and unpaid
     interest with funds held in the  restricted  project  escrow  account.  The
     Company incurred an extraordinary loss of approximately $4,089,000 in 1995,
     reflecting  the  premium  paid  to  retire  the  debt of  $200,000  and the
     write-off  of  related,  unamortized  debt issue costs and  original  issue
     discount in the aggregate of $3,889,000.

     Concurrent  with the placement of the Notes,  BGI sold  2,500,000  warrants
     (the  "Warrants")  exercisable  for BGI common stock for gross  proceeds of
     $7,500,000.  The  gross  proceeds  from  the  sale  of  the  Warrants  were
     contributed to the Company.

     The Indenture  governing the CQC Notes (the "Indenture")  limits the use of
     the net proceeds from the offering and the sale of the Warrants to fund the
     cost of the development and construction of the Capitol Queen project,  the
     development of a convention center in Jefferson City,  Missouri and initial
     interest  payments.  The  proceeds  were  placed in  escrow  with a trustee
     pending  drawdowns  for  qualifying  project  expenditures.  As more  fully
     explained in Note 2,  certain of the proceeds  were used in January 1995 in
     connection with the first step of the plan to repay the CQC Notes.  The CQC
     Notes are not  subject to  mandatory  redemption,  except  upon a change of
     control,  or other  circumstances as defined in the Indenture.  The Company
     has the  option to  redeem  the Notes at a  premium  of 106%  beginning  on
     November 15, 1997, declining to par value on November 15, 1999. If prior to
     November 15, 1997, BGI consummates an initial public offering of its common
     stock, the Company may also redeem the CQC Notes, at a premium of 108%.

     The  Indenture  contains  covenants  that,  among other  things,  limit the
     ability of the  Company  and, in certain  cases,  AC, to pay  dividends  or
     management fees, or incur additional indebtedness.

5.   Related-Party Transactions:

     Prior to the inception of CQC and through  November 18, 1993, AC advanced a
     total of approximately  $1,090,000 to fund  development  costs of CQC which
     was fully  repaid on  November  18,  1993 with  proceeds  from the  private
     placement financing transaction.  As of June 30, 1996 and 1995, the amounts
     payable to AC by the Company for  additional  advances  were  $993,000  and
     $392,000, respectively. The advances are non-interest bearing.

     In May,  1995,  CQC borrowed $1.2 million 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 June 30, 1997,
     with interest at an annual rate of 5.56%.

6.   Income Taxes:

     The components  included in determining  the provision for income taxes for
     the years ended June 30, 1996, 1995, and 1994, net of extraordinary  items,
     are shown below:

<TABLE>
<CAPTION>
                                            1996           1995           1994
                                            ----           ----           ----
<S>                                  <C>            <C>            <C>
Tax provision (benefit) at federal
 income tax statutory rate .......   $(2,647,000)   $(1,831,000)   $(3,240,000)
Unrecognized tax benefit from net
 operating losses ................     2,574,000      1,831,000      3,240,000
Other ............................        73,000           --             --
                                     -----------    -----------    -----------

         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 taxes as of June 30, 1996 and 1995 were as follows:

<TABLE>
<CAPTION>
                                                  1996           1995
                                                  ----           ----
<S>                                        <C>            <C>
Liabilities ............................   $      --      $      --
                                             ---------      ---------
Assets:

Federal net operating loss carryforwards     4,582,000      4,420,000
  Accrued interest expense .............       918,000           --
  Valuation allowance for assets held
    for sale ...........................     1,494,000           --
  Total deferred tax assets ............     6,994,000      4,420,000
                                             ---------      ---------
  Valuation allowance ..................    (6,994,000)    (4,420,000)
                                            ----------     ----------
  Net deferred taxes ...................   $       --      $      --
                                             ---------      ---------
</TABLE>

     As of  June  30,  1996,  the  Company  had a  federal  net  operating  loss
     carryforward of  approximately  $13,478,000  which expires between 2009 and
     2011.

7.   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 approximate market interest rates of these instruments.

     Management  is  unable  to  determine  a fair  value  for  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"). 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 the
     AC Notes and CQC Notes, as more fully discussed in Note 2.

================================================================================
                                   SCHEDULE I

                      BECKER GAMING, INC. AND SUBSIDIARIES

                 CONDENSED FINANCIAL INFORMATION OF THE COMPANY

The following condensed financial  statements reflect the parent company (Becker
Gaming,  Inc.) only,  accounting for its wholly owned subsidiaries on the equity
method of  accounting.  All footnote  disclosures  have been  omitted  since the
information has been included in the Company's consolidated financial statements
included elsewhere in this Annual Report an Form 10-K.

                               BECKER GAMING, INC.
                              (PARENT COMPANY ONLY)

                          CONDENSED STATEMENTS OF LOSS
                             (Dollars In Thousands)
================================================================================

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

Revenues:
 Management fee revenue from
  subsidiaries ................   $  2,125    $  3,787    $    240
                                  --------    --------    --------
Operating expenses:
 General and administrative ...      1,204       3,398         264
 Depreciation and  amortization        253         362          30
                                  --------    --------    --------
                                     1,457       3,760         294
                                  --------    --------    --------
Other income (expenses):
 Interest expense .............       (441)       (454)       (337)
 Gain on write-off of
  liability relating to the
  CQC project abandonment .....       --          --           309
 Write-down of assets to net
  realizable value ............       (439)       --          --
 Loss on sale of assets .......       --           (76)       --
 Equity interest in loss
  of subsidiaries .............    (11,785)    (13,424)     (9,455)
                                  --------    --------    --------
                                   (12,665)    (13,954)     (9,483)
                                  --------    --------    --------
 Loss before provision for
  income taxes ................    (11,997)    (13,927)     (9,537)
 Provision (benefit) for
  income taxes ................       (171)       (607)       --
                                  --------    --------    --------
    Net income (loss) .........    (11,826)    (13,320)     (9,537)
  Retained deficit,
   beginning of year ..........    (22,857)     (9,537)       --
                                  --------    --------    --------
  Retained deficit,
   end of year ................   $(34,683)   $(22,857)   $ (9,537)
                                  ========    ========    ========
================================================================================

                             SCHEDULE I (continued)

                      BECKER GAMING, INC. AND SUBSIDIARIES
                 CONDENSED FINANCIAL INFORMATION OF THE COMPANY

                               BECKER GAMING, INC.
                              (PARENT COMPANY ONLY)

                            CONDENSED BALANCE SHEETS
                             (Dollars In Thousands)


                                                         As of June 30,
                                             -----------------------------------
                                                     1996                1995
                                                 --------            --------
ASSETS

Current assets:
 Cash ..............................             $     27            $     40
 Income taxes receivable
  from subsidiaries ................                  778                 607
 Prepaid expenses ..................                 --                    14

 Assets held for sale ..............                3,233                --
                                                 --------            --------
    Total current assets ...........                4,038                 661
                                                 --------            --------

 Furniture and equipment ...........                  308               4,565
 Less accumulated depreciation .....                 (108)               (509)
                                                 --------            --------
    Net property and equipment .....                  200               4,056
                                                 --------            --------
Other assets:
 Deposits and other ................                  523                 425
 Investments in subsidiaries .......                2,630               2,071
 Management fees receivable from
  subsidiaries .....................                6,780               3,375
 Financing costs, net ..............                 --                    23
                                                 --------            --------
    Total other  assets ............                9,933               5,894
                                                 --------            --------
    Total assets ...................             $ 14,171            $ 10,611
                                                 ========            ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Accounts payable ..................             $      1            $    127
 Accounts payable to related parties                3,901                 467
 Accrued expenses ..................                  624                 171
 Current portion of notes payable ..                4,416               4,416
 Current portion of obligations ....                1,858                 779
  under capital leases .............                 --                  --
    Total current
     liabilities ...................               10,800               5,960
                                                 --------            --------

Obligations under capital leases,
 less current portion ..............                 --                 1,798
                                                 --------            --------
    Total liabilities ..............               10,800               7,758
                                                 --------            --------

 Common stock, $.01 par value,
  20,000,000 shares authorized,
  10,000,000 shares issued and
  outstanding ......................                  100                 100
 Preferred stock, $1 par value,
  5,000,000 shares authorized,
  none issued and outstanding ......                 --                  --
 Additional paid-in capital ........               37,954              25,610
 Accumulated deficit ...............              (34,683)            (22,857)
                                                 --------            --------
    Total stockholders' equity .....                3,371               2,853
                                                 --------            --------
    Total liabilities and ..........             $ 14,171            $ 10,611
     stockholders' equity ..........             ========            =========

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

                             SCHEDULE I (continued)
                      BECKER GAMING, INC. AND SUBSIDIARIES
                 CONDENSED FINANCIAL INFORMATION OF THE COMPANY
                               BECKER GAMING, INC.
                              (PARENT COMPANY ONLY)

                       CONDENSED STATEMENTS OF CASH FLOWS
                             (Dollars In Thousands)


                                                    Year Ended June 30,
                                        ----------------------------------------
                                                   1996        1995        1994
                                               --------    --------    --------
Cash flows from operating activities:
 Net loss .............................        $(11,826)   $(13,320)   $ (9,537)
                                               --------    --------    --------
Adjustments to reconcile net loss
 to net cash provided by operating
 activities:
 Equity interest in loss
  of subsidiaries .....................          11,785      13,424       9,455
 Depreciation and amortization ........             253         362          30
 Loss on sale of assets ...............             439          76        --
 (Increase) decrease in
  operating assets: ...................            --          --          --
 Income taxes receivable from
  subsidiaries ........................            (171)       (607)       --
 Prepaid expenses .....................              14           3           2
 Increase (decrease) in
  operating liabilities:
 Accounts payable .....................            (126)        (25)        152
 Accrued expenses .....................             453          90          82
 Payables to subsidiaries .............           3,434          22         445
                                               --------    --------    --------
    Total adjustments .................          16,081      13,345      10,166
                                               --------    --------    --------
    Net cash provided by
     operating activities .............           4,255          25         629

Cash flows from investing activities:
 Increase in management fees receivable
  from subsidiaries ...................          (3,405)     (3,109)       (240)
 Capital expenditures .................             (31)       (118)        (31)
 Increase in deposits and other .......            (113)        (48)        (76)
 Proceeds from sale of assets .........            --           662        --
 Contribution to Capitol Queen &
  Casino, Inc. ........................            --          --        (7,500)
                                               --------    --------    --------
    Net cash used in
     investing activities .............          (3,549)     (2,613)     (7,847)
                                               --------    --------    --------
Cash flows from financing activities: Proceeds from issuance of warrants, ..
  net of issuance costs ...............            --          --         7,004
 Proceeds from issuance of
  notes payable .......................            --         4,116         300
 Payments on capital
  lease obligations ...................            (719)     (1,495)        (79)
                                               --------    --------    --------
    Net cash provided by (used in)
     financing activities .............            (719)      2,621       7,225
                                               --------    --------    --------
    Net increase in cash and cash
     equivalents ......................             (13)         33           7
Cash and cash equivalents,
beginning of period ...................              40           7        --
                                               --------    --------    --------
Cash and cash equivalents, end
of period .............................        $     27    $     40    $      7
                                               ========    ========    ========
================================================================================

                                  SCHEDULE II

                      BECKER GAMING, INC. AND SUBSIDIARIES

                        VALUATION  AND  QUALIFYING  ACCOUNTS For The Years Ended
                June 30, 1996, 1995 And 1994


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

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

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

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

  Year ended June 30, 1994 ..............  $  150,000   $   14,689   $     --
                                           ==========   ==========   ==========



Deferred Tax Asset Valuation Allowance:

  Year ended June 30, 1996 ..............  $5,343,000   $     --     $3,705,000
                                            ==========   ==========   ==========

  Year ended June 30, 1995 ..............  $1,378,000   $     --     $3,965,000
                                            ==========   ==========   ==========

  Year ended June 30, 1994 ..............  $     --     $     --     $1,378,000
                                            ==========   ==========   ==========
</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   $     --
                                               ==========   ==========



Deferred Tax Asset Valuation Allowance:

  Year ended June 30, 1996 .............       $     --     $9,048,000
                                               ==========   ==========

  Year ended June 30, 1995 .............       $     --     $5,343,000
                                               ==========   ==========

  Year ended June 30, 1994 .............       $     --     $1,378,000
                                               ==========   ==========
</TABLE>

<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>

                                   SCHEDULE II

                          CAPITOL QUEEN & CASINO, INC.

              VALUATION AND QUALIFYING ACCOUNTS For The Years Ended
                          June 30, 1996, 1995 And 1994
<TABLE>
<CAPTION>

                                                               Additions
                                                     ------------------------

                                        Balance at    Charged to    Charged to
                                        Beginning     Costs and     Other
                 Description            of Year       Expenses      Accounts
--------------------------------------  -----------   -----------   -----------

Allowance for doubtful accounts
<S>                                     <C>           <C>           <C>
 Year ended June 30, 1996 ............  $ 4,420,000   $      --     $ 2,574,000
                                        ===========   ===========   ===========

 Year ended June 30, 1995 ............  $ 1,181,000   $      --     $ 3,239,000
                                        ===========   ===========   ===========

 Year ended June 30, 1994 ............  $      --     $      --     $ 1,181,000
                                        ===========   ===========   ===========
</TABLE>

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

 Year ended June 30, 1996 ............  $      --     $ 6,994,000
                                        ===========   ===========

 Year ended June 30, 1995 ............  $      --     $ 4,420,000
                                        ===========   ===========

 Year ended June 30, 1994 ............  $      --     $ 1,181,000
                                        ===========   ===========
</TABLE>

                                    EXHIBIT
         3.1        Articles of  Incorporation of the Company.*
         3.2        By-Laws of the Company.*
         4.1        Indenture  dated November 15, 1993 among Arizona  Charlie's,
                    as issuer, Sunset Coin, as guarantor,  and IBJ Schroder Bank
                    & Trust  Company  ("IBJ"),  as trustee,  as amended by First
                    Supplemental Indenture dated January 1, 1995.*
         4.2        Indenture  dated November 15, 1993 among Capitol  Queen,  as
                    issuer,  Arizona  Charlie's,  as  guarantor,   and  IBJ,  as
                    trustee,  as amended by First  Supplemental  Indenture dated
                    January 1, 1995.*
         10.1       Form of amended Warrant Agreement among the Company and the
                    purchasers named therein (the "Purchasers").*
         10.2       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.*
         10.3       Deed of Trust, Assignment of Leases, Security Agreement and
                    Fixture Filing dated November 15, 1993 by Capitol Queen, as
                    grantor, to Charles W. Riley, as trustee, for the benefit of
                    IBJ, as collateral agent.*
         10.4       Form of First Preferred Ship Mortgage  Securing an Indenture
                    between  Capitol  Queen  and  IBJ.*  10.5  Form of  Security
                    Agreements  dated  November 15, 1993 between each of Arizona
                    Charlie's and Capitol Queen and IBJ, as collateral agent.*
         10.6       Form of Stock  Pledge  Agreements  dated  November  15, 1993
                    between each of Arizona Charlie's and Capitol Queen and IBJ,
                    as collateral agent.*
         10.7       Form of Collateral  Agency Agreement dated November 15, 1993
                    among  Arizona  Charlie's,  CLC  and  IBJ,  as  trustee  and
                    collateral  agent and  between  Capitol  Queen  and IBJ,  as
                    trustee and collateral agent.*
         10.8       Promissory Notes dated December 24, 1993 made by each of the
                    Beckers in favor of Arizona Charlie's.*
         10.9       Promissory Notes dated December 24, 1993 made by each of the
                    Beckers  in favor  of  Sunset  Coin.*  10.10  Tax  Indemnity
                    Agreement  dated December 24, 1993 among Arizona  Charlie's,
                    Sunset Coin, Becker Gaming Group and each of the Beckers.*
         10.11      Registration Rights Agreements dated as of May 31, 1994
                    among the Company and each of the Beckers.*
         10.12      Form of  Management  Agreements  dated  as of May  31,  1994
                    between the Company and each of Arizona  Charlie's,  Capitol
                    Queen, Sunset Coin and Becker Gaming Group.*
         10.13      Form of Tax Allocation  Agreements  dated as of May 31, 1994
                    between the Company  and each of Arizona  Charlie's,  Sunset
                    Coin, Becker Gaming Group and Capitol Queen.*
         10.14      Form of Consulting Agreements dated as of May 31, 1994
                    between the Company and each of Ernest A. Becker, III,
                    Ernest A. Becker, IV and Barry W. Becker.*
         10.15      Employment  Agreement  dated as of May 31, 1994  between the
                    Company and Bruce F. Becker.* 10.16 Stockholders  Agreements
                    dated as of May 31, 1994 among each of the  Beckers.*  10.17
                    Leases  dated  May 1,  1988  and  August  21,  1990  between
                    Charleston Heights Shopping Center and Arizona Charlie's.*
         10.18      Ground Lease dated December 1, 1986 between Becker
                    Investment Company and Becker Family Trust No. 2 and Becker
                    Gaming Group; Assignment dated September 16, 1987 assigning
                    the interest of Becker Investment Company and Becker Family
                    Trust No. 2 to Lakeside Partners.*
         10.19      Lease dated  August 12, 1986 between  Fremont West  Shopping
                    Center and Becker Gaming  Group.* 10.20 Lease dated July 27,
                    1988 between Becker Investment Co. and Becker Gaming Group.*
                    10.21 Lease dated  September  19,  1994  between  Weddington
                    Investment Partnership and Innerout, Inc.* 10.22 Lease dated
                    March 24, 1995 between Sunset Coin, Inc. and Innerout, Inc.*
                    10.23 Lease agreement  between Arizona  Charlie's,  Inc. and
                    Bruce F. Becker.*
         10.24      Aircraft Purchase Agreement dated July 1, 1996 between
                    Arizona Charlie's and Limerick Holdings, LLC.
         21.1       Subsidiaries of the Company.
         27.1       Financial Data Schedule




                           AIRCRAFT PURCHASE AGREEMENT


This Agreement,  made this 1st day of July, 1996  ("Agreement"),  by and between
Arizona Charlie's,  a Nevada corporation  (hereinafter  referred to as "Seller")
having its principal office at 740 South Decatur  Boulevard,  Las Vegas,  Nevada
89107,  and Limerick  Holdings,  LLC  (hereinafter  referred to as  "Purchaser")
having its office at 252 Clayton Street, Denver, Colorado 80206.

NOW THEREFORE,  in consideration of the mutual covenants herein  contained,  the
parties agree as follows:

SECTION 1.  SALE OF AIRCRAFT; SALE PRICE; PAYMENT; ETC.

A.   SALE OF AIRCRAFT

     Purchaser  agrees to purchase and Seller agrees to sell one (1)  Gulfstream
     Model G1159 Aircraft bearing Federal Aviation  Administration  registration
     number N57BG and bearing  manufacturer's  serial number 061,  together with
     two (2) installed Rolls Royce Spey MK 511-8 engines bearing  manufacturer's
     serial number 8642 and 8631 (collectively,  the "Aircraft") pursuant to the
     terms and  conditions  set forth in this  Agreement.  A description  of the
     Aircraft is set forth in Exhibit A hereto.

B.   SALE PRICE

     The sale price for the Aircraft  shall be three million three hundred forty
     four thousand dollars ($3,344,000.00).

C.   PAYMENT

     Purchaser  has  previously  deposited two hundred  fifty  thousand  dollars
     ($250,000.00)  with  Insured  Aircraft  Title  Service,  Inc.  (the "Escrow
     Agent") to be applied  toward the sale of the Aircraft and  transferred  to
     Seller upon delivery of the Aircraft to Purchaser.  On the Closing Date (as
     defined  below),  Purchaser  shall pay three  million  ninety four thousand
     dollars ($3,094,000.00) to seller by wire transfer of immediately available
     funds to the Escrow Agent. In addition, Purchaser shall instruct the Escrow
     Agent  to  release  the  deposit  of two  hundred  fifty  thousand  dollars
     ($250,000.00) it holds to Seller.

D.   CLOSING DATE

     The  closing  shall  take  place on July 20,  1996,  or such  other date as
     mutually agreed by the parties hereto (the "Closing Date").

E.   AIRWORTHINESS CERTIFICATE

     A standard Airworthiness Certificate will be on the Aircraft on the Closing
     Date.

F.   RECORDS

     Seller will  transfer to  Purchaser  on the Closing  Date all log books and
     such other  records  pertaining to the  operation  and  maintenance  of the
     Aircraft.

SECTION 2.     DELIVERY OF AIRCRAFT

     Seller shall  deliver the Aircraft to Purchaser at Denver,  Colorado on the
     Closing  Date.  Purchaser  shall  evidence  the delivery of the Aircraft by
     executing the Delivery  Receipt,  substantially in the form attached hereto
     as Exhibit B. Seller  shall  deliver to  Purchaser  on the  Closing  Date a
     standard FAA Bill of Sale for the Aircraft or other  document in the normal
     and usual form conveying title of said Aircraft to Purchaser free and clear
     of all liens, charges or encumbrances other than those specified herein. On
     the  Closing  Date,  Purchaser  shall pay for such  Aircraft  according  to
     section 1 (C)  above,  and title to,  risk of loss  with  respect  to,  and
     responsibility for such Aircraft shall pass to Purchaser.  Upon delivery of
     the Aircraft to Purchaser,  such Aircraft  shall be in "as is",  "where is"
     condition at Denver, Colorado.

SECTION 3.     WARRANTIES

     Aircraft  is being  sold on an "as is" basis,  and there are no  warranties
     which extend  beyond the  description  of the Aircraft in Exhibit A. Seller
     disclaims all express or implied  warranties or representations of any kind
     or nature whatsoever including  merchantability or fitness for a particular
     purpose.  Seller  warrants that the Aircraft will be delivered with the FAA
     Bill of Sale.

     To the extent that any  manufacturers'  warranties are still in effect with
     respect to the  Aircraft  (other than  warranties  which by their terms are
     unassignable),  Seller will reasonably assist Purchaser to process warranty
     claims directly with the manufacturers.

     Seller  will  transfer  or aid  in the  transfer  of  all  revision  and/or
     subscription  services,  including but not limited to, Gulfstream  Computer
     Maintenance   Program  (CMP),   Aircraft  Technical   Publications   (ATP),
     Gulfstream Technical  Publications,  Gulfstream Flight Manuals, Global Data
     Base (NDB 2), and any credit remaining for these services to Purchaser.




SECTION   4.   TAXES

     Purchaser  hereby agrees to pay any and all taxes,  duties or fees assessed
     or levied by any federal,  state or local taxing authority as result of the
     sale, delivery, transfer or registration of Aircraft.

     Seller  shall not be liable for any  failure of or delay in delivery of the
     Aircraft for the period that such failure or delay is due to acts of God or
     the public enemy; civil war,  insurrection or riots,  fires,  explosions or
     serious accidents; governmental priorities or allocations; strikes or labor
     disputes; inability to obtain necessary materials,  accessories,  equipment
     or parts from the  manufacturers  thereof,  or any other cause and to carry
     out  this  Agreement  as  promptly  as  practicable  after  such  cause  is
     terminated.

     This  Agreement  may not be  assigned  by either  party  without  the prior
     written consent of the other.

     This Agreement shall be governed by, and construed in accordance  with, the
     laws of the State of Nevada,  without  regard to principles of conflicts of
     laws.

     This Agreement  shall not be notified or amended except by an instrument in
     writing  agreed to and signed by fully  authorized  representatives  of the
     parties.

     Upon a failure  by  Purchaser  to accept the  Aircraft  under the terms and
     conditions of this Agreement, upon written notice to Purchaser,  Seller may
     cancel this  Agreement,  retain the deposit or  downpayment  as  liquidated
     damages and proceed to otherwise  sell or dispose of the  Aircraft  with no
     further liability to the Purchaser.

     Purchaser  warrants that the terms and  conditions of this  Agreement  were
     fully read and understood,  and that they  constitute the entire  agreement
     between the parties.  There are no other  agreements  written or oral which
     pertain to the sale of the Aircraft.

     If any one or more  provisions  of this  Agreement  shall  be  found  to be
     illegal  or  unenforceable  in any  respect,  the  validity,  legality  and
     enforceability of the remaining provisions shall not in any way be affected
     or impaired thereby.

     This  Agreement  shall be  binding  upon and  insure to the  benefit of the
     respective  legal  representatives  and  heirs of the  individual  parties,
     except as otherwise herein provided.

     Purchaser  agrees to cause tail number N57BG to be changed  within 180 days
     of closing.

IN WITNESS WHEREOF, the parties hereto have caused this Purchase Agreement to be
executed by their duly authorized representative on the date first written.



ARIZONA CHARLIE'S                  LIMERICK HOLDINGS, LLC


BY:   /s/ Bruce F. Becker              BY:  /s/ Pat Broe
    ------------------------               -----------------------
      Name:  Bruce F. Becker                Name:Pat Broe
      Title:  CEO                           Title: President





July 18, 1996

Pat Broe
The Broe Companies, Inc./ Limerick Holdings, L.L.C.
752 Clayton Street
Denver, CO 80206

Dear Mr. Broe:

In reply to your letter  dated July 17, 1996  regarding  an extension of time to
close  the sale of the  Gulfstream  II,  a July 19,  1996  delivery  to  Denver,
installation of new equipment items including a TCAS II, dual GNS XLS's, DME 42s
and AFIS, and the cost of the July lease payment,  we will acknowledge and agree
with these items if the following  additional  conditions and considerations are
met:

          The buyer will immediately  forward the non-refundable  escrow deposit
       of  $250,000.00  to the seller  (bank wire  instructions  attached) to be
       applied against purchase price.
          The buyer agrees that the Gulfstream  will not be flown until the full
       and complete  proceeds have been disbursed to US Bankcorp Leasing Company
       and to the seller.
          A written document needs to be completed by the buyer and addressed to
       Stevens  Aviation  indicating that the seller can retrieve the Gulfstream
       II if the sale is not closed on or before Friday,  July 26, 1996. Payment
       for the installed new equipment  will be made by Limerick  Holdings,  LLC
       and,  if  required,  the  aircraft  will be  returned  with  improvements
       completed  and free of liens.  A copy of such document is to be forwarded
       to the seller as soon as completed.
           Buyer  acknowledges  that when seller  delivers the  Gulfstream II to
       Denver on July 19,  1996,  that such  delivery  constitutes  delivery and
       acceptance  of  the  Gulfstream  II,  evidenced  by a  delivery  receipt.
       (attached) At the closing, Buyer will pay an additional $5,000 to the
     seller to defray the July lease cost of the Gulfstream II.
     Except as  otherwise  expressly  provided  herein,  the  aircraft  purchase
agreement dated July 01, 1996, shall remain in full force and effect.



If you have any questions or desire additional  information,  please contact Tom
Burks.


Sincerely,


/s/ Jerry Griffis
-----------------
Jerry Griffis
Chief Financial Officer
Becker Gaming, Inc.



      ACKNOWLEDGED AND AGREED TO THIS     DAY  OF          ,
1996.


     BUYER:    Limerick Holding, LLC



     By:  /s/Pat Broe
          ----------------
          Pat Broe

     Title:  President



cc:  Bruce F. Becker, President Becker Gaming Group
     Tom Burks, Business Aviation
     Chris Kearns, Chief Pilot


July 17, 1996



Mr. Tom Burks
Business Aviation
8614 Townhouse
Dallas, TX 75225


Re:  Gulfstream II, S/N 61


Dear Mr.  Burks:

This letter details the issues discussed during our telephone  conversation this
afternoon.  As we discussed,  I am interested in closing this quickly,  and will
help negotiate with the lessor tomorrow if required. During our conversation,  I
outlined the following items that are critical to me:

     Seller extends the closing until Friday, July 26, 1996.

      Seller  delivers the aircraft to Denver on Friday,  July 19, 1996 in order
  for  improvements to be made. I will pay the cost of having the seller deliver
  the  aircraft to Denver.  We have  Stevens  Aviation  scheduled to perform the
  following  improvements:  Installation of TCASII,  dual GNS XLS's, new DME 42s
  and ASIS. The total workscope is worth approximately  $340,000. If the closing
  does not occur as schedule  under Item 1 above,  the aircraft will be returned
  to you with improvements completed free of any liens.

      I am to open to  discussion  of  defraying  the July lease cost.  However,
  based on our  conversation,  I have no feel for the dollar  magnitude  of this
  cost, and am not willing to pay for a significant amount.


Please acknowledge  agreement with these times by signing below. If you have any
questions, please call me at (303) 393-0033.

Sincerely,



/s/ Pat Broe
------------
Pat Broe




ACKNOWLEDGED AND AGREED TO THIS    DAY OF    , 1996.


SELLER:


By:


Title: