<PAGE>   1
                       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 for the fiscal year ended December 31, 2000

[ ]       Transition Report pursuant to Section 13 or 15(d) of the Securities
          Exchange Act of 1934


                           Commission File No. 0-21736

                  BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
             -------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

                 Colorado                              84-1158484
 ------------------------------------    ---------------------------------------
   (State or other jurisdiction of        (I.R.S. Employer Identification No.)
    incorporation or organization)

               Box 21, 240 Main Street, Black Hawk, Colorado 80422
 ------------------------------------------------------------------------------
               (Address of principal executive offices) (Zip code)

                                 (303) 582-1117
    ------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

        Securities Registered Pursuant to Section 12(b) of the Act: None.
           Securities Registered Pursuant to Section 12(g) of the Act:

                          Common Stock $.001 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. [ X ]

The aggregate market value of the voting stock held by non-affiliates of the
Registrant on March 9, 2001, was approximately $20,840,000 based upon the
reported closing sale price of such shares on the NASDAQ National Market System
on that date. As of March 9, 2001, there were 4,126,757 shares outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE:
                             See Item 14(c) herein.

                     The exhibit index appears on page E-1.

<PAGE>   2


                  BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
                         2000 Annual Report on Form 10-K

                                Table of Contents
<TABLE>
<CAPTION>

Item                        Description                                          Page
----                        -----------                                          ----
<S>     <C>                                                                      <C>
Item 1.  Business..................................................................1

Item 2.  Properties...............................................................21

Item 3.  Legal Proceedings........................................................22

Item 4.  Submission of Matters to a Vote of Security Holders......................25

Item 5.  Market for Registrant's Common Equity and Related
         Stockholder Matters......................................................26

Item 6.  Selected Financial Data..................................................27

Item 7.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations......................................28

Item 7A. Quantitative and Qualitative Disclosure About Market Risk................47

Item 8.  Financial Statements and Supplementary Data..............................48

Item 9.  Changes In and Disagreements With Accountants
         on Accounting and Financial Disclosure...................................48

Item 10. Directors and Executive Officers of the Registrant.......................49

Item 11. Executive Compensation...................................................53

Item 12. Security Ownership of Certain Beneficial Owners and Management...........60

Item 13. Certain Relationships and Related Transactions...........................62

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K..........63

</TABLE>



<PAGE>   3



Item 1.           Business.
------            --------

GENERAL.

         We are an owner, developer and operator of two gaming properties in
Black Hawk, Colorado and an owner and operator of one gaming property in Reno,
Nevada. We own the Gilpin Hotel Casino which we developed and have operated
since 1992. Along with our strategic partner, Jacobs Entertainment Ltd., we
developed and co-manage The Lodge Casino at Black Hawk, a hotel/casino/parking
complex completed in the second quarter of 1998. We own, through a limited
liability company, a 75% interest in The Lodge Casino and affiliates of Jacobs
Entertainment own 25%. On January 4, 2001, we closed the purchase of the Gold
Dust West Casino in Reno, Nevada which we now operate through a wholly owned
Nevada subsidiary, Gold Dust West Casino, Inc. The Gilpin Hotel Casino and The
Lodge Casino are sometimes referred to as the "Colorado Casinos."

         Casino gaming in Colorado is restricted to the three towns of Black
Hawk, Central City and Cripple Creek and two Native American gaming facilities
located in the southwest corner of the state. The Black Hawk market primarily
attracts drive-in or "day trip" customers from such key population centers as
Denver, Boulder, Fort Collins and Golden, Colorado and Cheyenne, Wyoming which
are located within a 100-mile radius of Black Hawk. The population within this
radius has experienced steady growth from approximately 2.8 million people in
1990 to 3.5 million in 2000. We estimate that about 70% of the Colorado Casinos'
gaming customers come from the greater Denver metropolitan area. The Denver
metropolitan population base is projected to increase steadily through 2015.
Adjusted gross proceeds (as defined below) from gaming in the Black Hawk market
have grown from $56 million in 1992, the first full year of gaming operations,
to $434 million in 2000, a compounded growth rate of 29% per year. Adjusted
gross proceeds in this market for 2000 were up $79 million or 22% over 1999.
Since 1992, the number of gaming devices in the Black Hawk market has grown from
about 500 devices at the beginning of 1992 to 8,398 devices at the end of 2000.
According to the Colorado Gaming Commission, the Colorado gaming industry's
adjusted gross proceeds have grown from approximately $180 million in 1992 to
$632 million in 2000, which was up 14% from 1999.

         At present, Black Hawk has no significant lodging facilities other than
those offered by The Lodge and the Isle of Capri which completed construction of
a 237 room hotel at its Black Hawk casino in mid-2000. A property called the
Hyatt Project is under development and has announced that it will open in the
fourth quarter of 2001 however, it will offer no hotel rooms upon opening. It
has announced plans for approximately 300 hotel rooms at some time in the
future.

         The City of Black Hawk has experienced more significant growth in
gaming revenues than Central City since 1992. The popularity of Black Hawk in
comparison to Central City is due primarily to Black Hawk's superior access to
major highways, as patrons must first pass through Black Hawk to access Central
City from Denver. Due to this superior location, larger casino operators have
focused on building in the City of Black Hawk. As a result, casinos in




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<PAGE>   4

Black Hawk now generally feature a larger average number of gaming devices, a
wider variety of amenities and more convenient free parking for patrons.

         On January 7, 2000, we contracted to purchase the assets of a casino
and motel business in Reno, Nevada known as the Gold Dust West Casino for $26.5
million. After receiving the requisite gaming licenses and approvals from the
Nevada State Gaming Control Board and the Nevada Gaming Commission in December
2000, we closed the acquisition of the Gold Dust West Casino on January 4, 2001.

         The Gold Dust West Casino is located on approximately 4.6 acres, a few
blocks west of Reno's downtown gaming district. The casino has been successful
in catering to the "locals" market for the past 22 years and has about 17,500
square feet of gaming space, currently accommodating about 500 slot machines.
The Gold Dust West Casino also offers the Wildwood Restaurant, a 6,600 square
foot dining facility and 106 motel rooms. The property is included within the
Central Downtown Gaming District corridor.

         The Reno/Sparks, Nevada market area generated approximately $1.140
billion of gaming revenues in the year ended December 31, 2000, up from $1.075
billion of gaming revenues in 1999. There were approximately 36 casinos in the
Reno/Sparks market area at December 31, 2000.

         Our corporate strategy focuses on increasing revenues and earnings
through efforts that are designed to increase our market share and enhance our
operational efficiencies, as well as to participate in other gaming
jurisdictions as a manager or owner of casino properties.

RECENT EVENTS.

         On February 26, 2001, Jeffrey P. Jacobs, our Chairman of the Board and
Chief Executive Officer, who beneficially owns approximately one third of our
outstanding common stock, offered to purchase all of the remaining shares for a
cash price of $11.00 per share. The Board determined to consider Mr. Jacobs'
offer and appointed a Special Committee to employ independent legal counsel and
a financial advisor to assist it in analyzing the offer and negotiating with Mr.
Jacobs. The Special Committee has announced the retention of legal counsel and a
financial advisor.

         Consummation of the transaction is subject to various conditions,
including the negotiation and execution of a definitive agreement, approval by
our Board of Directors and shareholders, the obtaining of various regulatory
approvals, and Mr. Jacobs' ability to obtain financing necessary for the
transaction.

         Shortly after the announcement of Mr. Jacobs' offer, two lawsuits were
filed against us and our directors. See Item 3 below.

                                       2
<PAGE>   5


GENERAL GAMING INFORMATION.

         The following table presents certain historical information obtained
from the Colorado Gaming Commission. A reader should not infer that this
information is any indication of what future Colorado gaming revenues or our
gaming revenues may be.
<TABLE>
<CAPTION>
                                               Average                                       Average
                               Adjusted          AGP             Average      Average          AGP
                                 Gross           Per            Number of    Number of      Per Device
State of Colorado(1)          Proceeds(3)      Casino(4)        Casinos(5)   Devices(6)       Per Day
--------------------          -----------      ---------        ----------   ----------     ------------

Calendar
 Year
--------
<S>                        <C>              <C>                     <C>        <C>             <C>
1991(2)                    $   23,129,000   $    965,000            24         2,166           $118
1992                          179,984,000      3,327,000            56         7,814             63
1993                          259,879,000      4,025,000            65        10,619             67
1994                          325,685,000      5,442,000            60        11,575             77
1995                          384,343,000      6,661,000            58        12,665             83
1996                          410,565,000      7,203,000            57        12,872             87
1997                          430,650,000      7,975,000            52        13,361             88
1998                          479,200,000      9,695,000            49        13,626             99
1999                          551,300,000     11,485,000            48        13,776            110
2000                          631,800,000     14,040,000            45        14,580            118
</TABLE>

<TABLE>
<CAPTION>
                                               Average                                       Average
                              Adjusted           AGP             Average      Average          AGP
                                 Gross           Per            Number of    Number of      Per Device
City of Black Hawk(1)        Proceeds(3)       Casino(4)        Casinos(5)   Devices(6)       Per Day
------------------           -----------       ---------        ----------   ----------     ------------

Calendar
 Year
--------
<S>                        <C>              <C>                     <C>        <C>             <C>
1991(2)                      $  6,561,000    $ 1,640,000             4           448           $162
1992                           56,201,000      4,223,000            14         2,033             75
1993                          112,140,000      5,303,000            21         3,658             84
1994                          173,703,000      8,635,000            20         4,563            104
1995                          195,856,000     10,171,000            19         4,848            111
1996                          220,200,000     11,589,000            19         5,176            117
1997                          234,631,000     12,295,000            19         5,417            119
1998                          272,008,000     15,326,000            18         5,864            129
1999                          354,900,000     18,679,000            19         7,129            136
2000                          433,700,000     22,826,000            19         8,398            141
</TABLE>


                                       3
<PAGE>   6


                               GILPIN HOTEL CASINO

         We commenced gaming operations through our joint venture in the Gilpin
Hotel Casino on October 1, 1992. Information concerning the casino follows:
<TABLE>
<CAPTION>

                                                                                 Average
                                 Adjusted              Average                     AGP
Calendar                          Gross               Number of                 Per Device
    Year                        Proceeds(3)            Devices                   Per Day
-----------                     -----------          ------------              ------------

<S>                             <C>                       <C>                       <C>
   1992  (from October 1)       $  2,927,000              293                       $110
   1993                           25,060,000              286                        240
   1994                           28,036,000              286                        269
   1995                           28,051,000              499  (7)                   154
   1996                           26,783,000              488                        150
   1997                           28,322,000              497                        156
   1998                           28,938,000              485                        163
   1999                           25,853,000              464                        153
   2000                           23,887,000              458                        143
</TABLE>

                                THE LODGE CASINO

         The Lodge Casino commenced gaming operations on June 24, 1998.
Information concerning the casino follows:
<TABLE>
<CAPTION>

                                                                                 Average
                                 Adjusted               Average                    AGP
Calendar                           Gross               Number of                Per Device
    Year                        Proceeds(3)             Devices                  Per Day
-----------                     -----------            ----------               ----------

<S>                             <C>                      <C>                       <C>
1998 (from June 24)             $27,781,000               829                       $176
1999                             56,120,000               880                        175
2000                             58,156,000               903                        176
</TABLE>



                                       4
<PAGE>   7


                              GOLD DUST WEST CASINO

         We have been operating the Gold Dust West Casino since January 5, 2001.
Information concerning the casino's operations in the calendar year 2000 was as
follows:

<TABLE>
<CAPTION>
                                                                                 Average
                                 Adjusted               Average                    AGP
Calendar                          Gross                Number of                Per Device
    Year                        Proceeds(3)             Devices                   Per Day
-----------                     -----------            ---------                -----------

<S>                             <C>                       <C>                        <C>
   2000                         $17,262,000               500                        $95
</TABLE>



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

(1) Limited stakes gaming totals for Colorado include Black Hawk, Central City
    and Cripple Creek and commenced October 1, 1991.
(2) Limited stakes gaming began in October 1991; thus the 1991 results reflect
    gaming activities from October through December.
(3) Adjusted gross proceeds is most easily defined as the casino win which is
    the amount of money wagered less the amount paid out in prizes.
(4) Adjusted gross proceeds divided by the number of reporting licenses
    (averaged on a monthly basis).
(5) Represents average number of licensees reporting adjusted gross proceeds.
(6) Represents average number of slot machines and table games reported by
    licensees for the calendar year.
(7) Includes expansion of the Gilpin Hotel Casino completed in January 1995.

         EMPLOYEES. The Gilpin Hotel Casino employs approximately 250 full-time
persons, The Lodge Casino employs approximately 500 full-time persons and the
Gold Dust West Casino employs approximately 225 persons. Employees include
cashiers, dealers, food and beverage service personnel, facilities maintenance,
security, valet, accounting, marketing, and personnel services. A manual has
been provided to each of our employees which emphasizes our philosophy of
customer service as our number one goal. No labor unions represent any employee
group. A standard package of employee benefits is provided to full-time
employees along with training and job advancement opportunities. Relations with
employees are deemed by management to be good. The gaming labor market is
extremely tight in Colorado and will become more so with the opening of new
casinos in Black Hawk. As a result, wages, salaries and employee benefits are
increasing. We compete for employees based on our work atmosphere, competitive
wages and fringe benefits.

                                       5
<PAGE>   8

         LOCATION AND PARKING. The scarcity of convenient parking facilities has
been a problem in Black Hawk and Central City since legalized gaming began. In
the last two years, several competitors have developed and have installed self
parking garages or arranged for convenient parking in or near their casinos
which has diminished part of the competitive advantage which we previously
enjoyed. Presently, we have parking availability for approximately 600 cars at
The Lodge Casino and 200 cars at the Gilpin Hotel Casino. At the Gold Dust West
Casino in Reno, we have open air parking for 277 cars.

         EMPHASIS ON SLOT PLAY. We emphasize slot machine play at all three of
our casinos, which we believe to be the fastest growing and most profitable
segment of the casino entertainment business. The increasing popularity of slot
machines is due, in part, to the continuing rapid technological development that
is resulting in the replacement of mechanical devices with advanced interactive
electronic games. These newer games offer greater variety, higher payouts and
longer periods of play for the casino entertainment dollar relative to simple
mechanical devices. Subject to the availability of financing, as to which there
can be no assurance, we intend to continue investing in state-of-the-art
machines and related equipment and systems, and to continue replacing older
models with the most current product offerings in an effort to maximize revenue.

         GAMING EQUIPMENT. The Lodge Casino presently has 854 slot machines and
26 table games. The Gilpin Hotel Casino operates with 455 slot machines and 9
table games. The Gold Dust West Casino has 500 slot machines and no table games.
Space is leased in the Gold Dust West Casino to an unaffiliated party, for $1
per year, which is used as a sports book. Management believes that offering the
sports book results in some increased slot machine activity. Included in the mix
of gaming devices at all three casinos are poker machines, keno machines, and a
series of progressive payoffs on nickel, quarter, and dollar slot machines. The
maximum wager under state law in Colorado is $5.00 per play; in Nevada the
amounts wagered are limited only by rules of individual casinos. We believe that
all three casinos have a competitive mix of machines based on the current
popularity of the types of play which casinos have been receiving in their
respective gaming areas.

         OPERATIONAL CONTROLS. The Colorado and Nevada Gaming Commissions have
established strict rules with regard to the supervision and control of all
gaming activities, including security and cash control systems. We employ a
full-time compliance officer who reports directly to our senior management. The
compliance officer's job is to ensure our casinos comply with the internal
control procedures as established by the Colorado and Nevada gaming authorities.
We employ these internal controls and paperwork systems to insure compliance
with applicable regulations. We employ a controller who is responsible for all
internal operational accounting matters.

                                       6
<PAGE>   9

         There are approximately 260 video cameras in the Gilpin Hotel Casino,
355 in The Lodge Casino and 96 in the Gold Dust West Casino, with taping devices
in place to record gaming and other activities at all times. These tapes and
live action play are monitored and reviewed by our security personnel and
authorized gaming employees and regulators to insure the integrity of our gaming
operations.

         SUPPORT SYSTEMS. Our Colorado Casinos utilize computerized slot data
tracking systems which allow us to track individual play, payouts, and develop
mailing lists for special events, contest play and promotions. The systems also
provide us with a variety of other useful marketing information. Computer based
point of sale accounting and data tracking systems monitor the popularity of all
food and beverage items and provides us control on food and beverage sales. We
intend to implement a slot data tracking system in the Gold Dust West Casino in
2001.

         COMPETITION IN COLORADO. We believe the primary competitive factors in
the Black Hawk market are location, availability and convenience of parking,
number and types of slot machines and gaming tables, types and pricing of
amenities, including food, name recognition, and overall atmosphere. We believe
our Colorado Casinos generally compete favorably based on these factors.

         Competition in the Black Hawk gaming market, which is the primary
gaming market in Colorado, is intense. Our Colorado Casinos are located in Black
Hawk on opposite sides of Main Street. Due to their proximity, the casinos
compete for some of the same customers from the Denver metropolitan area.
Further, there were 17 other casinos operating in Black Hawk, 5 casinos
operating in Central City and 18 casinos operating in Cripple Creek as of March
1, 2001. As of December 31, 2000, there were 8,398 gaming devices (slot
machines, blackjack and poker tables) in Black Hawk. Large, well financed
companies may enter the Black Hawk and other Colorado markets through the
purchase and/or expansion of existing facilities which could have a material
adverse effect on our consolidated results of operations and financial position
in fiscal 2001 and in the future.

         Our Colorado Casinos have a total of 800 parking spaces. Among our
competitors, the Isle of Capri has 1,100 parking spaces (many of which are self
parking), the Riviera has 550, the Mardi Gras has 750, Colorado Central Station
has 700, Fitzgerald's has 500 and the Canyon Casino has 400 parking spaces. We
have 50 hotel rooms and the Isle of Capri has 237 rooms. The Hyatt Project,
currently under construction and scheduled for completion in the fourth quarter
of 2001, reportedly will offer 300 hotel rooms at some time in the future.

         Central City is located adjacent to Black Hawk and provides the most
direct competition to the gaming establishments in Black Hawk. Black Hawk has
historically enjoyed a competitive advantage over Central City in large part
because access by State Highway 119 (currently the only major access to Black
Hawk from the Denver metropolitan area and Interstate 70) requires customers to
drive by and, in part, through Black Hawk to reach Central City. Central City
has acquired portions of a right-of-way and is taking steps toward formation of
an entity to construct


                                       7
<PAGE>   10

a road from I-70, commonly referred to as the Southern Access, and it is likely
that Central City will continue pursuing financing for this route. If the
Southern Access is constructed as proposed, it would be possible for certain
traffic which currently passes through Black Hawk to proceed directly to Central
City from Interstate 70. Even if the new route was constructed, motorists
driving from the Denver metropolitan area would still have the option of
choosing to go either to Black Hawk or Central City.

         The Black Hawk Business Improvement District ("BID") has contracted to
provide lighting along seven miles of State Highway 119, through the canyon
leading to Black Hawk. This project should be completed by the second quarter of
2001. The BID has also recently undertaken a study to determine the feasibility
of an access route to State Highway 119 by tunnel from Interstate 70.

         The casinos in Cripple Creek, located a driving distance of 110 miles
to the south of the Black Hawk market, and two native American casinos located
in the southwestern corner of the state, constitute the only other casino gaming
venues in the state of Colorado. We believe that Cripple Creek, located 45 miles
west of Colorado Springs, provides limited competition to the Black Hawk market.
We also compete with other forms of gaming including the Colorado lottery, bingo
and horse and dog racing, among others, and we compete generally with other
forms of entertainment.

         Any expansion of limited gaming within Colorado but outside of Native
American lands will require the approval, by statewide majority vote, of an
amendment to the Colorado Constitution. The six initiatives to expand gaming to
other locales in the state which have appeared on ballots since 1992 have all
been defeated by at least a 2-to-1 margin. In addition, bills have been
introduced in the state legislature to authorize or expand gaming in Colorado in
various forms, including, for example, the expansion of the state lottery by the
use of video lottery terminals, which look and play much like slot machines, at
horse and dog racing tracks. A proposal for expansion of gaming at horse and dog
racing tracks was passed by the legislature but vetoed by the former Governor in
1997. The incumbent Governor has also stated his intention to veto such
legislation should it reach his desk. There may be one or more bills to
authorize video lottery terminals introduced in future legislative sessions,
with substantial financial backing. In our opinion, video lottery, if legalized
throughout Colorado, would have a material adverse impact on the gaming industry
in Black Hawk. Other legislative proposals are also possible. Finally, expansion
of other existing forms of gaming, such as bingo or pull tab machines in bingo
establishments, could be approved by the state legislature or other regulatory
authorities, which could adversely affect the amount of gaming which might
otherwise occur within Black Hawk.

         Under the U.S. Indian Gaming Regulatory Act of 1988, various classes of
gaming activities are lawful on Native American lands if the lands are located
in a state that permits gaming for any purpose by any person. In addition to
other conditions, the Act requires that gaming activities be conducted in
conformance with a tribal-state compact entered into by the tribe with the
state. The Director of the Colorado State Department of Revenue has executed
agreements allowing for limited stakes gaming with the Ute Mountain Ute Tribe
and the



                                       8
<PAGE>   11

Southern Ute Tribe. We cannot give any assurance that these agreements will
continue to provide for gaming limitations in the future. Unlike casinos
operating in Black Hawk, Central City and Cripple Creek, casinos operating
within the reservations are not subject to the taxes imposed by the Colorado
Gaming Commission, and may be operated 24-hours a day. The reservations are
located in the southwestern portion of Colorado, approximately 250 miles from
Black Hawk.

         In addition to competing with other gaming facilities in Colorado as
described above, we compete to a lesser degree, for both customers and potential
future gaming sites, with gaming companies nationwide, including casinos in
Nevada and several other states, and casinos on Native American lands in several
states, many of which have substantially greater financial resources and
experience in the gaming business. The expansion of legalized casino gaming to
new jurisdictions throughout the United States may also affect competitive
conditions.

         In August 1996, President Clinton signed a bill creating the National
Gambling Impact and Policy Commission to conduct a comprehensive study of all
matters relating to the economic and social impact of gaming in the United
States. The commission issued a report to the President and Congress containing
its findings and conclusions, together with fourteen recommendations for
legislation and administrative actions. Any of these recommendations, if enacted
into law, could adversely impact the gaming industry and have a material adverse
effect on our business and results of operations.

         COMPETITION IN RENO, NEVADA. The Gold Dust West Casino encounters
strong competition from large hotel and casino facilities and smaller casinos
similar in size to the Gold Dust West Casino in the Reno area, which includes
Sparks, Nevada. There is also competition from gaming establishments in other
towns and cities in Nevada and, to a lesser extent, other jurisdictions in the
United States where gaming has been legalized (including Indian gaming
establishments). There are approximately 36 licensed casinos in the Reno/Sparks
area. In Reno we compete with these other properties principally on the basis of
location and parking while also directly appealing to the "locals" market.
Additional competition may come from the expansion or construction of other
hotel and casino properties or the upgrading of other existing facilities in the
Reno area.

         In addition, management believes that the introduction of casino
gaming, or the expansion of presently conducted gaming activities (particularly
at Indian establishments) in areas in or close to Nevada, such as California,
Oregon, Washington, Arizona and western Canada, could have an adverse effect on
operations at our Reno property and, depending on the nature, location and
extent of such operations, such effect could be material.


         Our ability to maintain our competitive position in Reno will require
the expenditure of sufficient funds for such items as updating slot machines to
reflect changing technology, installing a slot player tracking system, periodic
refurbishing of rooms and public service areas, and replacing obsolete equipment
on an ongoing basis. Because we are highly leveraged we may



                                       9
<PAGE>   12

lack financial flexibility and we may not be able to generate sufficient funds
internally, therefore there can be no assurance that we will be able to complete
needed capital improvements.

         GAMING REGULATION AND LICENSING IN COLORADO. The State of Colorado
created the Colorado Division of Gaming within the Department of Revenue to
license, implement, regulate and supervise the conduct of limited stakes gaming.
The Division, under the supervision of the Gaming Commission, has been granted
broad power to ensure compliance with Colorado law and regulations adopted
thereunder (collectively, the "Colorado Regulations"). The Division may inspect,
without notice, premises where gaming is being conducted; may seize, impound or
remove any gaming device; may examine and copy all of a licensee's records; may
investigate the background and conduct of licensees and their employees; and may
bring disciplinary actions against licensees and their employees. The Division
may also conduct detailed background checks of persons who loan money to or
invest money in a licensee.

         It is illegal to operate a gaming facility without a license issued by
the Gaming Commission. The Gaming Commission is empowered to issue five types of
gaming and gaming related licenses. The licenses are revocable and
non-transferable. Our failure or inability to maintain necessary gaming licenses
would have a material adverse effect on our gaming operations.

         The Colorado Casinos were granted retail/operator licenses concurrently
with their openings. The licenses are subject to continued satisfaction of
suitability requirements. The current license for both Colorado Casinos expire
on May 14, 2001. There can be no assurance that the Colorado Casinos can
successfully renew their licenses in a timely manner from year to year.

         All persons employed by us who are involved, directly or indirectly, in
gaming operations in Colorado also are required to obtain various forms of
gaming licenses. Key licenses are issued to "key employees," which include any
executive, employee or agent of a licensee having the power to exercise a
significant influence over decisions concerning any part of the operations of a
licensee. At least one key license holder must be on the premises of each
Colorado casino at all times that a casino is open for business. Messrs. Jacobs,
Roark and Politano, among others, hold associated key licenses. All of our
directors are required to become associated key licensees.

         The Gaming Commission closely regulates the suitability of persons
owning or seeking to renew an interest in a gaming license or permit, and the
suitability of a licensee or permittee can be adversely affected by persons
associated with the licensee or permittee. Additionally, any person or entity
having any direct interest in us or any casino directly or indirectly owned by
us may be subject to administrative action, including personal history and
background investigations. The actions of persons associated with us, such as
our management or employees, could jeopardize any licenses held by us in
Colorado, Nevada or elsewhere.

         As a general rule, under the Colorado Regulations, it is a criminal
violation for any person to have a legal, beneficial, voting or equitable
interest, or right to receive profits, in more



                                       10
<PAGE>   13

than three retail/operator gaming licenses in Colorado. We have an interest in
two such licenses. Any expansion opportunities that we may have in Colorado are
limited to one more license. In addition, this limitation may affect the ability
of certain persons to own our stock. Under the Colorado Regulations, an
"interest" in a licensee excludes ownership of less than 5% of a publicly traded
company such as us. A person or entity may not sell, lease, purchase, convey,
acquire or pledge an interest in an entity licensed to conduct limited stakes
gaming in Colorado without the prior approval of the Gaming Commission, except
for a less than 5% interest in a publicly traded corporation.

         The Gaming Commission has the right to request information from any
person directly or indirectly interested in, or employed by, a licensee, and to
investigate the moral character, honesty, integrity, prior activities, criminal
record, reputation, habits and associations of (i) all persons licensed pursuant
to the Colorado Limited Gaming Act, (ii) all officers, directors and
stockholders of a licensed privately held corporation, (iii) all officers,
directors and stockholders holding either a five percent (5%) or greater
interest or a controlling interest in a licensed publicly traded corporation,
(iv) any person who as agent, consultant, advisor or otherwise, exercises a
significant influence upon the management or affairs of a publicly traded
corporation, (v) all general partners and all limited partners of a licensed
partnership, (vi) all persons which have a relationship similar to that of an
officer, director or stockholder of a corporation (such as members and managers
of a limited liability company), (vii) all persons supplying financing or
loaning money to any licensee connected with the establishment or operation of
limited gaming, and (viii) all persons having a contract, lease or ongoing
financial or business arrangement with any licensee, where such contract, lease
or arrangement relates to limited gaming operations, equipment, devices or
premises.

         If the Gaming Commission determines that a person or entity is not
suitable to own a direct or indirect voting interest in us, we may be sanctioned
unless the person or entity disposes of its voting interest. Sanctions may
include the loss of our casino licenses. In addition, the Colorado Regulations
prohibit a licensee or any affiliate of a licensee from paying dividends,
interest or other remuneration to any person found to be unsuitable, or
recognizing the exercise of any voting rights by any person found to be
unsuitable. The Colorado Regulations require an operating casino licensee to
include in its corporate charter provisions which permit the repurchase of the
voting interests of any person found to be unsuitable. Our Articles of
Incorporation have been amended to include the required provisions.

         The Gaming Commission also has the power to require us to suspend or
dismiss our officers, directors and other key employees or sever relationships
with other persons who refuse to file appropriate applications or who are found
to be unsuitable to act in such capacities. The Commission or the Director of
the Division of Gaming may review a licensee's gaming contracts, require changes
in the contract before the licensee's application is approved or participation
in the contract is allowed, and require a licensee to terminate its
participation in any gaming contract.

         The Gaming Commission has enacted Rule 4.5, which imposes requirements
on publicly



                                       11
<PAGE>   14

traded corporations holding gaming licenses in Colorado and on gaming licenses
owned directly or indirectly by a publicly traded corporation, whether through a
subsidiary or intermediary company. The term "publicly traded corporation"
includes corporations, firms, limited liability companies, trusts, partnerships
and other forms of business organizations. Such requirements automatically apply
to any ownership interest held by a publicly traded corporation, holding company
or intermediary company thereof, where the ownership interest directly or
indirectly is, or will be upon approval of the Gaming Commission, 5% or more of
the entire licensee. In any event, if the Gaming Commission determines that a
publicly traded corporation, or a subsidiary, intermediary company or holding
company has the actual ability to exercise influence over a licensee, regardless
of the percentage of ownership possessed by said entity, the Gaming Commission
may require the entity to comply with the disclosure regulations contained in
Rule 4.5.

         Under Rule 4.5, gaming licensees, affiliated companies and controlling
persons commencing a public offering of voting securities must notify the Gaming
Commission no later than ten business days after the initial filing of a
registration statement with the Securities and Exchange Commission. Licensed
publicly traded corporations are also required to send proxy statements to the
Division of Gaming within 5 days after their distribution. Licensees to whom
Rule 4.5 applies must include in their charter documents provisions that:
restrict the rights of the licensees to issue voting interests or securities
except in accordance with the Colorado Gaming Act and the Colorado Regulations;
limit the rights of persons to transfer voting interests or securities of
licensees except in accordance with the Colorado Gaming Act and the Colorado
Regulations; and provide that holders of voting interests or securities of
licensees found unsuitable by the Gaming Commission may, within 60 days of such
finding of unsuitability, be required to sell their interests or securities back
to the issuer at the lesser of the cash equivalent of the holders' investment or
the market price as of the date of the finding of unsuitability. Alternatively,
the holders may, within 60 days after the finding of unsuitability, transfer the
voting interests or securities to a person suitable to the Gaming Commission.
Until the voting interests or securities are held by suitable persons, the
issuer may not pay dividends or interest, the securities may not be voted, they
may not be included in the voting or securities of the issuer, and the issuer
may not pay any remuneration in any form to the holders of the securities.

         Notification must be given to the Division of Gaming of the acquisition
of direct or indirect beneficial ownership of:

     o   5% or more of any class of voting securities of a publicly traded
         corporation that is required to include in its articles of organization
         the Rule 4.5 charter language provisions; or

     o   5% or more of the beneficial interest in a gaming licensee directly or
         indirectly through any class of voting securities of any holding
         company or intermediary company of a licensee, referred to as
         qualifying persons. Notification shall be made by persons acquiring
         these interests. Such persons are required to submit all



                                       12
<PAGE>   15

         requested information and are subject to a finding of suitability as
         required by the Division of Gaming or the Gaming Commission. Licensees
         must notify any qualifying persons of these requirements. A qualifying
         person other than an institutional investor whose interest equals 10%
         or more of a publicly traded corporation or the beneficial interest in
         a gaming licensee must apply to the Gaming Commission for a finding of
         suitability within 45 days after acquiring such securities.

         A qualifying person who is an institutional investor under Rule 4.5 and
who individually or in association with others, acquires, directly or
indirectly, the beneficial ownership of 15% or more of any class of voting
securities or 15% of the beneficial interest in a gaming licensee must apply to
the Gaming Commission for a finding of suitability within 45 days after
acquiring such interests.

         Licensees must also notify any qualifying persons of these
requirements. Whether or not notified, qualifying persons are responsible for
complying with these requirements.

         The Colorado Regulations also provide for exemption from the
requirements for a finding of suitability when the Gaming Commission finds such
action to be consistent with the purposes of the Colorado Gaming Control Act.

         Pursuant to Rule 4.5, persons found unsuitable by the Gaming Commission
must be removed from any position as an officer, director, or employee of a
licensee, or from a holding or intermediary company. Such unsuitable persons
also are prohibited from any beneficial ownership of the voting securities of
any such entities. Licensees, or affiliated entities of licensees, are subject
to sanctions for paying dividends or distributions to persons found unsuitable
by the Gaming Commission, or for recognizing voting rights of, or paying a
salary or any remuneration for services to, unsuitable persons. Licensees or
their affiliated entities also may be sanctioned for failing to pursue efforts
to require unsuitable persons to relinquish their interest. The Gaming
Commission may determine that anyone with a material relationship to, or
material involvement with, a licensee or an affiliated company must apply for a
finding of suitability or must apply for a key employee license.

         Colorado casinos may operate only between 8:00 a.m. and 2:00 a.m., and
may permit only individuals 21 years or older to gamble or consume alcohol in
the casino. Slot machines, black jack, poker and other approved variations of
those games and video poker are the only permitted games, with a maximum single
wager of $5.00. Colorado casinos may not extend credit to gaming patrons. The
Colorado Constitution and Regulations restrict the percentage of space a casino
may use for gaming to 50% of any floor and 35% of the overall square footage of
the building in which the casino is located. Effective July 1 of each year,
Colorado establishes the gross gaming revenue tax rate for the ensuing twelve
months. Under the Colorado Constitution, the rate can be increased to as much as
40% of adjusted gross proceeds. Colorado has both raised and lowered gaming tax
rates since they were initially set in 1991. Currently, the maximum gaming tax
rate is 20%. See "Taxation" below.

                                       13
<PAGE>   16
         NEVADA REGULATION AND LICENSING--NEVADA. The ownership and operation of
casino gaming facilities in Nevada, including our casino, Gold Dust West Casino,
are subject to the Nevada Gaming Control Act and the regulations promulgated
thereunder (the "Nevada Act") and to the licensing and regulatory control of the
Nevada Gaming Commission (the "Nevada Commission"), the Nevada State Gaming
Control Board (the "Nevada Board") and various local ordinances and regulations,
including, without limitation, applicable city and county gaming and liquor
licensing authorities (collectively, the "Nevada Gaming Authorities").

         The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which 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 filing 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. Change in such laws, regulations and procedures
could have an adverse effect on our Nevada gaming operations.

         Gold Dust West Casino (the "Gaming Subsidiary"), our subsidiary that
conducts gaming operations in Nevada, is required to be licensed by the Nevada
Gaming Authorities. Gaming licenses require the periodic payment of fees and
taxes and are not transferable. We are registered by the Nevada Commission as a
publicly traded corporation (a "Registered Corporation") and have been found
suitable to own the stock of the Gaming Subsidiary which is a corporate licensee
("Corporate Licensee") under the terms of the Nevada Act. As a Registered
Corporation, we are required periodically to submit detailed financial and
operating reports to the Nevada Commission and furnish any other information
which the Nevada Commission may require. No person may become a stockholder of,
or holder of an interest of, or receive any percentage of profits from a
Corporate Licensee without first obtaining licenses and approvals from the
Nevada Gaming Authorities. The Company, the Gold Dust West Casino and our
controlling persons, directors and certain officers have obtained from the
Nevada Gaming Authorities the various registrations, findings of suitability,
approvals, permits and licenses required in order to engage in gaming activities
in Reno, Nevada. The following regulatory requirements are currently applicable
to us.

         The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with us or the Gaming
Subsidiary in order to determine whether such individual is suitable or should
be licensed as a business associate of a gaming licensee. Our officers,
directors and certain key employees of the Gaming Subsidiary must file
applications with the Nevada Gaming Authorities and may be required



                                       14
<PAGE>   17

to be licensed or found suitable by the Nevada Gaming Authorities. Our officers,
directors and key employees who are actively and directly involved in the gaming
activities of the Gaming Subsidiary may 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 which 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 a corporate position.

         If the Nevada Gaming Authorities were to find an officer, director or
key employee unsuitable for licensing or unsuitable to continue having a
relationship with us or the Gaming Subsidiary, the companies involved would have
to sever all relationships with such person. In addition, the Nevada Commission
may require us or the Gaming Subsidiary to terminate the employment of any
person who refuses to file appropriate applications. Determinations of
suitability or of questions pertaining to licensing are not subject to judicial
review in Nevada.

         Both Black Hawk and the Gaming Subsidiary are required periodically to
submit detailed financial and operating reports to the Nevada Commission and
furnish any other information which the Nevada Commission may require.
Substantially all of our material loans, leases, sales of securities and similar
financing transactions and those of the Gaming Subsidiary must be reported to or
approved by the Nevada Commission.

         If it were determined that the Nevada Act was violated by us or the
Gaming Subsidiary, the registration or gaming licenses we hold could be limited,
conditioned, suspended or revoked, subject to compliance with certain statutory
and regulatory procedures. In addition, Black Hawk, the Gaming Subsidiary and
the persons 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 Gaming
Subsidiary and, under certain circumstances, earnings generated during the
supervisor's appointment (except for reasonable rental value of the casino)
could be forfeited to the State of Nevada. Limitation, conditioning or
suspension of the gaming licenses of the Gaming Subsidiary or the appointment of
a supervisor could (and revocation of any gaming license would) have a material
adverse effect on our gaming operations, financial condition and results of
operations.

         Any beneficial holder of our voting securities (or rights to acquire
such securities), regardless of the number of shares owned, may be required to
file an application, be investigated and have his or her suitability as a
beneficial holder of our voting securities determined if the Nevada Commission
has reason to believe that such ownership would otherwise be inconsistent with
the declared policies of the State of Nevada. The applicant must pay all costs
of investigation incurred by the Nevada Gaming Authorities in conducting any
such investigation.

         The Nevada Act requires any person who acquires beneficial ownership of
more than 5% of our voting securities to report the acquisition to the Nevada
Commission. The Nevada Act requires that beneficial owners of more than 10% of
our voting securities apply to the Nevada Commission for a finding of
suitability within thirty days after the Chairman of the Nevada




                                       15
<PAGE>   18

Board mails the 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 our 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 our board of directors, any change in our corporate charter, bylaws,
management, policies or operations our, or any of our gaming affiliates, or any
other action which the Nevada Commission finds to be inconsistent with holding
our 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.

         Any person who fails or refuses to apply for a finding of suitability
or a license within 30 days after being ordered to do so by the Nevada
Commission or the Chairman of the Nevada Board 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
beyond such period of time as may be prescribed by the Nevada Commission may be
guilty of a criminal offense. We will be subject to disciplinary action if,
after we receive notice that a person is unsuitable to be a stockholder or to
have any other relationship with us, we (i) pay that person any dividend or
interest on our voting securities, (ii) allow that person to exercise, directly
or indirectly, any voting right conferred through securities held by that
person, (iii) pay remuneration in any form to that person for services rendered
or otherwise, or (iv) fail to pursue all lawful efforts to require such
unsuitable person to relinquish his voting securities including, if necessary,
the immediate purchase of the voting securities for cash at fair market value.
Additionally, the City of Reno has the authority to approve all persons owning
or controlling the stock of any corporation controlling a gaming licensee
operating in Reno.

         The Nevada Commission may, in its discretion, require the holder of any
of our debt or similar securities to file applications, be investigated and be
found suitable to own our debt securities if the Nevada Commission has reason to
believe that such ownership would otherwise be inconsistent with the declared
policies of the State of Nevada. If the Nevada Commission determines that a
person is unsuitable to own such securities, then pursuant to the Nevada Act, we
can be sanctioned, including the loss of our approvals, if without the prior
approval of the Nevada Commission, we (i) pay to the unsuitable person any
dividend, interest, or any distribution whatsoever; (ii) recognize any voting
right by such unsuitable person in connection



                                       16
<PAGE>   19

with our securities; (iii) pay the unsuitable person remuneration in any form;
or (iv) make any payment to the unsuitable person by way of principal,
redemption, conversion, exchange, liquidation, or similar transaction.

         We are required to maintain a current stock ledger in Nevada which may
be examined by the Nevada Gaming Authorities 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.
A failure to make such disclosure may be grounds for finding the record holder
unsuitable. We are also required to render maximum assistance in determining the
identity of the beneficial owner. The Nevada Commission has the power to require
our stock certificates to bear a legend indicating that the securities are
subject to the Nevada Act. To date, the Nevada Commission has not imposed such a
requirement on us.

         We may not make a public offering of our 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. On
December 21, 2000, the Nevada Commission granted to us prior approval to make
public offerings for a period of one year, subject to certain conditions (the
"Shelf Approval"). The Shelf Approval also applies to any affiliated company
wholly owned by us (an "Affiliate"), which is a publicly traded corporation or
would thereby become a publicly traded corporation pursuant to a public
offering. The Shelf Approval also includes approval for the Gaming Subsidiary to
hypothecate its assets to secure the payment or performance of any obligations
evidenced by a security issued by us or an Affiliate in a public offering under
the Shelf Approval. The Shelf Approval also includes approval to place
restrictions upon the transfer of, and to enter into agreements not to encumber
the equity securities of the Gaming Subsidiary. The Shelf Approval, however, may
be rescinded for good cause without prior notice upon the issuance of an
interlocutory stop order by the Chairman of the Nevada Gaming Control Board. The
Shelf Approval 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. Any representation to the
contrary is unlawful.

         Changes in control of Black Hawk 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 us
must satisfy the Nevada Board and Nevada Commission on a variety of stringent
standards prior to assuming control of us. The Nevada Commission may also
require controlling stockholders, officers, directors and other persons having a
material relationship or involvement with the entity proposing to acquire
control, to be investigated and licensed as part of the approval process
relating to the transaction.

                                       17
<PAGE>   20

         The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and corporate defense
tactics affecting Nevada corporate gaming licensees, 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 upon Nevada's gaming industry and to further Nevada's policy
to (i) assure the financial stability of corporate gaming licensees and their
affiliates; (ii) preserve the beneficial aspects of conducting business in the
corporate form; and (iii) promote a neutral environment for the orderly
governance of corporate affairs. Approvals are, in certain circumstances,
required from the Nevada Commission before we can make exceptional repurchases
of voting securities above the current market price thereof 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 us in
response to a tender offer made directly to our stockholders for the purposes of
acquiring control of us.

         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 licensee's respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon
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 operations where entertainment is
furnished in connection with the selling or serving of food or refreshments or
the selling of merchandise. See "Taxation" below.

         Any person who is licensed, required to be licensed, registered,
required to be registered, or is under common control with such persons
(collectively, "Licensees"), and who is or proposes to become involved in a
gaming venture outside of Nevada, is required to deposit with the Nevada Board,
and thereafter maintain, a revolving fund in the amount of $10,000 to pay the
expenses of investigation by the Nevada Board for their participation in such
foreign gaming. The revolving fund is subject to increase or decrease in the
discretion of the Nevada Commission. Thereafter, foreign Licensees are required
to comply with certain reporting requirements imposed by the Nevada Act. Such
licensees are also 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 or enter into associations that are harmful to
the State of Nevada or its ability to collect gaming taxes and fees, or employ,
contract with or associate with a person in the foreign operation who has been
denied a license or finding of suitability in Nevada on the grounds of personal
unsuitability.

                                       18
<PAGE>   21


         LIQUOR REGULATION. The sale of alcoholic beverages in Colorado is
subject to licensing, control and regulation by certain Colorado state and local
agencies (the "Liquor Agencies"). Subject to certain exceptions, all persons who
directly or indirectly own 5% or more of a company or its casino must file
applications with and are subject to investigation by the Liquor Agencies. The
Liquor Agencies also may investigate persons who, directly or indirectly, loan
money to liquor licensees. All liquor licenses are renewable, are revocable and
are not transferable. The Liquor Agencies have broad powers to limit, condition,
suspend or revoke any liquor license. Any disciplinary action by the Liquor
Agencies or any failure to renew or other revocation of any of our liquor
licenses would have a material adverse effect upon our operations and our
Colorado Casinos.

         Under Colorado law, it is a criminal violation for any person or entity
to own a direct or indirect interest in more than one type of alcoholic beverage
license or more than three gaming tavern liquor licenses. Our Colorado Casinos
have gaming tavern liquor licenses. Accordingly, our expansion and
diversification opportunities in Colorado are limited by these licensing
restrictions.

         The sale of alcoholic beverages in Reno, Nevada is subject to
licensing, control and regulation by the City of Reno. All licenses are
revocable and are not transferable. The agencies involved have full power to
limit, condition, suspend or revoke any such license, and any such disciplinary
action could (and revocation would) have a material adverse effect on the
operations of the Gold Dust West Casino.

         TAXATION. Gaming operators in Colorado are subject to state and local
taxes and fees in addition to ordinary federal and state income taxes. Black
Hawk has imposed an annual license fee, currently $750, for each gaming device
installed in a casino. In addition, Colorado has a gross gaming revenue tax
(gross gaming revenue being generally defined as the total amount wagered less
the total amount paid out in prizes and is also called "adjusted gross
proceeds"). Currently, gaming tax rates are as follows:
<TABLE>
<CAPTION>

                                                     Annual
     Tax as Percentage of                          Amount of
  Adjusted Gross Proceeds                    Adjusted Gross Proceeds
---------------------------                 --------------------------
<S>                                          <C>
            .25%                             $          0 -   2,000,000
              2%                                2,000,001 -   4,000,000
              4%                                4,000,001 -   5,000,000
             11%                                5,000,001 - 10,000,000
             16%                               10,000,001 - 15,000,000
             20%                               15,000,001 and above
</TABLE>

Both of our Colorado Casinos are subject to the maximum rate. Neither the
Constitution nor the gaming statutes require that gaming tax rates be graduated,
as they currently are. Under the Colorado Constitution, the Colorado Gaming
Commission could increase the top rate to as much



                                       19
<PAGE>   22

as 40%. A more recent tax limitation amendment to the Colorado Constitution,
however, states that neither the state nor any local government may increase a
tax rate without an affirmative vote of the people; therefore, there is a
question as to whether the Colorado Gaming Commission could constitutionally
increase the state tax levied on gross gaming revenues without such a vote. The
Colorado legislature rejected this argument after the top tax rate was increased
to 20% in 1996, and no court was asked to rule on the applicability of the tax
limitation amendment to gaming tax rates.


         In Nevada, 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 Washoe County. Depending upon the particular fee or tax involved, these
fees and taxes are payable either monthly, quarterly or annually and are based
upon 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 operations where entertainment is
furnished in connection with the selling or serving of food or refreshments or
the selling of merchandise. Presently the state tax in Nevada on adjusted gross
revenue from gaming is 6.25%.


                                       20
<PAGE>   23


Item 2.                    Properties.
------                     ----------

         GILPIN HOTEL CASINO. The Gilpin Hotel Casino was our first casino
project. The 37,000 square foot facility is located in the central Black Hawk
gaming district. Originally built in the 1860s, the Gilpin Hotel is one of the
oldest buildings in Colorado, however, we offer no hotel or lodging facilities
on the property. The Gilpin Hotel Casino commenced operations in October 1992,
and was expanded through the acquisition of an adjacent casino in late 1994.

         THE LODGE CASINO. The Lodge Casino, opened on June 24, 1998 and is also
located in the central Black Hawk gaming district. The 250,000 square foot
facility has approximately 50,000 square feet of casino space, 50 hotel rooms,
three restaurants, four bars and parking for 600 cars. We have established a
jointly owned entity with affiliates of Jacobs Entertainment Ltd. to develop,
own and operate The Lodge Casino. We own 75% of this entity and affiliates of
our Chairman and Chief Executive Officer own the remaining 25%.

         GOLD DUST WEST CASINO. The Gold Dust West Casino is located on
approximately 4.6 acres a few blocks west of Reno's downtown gaming district.
The Casino has catered to the "locals" market for the past 24 years and has
about 17,500 square feet of gaming space, currently accommodating about 500 slot
machines. The Gold Dust West Casino also offers the Wildwood Restaurant, a 6,600
square foot dining facility and 106 motel rooms. The property is included within
the Central Downtown Gaming District corridor.



                                       21
<PAGE>   24


Item 3.           Legal Proceedings.
------            -----------------

         On June 25, 1999, a complaint was filed by a casino which operates
downstream from The Lodge Casino against Black Hawk/Jacobs Entertainment LLC,
which owns and operates The Lodge Casino and against John Does 1-3 which
apparently are other casino properties upstream from the plaintiff. The
complaint alleges, among other things, that the plaintiff is being damaged by
subsurface water flows onto its property from The Lodge Casino property and the
properties of John Does 1-3. The LLC, which is 75% owned by us, has denied all
liability and has turned the matter over to our insurance carrier for defense.
We do not believe the suit has merit and we will continue to defend against the
allegations of the plaintiff. We do not believe the suit will result in any
material liability; however, we can give no assurance in this regard.

         Along with us, the LLC and other LLC members were named as defendants
in an action for trespass brought in late January 1998 by a plaintiff who
claimed to have succeeded to rights of heirs of certain shareholders of a
corporation which was dissolved under Colorado law in 1942. The action alleged
that the long defunct corporation had certain reversionary rights to a strip of
land included within the boundaries of The Lodge Casino property. The
defendants, including us, and certain title insurance companies entered into a
joint defense of the action with all parties reserving their respective rights.
The action was dismissed without prejudice on January 3, 1999. A trustee was
appointed by the court on December 22, 1998 to represent the purported interests
of the defunct corporation, if any. The trustee filed an action similar to that
described above in September 1999 against the previous defendants, including us,
containing essentially the same allegations as in the previous case. The present
action seeks to quiet title in the plaintiff to the alleged reversionary strip
and further seeks monetary and injunctive relief against us for trespass. The
case is in its early stages. We filed an answer to the action and, although we
intend to vigorously litigate the matter, we do not believe it will result in
material liability to us, but we can give no assurance as to the ultimate
outcome of the litigation.

         On February 27, 2001, we announced that we had received an offer from
our largest shareholder, an affiliate of our Chairman and Chief Executive
Officer, to purchase all shares not owned by it for $11 cash. Our Board
determined to consider the offer and appointed a Special Committee to employ
independent legal counsel and a financial advisor to assist it in analyzing the
offer and negotiating with Mr. Jacobs.

         On February 27, 2001, a stockholder of Black Hawk filed a purported
stockholder class action lawsuit against us and our directors in Colorado
District Court for the County of Gilpin under the caption Joseph Brecher v.
Timothy Knudsen, Robert H. Hughes, Jeffrey P. Jacobs, Stephen R. Roark, J.
Patrick McDuff, Frank B. Day and Black Hawk Gaming & Development Company, Inc.,
Case No. 01CV13. The plaintiff alleges, among other things, that: (1) Mr.
Jacobs, by reason of his substantial ownership of our outstanding shares, is in
a position to ensure effectuation of the management led leveraged buy-out
without regard to its fairness to our public stockholders; (2) Mr. Jacobs and
his alleged allies on our Board are acting to force our public stockholders to
relinquish their Black Hawk shares without an adequate process to ensure that
these stockholders receive the highest price attainable under the circumstances
for such shares;



                                       22
<PAGE>   25

(3) Mr. Jacobs has the power and is exercising his power to acquire Black Hawk's
shares and dictate terms which are in Mr. Jacobs' best interest, without
seriously exploring any other bids and regardless of the wishes or best
interests of the class members or the intrinsic value of Black Hawk's stock; (4)
any transaction to acquire Black Hawk at the price being considered does not
represent the true value of Black Hawk and is unconscionable, unfair and grossly
inadequate and constitutes unfair dealing; (5) the stock acquisition price that
defendant Mr. Jacobs has offered and which constitutes the maximum he would
agree to pay in a buy-out has been dictated by defendant Mr. Jacobs to serve his
own interests, and is being crammed down by Mr. Jacobs to force our public
stockholders to relinquish their Black Hawk shares at a grossly unfair price;
(6) because Mr. Jacobs is in possession of proprietary corporate information
concerning our future financial prospects, the degree of knowledge and economic
power between Mr. Jacobs and the class members is unequal, making it grossly and
inherently unfair for Mr. Jacobs to obtain the remaining Black Hawk shares
without an adequate process; (7) by using his domination and control as a means
to force the consummation of the leveraged buy-out transaction, Mr. Jacobs is
violating his duties as Black Hawk's principal shareholder; (8) defendants,
acting in concert, are violating their fiduciary duties owed to the public
shareholders of Black Hawk and are putting their own personal interests ahead of
the interests of Black Hawk's public shareholders. The plaintiff seeks
preliminary and permanent injunctive relief restraining the defendants from
proceeding with the transaction and unspecified compensatory or recissory
damages, and, if such transaction is consummated, rescinding the transaction,
together with unspecified compensatory or recissory damages, and attorneys' fees
and costs.

         On March 1, 2001, another purported class action lawsuit was filed in
the Colorado District Court, County of Gilpin, under the caption Mary Bonsall v.
Black Hawk Gaming & Development Co. [sic], Inc.; Jeffrey P. Jacobs; Stephen R.
Roark; Frank B. Day; J. Patrick McDuff; Robert H. Hughes; Timothy Knudsen; and
Stephen P. Owendoff, Case No. 01-CV-16. The allegations in this case essentially
are: (1) defendant Jacobs has timed the proposal to freeze out Black Hawk's
public shareholders in order to capture for himself Black Hawk's future
potential without paying an adequate or fair price to Black Hawk's public
shareholders; (2) defendant Jacobs timed the announcement of the proposed buyout
to place an artificial lid on the market price of Black Hawk's stock so that the
market would not reflect Black Hawk's improving potential, thereby purporting to
justify an unreasonably low price; (3) defendant Jacobs has access to internal
financial information about Black Hawk, its true value, expected increase in
true value and the benefits of 100% ownership of Black Hawk to which plaintiff
and the class members are not privy; that Jacobs is using such inside
information to benefit himself and his affiliates in the transaction, to the
detriment of Black Hawk's public stockholders; (4) defendant Jacobs has clear
and material conflicts of interest and is acting to better his own interests at
the expense of Black Hawk's public shareholders; (5) Jacobs and his affiliates
have voting control of Black Hawk and control its proxy machinery and they have
selected and elected all of Black Hawk's directors who are logically beholden to
Jacobs for their offices and the valuable perquisites which they enjoy
therefrom; (6) Jacobs, with the acquiescence of the directors of Black Hawk, is
engaging in self-dealing and not acting in good faith toward plaintiff and the
other members of the class; and (7) by reason of the foregoing, Jacobs and the
other individual defendants have breached and are breaching their fiduciary
duties to the members of the class. The plaintiff in this action also seeks
preliminary and permanent injunctive relief restraining



                                       23
<PAGE>   26

the defendants from proceeding with the transaction and, if such transaction is
consummated, rescinding the transaction, together with unspecified compensatory
or recissory damages, and attorneys' and experts' fees and costs.

         Our Board of Directors believes that it and the Special Committee it
has appointed have met and will continue to meet their respective fiduciary
obligations. We believe both suits are without merit and both will be vigorously
contested, however, at this early stage, we are unable to predict whether we or
any of our director co-defendants will ultimately be subject to any material
loss or expense.

         Further, we are involved in routine litigation arising in the ordinary
course of business. We believe these matters are covered by appropriate
insurance policies or are not deemed material.


                                       24
<PAGE>   27


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

         No matter was submitted to our shareholders during the fourth quarter
of the fiscal year covered by this Report to a vote of security holders through
the solicitation of proxies or otherwise.


                                       25
<PAGE>   28


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

         MARKET. Our common stock is quoted on the Nasdaq National Market under
the symbol "BHWK." The following table sets forth for the calendar periods
indicated the high and low closing sales prices of our common stock as reported
on the Nasdaq National Market:
<TABLE>
<CAPTION>

      1999                              High                     Low
      ----                              ----                     ---
<S>                                  <C>                       <C>
First Quarter                        $ 8.50                    $ 5.70
Second Quarter                         8.75                      5.25
Third Quarter                          7.88                      5.00
Fourth Quarter                         8.00                      5.06
</TABLE>

<TABLE>
<CAPTION>

     2000                             High                       Low
     ----                             ----                       ---
<S>                                  <C>                       <C>
First Quarter                        $ 7.00                    $ 5.38
Second Quarter                         7.25                      5.63
Third Quarter                          7.13                      6.00
Fourth Quarter                         7.06                      6.00
</TABLE>


         On March 9, 2001, the last reported sale price of our common stock on
the Nasdaq National Market was $9.13 per share. As of March 9, 2001, there were
approximately 250 holders of record of our common stock and we estimate, based
upon information provided by brokers, that we have approximately 1,000
beneficial owners of our common stock.

         DIVIDENDS. We have not paid or declared cash distributions or dividends
on our common stock and we do not intend to pay cash dividends in the
foreseeable future. We intend to follow a policy of retaining any earnings
either to repay borrowings, to finance future growth and acquisitions or for
general corporate purposes. Along with the LLC (owner of The Lodge Casino), we
are parties to a credit agreement which require us to meet certain financial
ratios. Financial covenants in the credit agreement also restrict our ability to
pay dividends.


                                       26
<PAGE>   29



Item 6.           Selected Financial Data.
------            -----------------------

         The selected financial data for the periods set forth below have been
derived from our financial statements included elsewhere in this report. This
data should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations and the Consolidated Financial
Statements and the related Notes thereto included elsewhere in this report.
<TABLE>
<CAPTION>

                                                                   Year Ended December 31,
                                        -------------------------------------------------------------------------


                                         2000             1999           1998           1997             1996
                                         ----             ----           ----           ----             ----
<S>                                  <C>             <C>             <C>             <C>             <C>
STATEMENTS OF OPERATIONS
  DATA:
  Net revenues                       $ 86,375,765    $ 86,497,180    $ 49,974,960    $  1,260,291    $  1,263,887
  Costs and expenses                   72,741,115      72,036,622      42,891,229       1,382,055       1,736,688
  Equity in earnings of
    joint venture                              --              --       1,017,789       2,812,858       2,255,635

  Net income                            5,460,958       5,422,798       3,212,024       1,706,321       1,046,941
  Net income per common share:
    Basic                                    1.33            1.32             .80             .64             .41
    Diluted                                  1.31            1.30             .75             .48             .39

</TABLE>


<TABLE>
<CAPTION>

                                                                     At December 31,
                                       ------------------------------------------------------------------------------


                                         2000             1999           1998           1997             1996
                                         ----             ----           ----           ----             ----
<S>                                  <C>             <C>             <C>             <C>             <C>
BALANCE SHEET DATA:
  Current assets                     $ 10,906,515     $ 12,104,183    $  12,423,756    $  1,267,043      $5,016,658
  Noncurrent assets                    86,569,734       88,975,759       89,638,344      48,036,487      19,507,337
  Total assets                         97,476,249      101,079,942      102,062,100      49,303,530      24,523,995
  Current liabilities                  11,005,652       11,284,996       11,717,110       3,110,232         620,282
  Convertible note payable
    to stockholder                             --               --               --              --       1,500,000
  Long-term debt and
    other liabilities                  35,668,544       45,181,108       51,978,057      12,897,174       2,251,639
  Common stock subject to
    put options                                --               --               --              --         137,499
  Minority interest                     8,739,694        8,115,287        7,541,523       6,704,688       1,793,500
  Stockholders' equity                 42,062,359       36,498,551       30,825,410      26,591,436      18,159,569
</TABLE>




                                       27
<PAGE>   30



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

         This Report contains certain forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934 and we intend that
such forward-looking statements be subject to the safe harbors created thereby.
These forward-looking statements include our plans and objectives for future
operations, including plans and objectives relating to our gaming operations and
future economic performance. The forward-looking statements are based on current
expectations that involve a number of risks and uncertainties that might
adversely affect our operating results in the future in a material way:
intensity of competition, particularly including the opening of new casinos by
competitors in our Black Hawk market area in 2000 and 2001, the possible
expansion of gaming on Indian lands in California, levels of gaming activity in
general and in Black Hawk, Colorado and Reno, Nevada in particular, our ability
to meet debt obligations, regulatory compliance in both Colorado and Nevada,
taxation levels, effects of national and regional economic and market
conditions, labor and marketing costs, success of our diversification plans, our
ability to integrate and operate our recent Reno, Nevada acquisition and the
ultimate outcome of litigation matters described in Item 3 above.

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

INTRODUCTION

INCREASED COMPETITION IN THE BLACK HAWK MARKET

         Both the market and the competition in Black Hawk grew considerably in
2000. Specifically, on February 4, 2000 a casino opened in Black Hawk with
approximately 950 devices and a 550-car valet/self-parking garage. A second
casino opened next door to The Lodge on March 6, 2000 with approximately 750
devices and parking for 500 cars. A third project recommenced construction with
a projected opening date in late 2001 or early 2002, and a fourth project has
begun various predevelopment efforts and submittals to the City of Black Hawk
and other agencies. Based upon the level of development activity in the City of
Black Hawk, it is apparent that increased competition within this market is a
certainty.

         We believe the new casinos have expanded the City of Black Hawk's
gaming market; however, it is extremely difficult, if not impossible, to
accurately predict the extent of the future growth in this market. In any event,
we expect some of our existing market share to be lost to the new casinos. The
competition within this marketplace continues to increase and intensify as new
casinos open. As a result, our marketing costs, our personnel costs and other
costs at our two properties in Black Hawk will more than likely increase while
we attempt to maintain our market share.



                                       28
<PAGE>   31

         Generally speaking, we anticipated that the opening of the new casinos
in Black Hawk would have an impact on our overall operations during the first
half of 2000. These new casinos and others implemented very aggressive and
expensive marketing programs during the last half of 2000. While we believe that
the aggressive marketing programs implemented by these casinos had an impact on
our third and fourth quarter operations for 2000 as compared to the third and
fourth quarters of last year, we believe our continuing marketing programs will,
in the long run, continue to develop and enhance our customer loyalty. Further,
when our marketing programs are combined with our gaming products and devices we
believe we will maintain our share of this growing market.

COMPARABILITY OF FINANCIAL STATEMENTS

         During 1998, we had two significant events that had a major impact on
the financial reporting and comparability of our consolidated financial
statements. The first event was the acquisition of the other half of the Gilpin
Hotel Casino (GHC) and related land, which occurred on April 24, 1998 and
increased our ownership percentage in GHC from 50% to 100%. The second event was
the opening of The Lodge Casino, which occurred on June 24, 1998. Because of
these two events, our consolidated financial statements for the years ended
December 31,1999 and 2000 include the operating results of GHC and The Lodge
Casino for a full year. Comparatively, 1998 includes 50% of the operations of
GHC from January 1 through April 24, 1998 and 100% of the operations from April
25, 1998 through year end and the operations of The Lodge from June 24, 1998
through year end.

         Prior to April 24, 1998 the activity of GHC was reported under the
equity method of accounting which required us to record our 50% share of the
earnings of GHC, after eliminating inter-company transactions and other
adjustments, under the caption "equity in earnings of joint venture." Even
though we received management fees and rental revenue from GHC, the equity in
earnings of the joint venture accounted for almost all of our income before
income taxes. Since April 24, 1998, we have consolidated all of the operations
of GHC into our financial statements. Furthermore, we no longer receive
management fees or rental income and GHC no longer incurs those related
expenses.

         As discussed above, due to the timing of the acquisition of the other
half of GHC and the opening of The Lodge, it is difficult to draw meaningful
comparisons between the consolidated financial statements for the years ended
December 31, 1999 and 1998.

GOLD DUST WEST CASINO-ACQUISITION

         On January 7, 2000 we entered into an agreement to purchase the assets
and operating business of a gaming casino and motel located in Reno, Nevada
known as the Gold Dust West Casino. The purchase price was $26,500,000 and
closing took place on January 4, 2001 after we obtained Nevada gaming approvals
which included licensing of the Company and certain of our officers and
directors. This took almost one year to complete. Other conditions to closing
required Gold Dust West Casino to achieve at least $5,100,000 of EBITDA
(earnings before



                                       29
<PAGE>   32

interest, taxes, depreciation and amortization) for the trailing 12-month period
ending 30 days prior to the closing date, satisfactory completion of the due
diligence process, and acceptable environmental reports and title surveys on the
property. All of these conditions were met. We funded the purchase price of the
Gold Dust West Casino acquisition from our revolving credit line discussed below
under "Liquidity and Capital Resources." Our acquisition of the Gold Dust Casino
will be accounted for under the purchase method and its operations will be
consolidated with ours beginning January 4, 2001. Certain historical and pro
forma financial information concerning Gold Dust West Casino may be found in our
Report on Form 8K-A filed on March 19, 2001. Also see Note 15 to the
Consolidated Financial Statements included herein.

RESULTS OF OPERATIONS

         The following discussion is an analysis of the results of our
operations for the year ended December 31, 2000 compared to 1999, followed by a
comparison between the results of our operations for the years ended December
31, 1999 and 1998. Adjusted EBITDA (earnings before interest, taxes,
depreciation, amortization, and minority interest) (which will be henceforth
referred to as EBITDA) is presented below and is included in the discussion of
the results of operations. EBITDA should not be considered to be an alternative
to operating income or net income as defined by accounting principles generally
accepted in the United States of America. It also should not be construed to be
an indicator of our operating performance, nor as an alternative to cash flows
from operational activities and hence, a measure of our liquidity. We have
presented EBITDA as a supplemental disclosure to facilitate a more complete
analysis of our financial performance. We believe this disclosure enhances the
understanding of the financial performance of a company, such as ours, with
substantial interest, taxes, depreciation, and amortization.


                                       30
<PAGE>   33


                  BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

<TABLE>
<CAPTION>
                                                               Year Ended
                                                               December 31,
                                                --------------------------------------        Percentage
                                                                                               Increase
                                                      2000                    1999            (Decrease)
                                                      ----                    ----            ----------
<S>                                                <C>                     <C>                        <C>
NET REVENUE
     Lodge                                         $61,730,984             $59,867,955                3%
     GHC                                            24,644,781              26,629,225              (7)%
                                                  ------------            ------------
     Total net revenue                              86,375,765              86,497,180              (0)%


COSTS AND EXPENSES
     Lodge                                          45,690,844              44,431,198                3%
     GHC                                            19,171,301              19,822,888              (3)%
     Corporate                                       2,132,834               2,339,417              (9)%
                                                  ------------           -------------
     Total costs and expenses                       66,994,979              66,593,503                1%

EBITDA
     Lodge                                          16,040,140              15,436,757                4%
     GHC                                             5,473,480               6,806,337             (20)%
     Corporate                                      (2,132,834)             (2,339,417)             (9)%
                                                  ------------           -------------
     Total EBITDA                                   19,380,786              19,903,677              (3)%

Interest income                                       (285,255)               (244,682)              17%
Interest expense                                     3,423,609               4,585,725             (25)%
Income taxes                                         2,975,594               2,929,000                2%
Depreciation and amortization                        5,746,136               5,443,119                6%
Minority interest in The Lodge                       2,059,744               1,767,717               17%
                                                  ------------           -------------
Net income                                          $5,460,958              $5,422,798                1%
                                                    ==========              ==========

Basic earnings per share                                 $1.33                   $1.32                1%
Diluted earnings per share                               $1.31                   $1.30                1%
</TABLE>



                                       31
<PAGE>   34

RESULTS OF OPERATIONS

         YEAR ENDED DECEMBER 31, 2000 COMPARED TO THE YEAR ENDED DECEMBER 31,
1999

Consolidated Results of Operations-- Black Hawk Gaming & Development Company,
Inc.

NET REVENUES

         We generated net revenues of $86,376,000 during the year ended December
31, 2000 compared to $86,497,000 for the same period of 1999. The slight
decrease in net revenues of $121,000 is the result of an increase in net
revenues at The Lodge of $1,863,000 offset by decreases in net revenues at GHC
of $1,984,000. We attribute the increased gaming revenues at The Lodge to its
larger size and "themed" atmosphere that offers customers a greater variety of
amenities similar to other new developments in the City of Black Hawk. We
attribute the decline in gaming revenue at GHC to the significant development of
newer and larger "themed" casinos similar to The Lodge.

COSTS AND EXPENSES

         Our total costs and expenses were $66,995,000 for the year ended
December 31, 2000 compared to $66,594,000 for the same period of 1999. The
overall increase of $401,000 or 1% was the result of increases in labor costs of
$884,000, slot participation expense of $789,000, marketing related costs
(excluding bussing) of $1,324,000, and repairs and maintenance of $217,000.
Increased costs and expenses were offset by reductions in gaming taxes of
$530,000, bus program costs of $1,788,000, food and beverage cost of sales of
$184,000, net returned check expense after collections of $69,000, corporate
overhead expenses of $206,000, and other net expenses of $36,000.

EBITDA AND MINORITY INTEREST

         When our total costs and expenses are subtracted from our net revenues,
the result is EBITDA and Minority Interest of $19,381,000 for the year ended
December 31, 2000 compared to $19,904,000 for the same period of 1999. The
decrease of $523,000 or 3% is generally the result of the factors discussed
above. Our EBITDA and Minority Interest margin (EBITDA and Minority Interest
divided by our net revenues) was 22% and 23% for the years ended December 31,
2000 and 1999, respectively.

INTEREST INCOME

         We had interest income totaling $285,000 during the year ended December
31, 2000 compared to $245,000 for the same period of 1999. The decrease of
$40,000 or 17% is due to an increase in interest earnings at The Lodge and GHC
of $25,000 each offset by a decrease in interest earned at the corporate level
of $10,000.

                                       32
<PAGE>   35

INTEREST EXPENSE

         We had interest expense totaling $3,424,000 during the year ended
December 31, 2000 compared to $4,586,000 for the same period of 1999. The
decrease of $1,162,000 or 25% is primarily the result of paying down our debt by
approximately $9,800,000 at various times during the year.

DEPRECIATION AND AMORTIZATION

         We had depreciation and amortization of $5,746,000 for the year ended
December 31, 2000 compared to $5,443,000 for the same period of 1999. The
increase of $303,000 or 6% is generally due to the net increase in our
depreciable assets. Depreciation and amortization primarily relates to
buildings, equipment, and intangible assets.

MINORITY INTEREST

         Minority Interest for the year ended December 31, 2000 totaled
$2,060,000 compared to $1,768,000 for the same period of the prior year.
Minority Interest represents the 25% share of The Lodge's income (before
eliminating inter-company transactions) that is owned by affiliates of our chief
executive officer.

INCOME TAXES

         Our effective income tax rate of 35% for the years ended December 31,
2000 and 1999 resulted in income tax expense of $2,976,000 and $2,929,000. The
tax characteristics of the individual components of our income before income
taxes determine our overall effective tax rate.

NET INCOME

         As a result of the factors discussed above, we reported net income of
$5,461,000 for the year ended December 31, 2000 compared to $5,423,000 for the
same period of 1999, an increase of $38,000 or 1%.

EARNINGS PER SHARE

         We reported basic earnings per share for the year ended December 31,
2000 and 1999 of $1.33 and $1.32, respectively and diluted earnings per share
for the same periods of $1.31 and $1.30, respectively. The increase in basic and
diluted earnings per share of $.01 or 1% and $.01 or 1%, respectively, is the
result of increased profitability.

                                       33
<PAGE>   36

Results of Operations-- The Lodge Casino

NET REVENUES

         The Lodge generated net revenues of $61,731,000 during the year ended
December 31, 2000 compared to $59,868,000 for the same period of 1999. The
increase in our net revenues at The Lodge of $1,863,000 or 3% is primarily the
result of an increase in casino revenues of $2,003,000 or 4% offset by a
decrease in other combined net revenues of $140,000. We believe the primary
reason for our increased net revenues is due to an increase in gaming revenues
in the Black Hawk market, which is generally attributable to the opening of
larger and newer gaming facilities, such as The Lodge.

COSTS AND EXPENSES

         The Lodge's costs and expenses (after eliminating inter-company
transactions) totaled $45,691,000 during the year ended December 31, 2000
compared to $44,432,000 for the same period of 1999. The overall increase of
$1,259,000 or 3% is due to increases in labor costs of $840,000, slot
participation expense of $461,000, gaming taxes of $200,000, marketing costs
(excluding bussing) of $1,042,000, and repair and maintenance on the facility of
$176,000. Increased expenses were offset by a reduction in bus program costs of
$1,158,000, food and beverage cost of sales of $227,000, net returned check
expense after collections of $65,000, and other net expenses of $10,000.

EBITDA

         When The Lodge's costs and expenses are subtracted from net revenues,
the result is EBITDA and Minority Interest of $16,040,000 for the year ended
December 31, 2000 compared to $15,437,000 for the same period of 1999. The
increase in EBITDA of $603,000 or 4% is primarily the result of increased casino
revenues offset by the increase in related expenses.

INTEREST INCOME

         The Lodge's interest income totaled $183,000 for the year ended
December 31, 2000 compared to $158,000 for the same period of 1999 due primarily
to increased cash balances earning interest.

INTEREST EXPENSE

         Interest expense at The Lodge was $2,617,000 for the year ended
December 31, 2000 compared to $3,459,000 for the same period of 1999. The
decrease of $842,000 or 24% is primarily the result of paying down our Lodge
debt levels by approximately $5,589,000 at various times during the year.

                                       34
<PAGE>   37

DEPRECIATION AND AMORTIZATION

         Depreciation and amortization expense of The Lodge totaled $3,914,000
for the year ended December 31, 2000 compared to $3,531,000 for the same period
of 1999. The increase of $383,000 or 11% is generally due to an increase in
additions to our fixed assets.

INCOME BEFORE INCOME TAXES

         As a result of the factors discussed above, The Lodge generated income
before income taxes (after eliminating inter-company transactions and before
Minority Interest) of $9,692,000 for the year ended December 31, 2000 compared
to $8,604,000 for the same period of 1999, an increase of $1,088,000 or 13%.

Results of Operations--The Gilpin Hotel Casino

NET REVENUES

         GHC generated net revenues of $24,645,000 during the year ended
December 31, 2000 compared to $26,629,000 for the same period of 1999. The
decrease in the net revenues at GHC of $1,984,000 or 7% is primarily due to a
decrease in casino revenues of $1,919,000 and a net decrease in other combined
net revenues of $65,000. We believe the primary reasons for our decrease in net
revenues at GHC is attributable to the reduction of bussing programs as well as
the opening of larger and newer gaming facilities in the City of Black Hawk,
including The Lodge.

COSTS AND EXPENSES

         GHC's costs and expenses totaled $19,171,000 during the year ended
December 31, 2000 compared to $19,823,000 for the same period of 1999. The
overall decrease of $652,000 or 3% is due to a decrease in gaming taxes of
$730,000, and bus program costs of $630,000, and other net expenses of $30,000.
The overall decrease in expenses was offset by increases in labor costs of
$44,000, food and beverage cost of sales of $43,000, slot participation expense
of $328,000, marketing related costs (excluding bussing) of $282,000, and repair
and maintenance of the facility of $41,000.

EBITDA

         When GHC's costs and expenses are subtracted from net revenues, the
result is EBITDA of $5,474,000 for the year ended December 31, 2000 compared to
$6,806,000 for the same period of 1999. The decrease in EBITDA of $1,333,000 or
20% is primarily the result of a decrease in net revenue at GHC partially offset
by a decrease in gaming taxes and marketing costs.


                                       35
<PAGE>   38

INTEREST INCOME

         GHC's interest income totaled $78,000 for the year ended December 31,
2000 compared to $53,000 for the same period of 1999 due primarily to increased
cash balances earning interest.

INTEREST EXPENSE

         Interest expense at GHC was $806,000 for the year ended December 31,
2000 compared to $1,126,000 for the same period of 1999. The decrease of
$320,000 or 28% is the result of paying down our GHC debt levels by
approximately $4,228,000 at various times since December 31, 1999 as well as
refinancing GHC's fixed rate revolving credit facility with a variable rate
reducing and revolving credit facility.

DEPRECIATION AND AMORTIZATION

         Depreciation and amortization expense of GHC totaled $1,822,000 for the
year ended December 31, 2000 compared to $1,903,000 for the same period of 1999.
The decrease of $81,000 or 4% is generally due to fully depreciated assets
associated with the 1994 GHC expansion.

INCOME BEFORE INCOME TAXES

         As a result of the factors discussed above, GHC generated income before
income taxes of $2,538,000 for the year ended December 31, 2000 compared to
$2,782,000 for the same period of 1999, a decrease of $244,000 or 9%.

Results of Operations--Corporate Overhead

NET REVENUES

         Net revenues generated at our corporate level (after eliminating
inter-company transactions) are primarily derived from interest earned on our
corporate cash balances. Interest income totaled $24,000 for the year ended
December 31, 2000 compared to $34,000 for the same period of 1999.

COSTS AND EXPENSES AND NET CORPORATE OVERHEAD

         Our costs and expenses totaled $2,133,000 for the year ended December
31, 2000 compared to $2,339,000 for the same period of 1999. The decrease of
$206,000 or 9% is primarily due to the reduction in legal expense and claims of
$336,000. This reduction was in part offset by increases in insurance costs of
$42,000, the write-off of $101,000 of costs incurred in the pursuit of potential
new gaming projects and opportunities, and other net expenses of $13,000.

                                       36
<PAGE>   39

DEPRECIATION AND AMORTIZATION

         Depreciation and amortization at the corporate level was $10,000 and
$8,000 for the year ended December 31, 2000 and 1999, respectively.


                                       37
<PAGE>   40


                  BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                               Year Ended
                                                               December 31,
                                                   ----------------------------------         Percentage
                                                                                              Increase
                                                      1999                    1998            (Decrease)
                                                      ----                    ----            ----------
<S>                                                <C>                     <C>                      <C>
NET REVENUE
     Lodge                                         $59,867,955             $29,667,596              102%
     GHC                                            26,629,225              19,950,700               33%
     Corporate                                              --                 356,664            (100)%
                                                   -----------             -----------
     Total net revenue                              86,497,180              49,974,960               73%

COSTS AND EXPENSES
     Lodge                                          44,431,198              21,906,766              103%
     GHC                                            19,822,888              14,298,048               39%
     Corporate                                       2,339,417               1,775,222               32%
                                                  ------------           -------------
     Total costs and expenses                       66,593,503              37,980,036               75%

EBITDA
     Lodge                                          15,436,757               7,760,830               99%
     GHC                                             6,806,337               5,652,652               20%
     Corporate                                      (2,339,417)             (1,418,558)              65%
                                                  ------------           -------------
     Total EBITDA                                   19,903,677              11,994,924               66%

Interest income                                       (244,682)               (178,371)              37%
Interest expense                                     4,585,725               2,744,527               67%
Income taxes                                         2,929,000               1,900,088               54%
Depreciation and amortization                        5,443,119               2,638,581              106%
Minority interest in The Lodge                       1,767,717                 469,442              277%
Impairment writedown                                        --                 610,338            (100)%
Other                                                       --                 598,295            (100)%
                                                  -------------          -------------
Net income                                          $5,422,798            $  3,212,024               69%
                                                    ==========            ============

Basic earnings per share                                 $1.32                   $0.80               65%
Diluted earnings per share                               $1.30                   $0.75               73%
</TABLE>



                                       38
<PAGE>   41


RESULTS OF OPERATIONS

         YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR ENDED DECEMBER 31,
1998

NOTES:

         We opened The Lodge and commenced operations on June 24, 1998.

         The operating results of GHC for the year ended December 31, 1998
reflect 100% of the operations of GHC from April 24, 1998 through year end, and
50% of the operations from January 1 through April 23, 1998.

         Preopening expenses of $1,662,000, offset by equity in earnings of
joint venture of $1,018,000 and an extraordinary gain totaling $46,000 have been
classified as "Other" for the calculation of net income for the year ended
December 31, 1998.

         Consolidated Results of Operations-- Black Hawk Gaming & Development
Company, Inc.

         The increase in net income for the year ended December 31, 1999 over
the same period of the prior year resulted almost entirely from the acquisition
of the other half of GHC as well as the opening of The Lodge. Both of these
events occurred during 1998 -- see "Results of Operations--Introduction."
Because of these two events, the comparisons between our 1999 and 1998
consolidated financial statements are difficult; however, the following outlines
the components of our consolidated statement of income for 1999 and attempts to
explain some of the differences as compared to 1998.

NET REVENUES

         We generated net revenues of $86,497,000 during the year ended December
31, 1999. The components of our net revenues (after eliminating inter-company
transactions) consisted of $59,868,000, $26,629,000, and $0 at The Lodge, GHC,
and BHWK, respectively. The vast majority of our revenues are derived from
casino operations. We try to enhance our casino revenues through the offering of
a wide variety of the latest gaming equipment accompanied by an inviting
atmosphere which includes fine dining and an emphasis on customer service.
Additionally, we have 50 hotel rooms at The Lodge which we can offer to our
players, thereby enhancing their visit to the Black Hawk area. There are other
casinos that are currently in the process of adding hotel rooms to their
operations. Our hotel revenues may decline as these new rooms are opened.

COSTS AND EXPENSES

         Our costs and expenses totaled $66,594,000 during the year ended
December 31, 1999. The expenses at The Lodge, GHC and BHWK were $44,431,000,
$19,823,000 and $2,339,000, respectively. While we believe most of our costs and
expenses are in line with our net revenues,



                                       39
<PAGE>   42

the major portion of our expenses lie in the area of salaries, wages, gaming
taxes and marketing costs. During 1999 our total payroll, including benefits, at
The Lodge was $14,426,000, $6,826,000 at the Gilpin and $1,129,000 at our
corporate level; we paid gaming taxes totaling $13,889,000 ($9,932,000 at The
Lodge and $3,957,000 at GHC) and we incurred marketing costs of $12,913,000
($8,323,000 at The Lodge and $4,590,000 at GHC).

EBITDA

         When our total costs and expenses are subtracted from our net revenues
the results is EBITDA of $19,904,000 for the year ended December 31, 1999.
EBITDA at The Lodge and GHC was $15,437,000 and $6,806,000 offset by the net
corporate overhead at BHWK of $2,339,000. Our EBITDA ratio (EBITDA divided by
net revenues) at December 31, 1999 was 23%.

INTEREST INCOME

         We had interest income totaling $245,000 during the year ended December
31, 1999 compared to $178,000 for the same period of 1999. The increase of
$67,000 or 38% is due to an increase in interest earnings at The Lodge and GHC
of $55,000 and $53,000, respectively, offset by a decrease in interest earned at
corporate of $41,000.

INTEREST EXPENSE

         We had interest expense totaling $4,586,000 during the year ended
December 31, 1999. Interest expense at The Lodge and GHC was $3,460,000 and
$1,126,000, respectively. Essentially, our interest expense relates to the debt
that we incurred in order to construct and equip The Lodge as well as to acquire
the other half of GHC. As discussed below, the Company entered into a swap
agreement on $35,000,000 of our total debt. This instrument reduced our exposure
to floating interest rates, and lowered our overall cost of borrowing to
approximately 8.7%.

INCOME TAXES

         Our effective income tax rate for 1999 and 1998 resulted in income tax
expense of $2,929,000 and $1,900,000 for the respective years. The unique tax
characteristics of the individual components of our income before taxes are what
determine our overall effective tax rate.

                                       40
<PAGE>   43

DEPRECIATION AND AMORTIZATION

         Our total depreciation and amortization expense for 1999 was
$5,443,000. Depreciation and amortization at The Lodge, GHC and BHWK was
$3,532,000, $1,903,000 and $8,000, respectively. Depreciation and amortization
primarily relates to buildings, equipment, and intangible assets.

MINORITY INTEREST

         Minority interest for the year ended December 31, 1999 was $1,768,000.
The minority interest is the 25% share of the income of The Lodge that is owned
by affiliates of our chief executive officer.

NET INCOME

         As a result of the factors discussed above, we reported net income for
1999 of $5,423,000. The net income for 1998 was $3,212,000. The reason for the
increase in the net income of $2,211,000 is generally due to the opening of The
Lodge and the acquisition of the other half of GHC as discussed in the
"Introduction to the Results of Operations."

EARNINGS PER SHARE

         We reported basic earnings per share for 1999 and 1998 of $1.32 and
$.80, respectively and diluted earnings per share for 1999 and 1998 of $1.30 and
$.75, respectively. Again, the increase in our earnings per share is generally
due to the opening of The Lodge and the acquisition of the other half of GHC.

Results of operations -- The Lodge Casino

         Our first full year of operations for The Lodge was in 1999. During
1998 The Lodge was open for two quarters. Therefore, drawing practical
comparisons between the operational numbers of 1999 and 1998 is difficult. This
is further complicated by the fact that another casino opened on December 30,
1998 and provided additional competition in the City of Black Hawk.

Results of operations -- The Gilpin Hotel Casino

         We owned 50% of GHC until April 24, 1998, which was the date that we
acquired the other half of GHC. The consolidated financial statements for 1998
contain 100% of the operating results of GHC from April 24, 1998 to the end of
the year. Before April 24, 1998 we recorded our 50% of the income of GHC as
"equity in earnings of joint venture." The following table presents GHC's
operating results for 1999 and 1998 and adjusts 1998 for expenses GHC no longer
incurs. These expenses were related to contracts that we cancelled when we
acquired GHC.

                                       41
<PAGE>   44


                               Gilpin Hotel Casino
                              Statements of Income
                 For the Years Ended December 31, 1999 and 1998

<TABLE>
<CAPTION>
                                                                                                Percentage
                                                                                                 Increase
                                                        1999                    1998            (Decrease)
                                                     -----------           -----------         -----------
<S>                                                   <C>                   <C>                      <C>
Net Revenues                                         $26,629,000           $29,940,000               (11)%
     Less:  Costs and expenses                        19,823,000            22,379,000               (11)%
     Add:  Cancelled contracts                                               1,068,000              (100)%
                                                     -----------           -----------          ----------
EBITDA                                                 6,806,000             8,629,000               (21)%
                                                     -----------           -----------          ----------
Interest income                                          (53,000)              (32,000)                66%
Interest expense                                       1,126,000               911,000                 24%
Depreciation and amortization                          1,903,000             1,538,000                 24%
                                                     -----------           -----------          ----------
Proforma net income                                   $3,830,000            $6,212,000               (38)%
                                                     ===========           ===========          ==========
</TABLE>


NET REVENUES

         GHC generated net revenues of $26,629,000 during 1999 compared to
$29,940,000 for 1998. The decrease in net revenues of $3,311,000 or 11% is
generally attributable to the opening of the larger and newer gaming facilities
in the City of Black Hawk. A small portion of the decline in our net revenues is
due to the elimination of the OTB facility and the poker room, which were not
enhancing GHC's overall operations.

COSTS AND EXPENSES

         GHC's costs and expenses were $19,823,000 for 1999 compared to
$22,379,000 for 1998. The overall decrease of $2,556,000 or 11% is due to the
cancelled contracts resulting from our acquisition of the other half of GHC. We
cancelled contracts totaling $1,068,000 and decreased casino-operating costs by
$1,488,000.

EBITDA

         When GHC's costs and expenses are subtracted from net revenue and the
expense for contracts that were cancelled are added back, the result is EBITDA
of $6,806,000 for 1999 compared to $8,661,000 of EBITDA for 1998. In general,
the decrease in the EBITDA of $1,855,000 or 21% is because of the decrease in
the net revenue of GHC.

                                       42
<PAGE>   45

INTEREST INCOME

         GHC's interest income totaled $53,000 for the year ended December 31,
1999 compared to $32,000 for the same period of 1998 due primarily to increased
cash balances earning interest.

INTEREST EXPENSE

         Interest expense at GHC was $1,126,000 in 1999 compared to $911,000 for
1998. The increase of $215,000 or 24% is due to an increase in our debt when we
acquired the other half of GHC.

DEPRECIATION AND AMORTIZATION

         The depreciation and amortization of GHC was $1,903,000 in 1999
compared to $1,538,000 for 1998. The increase of $365,000 or 24% is a result of
the GHC acquisition.

         GHC's operations have been impacted due to the additional competition
in Black Hawk, which also includes The Lodge. We continually attempt to enhance
GHC's operations, which includes reviewing the overall costs at GHC and
eliminating areas that do not provide a meaningful contribution to our
operations. Our market strategy is to focus on our existing customer base at GHC
while we try to develop marketing programs that increase our new customers. One
of our goals for 2000 is to continue to enhance the overall product we offer at
GHC in order to be responsive to the new and increased competition in the City.

Results of operations - Corporate Overhead

NET REVENUES

         During 1999 we generated no net revenues at the corporate level
compared to $357,000 during 1998. Generally, corporate is not a profit center,
but rather an overhead function, which directs the overall operations of the
Company, including the specific efforts, related to being a public company. The
decrease in net revenues of $357,000 or 100% is due to the discontinuance of
management fees and rents received from GHC of $357,000, which were cancelled
when we bought the other half of GHC.

COSTS AND EXPENSES

         Corporate costs and expenses were $2,339,000 for 1999 compared to
$1,775,000 during 1998. The increase of $564,000 or 32% is primarily related to
increases in labor costs of $225,000, legal costs of $350,000 (including payment
of arbitration claims), which was partially offset by a decrease in other
general and administrative costs of $11,000.

                                       43
<PAGE>   46

Other matters

         RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

         Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" is effective for all fiscal years
beginning after June 15, 2000. SFAS No. 133, as amended and interpreted,
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. All derivatives, whether designated in hedging relationships
or not, will be required to be recorded in the balance sheet at fair value. If
the derivative is designated in a fair-value hedge, the changes in the fair
value of the derivative and the hedged item will be recognized in earnings. If
the derivative is designated in a cash-flow hedge, changes in the fair value of
the derivative will be recorded in other comprehensive income net of taxes, and
will be recognized in the income statement when the hedged item affects
earnings. SFAS No. 133 defines new requirements for designation and
documentation of hedging relationships as well as ongoing effectiveness
assessments in order to use hedge accounting. For a derivative that does not
qualify as a hedge, changes in fair value will be recognized in earnings.

         Effective January 1, 2001, we recorded $368,000 (net of income taxes of
$200,000) as a cumulative transition adjustment to income relating to
derivatives not designated as hedges prior to the adoption of SFAS No. 133.

         In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
No. 101"). SAB No. 101 clarifies existing accounting principles related to
revenue recognition in financial statements. We adopted SAB No. 101 during the
fourth quarter of 2000 and the adoption did not affect our consolidated
financial statements for the year ended December 31, 2000.

Liquidity and capital resources

         Net cash provided by operating activities was $12,951,000 during the
year ended December 31, 2000 compared to net cash provided by operating
activities of $12,010,000 for the same period of 1999.

         Net cash used in investing activities for the year ended December 31,
2000 was $3,512,000. These uses of funds included payments for equipment
additions to our casinos of $2,407,000, acquisition costs related to the Gold
Dust West of $1,196,000 (which included a $500,000 earnest money deposit,
$455,000 paid to the Nevada Gaming Control Board as payments for our licensing
costs, and other costs and expenses, primarily legal totaling approximately
$230,000) and $4,000 in other investing activities. These uses of funds were
partially offset by the proceeds from the sale of equipment totaling $85,000.
Net cash used in investing activities for the twelve-months ended December 31,
1999 was $3,209,000. These uses of funds included payments for equipment
purchases and additions to our casinos totaling $3,261,000. These uses of funds
were partially offset by the proceeds from the sale of equipment totaling
$52,000.



                                       44
<PAGE>   47


         The net cash used in financing activities during the year ended
December 31, 2000 totaled $11,160,000. These uses of funds included payments on
bonds totaling $339,000, payments on long-term debt of $9,478,000 and
distributions to the 25% Minority Interest owner of The Lodge totaling
$1,435,000 and were partially offset by other financing activities of $93,000.
The net cash used in our financing activities during the twelve-months ended
December 31, 1999 totaled $9,449,000. The sources of cash we generated in
financing our activities included proceeds from bonds issued by the Business
Improvement District of $6,000,000, borrowings against GHC's revolving line of
credit of $6,573,000, proceeds from a syndicated bank loan of $47,941,000,
proceeds from the City of Black Hawk for its share of public improvements
totaling $380,000 and other proceeds of $139,000. These various sources of cash
were reduced by payments of $13,168,000 against our debt, payments against GHC's
revolving line of credit of $8,874,000, payments to retire GHC's revolving line
of credit of $12,706,000, payments to retire The Lodge's construction loan of
$32,318,000, payments to refinance debt of $2,222,000 and distributions to the
Minority Interest owner of The Lodge of $1,194,000.

         As of December 31, 2000 we had negative working capital of
approximately $99,000 as compared to working capital of $819,000 at December 31,
1999. The decrease in working capital is due to cash used in the reduction of
Long Term Debt. As of March 16, 2001, we have approximately $15,000,000 of
availability remaining on our syndicated bank line of credit to use for working
capital and/or other corporate purposes.

GOLD DUST WEST CASINO ACQUISITION

         On January 7, 2000, we entered into an agreement to purchase the assets
and operating business of a casino and motel located in Reno, Nevada known as
the Gold Dust West Casino. On December 22, 2000, we obtained the appropriate
Nevada gaming approvals and licensing, and closed on the purchase transaction
January 4, 2001 for $27,195,000 including $695,000 in transaction costs.
Approximately $26,000,000 of the acquisition cost was funded from the amended
reducing and revolving credit facility.

REDUCING AND REVOLVING CREDIT FACILITY

         On December 21, 2000, we entered into the first amendment to our
existing reducing and revolving credit facility with an effective date of
January 4, 2001 (the acquisition date of the assets and operating business of
the Gold Dust West Casino). The first amendment to our credit agreement
increased the aggregate reducing and revolving credit facility to $75,000,000
from $65,000,000. Some of the more important terms of the amended credit
agreement are: (i) the facility is a four year reducing commitment in the
aggregate amount of $75,000,000; (ii) the available balance of the facility may
be used for working capital and/or to finance other possible growth
opportunities; (iii) the facility bears interest which is based on either the
prime rate as published by Wells Fargo or the London Interbank Offering Rate



                                       45
<PAGE>   48
("LIBOR") each of which is added to an applicable margin based on our financial
ratios (all of which resulted in a total interest cost of approximately 8.9% at
December 31, 2000). The availability reduction schedule was amended as follows;
two quarterly reductions in availability will commence January 1, 2002 at
$1,875,000 each, the next four quarterly reductions in availability are
$2,812,500 each, with the following four quarterly reductions in availability of
$3,750,000 each until April 16, 2004 when the balance of the facility is due.
The credit agreement contains a number of affirmative and negative covenants
which, among other things, require us to maintain certain financial ratios and
refrain from certain actions without the syndicate group's concurrence; and (vi)
substantially all of our assets, and those of the Gilpin Hotel Venture, GVI, The
Lodge Casino, and Gold Dust West Casino are pledged as security for repayment of
the credit facility. The credit agreement also contains customary events of
default provisions.

         In March 1999, The Lodge closed financing with the Black Hawk Business
Improvement District (BID) and issued bonds in two series with a total principal
balance of $6,000,000. The BID is a quasi-municipal corporation and political
subdivision of the State of Colorado, generally organized for the purpose of
providing financing for public improvements and services benefiting the
commercial properties within the District. The purpose of the bonds was to
finance our costs of various infrastructure improvements made for the benefit of
the city of Black Hawk and The Lodge. We used the proceeds to pay down existing
debt at The Lodge. The bonds carry an interest rate varying between 6.25% and
6.50% and mature at various times up to and including December of 2011.




                                       46
<PAGE>   49


Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
-------  ---------------------------------------------------------

         Our primary exposure to market risks relates to our reducing and
revolving credit facility, which is variable rate debt. We are exposed to
interest rate risk on this debt, which totaled approximately $60.4 million at
February 28, 2001. If market interest rates increase, our cash requirements for
interest would also increase. Conversely, if market interest rates decrease, our
cash requirements for interest would decrease.

         At February 28, 2001 we had partially hedged the exposure discussed
above to interest rate risk by participating in an interest rate swap, under
which we receive a variable interest payment and pay a fixed interest payment on
a notional amount of $50 million. This has reduced our exposure to interest rate
risk to approximately $10.4 million of debt not hedged with the interest rate
swap.

         After considering the impact of the interest rate swap agreement there
would be no additional annual cash requirements for interest should market rates
increase or decrease by 10% compared to the interest rate levels at December 31,
2000.

         The annual increase or decrease in cash requirements for interest,
after considering the impact of the interest rate swap agreement, should market
rates increase or decrease by 10% compared to the interest rate levels at
February 28, 2001, would be approximately $52,000.


                                       47
<PAGE>   50


Item 8.  Financial Statements and Supplementary Data.
------   -------------------------------------------

         See pages F-1 through F-23 attached hereto.


Item 9.  Changes In and Disagreements With Accountants on Accounting and
------   ---------------------------------------------------------------
         Financial Disclosure.
         ---------------------
                                 NOT APPLICABLE


                                       48
<PAGE>   51

INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of
   Black Hawk Gaming & Development Company, Inc.
Black Hawk, Colorado

We have audited the accompanying consolidated balance sheets of Black Hawk
Gaming & Development Company, Inc. and subsidiaries as of December 31, 2000 and
1999, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Black Hawk Gaming & Development
Company, Inc. and subsidiaries as of December 31, 2000 and 1999, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States of America.

As discussed in Note 16 to the consolidated financial statements, on February
26, 2001, Black Hawk Gaming & Development Company, Inc.'s largest stockholder
made an offer to acquire all of the outstanding shares of the company that he
does not already own.





Denver, Colorado
March 27, 2001



<PAGE>   52



BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

ASSETS                                                                           2000                      1999
-------                                                                          ----                      ----
<S>                                                                         <C>                      <C>
CURRENT ASSETS:
  Cash and cash equivalents                                                 $  8,518,464             $  10,239,735
  Accounts receivable                                                            740,804                   190,044
  Inventories                                                                    535,231                   557,182
  Prepaid expenses                                                               671,546                   699,899
  Deferred income tax                                                            440,470                   417,323
                                                                            ------------             -------------
      Total current assets                                                    10,906,515                12,104,183

LAND                                                                          15,239,426                15,235,092

GAMING FACILITIES:
  Building and improvements                                                   58,283,231                58,098,219
  Equipment                                                                   18,487,936                17,342,370
  Accumulated depreciation                                                   (14,134,293)              (10,310,295)
                                                                            ------------             -------------
     Total gaming facilities                                                  62,636,874                65,130,294

OTHER ASSETS:
  Goodwill, net of accumulated amortization of $1,369,615 and
     $931,729 for 2000 and 1999, respectively                                  5,374,461                 5,812,347
  Other assets                                                                 3,318,973                 2,724,609
  Deferred income tax                                                                                       73,417
                                                                            ------------             -------------
TOTAL                                                                       $ 97,476,249             $ 101,079,942
                                                                            ============             =============
</TABLE>
                                                                   (Continued)

                                     F - 2


<PAGE>   53




BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
------------------------------------------------------------------------------
<TABLE>
<CAPTION>


LIABILITIES AND STOCKHOLDERS' EQUITY                                             2000                      1999
------------------------------------                                             ----                      ----
<S>                                                                         <C>                       <C>
CURRENT LIABILITIES:
  Accounts payable and accrued expenses                                     $  5,320,255              $  6,130,085
  Accrued payroll                                                                760,297                   705,178
  Gaming taxes payable                                                         2,673,927                 2,666,749
  Property taxes payable                                                         526,931                   153,715
  Slot club liability                                                            940,655                   891,529
  Current portion of long-term debt                                              783,587                   737,740
                                                                            ------------             -------------
      Total current liabilities                                               11,005,652                11,284,996

LONG-TERM DEBT AND OTHER LIABILITIES:
  Reducing and revolving credit facility                                      29,900,000                39,000,000
  Bonds payable                                                                5,298,624                 5,645,000
  GHV revolving line of credit and other                                                                   416,860
                                                                            ------------             -------------
      Total long-term debt                                                    35,198,624                45,061,860

  Deferred income tax liability                                                  469,920                   119,248
                                                                            ------------             -------------
      Total liabilities                                                       46,674,196                56,466,104
                                                                            ------------             -------------
COMMITMENTS AND CONTINGENCIES

MINORITY INTEREST                                                              8,739,694                 8,115,287


STOCKHOLDERS' EQUITY:
  Preferred stock; $.001 par value; 10,000,000 shares authorized;
    none issued and outstanding
  Common stock; $.001 par value; 40,000,000 shares authorized;
    4,126,757 and 4,110,209 shares issued and outstanding, respectively            4,127                     4,110
  Additional paid-in capital                                                  18,569,538                18,466,705
  Retained earnings                                                           23,488,694                18,027,736
                                                                            ------------             -------------
        Total stockholders' equity                                            42,062,359                36,498,551
                                                                            ------------             -------------
TOTAL                                                                       $ 97,476,249             $ 101,079,942
                                                                            ============             =============
</TABLE>

See notes to consolidated financial statements.                      (Concluded)



                                     F - 3
<PAGE>   54




BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.

CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>


                                                                            2000                   1999                  1998
                                                                            ----                   ----                  ----
<S>                                                                      <C>                    <C>                  <C>
REVENUES:
  Casino revenue                                                         $ 81,987,862           $81,902,996          $ 47,116,406
  Food and beverage revenue                                                 9,152,795             8,827,171             5,914,804
  Hotel revenue                                                             1,047,558             1,106,287               363,381
  Other                                                                       744,190               740,369                46,156
  Gilpin Hotel Venture - management fees
    and rental income                                                                                                     342,385
                                                                         ------------           -----------          ------------
      Total revenues                                                       92,932,405            92,576,823            53,783,132
      Promotional allowances                                                6,556,640             6,079,643             3,808,172
                                                                         ------------           -----------          ------------
      Net revenues                                                         86,375,765            86,497,180            49,974,960
                                                                         ------------           -----------          ------------
COSTS AND EXPENSES:
  Casino operations                                                        26,014,337            25,260,708            15,553,942
  Food and beverage operations                                              8,210,397             8,624,562             5,338,311
  Hotel operations                                                            469,011               416,642               315,388
  Marketing, general and administrative                                    32,301,234            32,291,591            16,772,394
  Depreciation and amortization                                             5,746,136             5,443,119             2,638,581
  Pre-opening                                                                                                           1,662,275
  Impairment writedown                                                                                                    610,338
                                                                         ------------           -----------          ------------
      Total costs and expenses                                             72,741,115            72,036,622            42,891,229
                                                                         ------------           -----------          ------------
OPERATING INCOME                                                           13,634,650            14,460,558             7,083,731

  Interest income                                                             285,255               244,682               178,371
  Interest expense                                                         (3,423,609)           (4,585,725)           (2,744,529)
                                                                         ------------           -----------          ------------
INCOME BEFORE MINORITY INTEREST,
  EQUITY IN EARNINGS OF JOINT VENTURE,
  INCOME TAXES AND EXTRAORDINARY
  ITEM                                                                     10,496,296            10,119,515             4,517,573

MINORITY INTEREST                                                          (2,059,744)           (1,767,717)             (469,442)

EQUITY IN EARNINGS OF JOINT VENTURE                                                                                     1,017,789
                                                                         ------------           -----------          ------------
INCOME BEFORE INCOME TAXES AND
  EXTRAORDINARY ITEM                                                        8,436,552             8,351,798             5,065,920
</TABLE>

                                                                    (Continued)



                                     F - 4
<PAGE>   55



BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.

CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                               2000                        1999                  1998
                                                               ----                        ----                  ----
<S>                                                         <C>                         <C>                    <C>
PROVISION FOR INCOME TAXES:
  Current                                                   $ 2,574,652                 $ 2,696,104            $ 2,249,999
  Deferred                                                      400,942                     232,896               (349,911)
                                                            -----------                 -----------            -----------
                                                              2,975,594                   2,929,000              1,900,088
                                                            -----------                 -----------            -----------

INCOME BEFORE EXTRA-
  ORDINARY ITEM                                               5,460,958                   5,422,798              3,165,832

EXTRAORDINARY ITEM - EARLY
  RETIREMENT OF DEBT, NET OF
  INCOME TAXES OF $27,129                                                                                           46,192
                                                            -----------                 -----------            -----------
NET INCOME                                                  $ 5,460,958                 $ 5,422,798            $ 3,212,024
                                                            ===========                 ===========            ===========

BASIC EARNINGS PER SHARE:
  Income before extraordinary item                          $      1.33                 $      1.32            $      0.79
  Extraordinary item                                                                                                  0.01
                                                            -----------                 -----------            -----------
    Basic earnings per share                                $      1.33                 $      1.32            $      0.80
                                                            ===========                 ===========            ===========
DILUTED EARNINGS PER SHARE:
  Income before extraordinary item                          $      1.31                 $      1.30            $      0.74
  Extraordinary item                                                                                                  0.01
                                                            -----------                 -----------            -----------
   Diluted earnings per share                               $      1.31                 $      1.30            $      0.75
                                                            ===========                 ===========            ===========
</TABLE>

See notes to consolidated financial statements.                    (Concluded)


                                     F - 5

<PAGE>   56




BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                          COMMON STOCK                 ADDITIONAL
                                  ---------------------------            PAID-IN               RETAINED
                                     SHARES            AMOUNT            CAPITAL               EARNINGS                TOTAL
                                  ------------         ------          ----------             ---------               -------
<S>                                 <C>               <C>             <C>                    <C>                    <C>
BALANCES,
  JANUARY 1, 1998                   3,947,496         $ 3,947         $17,194,575            $ 9,392,914            $26,591,436
  Stock issued for
    compensation                        1,284              1               16,250                                        16,251
  Sale of shares,  net
    of issuance costs                 138,566            139              894,494                                       894,633
  Compensation under non-
    qualified stock options                                               111,066                                       111,066
  Net income                                                                                   3,212,024              3,212,024
                                    ----------         ------          ----------             ----------             ----------
BALANCES,
  DECEMBER 31, 1998                  4,087,346          4,087          18,216,385             12,604,938             30,825,410
  Exercise of stock options             22,863             23             139,252                                       139,275
  Compensation under non-
    qualified stock options                                               111,068                                       111,068
  Net income                                                                                   5,422,798              5,422,798
                                    ----------         ------          ----------             ----------             ----------
BALANCES,
  DECEMBER 31, 1999                  4,110,209          4,110          18,466,705             18,027,736             36,498,551
  Stock issued for
    compensation                         1,548              2               9,998                                        10,000
  Exercise of stock options             15,000             15              92,835                                        92,850
  Net income                                                                                   5,460,958              5,460,958
                                    ----------         ------          ----------             ----------             ----------

BALANCES,
  DECEMBER 31, 2000                  4,126,757        $ 4,127         $18,569,538            $23,488,694            $42,062,359
                                    ==========        =======         ===========            ===========            ===========
</TABLE>

See notes to consolidated financial statements.


                                     F - 6

<PAGE>   57

BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
------------------------------------------------------------------------------
<TABLE>
<CAPTION>


                                                                           2000                 1999                 1998
                                                                           ----                 ----                 ----
<S>                                                                    <C>                  <C>                  <C>
OPERATING ACTIVITIES:
  Net income                                                           $ 5,460,958          $ 5,422,798          $ 3,212,024
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Equity in earnings of joint venture                                                                           (675,405)
      Depreciation and amortization                                      5,746,136            5,443,119            2,638,581
      Minority interest                                                  2,059,744            1,767,717              469,442
      Loss (gain) on sale of equipment                                     146,535               85,185              (12,766)
      Gain on sale of land                                                                                           (14,280)
      Gain on early retirement of debt                                                                               (73,321)
      Noncash compensation                                                  12,500              121,068              127,317
      Deferred taxes                                                       400,942              232,896             (349,911)
      Impairment writedown                                                                                           610,338
  Changes in operating assets and liabilities:
    Accounts receivable                                                   (550,760)             (25,967)               8,333
    Inventories                                                             21,951               (2,689)            (384,030)
    Prepaid expenses and other assets                                      (21,999)          (2,533,117)            (464,250)
    Accounts payable, accrued expenses and other
      current liabilities                                                 (325,191)           1,498,983            6,811,660
                                                                       -----------          -----------          -----------
           Net cash provided by operating activities                    12,950,816           12,009,993           11,903,732
                                                                       -----------          -----------          -----------
INVESTING ACTIVITIES:
  Construction and equipping of gaming facility                         (2,407,334)          (3,260,592)         (30,647,641)
  Distributions from joint venture                                                                                 1,168,407
  Purchase of joint venture interest and land                                                                    (10,000,000)
  Cash acquired in joint venture acquisition                                                                       1,726,062
  Investment in St. Croix gaming project                                                                            (606,388)
  Proceeds from the sale of land, net of costs to sel                                                                593,329
  Acquisition costs related to Gold Dust West                             (696,411)
  Deposit related to Gold Dust West                                       (500,000)
  Other                                                                     91,534               51,519               70,013
                                                                       -----------          -----------          -----------
           Net cash used in investing activities                        (3,512,211)          (3,209,073)         (37,696,218)
                                                                       -----------          -----------          -----------
</TABLE>
                                                                    (Continued)



                                     F - 7
<PAGE>   58




BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                           2000                 1999                 1998
                                                                           ----                 ----                 ----
<S>                                                                    <C>                  <C>                  <C>
FINANCING ACTIVITIES:
  Proceeds from construction loan                                                                                $23,292,891
  Proceeds from GHC revolving line of credit                                                $ 6,573,122           26,583,076
  Proceeds from bonds                                                                         6,000,000
  Proceeds from reducing and revolving credit facility                                       47,940,534
  Proceeds from sale of common shares, net of issuance
    costs                                                                                                            894,633
  Proceeds from the City of Black Hawk for public
    improvements                                                                                380,000
  Minority interest contributions to majority owned
    subsidiary                                                                                                       617,393
  Payments on bonds                                                    $  (339,137)
  Payment to retire construction loan                                                       (32,317,500)
  Payment to retire GHC revolving line of credit                                            (12,706,000)
  Payment to refinance pre-existing debt                                                     (2,222,015)
  Payments on long-term debt and GHC revolving line
    of credit                                                             (378,252)          (8,874,275)         (15,223,179)
  Payments on reducing and revolving credit facility                    (9,100,000)         (13,167,977)
  Distributions to minority interest owner                              (1,435,337)          (1,193,951)            (250,000)
  Payment on notes payable to shareholders                                                                          (300,000)
  Exercise of stock options                                                 92,850              139,275
                                                                       -----------         ------------          -----------
           Net cash (used in) provided by financing activities         (11,159,876)          (9,448,787)          35,614,814
                                                                       -----------         ------------          -----------
NET (DECREASE) INCREASE IN CASH
  AND CASH EQUIVALENTS                                                  (1,721,271)            (647,867)           9,822,328

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                            10,239,735           10,887,602            1,065,274
                                                                       -----------         ------------          -----------
CASH AND CASH EQUIVALENTS, END OF YEAR                                 $ 8,518,464          $10,239,735          $10,887,602
                                                                       ===========         ============          ===========

SUPPLEMENTAL CASH FLOW INFORMATION:
  Cash paid for interest, net of amounts capitalized of
   $1,333,218 during 1998                                              $ 3,392,236          $ 4,550,322          $ 1,864,395
                                                                       ===========         ============          ===========
  Cash paid for income taxes                                           $ 2,893,334          $ 2,453,299          $ 2,566,876
                                                                       ===========         ============          ===========
</TABLE>


See notes to consolidated financial statements.                     (Concluded)


                                     F - 8

<PAGE>   59
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
-------------------------------------------------------------------------------


1.    BUSINESS

      Black Hawk Gaming & Development Company, Inc. and subsidiaries (the
      Company) is an owner, developer and operator of gaming properties in Black
      Hawk, Colorado. Through April 23, 1998, the Company owned a 50% interest
      in the Gilpin Hotel Venture (GHV), which owned the Gilpin Hotel Casino,
      which the Company developed and has managed since 1992. On April 24, 1998,
      the Company acquired the other 50% interest in GHV and related land for
      $10 million (see Note 3). In November 1996, the Company entered into an
      Amended and Restated Purchase Agreement and an Operating Agreement to form
      Black Hawk/Jacobs Entertainment LLC (the LLC) for the purpose of
      developing and managing a casino/hotel/parking complex in Black Hawk,
      Colorado, The Lodge Casino at Black Hawk (the Lodge). During the second
      quarter of 1998, the Company completed the development of the casino
      portion of the Lodge, which opened for business on June 24, 1998. On
      August 17, 1998, the hotel portion of the project opened and on November
      6, 1998, the parking garage opened. The total cost of the
      casino/hotel/parking complex was approximately $74 million (see Note 4).

2.    SIGNIFICANT ACCOUNTING POLICIES

      CONSOLIDATION - The accompanying consolidated balance sheets as of
      December 31, 2000 and 1999, and the related consolidated statements of
      income, stockholders' equity, and cash flows for each of the three years
      in the period ended December 31, 2000, include the accounts of the
      Company, its 75% share of the LLC, and beginning on April 24, 1998, the
      Company's 100% ownership interest in the GHV. All inter-company
      transactions and balances have been eliminated in consolidation. Prior to
      April 24, 1998, the Company accounted for its 50% interest in GHV under
      the equity method of accounting and, accordingly, all inter-company
      transactions between the Company and GHV have been eliminated to the
      extent of the Company's 50% ownership in GHV prior to April 24, 1998.

      CASH EQUIVALENTS - The Company considers all highly liquid investments
      purchased with a maturity of three months or less to be cash equivalents.

      INVENTORY - Inventory consists of food and beverages, chips and tokens and
      uniforms and are recorded at the lower of cost (first-in, first-out
      method) or market.

      GAMING FACILITIES - Building and improvements and equipment are
      depreciated on the straight-line method over the estimated useful lives of
      the assets (39 years for building and improvements, and 5 to 7 years for
      equipment). Costs of major improvements are capitalized, while costs of
      normal repairs and maintenance are charged to expense as incurred. Gains
      or losses on disposal of assets are recognized as incurred.

      GOODWILL - Goodwill represents the excess purchase price over the fair
      value of the net identifiable assets acquired related to the Company's
      acquisition of the 50% interest in GHV and related land, plus the
      Company's 50% share of pre-existing goodwill of GHV. Amortization of
      goodwill is provided using the straight-line method over 15 years.

      DEBT ISSUE COSTS - Debt issue costs are capitalized and amortized, using
      the straight line method (which approximates the effective interest
      method), over the life of the related loan.

                                     F - 9

<PAGE>   60

      SLOT CLUB LIABILITY - The Company's casinos have slot clubs for their
      preferred players who may insert a special card into slot and video poker
      machines while playing in the Company's casinos to earn "points." Based on
      their point totals, members receive various cash and gift prizes. The
      Company accrues the cost of points as they are earned by the members of
      the respective slot clubs.

      OUTSTANDING GAMING CHIP AND TOKEN LIABILITY - When customers exchange cash
      for gaming chips and tokens, the Company has a liability as long as those
      chips and tokens are not redeemed or won by the house. That liability is
      established by determining the difference between the total chips and
      tokens placed in service and the actual inventory of chips and tokens in
      custody or under the control of the casinos. The chip and token liability
      is adjusted periodically to reflect an estimate of chips and tokens that
      will never be redeemed, such as chips and tokens that have been lost or
      taken as souvenirs.

      CASINO REVENUES - Casino revenues are the net winnings from gaming
      activities, which is the difference between gaming wins and losses.

      HOTEL, FOOD AND BEVERAGE, INTEREST AND OTHER REVENUE - The Company
      recognizes hotel, food and beverage and other revenue at the time that
      goods or services are provided. Interest revenue is recognized when
      earned.

      PROMOTIONAL ALLOWANCES - Gross revenues include the retail amount of hotel
      and food and beverages provided gratuitously to customers, which amounted
      to $6,556,640, $6,079,643 and $3,808,172 for the years ended December 31,
      2000, 1999 and 1998, respectively. When computing net revenues, the retail
      amount of hotel and food and beverages gratuitously provided to customers
      is deducted from gross revenues as promotional allowances. The estimated
      cost of such complimentary services is charged to casino operations and
      was $3,273,000, $3,123,000 and $2,370,000 for the years ended December 31,
      2000, 1999 and 1998, respectively.

      INCOME TAXES - The Company accounts for income taxes in accordance with
      Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting
      for Income Taxes." SFAS No. 109 requires recognition of deferred tax
      assets and liabilities for the expected future tax consequences of events
      that have been included in the financial statements or tax returns.
      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.

      LONG-LIVED ASSETS - The Company periodically evaluates the value of
      long-lived assets, including goodwill, for potential impairment. If an
      impairment is indicated, based on estimated undiscounted future cash flows
      that are less than the carrying value of the asset, such impaired assets
      are written down to their estimated fair value. As of December 31, 2000
      and 1999, management determined that there was no impairment of the
      Company's long-lived assets. See Note 13 for discussion of the impairment
      losses recorded during 1998.

      MINORITY INTEREST - The Company records minority interest which reflects
      the portion of the earnings of the LLC which are applicable to the
      minority interest owners of the LLC.

      CAPITALIZED INTEREST - The Company began capitalizing interest expense in
      1996 due to the construction of the Lodge casino/hotel/parking complex.
      Total interest expense incurred during the years ended December 31, 2000,
      1999 and 1998 was approximately $3,424,000, $4,586,000, and $4,078,000,
      respectively. Interest capitalized during the years ended December 31,
      2000, 1999 and 1998 totaled approximately $0, $0, and $1,333,000,
      respectively.

                                     F - 10

<PAGE>   61

      STOCK ISSUED FOR SERVICES - Common stock was issued, or accrued for
      issuance, to directors in 2000, 1999, and 1998 for services, and was
      valued at the market value as of the date awarded. Included in marketing,
      general and administrative expenses in the consolidated statements of
      income for the years ended December 31, 2000, 1999 and 1998 is $12,500,
      $10,000 and $16,251, respectively, of expenses related to stock issued or
      accrued for services.

      EMPLOYEE STOCK COMPENSATION PLANS - The Company uses the intrinsic value
      method to account for stock options and similar stock-based employee
      compensation plans. The exercise price of stock options issued to
      employees equals the market price of the stock on the measurement date,
      and therefore, the Company does not record compensation expense on stock
      options granted to employees. Options granted to non-employees are valued
      at estimated fair value and charged to operations as earned. See Note 9
      for discussion of the Company's stock options plans.

      EARNINGS PER SHARE - The Company follows the provisions of SFAS No. 128,
      "Earnings Per Share," in calculating basic and diluted earnings per share.
      Basic earnings per share considers only outstanding common stock in the
      computation. Diluted earnings per share gives effect to all potentially
      dilutive securities.

      OPERATING SEGMENTS - Management considers the Company's business to
      presently comprise a single operating segment, as that term is defined by
      SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
      Information." Through December 31, 2000, all of the Company's gaming
      operations were concentrated in Black Hawk, Colorado (see Note 15).

      DERIVATIVE FINANCIAL INSTRUMENTS - The Company is party to an interest
      rate swap agreement, the purpose of which is to manage the Company's
      exposure to fluctuations in interest rates. The Company does not enter
      into derivative transactions for trading purposes. The interest rate swap
      is used to convert the interest rate on its Wells Fargo Bank debt from a
      floating rate to a fixed rate. Net amounts owed or receivable under the
      swap are included in interest expense (see Note 6).

      Although derivative financial instruments taken alone may expose the
      Company to varying degrees of market and credit risk in excess of amounts
      recognized in the financial statements, when used for hedging purposes,
      these instruments typically reduce overall interest rate risk. The Company
      controls the credit risk of its financial contracts through credit
      approvals, limits, and monitoring procedures. As the Company enters into
      derivative transactions only with high quality institutions, no losses
      associated with non-performance on its derivative financial instrument
      have occurred or are expected to occur.

      Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
      for Derivative Instruments and Hedging Activities," is effective for all
      fiscal years beginning after June 15, 2000. SFAS No. 133, as amended and
      interpreted, establishes accounting and reporting standards for derivative
      instruments, including certain derivative instruments embedded in other
      contracts, and for hedging activities. All derivatives, whether designated
      in hedging relationships or not, will be required to be recorded on the
      balance sheet at fair value. If the derivative is designated in a
      fair-value hedge, the changes in the fair value of the derivative and the
      hedged item will be recognized in earnings. If the derivative is
      designated in a cash-flow hedge, changes in the fair value of the
      derivative will be recorded in other comprehensive income net of taxes,
      and will be recognized in the income statement when the hedged item
      affects earnings. SFAS No. 133 defines new requirements for designation
      and documentation of hedging relationships as well as ongoing
      effectiveness assessments in order to use hedge accounting. For a
      derivative that does not qualify as a hedge, changes in fair value will be
      recognized in earnings.



                                     F - 11
<PAGE>   62


      Effective January 1, 2001, the Company recorded $368,000 gain (net of
      income taxes of $200,000) as a cumulative transition adjustment to income
      relating to derivatives not designated as hedges prior to the adoption of
      SFAS No. 133.

      USE OF ESTIMATES - The preparation of financial statements in accordance
      with accounting principles generally accepted in the United States of
      America requires management to make estimates and assumptions that affect
      the reported amounts of assets and liabilities and disclosure of
      contingent assets and liabilities at the date of the financial statements
      and the reported amounts of revenues and expenses during the reporting
      periods. Significant estimates used by the Company include the estimated
      useful lives for depreciable and amortizable assets and estimated cash
      flows in assessing the recoverability of long-lived assets. Actual results
      could differ from those estimates.

      RECLASSIFICATIONS - Certain reclassifications have been made in the 1998
      and 1999 financial statements to conform to the classifications used in
      2000. These reclassifications had no effect on the Company's financial
      position or net income.

      RECENTLY ISSUED ACCOUNTING STANDARDS - In December 1999, the Securities
      and Exchange Commission issued Staff Accounting Bulletin No. 101, "Revenue
      Recognition in Financial Statements" ("SAB No. 101"). SAB No. 101
      clarifies existing accounting principles related to revenue recognition in
      financial statements. The Company adopted SAB No. 101 during the fourth
      quarter of 2000 and the adoption did not affect the Company's consolidated
      financial statements for the year ended December 31, 2000.

3.    GILPIN HOTEL VENTURE

      In May 1991, the Company entered into an agreement to purchase a one-half
      interest in undeveloped land and an historic hotel property known as the
      Gilpin Hotel, both located in Black Hawk, Colorado. Simultaneously, the
      Company entered into a joint venture agreement (the Agreement) to form GHV
      with Gilpin Ventures, Inc. (GVI), the owners of the remaining one-half
      interest in the properties, for the purpose of developing and operating a
      limited-stakes gaming and restaurant facility, the Gilpin Hotel Casino
      (the Gilpin). The Gilpin opened for business in October 1992. Each party
      owned 50% of GHV. Under the terms of the Agreement, the Company was the
      manager of the joint venture.

      Through April 23, 1998, the land and improvements were leased by GHV from
      the Company and an affiliate of GVI for a fee, as defined in the
      Agreement, and the Company operated the Gilpin facility for a fee pursuant
      to a management agreement. In addition, the Company charged GHV a monthly
      fee for the use of land owned by the Company for parking for the benefit
      of casino customers. The Company's equity in earnings of GHV as reflected
      in the statements of income for the period January 1, 1998 to April 23,
      1998 has been adjusted for elimination of the Company's share of fees and
      rentals it received from GHV.

      On April 24, 1998, the Company acquired the other 50% interest in GHV and
      related land for $10,000,000. The Company borrowed $10,000,000 under a
      $20,000,000 revolving line of credit with Wells Fargo Bank to finance the
      acquisition. The acquisition has been accounted for by the Company under
      the purchase method of accounting and, accordingly, GHV's results of
      operations subsequent to April 23, 1998, are included in the accompanying
      financial statements.

                                     F - 12

<PAGE>   63

      The Company obtained an appraisal of the assets of GHV at the date of
      acquisition and the purchase price has been allocated accordingly. The
      total purchase price, including $429,000 of transaction costs, was
      allocated to the 50% interest in GHV as follows:

<TABLE>

<S>                                                            <C>
      Cash                                                  $    863,000
      Land                                                     3,900,000
      Building, furniture, fixtures and equipment              3,430,000
      Other assets                                               329,000
      Goodwill                                                 5,224,000
      Notes payable and other liabilities                     (3,317,000)
                                                            ------------
      Total purchase price                                  $ 10,429,000
                                                            ============
</TABLE>


      The Company recorded as additional goodwill the excess of its
      pre-acquisition investment in GHV over its proportionate share of GHV
      pre-acquisition net equity.

      Summarized income statement information of GHV for the period January 1,
      1998, through April 23, 1998, during which GHV was accounted for under the
      equity method, is as follows:
<TABLE>

<S>                                                       <C>
      Net revenues                                        $ 9,948,008
      Operating costs                                      (5,252,437)
      Marketing, general and administrative expenses       (2,828,288)
      Depreciation and amortization                          (366,731)
      Interest                                               (149,743)
                                                          -----------
      Net income                                          $ 1,350,809
                                                          ===========
</TABLE>
      Pro forma financial information for the Company, assuming the acquisition
      had occurred on January 1, 1998, is as follows:
<TABLE>

<S>                                               <C>
      Net revenues                                $ 59,759,000

      Net income                                  $  3,856,000

      Earnings per share:
      Basic                                       $       0.96
      Diluted                                     $       0.91

</TABLE>

4.    BLACK HAWK/JACOBS ENTERTAINMENT LLC

      In December 1994, the Company signed a joint venture agreement with Jacobs
      Entertainment, Inc. (Jacobs) of Cleveland, Ohio, to develop a major
      casino/hotel/parking structure complex in Black Hawk, Colorado, named The
      Lodge Casino at Black Hawk. Construction of the 250,000 square foot
      project began in January 1997. The casino portion of the project was
      completed and opened for business on June 24, 1998. As a result of the
      refinements during the development process, it was decided to incorporate
      a three-story overflow parking structure into the Lodge project. Two
      stories of the overflow parking structure provide parking for the Lodge
      and the third-story of the structure provides parking for the Gilpin Hotel
      Casino. The hotel portion of the project and the garage were completed
      during August 1998 and November 1998, respectively.

                                     F - 13
<PAGE>   64

      On November 12, 1996, the Company entered into an agreement with
      Diversified Opportunities Group, Inc. (Diversified) and BH Entertainment
      Ltd. (BH) (both affiliates of Jacobs) whereby Diversified, BH and the
      Company created the LLC in which the Company is a 75% member and the
      Jacobs' affiliates are a 25% member. Under the agreement, the Company and
      Diversified are joint managers of the LLC. In connection with the
      formation of the LLC, Diversified provided debt and equity financing to
      the Company.

5.    LONG-TERM DEBT

      Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>

                                                                                            2000          1999
                                                                                            ----          ----
<S>                                                                                    <C>             <C>
      Reducing and revolving credit facility; a four year reducing and revolving
        facility totaling $65 million; interest accrues at either the prime rate
        published by Wells Fargo Bank or the LIBOR rate plus an applicable margin based
        upon financial ratios maintained by the Company (approximately 8.94% for the
        quarter ended December 31, 2000); four quarterly reductions in availability
        commenced July 2000 at $1,300,000 each, the next four quarterly reductions in
        availability commencing July 2001 of $2,750,000 each, with the following four
        quarterly reductions in availability commencing July 2002 of $3,250,000 each,
        until July 2003 when the balance of the facility is due. Substantially all of
        the assets of the Company, GHC and the LLC are pledged as
        collateral under the facility                                                  $29,900,000     $39,000,000

      Bonds payable; issued in two series with interest payments varying between 6.25%
        and 6.50%; principal and interest payments approximating $360,000 are due
        semi-annually beginning in June 2000 continuing until December 2011; secured by
        the street and other infrastructure improvements made by the LLC                 5,660,863       6,000,000

      Note payable; payments of $40,863, including principal and interest at 11.66%
        per annum due monthly through 2001, when the remaining principal and interest
        balance is due; secured by GHV equipment                                           420,910         799,162


      Other                                                                                    438             438
                                                                                       -----------     -----------
                                                                                        35,982,211      45,799,600
      Less current portion                                                                 783,587         737,740
                                                                                       -----------     -----------
      Total                                                                            $35,198,624     $45,061,860
                                                                                       ===========     ===========
</TABLE>

      During 1999, the Company entered into a four-year reducing and revolving
      credit facility providing for maximum borrowings of $65,000,000. The
      reducing and revolving facility replaced a revolving credit facility,
      which had maximum borrowings of $20,000,000 and a construction credit
      facility, which provided for maximum borrowings of $40,000,000. The
      reducing and revolving credit facility contains a number of affirmative
      and negative covenants, which among other things require the Company to
      maintain certain financial ratios and refrain from certain actions without
      the approval of the bank syndicate group's concurrence. As of December 31,
      2000, the Company is in compliance with all such debt covenants.

      On December 21, 2000, the Company entered into the first amendment to its
      existing reducing and revolving credit facility with an effective date of
      January 4, 2001, the acquisition date of the assets and operating business
      of the Gold Dust West Casino, Inc. (GDW) (see Note 15). On January 4,
      2001, the Company borrowed $30,500,000 on this credit facility of which
      $27,650,000 was used to fund the acquisition. The first amendment to the
      Company's credit agreement increases the aggregate reducing and revolving
      credit facility to $75,000,000. Debt issue costs of $483,000 were incurred
      on this


                                     F - 14
<PAGE>   65

      transaction and are being amortized over the life of the related debt. In
      addition, the reduction in the amount available under the facility was
      amended as follows: two quarterly reductions in availability will commence
      January 1, 2002 at $1,875,000 each, the next four quarterly reductions in
      availability are $2,812,500 each, with the following four quarterly
      reductions in availability of $3,750,000 each until April 16, 2004 when
      the remaining balance of the facility is due. Substantially all of the
      assets of the Company, GHC, LLC, and GDW are pledged as collateral under
      the facility.

      Scheduled principal payments at are as follows:
<TABLE>
<CAPTION>

                                                        EFFECT OF
                                      AS OF           AMENDMENT AND      NET SCHEDULED
                                   DECEMBER 31,      JANUARY 4, 2001       PRINCIPAL
                                       2000             BORROWING           PAYMENTS
                                   ------------      ---------------     -------------
<S>   <C>                          <C>               <C>                  <C>
      2001                         $   783,587                            $   783,587
      2002                             386,916                                386,916
      2003                          30,313,273       $(22,000,000)          8,313,273
      2004                             441,426         52,500,000          52,941,426
      2005                             471,498                                471,498
      Thereafter                     3,585,511                              3,585,511
                                  ------------       ------------         -----------
      Total                        $35,982,211       $ 30,500,000         $66,482,211
                                   ===========       =============        ===========
</TABLE>

      During 1998, the Company repaid debt of GHV totaling $3,557,595, including
      accrued interest of $62,827, in advance of the due date of the debt which
      resulted in an extraordinary gain of $46,192, net of income taxes of
      $27,129.

6.    DERIVATIVE FINANCIAL INSTRUMENT

      The Company is a party to an interest rate swap agreement with
      off-balance-sheet risk. This derivative financial instrument is used in
      the normal course of business to manage exposure to fluctuations in
      interest rates and involves market risk, as the instrument is subject to
      interest rate fluctuations and, potentially, credit risk. This derivative
      transaction is used to hedge interest rate risk in the Company's variable
      rate debt. The interest rate swap agreement provides that, on a quarterly
      basis, the Company pays a fixed rate of 5.18% on the notional amount of
      $35,000,000 and receives a payment based on LIBOR applied to the notional
      amount. Gains or losses on the interest rate exchange are included in
      interest expense as realized or incurred. As of December 31, 2000, the
      amount of loss the Company would incur if the counterparty failed to
      perform under the agreement would be equal to the net settlement and is
      not material. Neither the counterparty's nor the Company's obligations
      under the agreement are collateralized. The Company manages its exposure
      to credit risk related to the interest rate swap by selecting a
      counterparty with a high credit rating.

      On February 16, 2001, the Company terminated the interest rate swap
      agreement and concurrently entered into an new interest rate swap
      agreement, with the same counterparty, with an initial notional amount of
      $50,000,000 including scheduled reductions of $10,000,000 each at December
      31, 2002 and December 31, 2003 until final maturity on April 16, 2004. The
      new interest rate swap agreement provides that, on a quarterly basis, the
      Company pays a fixed rate of 5.46% on the notional amount of $50,000,000
      and receives a payment based on LIBOR applied to the notional amount. The
      fair value of the interest rate swap upon termination of approximately
      $166,000 was used to pay down the fixed interest rate to be paid by the
      Company.


                                     F - 15
<PAGE>   66
7.    ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

      The following disclosure of estimated fair value of the Company's
      financial instruments has been determined by the Company using available
      market information and generally accepted valuation methodologies.
      However, considerable judgment is required to interpret market data in
      order to develop the estimates of fair value. Accordingly, the estimates
      herein are not necessarily indicative of the amounts the Company could
      realize in a current market exchange. The use of different market
      assumptions and/or estimation methodologies may have a material effect on
      the estimated fair value amounts. The asset (liability) amounts for the
      Company's financial instruments are as follows:

<TABLE>
<CAPTION>
                                            2000                                      1999
                               ---------------------------------        ---------------------------------------------
                                                      ESTIMATED                             ESTIMATED
                                 CARRYING                FAIR              CARRYING            FAIR
                                  AMOUNT                VALUE               AMOUNT            VALUE
                               -------------        -------------       ------------       -----------

<S>                             <C>                <C>                 <C>                <C>
      Liabilities - Debt        $(35,982,000)      $ (35,982,000)      $(45,800,000)      $(45,800,000)

      Off-Balance Sheet -
       Interest Rate Swap
       Agreement                                         568,000                             2,031,000
</TABLE>

      The estimation methodologies utilized by the Company are summarized as
      follows:

      DEBT - The fair value of variable-rate debt is estimated to be equal to
      its carrying amount. The fair value of fixed rate debt is estimated to be
      equal to its carrying amount, based on the prevailing market interest
      rates for debt of similar dollar amount, maturity and risk.

      INTEREST RATE SWAP AGREEMENT - The fair value of the interest rate swap
      agreement was based on the present value of estimated payments that would
      be received by the Company over the term of the swap, based on the forward
      interest rate swap curve as of December 31, 2000 and 1999, respectively.

      The estimated fair value of the Company's other financial instruments,
      such as cash and cash equivalents, accounts receivable and accounts
      payable, have been determined to approximate carrying value based on the
      short-term nature of those financial instruments.

8.    WARRANTS

      The Company issued warrants to purchase shares of common stock to the
      underwriters of its initial public offering. The warrants were exercisable
      at any time during the period of four years commencing May 1994. On May
      12, 1998, the warrants were exercised and 105,598 shares were issued at a
      price of $7.99 per share.

                                     F - 16
<PAGE>   67


9.    STOCK OPTIONS

      The Company currently has two stock option plans: the 1994 Employees'
      Incentive Stock Option Plan (1994 Plan) and the 1996 Incentive Stock
      Option Plan (1996 Plan). The 1994 Plan provides for the grant of incentive
      stock options to officers, directors and employees of the Company for
      300,000 shares of common stock. The 1996 Plan provides for the grant of
      stock options, including incentive stock options and non-qualified stock
      options for 500,000 shares of common stock. At December 31, 2000, there
      were 19,150 shares available for future grants under the 1994 Plan and
      29,300 shares were available for future grants under the 1996 Plan. Stock
      option transactions are summarized as follows:
<TABLE>
<CAPTION>

                                                                                      WEIGHTED
                                                                                       AVERAGE
                                      NUMBER OF                    EXERCISE        EXERCISE PRICE
                                       SHARES                  PRICE PER SHARE        PER SHARE
                                      ---------                ----------------    --------------
<S>                                    <C>                     <C>                     <C>
      Outstanding at
       January 1, 1998                 642,863                 $ 5.63 - $ 6.19         $ 5.79
       Granted                         31,000                  $ 7.75 - $ 8.38         $ 8.35
       Exercised                       (98,000)                $ 5.63 - $ 6.19         $ 6.12
       Forfeited                       (29,950)                $ 5.63 - $ 6.19         $ 6.13

      Outstanding at
       December 31, 1998               545,913                 $ 5.63 - $ 8.38         $ 5.86
       Granted                         93,000                  $ 6.25 - $ 8.38         $ 7.23
       Exercised                       (22,863)                         $ 6.19         $ 6.19
       Forfeited                       (25,750)                $ 5.63 - $ 8.38         $ 5.71

      Outstanding at
       December 31, 1999               590,300                 $ 5.63 - $ 8.38         $ 6.07
       Granted                         45,000                           $ 6.46         $ 6.46
       Exercised                       (15,000)                         $ 6.19         $ 6.19
       Forfeited                       (4,250)                          $ 8.38         $ 8.38

      Outstanding at
       December 31, 2000               616,050                 $ 5.63 - $ 8.38         $ 6.08
</TABLE>

      Options granted under the 1994 Plan generally vest proportionately over
      three years on June 30 following the grant date. Options granted under the
      1996 Plan generally vest proportionately over three years on each of the
      first, second, and third anniversary dates of the grant. The number of
      stock option shares exercisable at December 31, 2000 was 500,383. These
      stock options have a weighted average exercise price of $5.85 per share.

                                     F - 17

<PAGE>   68

      As discussed in Note 2, the Company follows the intrinsic value method to
      account for stock options issued to employees, resulting in no
      compensation expense since options are granted at market price. Had
      compensation cost for the Company's plans been determined based on the
      fair value of the options at the grant date, the Company's net income and
      income per share would have been reduced to the pro forma amounts
      indicated below:
<TABLE>
<CAPTION>

                                                 2000                 1999                  1998
                                                ------               ------                ------
<S>                                            <C>                  <C>                  <C>
       Net income - as reported                $5,460,958           $5,422,798           $3,212,024
       Net income - pro forma                  $5,322,587           $5,233,447           $3,026,556

       Income per share - as reported:
         Basic                                 $     1.33           $     1.32           $     0.80
         Diluted                               $     1.31           $     1.30           $     0.75
       Income per share - pro forma:
         Basic                                 $     1.30           $     1.27           $     0.75
         Diluted                               $     1.28           $     1.25           $     0.71
</TABLE>

      The weighted average fair value of the stock options granted was $4.06 in
      2000, $4.60 in 1999 and $3.79 in 1998. The fair value of each stock option
      granted is estimated on the date of grant using the Black-Scholes option
      pricing model with the following assumptions used for grants in 2000,
      1999, and 1998: risk-free interest rate of 5.11%, 5.50%, and 5.50%,
      respectively; expected dividend yield of 0%; expected life of three years;
      and expected volatility of 124.07%, 98.61% and 60.63%, respectively. The
      outstanding stock options at December 31, 2000 have a weighted average
      remaining contractual life of 6.12 years.

      On November 12, 1996, the Company issued options for 85,000 shares of
      common stock to non-employees, which vest one-third on each anniversary
      date of the grant. The fair value of the options was $333,200, which was
      amortized to operations over the vesting period. The consolidated
      financial statements for the years ended December 31, 2000, 1999 and 1998
      reflect compensation expense of $0, $111,068 and $111,066, respectively,
      related to the vesting of the non-qualified options.

10.   EARNINGS PER COMMON SHARE

      The following table shows the computation of basic and diluted earnings
      per share for the years ended December 31, 2000, 1999 and 1998:
<TABLE>
<CAPTION>

                                  2000                                 1999                               1998
                -------------------------------------  --------------------------------------  -----------------------------------
                  INCOME         SHARES      EARNINGS     INCOME       SHARES       EARNINGS     INCOME      SHARES      EARNINGS
                (NUMERATOR)  (DENOMINATOR)  PER SHARE   (NUMERATOR)  (DENOMINATOR)  PER SHARE  (NUMERATOR) (DENOMINATOR) PER SHARE
                -----------  -------------  ---------  ------------  ------------- ----------  ----------- ------------- ---------
<S>              <C>            <C>         <C>         <C>           <C>            <C>        <C>           <C>        <C>
Basic
earnings
  per share:     $5,460,958     4,118,697    $ 1.33     $5,422,798    4,101,075      $ 1.32     $3,212,024    4,016,007   $ 0.80
                                             ======                                  ======                               ======
Effect of
  dilutive
  securities:

  Stock
  options
  and warrants                     51,263                                82,444                                 240,804
                                 --------                              --------                                 -------
Diluted
  earnings
  per share      $5,460,958     4,169,960    $ 1.31    $5,422,798     4,183,519     $ 1.30      $3,212,024    4,256,811  $ 0.75
                 ==========     =========    ======    ==========     =========     ======      ==========    =========  ======
</TABLE>

                                     F - 18

<PAGE>   69


11.   INCOME TAXES

      Income tax expense includes the following current and deferred provisions
      for the years ended December 31, 2000, 1999 and 1998:
<TABLE>
<CAPTION>

                                       2000                1999                 1998
                                  -------------        ------------         ------------
<S>                                <C>                  <C>                 <C>
       Current                     $ 2,574,652          $ 2,696,104         $ 2,249,999
       Deferred                        400,942              232,896            (349,911)
                                   -----------          -----------         -----------
       Total                       $ 2,975,594          $ 2,929,000         $ 1,900,088
                                   ===========          ===========         ===========
</TABLE>


      Income tax expense includes the following federal and state components for
      the years ended December 31, 2000, 1999 and 1998:
<TABLE>
<CAPTION>
                                       2000                1999                 1998
                                  -------------        ------------         ------------
<S>                                <C>                  <C>                 <C>
       Federal                     $ 2,730,107          $ 2,562,875          $ 1,681,237
       State                           245,487              366,125              218,851
                                   -----------          -----------          -----------
       Total                       $ 2,975,594          $ 2,929,000          $ 1,900,088
                                   ===========          ===========          ===========
</TABLE>

      The Company's income tax expense for the years ended December 31, 2000,
      1999 and 1998 varies from the amount expected by applying the federal tax
      rate due to the following items:
<TABLE>
<CAPTION>

                                                                   2000                  1999                 1998
                                                              --------------        --------------        -------------
<S>                                                             <C>                  <C>                   <C>
       Expected federal income tax expense                      $ 2,868,428          $ 2,839,611           $ 1,722,413
       State income taxes, net of federal benefit                   258,158              258,906               164,642
       Other, net                                                  (150,992)            (169,517)               13,033
                                                                -----------          -----------           -----------
       Total                                                    $ 2,975,594          $ 2,929,000           $ 1,900,088
                                                                ===========          ===========           ===========
</TABLE>


      Current income taxes payable of $225,000 and $212,000 as of December 31,
      2000 and 1999, respectively, are included in accounts payable and accrued
      expenses. The Company's deferred income taxes at December 31, 2000 and
      1999, are comprised of the following:
<TABLE>
<CAPTION>

                                                                2000            1999
                                                            -----------     ----------
<S>                                                            <C>             <C>
       Deferred income tax assets:
       Start-up costs and intangible assets                                 $   73,417
       Accrued expenses                                      $ 440,470         417,323
                                                             ---------      ----------
       Total gross deferred income tax assets                  440,470         490,740

       Deferred income tax liabilities:
       Land and gaming facilities basis differences            295,973         119,248
       Start-up costs and intangible assets                    173,947
                                                             ---------      ----------
       Total gross deferred income tax liabilities             469,920         119,248
                                                             ---------      ----------
       Net deferred income tax (liability) asset             $ (29,450)     $  371,492
                                                             =========      ==========
</TABLE>

                                     F - 19
<PAGE>   70

      Although realization is not assured, management has evaluated the
      available evidence about future taxable income and other possible sources
      of realization of deferred income tax assets. A valuation allowance
      against deferred income tax assets at December 31, 2000 and 1999, is not
      considered necessary because management believes it is more likely than
      not the deferred income tax asset will be fully realized.

      The Internal Revenue Service is currently examining the Company's federal
      consolidated income tax return for the fiscal year ended December 31,
      1998. The Internal Revenue Service has not proposed any preliminary
      adjustments in connection with the examination of the 1998 return. In the
      opinion of management, any tax liability arising from the examination will
      not have a material adverse impact on the Company's consolidated financial
      statements.

12.   RELATED PARTIES

      The Company and Diversified share a management fee of 5% of adjusted gross
      gaming proceeds for the gaming operations of the LLC. For the first year
      of operations, the sharing ratio of this management fee was disbursed 60%
      to the Company and 40% to Diversified. For all subsequent periods of
      operations, the management fee is disbursed 50% to the Company and 50% to
      Diversified. During the periods ended December 31, 2000, 1999 and 1998,
      Diversified was paid $1,453,473, $1,274,033 and $556,885, respectively,
      for management fees from the LLC.

      An officer, director and significant stockholder of the Company and
      certain of his affiliates received an annual credit enhancement fee of 2%
      of the amount guaranteed, as defined, for personally guaranteeing the
      Company's construction loan. Total credit enhancement fees paid during the
      years ended December 31, 2000, 1999 and 1998 were $0, $226,693 and
      $546,487, respectively.

      Effective October 1, 1997, the Company entered into a one-year agreement
      with an affiliate of an officer, director and significant stockholder of
      the Company to assist the Company in its efforts to research, develop,
      perform due diligence and possibly acquire new gaming opportunities. The
      Company extended the agreement on September 30, 1998 for six months, and
      again on March 31, 1999 through December 31, 1999. The annual cost to the
      Company under the agreement was $225,000, $225,000 and $225,000 for 2000,
      1999, and 1998, respectively. Effective January 1, 2000, the Company
      extended the agreement for an additional two-years through December 31,
      2002.

13.   IMPAIRMENTS

      As of December 31, 1998, the Company determined that certain costs
      incurred in the pursuit of a gaming license in the U.S. Virgin Islands on
      the island of St. Croix may not be recoverable and an impairment loss
      should be recognized. This determination was based upon the Company's
      inability to reach an agreement with respect to certain development issues
      with the Virgin Islands Casino Control Commission. The impairment loss
      recognized during the year ended December 31, 1998, was $610,338.

14.   COMMITMENTS AND CONTINGENCIES

      Along with the Company, the LLC and other LLC members were named as
      defendants in an action for trespass brought in late January 1998 by a
      company which claimed to have succeeded to rights of heirs of certain
      stockholders of a company which was dissolved under Colorado law in 1942.
      The action alleged that the long defunct company has certain reversionary
      rights to a strip of land included within the boundaries of The Lodge
      Casino property. The defendants, including the Company, and certain title
      insurance companies entered into a joint defense of the action with all
      parties reserving their respective rights. The action was dismissed
      without prejudice on January 3, 1999. A trustee was appointed by the

                                     F - 20

<PAGE>   71

      court on December 22, 1998 to represent the purported interests of the
      former plaintiff, if any. The trustee filed an action similar to that
      described above in September 1999 against the previous defendants,
      including the Company, containing essentially the same allegations as in
      the previous case. The present action seeks to quiet title in the
      plaintiff to the alleged reversionary strip and further seeks monetary and
      injunctive relief against the Company for trespass. The Company is in the
      process of filing an answer to the action and does not believe the suit
      will result in any material liability; however, no assurance can be given
      in this regard.

      On June 25, 1999, a complaint against the LLC and John Does 1-3, which
      represent other casino projects upstream from the plaintiff, was filed by
      a casino which operates downstream from these casinos. The complaint
      alleges, among other things, that the plaintiff is being damaged by
      subsurface water flows onto its property from The Lodge Casino property
      and the properties of John Does 1-3. The LLC has denied all liability and
      has turned the matter over to its insurance carrier for defense. The
      Company does not believe the suit has merit and will continue to defend
      against the allegations alleged by the plaintiff. The Company does not
      believe the suit will result in any material liability; however, no
      assurance can be given in this regard.

      The Company is also involved in routine litigation arising in the ordinary
      course of business. These matters are believed by the Company to be
      covered by appropriate insurance policies.

      On January 1, 1997, the Gilpin Hotel Casino Employees' 401(k) Plan (the
      Plan) was organized and began accepting contributions on September 1,
      1997. The Plan is a defined contribution plan covering eligible employees
      of the Company. The Plan allows eligible employees to make tax-deferred
      contributions that are matched by the Company up to a specified level. The
      Company contributed approximately $237,000, $161,000 and $92,000 to the
      Plan for the years ended December 31, 2000, 1999 and 1998, respectively.

15.   SUBSEQUENT EVENT - ACQUISITION

      On January 4, 2001, the Company purchased the assets and operating
      business of a casino and motel located in Reno, Nevada known as the Gold
      Dust West Casino, Inc. (GDW) for $26,500,000. The Company obtained an
      appraisal of the assets of GDW at the date of acquisition and the total
      purchase price, including approximately $696,000 of transaction costs, was
      allocated to the GDW assets as follows:
<TABLE>

<S>                                                              <C>
      Cash                                                       $    45,000
      Land                                                         3,560,000
      Building, furniture, fixtures and equipment                  7,762,000
      Other assets                                                    96,000
      Goodwill                                                    15,733,000
                                                                 -----------
      Total purchase price                                       $27,196,000
                                                                 ===========
</TABLE>

16.   SUBSEQUENT EVENT - STOCKHOLDER OFFER

      On February 26, 2001, the Company's largest shareholder, Chairman of the
      Board and Chief Executive Officer, Jeffrey P. Jacobs offered to acquire
      all of the outstanding shares of the Company that he does not already own,
      for $11.00 per share. A Special Committee appointed by the Board of
      Directors has employed independent legal counsel and financial advisors to
      assist it in analyzing the offer and to negotiate with Mr. Jacobs.
      Consummation of the transaction is subject to various conditions,
      including the successful negotiation and execution of definitive
      agreements, approval by the Company's Board of


                                     F - 21
<PAGE>   72

      Directors and stockholders, the obtaining of various regulatory approvals,
      and Mr. Jacobs' ability to obtain financing necessary to complete the
      transaction. If a transaction with Mr. Jacobs occurs, it is anticipated
      that it would close in mid to late summer of 2001.

      On February 27, 2001, a stockholder of the Company filed a class action
      lawsuit against the Company and its Board of Directors in Colorado
      District Court for the County of Gilpin. The plaintiff alleges, among
      other things, that the buyout proposal is being dictated by Mr. Jacobs at
      a price which is grossly unfair and unconscionable to other stockholders
      and is designed to serve only his best interests. Further, the plaintiff
      alleges than an adequate process is not in place to seek other bids or to
      achieve the highest price attainable for the public's shares. The
      plaintiff alleges that Mr. Jacobs has proprietary corporate information
      and economic power which is unfair to public stockholders. Finally, the
      plaintiff alleges that the individual defendants are acting in concert
      with Mr. Jacobs and therefore breaching their fiduciary duties to the
      stockholders. The plaintiff seeks to enjoin the transaction, rescind the
      transaction if it is consummated, and recover unspecified compensatory or
      recissory damages and legal fees and costs.

      On March 1, 2001, another purported class action lawsuit was filed in the
      Colorado District Court, County of Gilpin against the Company and its
      Board of Directors. The allegations in this case essentially are, in
      essence, the same as those described immediately above. The relief sought
      by the plaintiffs is also essentially the same.

      The Company's Board of Directors believes that it and the Special
      Committee it has appointed have met and will continue to meet their
      respective fiduciary obligations. The Company believes both suits are
      without merit, both will be vigorously contested, and neither will result
      in a material liability; however, no assurance can be given in this
      regard.

17.   SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

      In the opinion of management, the accompanying unaudited selected
      quarterly financial data reflects all adjustments, consisting of normal
      recurring accruals, which are necessary for the fair presentation of the
      financial performance of the Company for the periods presented. The
      accompanying unaudited selected quarterly financial data includes the
      accounts of the Company, its 75% share of the LLC and its 100% ownership
      interest in the GHV. All significant intercompany transactions and
      balances have been eliminated in consolidation. Certain reclassifications
      have been made to the accompanying unaudited quarterly financial data to
      conform to the accompanying consolidated financial statements. Most
      significantly, interest income and interest expense, which have been
      previously classified as components of operating income, have been
      presented as separate components after operating income.

                                     F - 22
<PAGE>   73

<TABLE>
<CAPTION>

                                                                       2000 QUARTERS
                                           ----------------------------------------------------------------------
SELECTED QUARTERLY DATA                       1ST             2ND            3RD          4TH           TOTAL
                                           -----------     -----------   -----------   -----------    -----------

<S>                                        <C>             <C>           <C>           <C>            <C>
Net revenues                               $22,285,306     $22,048,235   $22,188,157   $19,854,067    $86,375,765
Costs and expenses                          17,909,737      18,201,590    18,523,855    18,105,933     72,741,115
Interest Income                                 78,962          81,577        68,325        56,391        285,255
Interest Expense                               986,246         920,860       795,187       721,316      3,423,609
Minority interest                              655,514         597,394       590,669       216,167      2,059,744
                                           -----------     -----------   -----------   -----------    -----------
Income before income taxes                   2,812,771       2,409,968     2,346,771       867,042      8,436,552
Income tax expense                           1,012,600         867,600       844,823       250,571      2,975,594
                                           -----------     -----------   -----------   -----------    -----------
Net income                                 $ 1,800,171     $ 1,542,368   $ 1,501,948   $   616,471    $ 5,460,958
                                           ===========     ===========   ===========   ===========    ===========
Basic earnings per share                   $      0.44     $      0.38   $      0.36   $      0.15    $      1.33
                                           -----------     -----------   -----------   -----------    -----------
Dilutive effect of outstanding options                           (0.01)                      (0.01)         (0.02)
                                           -----------     -----------   -----------   -----------    -----------
Dilutive earnings per share                $      0.44     $      0.37   $      0.36   $      0.14    $      1.31
                                           ===========     ===========   ===========   ===========    ===========

Weighted average common shares outstanding:
  Basic                                      4,111,600       4,111,757     4,126,257     4,128,494      4,118,697
Dilutive effect of outstanding options:         25,364          53,487        72,043        58,003         51,263
                                           -----------     -----------   -----------   -----------    -----------
  Diluted                                    4,136,964       4,165,244     4,198,300     4,186,497      4,169,960
                                           ===========     ===========   ===========   ===========    ===========
</TABLE>

<TABLE>
<CAPTION>

                                                                       1999 QUARTERS
                                           ----------------------------------------------------------------------
SELECTED QUARTERLY DATA                       1ST             2ND            3RD          4TH           TOTAL
                                           -----------     -----------   -----------   -----------    -----------

<S>                                        <C>             <C>           <C>           <C>            <C>
Net revenues                               $19,756,041     $21,260,468   $23,279,186   $22,201,485    $86,497,180
Costs and expenses                          16,760,442      18,411,257    18,416,032    18,448,891     72,036,622
Interest Income                                  5,680          84,832        62,977        91,193        244,682
Interest Expense                             1,287,504       1,131,740     1,102,009     1,064,472      4,585,725
Minority interest                              209,291         349,903       684,176       524,347      1,767,717
                                           -----------     -----------   -----------   -----------    -----------
Income before income taxes                   1,504,484       1,452,400     3,139,946     2,254,968      8,351,798
Income tax expense                             541,650         522,850     1,090,000       774,500      2,929,000
                                           -----------     -----------   -----------   -----------    -----------
Net income                                 $   962,834     $   929,550   $ 2,049,946   $ 1,480,468    $ 5,422,798
                                           ===========     ===========   ===========   ===========    ===========
Basic earnings per share                   $      0.23     $      0.23   $      0.50   $      0.36    $      1.32
Dilutive effect of outstanding options                           (0.01)        (0.01)                       (0.02)
                                           -----------     -----------   -----------   -----------    -----------
Dilutive earnings per share                $      0.23     $      0.22   $      0.49   $      0.36    $      1.30
                                           ===========     ===========   ===========   ===========    ===========
Weighted average common shares outstanding:
  Basic                                      4,087,346       4,094,611     4,110,557     4,111,159      4,101,075
Dilutive effect of outstanding options:         98,507          79,153        54,331        24,745         82,444
                                           -----------     -----------   -----------   -----------    -----------
  Diluted                                    4,185,853       4,173,764     4,164,888     4,135,904      4,183,519
                                           ===========     ===========   ===========   ===========    ===========
</TABLE>

                                     * * * *


                                     F - 23




<PAGE>   74


Item 10. Directors and Executive Officers of the Registrant.
-------  --------------------------------------------------

         DIRECTORS AND OFFICERS. The following sets forth certain information as
of March 9, 2001 with respect to each of our directors and executive officers:
<TABLE>
<CAPTION>

         Name                 Age            Position(s) Held
         ----                ----            ----------------
<S>                           <C>            <C>
Jeffrey P. Jacobs             47             Chairman of the Board and Chief Executive Officer

Stephen R. Roark              53             President, Chief Financial Officer and a Director

Stanley Politano              51             Vice President, Secretary and Treasurer

Frank B. Day                  67             A Director

J. Patrick McDuff             52             A Director

Robert H. Hughes              60             A Director

Timothy Knudsen               47             A Director

Stephen P. Owendoff           57             A Director
</TABLE>

         JEFFREY P. JACOBS, since 1995 has served as Chairman and Chief
Executive Officer of Jacobs Entertainment, Inc., a company based in Cleveland,
Ohio that has investments in gaming companies and ventures, including the
Company and Colonial Holdings, Inc., which operates a horse-racing track and
satellite wagering facilities. From 1975 to present, he has also served as
President and Chief Executive Officer of Jacobs Investments, Inc., a company
engaged in the development, construction and operation of residential and
commercial real estate and entertainment projects in Ohio. Mr. Jacobs also
served in the Ohio House of Representatives from 1982 until 1986. He is also
Chairman and Chief Executive Officer of Colonial Holdings, Inc. which is a
reporting company under the Securities Exchange Act of 1934. Mr. Jacobs became
our Chief Executive Officer and Co-Chairman of the Company on November 12, 1996
and became Chairman on December 31, 1997.

         STEPHEN R. ROARK, has been employed as Chief Financial Officer since
August 1993. Mr. Roark became a director in 1994. He was elected as our
President in September 1995. Prior to that time he had been an independent
consultant in the Denver area rendering financial and accounting assistance to
companies in the public marketplace. Mr. Roark has 17 years of public accounting
experience having served as a partner with a large local accounting firm and as
a partner with a national accounting firm. Mr. Roark was with Hanifen, Imhoff
and Prudential Securities, Inc. for three years and is a member of the American
Institute of Certified Public


                                       49
<PAGE>   75


Accountants and the Colorado Society of Certified Public Accountants. Mr. Roark
obtained his B.S.B.A. in Accounting from the University of Denver in 1973.


         STANLEY POLITANO, has been our Vice President since August 1994 and was
a former director of ours. He was appointed Secretary and Treasurer in April
1998. He received his B.S. degree in Business, majoring in finance, from the
University of Colorado in 1972. He has 22 years of experience in the securities
industry, working in both retail and wholesale capacities. He has worked for
Rauscher Pierce Securities Corporation and Prudential Securities, Inc. and was a
vice president with E.F. Hutton & Company, Inc. and Hanifen Imhoff Securities
Corporation. He has served as Treasurer for Mission Corps International, a
non-profit organization.

         FRANK B. DAY, Chairman of the Board, Chief Executive Officer and
President of Rock Bottom Restaurants, Inc., has been employed since January 1980
as President of Concept Restaurants, Inc., and Managing General Partner of the
Hotel Boulderado in Boulder, Colorado since August 1982. Concept Restaurants,
Inc. owns or operates twelve full service restaurants in Colorado front range
communities. From 1959 to present, Mr. Day has owned and operated food service
and hospitality facilities in Illinois, Michigan, Wisconsin, and Colorado. He
attended Harvard University from 1950 to 1956 and received B.A. and M.B.A.
degrees. Mr. Day is also an active real estate investor and is active in many
civic and nonprofit organizations, having served as a director of the Boulder
Chamber of Commerce (September 1988 to September 1991) and Downtown Boulder,
Inc. (from June 1987 to June 1990). Mr. Day has been one of our directors since
1992.

         J. PATRICK MCDUFF, has served as a director and Chairman of our Audit
Committee since 1994 and has over 28 years of executive level management
experience in community and regional commercial banks. He also has extensive
experience in lending to companies in the hospitality and restaurant industries.
Mr. McDuff was instrumental in the formation of a community bank, Vectra Bank,
which became a publicly traded company. Subsequently that startup bank was sold
to Zion's Bancorporation. Mr. McDuff was also instrumental in the formation of
ClearSpring Pharmacy, LTD., which is a new retail concept that combines
traditional prescription pharmaceuticals with homeopathic medicines and
non-prescription drugs. Its first store opened in January of 2001. Mr. McDuff is
currently President of McDuff Interests, LLC, a business consulting firm that
specializes in financial management, marketing and sales. That entity is also a
direct participant in various real estate development projects.

         Mr. McDuff attended the University of Arkansas from 1966 to 1972 and
received a B.S.B.A. degree in Finance and Commercial Banking. Mr. McDuff is
active in many civic and non-profit organizations, having served as a director
of Boulder Center YMCA, Boulder Valley Rotary Club, and Longs Peak Council of
the Boy Scouts of America. Additionally, Mr. McDuff served as President of the
Boulder Valley Rotary Club.

                                       50
<PAGE>   76

         ROBERT H. HUGHES, served as Chief Financial Officer of Jacobs
Investments, Inc. from 1993 until May 1999 when he retired. Mr. Hughes was a
partner in charge of the audit department of the Cleveland office of the
accounting firm of Deloitte & Touche LLP until his retirement in 1991. Mr.
Hughes is a certified public accountant (retired). Mr. Hughes serves as a member
of the Board of Directors of Colonial Holdings, Inc., a reporting company under
the Securities Exchange Act of 1934. Mr. Hughes has been one of our directors
since November 12, 1996.

         TIMOTHY KNUDSEN, has been associated with Knudsen, Gardner & Howe, a
Cleveland, Ohio based marketing communications agency for 21 years. He was
elected President of the agency in 1984. Mr. Knudsen holds a B.S. degree in
Marketing from Dyke Business College and has studied toward an advanced degree
at Cleveland State University. Mr. Knudsen was elected as one of our directors
in February, 1998.

         STEPHEN P. OWENDOFF, is a Partner in the Cleveland law firm of Hahn
Loeser & Parks LLP. He has been a partner in this firm since 1977, and prior to
that was an associate. He heads the Business Practice Area of this firm, and has
a general corporate practice, including public and private security offerings
for issuers and underwriters, acquisitions and sales with businesses, including
branch acquisitions and dispositions for financial institutions. He received his
undergraduate degree from Kent State University, Kent, Ohio and his law degree
from Georgetown University Law Center in Washington, D.C. Mr. Owendoff is active
in many civic and non-profit organizations in Cleveland, Ohio.

         COMMITTEE OF OUR BOARD OF DIRECTORS. Our Board of Directors has two
standing committees whose members for 2001 are as follows:
<TABLE>
<CAPTION>

            Audit             Compensation
           ------             ------------
<S>                           <C>
    Robert H. Hughes          Frank B. Day
    J. Patrick McDuff         Timothy Knudsen
    Frank B. Day              Robert H. Hughes
</TABLE>

         In addition, the Board has created a Special Committee consisting of
Messrs. McDuff, Day and Knudsen in connection with the Jacobs' proposal
described in Item 1 above.


                                       51
<PAGE>   77


                  AUDIT COMMITTEE--THREE MEETINGS FOR YEAR 2000

         We have adopted an Audit Committee Charter which was attached to our
Annual Proxy Statement dated May 8, 2000. The Charter requires our Audit
Committee to undertake a variety of activities designed to assist our Board of
Directors in fulfilling its oversight role regarding our auditors' independence,
our financial reporting process, our systems of internal control and compliance
with applicable laws, rules and regulations. The Charter also makes it clear
that the independent auditors are ultimately accountable to the Board of
Directors and the Audit Committee, not management.

         The members of our Audit Committee for 2000 were J. Patrick McDuff,
Robert H. Hughes and Stephen P. Owendoff.

                COMPENSATION COMMITTEE--ONE MEETING FOR YEAR 2000

         The function of our Compensation Committee is review and approval of
compensation and benefit programs for key executives and administration of our
stock options plans. See "Compensation Committee Report on Executive
Compensation" below.

         The members of our Compensation Committee for 2000 were Frank B. Day,
Robert H. Hughes and Timothy Knudsen.

         Each member of our Board of Directors attended at least 75% of all
meetings of the Board and of each committee on which he served.

         There are no family relationships between or among any directors or
executive officers and, except as set forth in the above resumes, none serve as
a director of any company required to file reports under the Securities Exchange
Act of 1934 or which is registered under the Investment Company Act of 1940.

         The number of shares of Common Stock held by each of our directors and
executive officers is set forth under Item 12 hereof.


                                       52
<PAGE>   78

Item 11. Executive Compensation.
-------  ----------------------

         COMMITTEE INTERLOCKS; CASH COMPENSATION. None of the members of the
Compensation Committee is or has been an officer or employee, nor do they serve
on the compensation committee, of any company related to or affiliated with us.
No member of the Compensation Committee is an executive officer of another
entity for whom any of our executive officers serves as a director or officer.
The following table sets forth information regarding the compensation paid by us
for services rendered in all capacities during 1998, 1999 and 2000 to (i) our
Chief Executive Officer, and (ii) our other named executive officers whose total
annual compensation for 2000 exceeded $100,000:

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                          Annual Compensation                 Long-Term Compensation
                                     -----------------------------    ------------------------------------
                                                                             Awards          Payouts
                                                                      -------------------------------------
                                                                                     Securities
                                                          Other                        Under-
                                                          Annual      Restricted       lying                      All Other
                                                          Compen-       Stock         Options/     LTIP            Compen-
    Name of                 Year      Salary    Bonus     sation       Award(s)         SARs      Payouts           sation
Officer/Director                        ($)      ($)        ($)          ($)            (#)         ($)               ($)
-----------------          ------     -------   -----    --------    ------------    ---------   ----------      -----------
<S>                        <C>        <C>       <C>        <C>          <C>           <C>          <C>               <C>
Jeffrey P. Jacobs          1998       200,000   50,000       --          --              --         --                --
Chief Executive Officer
                           1999       300,000  137,000       --          --              *          --                --

                           2000       300,000   75,000       --          --            45,000       --                --

Stephen R. Roark           1998       138,000   35,000       --          --              --         --                --
President
                           1999       220,000   60,000       --          --            45,000       --                --

                           2000       250,000   62,500       --          --              --         --                --
</TABLE>

                                       53
<PAGE>   79


<TABLE>

<S>                        <C>        <C>       <C>        <C>          <C>           <C>          <C>               <C>
Antone R. Cook             1998       175,000   35,000       --          --             --          --                --
Vice President*
                           1999       240,000   60,000       --          --            30,000       --                --

                           2000       230,800     --         --          --             --          --              115,000*

Stanley Politano           1998       102,000   15,000       --          --             --          --                --
Vice President-
                           1999       106,000   20,000       --          --            15,000       --                --

                           2000       111,000   20,000       --          --             --          --                --
</TABLE>


* Mr. Cook resigned on November 20, 2000 and received $115,000 in severance pay.

         COMPENSATION ARRANGEMENTS. Effective January 1, 2000, we entered into a
three year employment agreement with Mr. Jacobs which contains customary terms
and conditions and which provides for a base salary of the greater of $300,000
per year or 1.5% of our earnings before interest, taxes, depreciation and
amortization ("EBITDA") (up to $50 million) each year. Mr. Jacobs is also
entitled to receive a bonus of not less than 25% nor more than 40% of his base
salary with the percentage to be established by our Compensation Committee. Mr.
Jacobs is entitled to the present value of his base salary for the unexpired
term of the agreement if he is terminated without cause. In addition, he is
entitled to one year's base salary if another company acquires us, our assets
are sold to another company or there is a 50% change in the ownership of our
common stock, unless Mr. Jacobs continues his employment or unless Mr. Jacobs is
a participant in any such transaction.

         Effective May 1, 1999, and amended on January 1, 2000, we entered into
a three year and eight month employment agreement with Mr. Roark which contains
customary terms and conditions and which provides for a base salary of the
greater of $250,000 per year or 1.05% of our EBITDA (up to $50 million) each
year. Mr. Roark is also entitled to receive a bonus of not less than 25% nor
more than 40% of his base salary with the percentage to be established by our
Compensation Committee. Mr. Roark is entitled to the present value of his base
salary for the unexpired term of the agreement if he is terminated without
cause. In addition, he is entitled to one year's base salary if another company
acquires us, our assets are sold to another company or there is a 50% change in
the ownership of our common stock, unless Mr. Roark continues his employment or
unless Mr. Roark is a participant in any such transaction.

                                       54
<PAGE>   80

         Effective November 22, 1999, we entered into a three year employment
agreement with Stanley Politano which contains customary terms and conditions
and which provides for a salary of $111,000 per year, which increases $5,000 in
years two and three. He is eligible for a bonus at the discretion of our
Compensation Committee.

         COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION. The
Compensation Committee endeavors to ensure that the compensation program for our
executive officers is effective in attracting and retaining key executives
responsible for our success and is tailored to promote our long-term interests
and that of our stockholders. Our executive officer compensation program in the
fiscal year 2000 was principally comprised of base salary, a cash bonus and
long-term incentive compensation in the form of incentive stock options or
non-qualified stock options.

         The Compensation Committee takes into account various qualitative and
quantitative indicators of corporate and individual performance in determining
the level and composition of compensation for our Chief Executive Officer and
his recommendations regarding the other executive officers. In particular, the
Compensation Committee considers several financial performance measures,
including revenue growth, net income and EBITDA levels. However, in 2000 we did
not apply any specific quantitative formula in making compensation decisions.
Rather, salary levels for our three highest paid executives was determined in
accordance with previously negotiated employment agreements described above. In
making bonus determinations, the Compensation Committee considered our record
revenues, net income, EBITDA and management's year long efforts in obtaining
Nevada gaming licenses and closing the Gold Dust Casino acquisition. We also
consider contributions of our officers, including dedication and loyalty that,
while difficult to quantify, are important to our company's long-term success.
The Compensation Committee seeks to create a mutuality of interest between our
executive officers and our stockholders by increasing the executive officers'
ownership of our company's common stock through our stock option plans.

         Salary levels for our executive officers are significantly influenced
by the need to attract and retain management employees with high levels of
expertise. In each case, consideration is given both to personal factors, such
as the individual's experience, responsibilities and work performance, and to
external factors, such as salaries paid by comparable companies in the gaming
and casino entertainment industry. With regard to the latter, it is important to
recognize that because of the opening of new properties in Black Hawk, Colorado
in 1999 and 2000, the scheduled openings of new properties in 2001, and the
growth of casinos in Nevada, riverboat and dockside gaming, expanding Native
American gaming operations and the proliferation of jurisdictions in which
gaming is permitted, our company competes with numerous other companies for
experienced and skilled personnel. Therefore, it is critical that we provide
compensation arrangements that are competitive in the casino industry.

         With respect to the personal factors, the Compensation Committee makes
salary bonus and stock option grant decisions in a review based on the
recommendations of the Chief Executive Officer. This review considers the
decision-making responsibilities of each position






                                       55
<PAGE>   81

as well as the experience and work performance of each executive. The Chief
Executive Officer views work performance as the single most important
measurement factor. With respect to the Chief Executive Officer, the
Compensation Committee considers a variety of factors, including company
financial performance, prospects for company growth, vision, leadership and
ability to obtain and retain other key executives.

         The Compensation Committee approves all employment agreements with key
executive officers with the philosophy and policies described above in mind.

                  /s/      Compensation Committee Members

                  /s/      Timothy Knudsen
                  /s/      Robert H. Hughes
                  /s/      Frank B. Day

         STOCK OPTION PLANS. We currently have two stock option plans: our 1994
Employees' Incentive Stock Option Plan ("1994 Plan") and the 1996 Incentive
Stock Option Plan ("1996 Plan"). The 1994 Plan provides for the grant of
incentive stock options to our officers, directors and employees. Under the
terms of the 1994 Plan, as amended, 300,000 shares of our Common Stock were
reserved for issuance to key employees. The 1996 Plan provides for the grant of
stock options, including incentive stock options and non-qualified stock
options. Under the terms of the 1996 Plan, 500,000 shares of our Common Stock
were reserved for issuance to key employees and other persons. At March 9, 2001,
there were 20,150 shares available for future grants under the 1994 Plan and
100,600 shares were available for the future grants under the 1996 Plan.

         Both Plans are managed by the Board of Directors' Compensation
Committee. The Plans provide that the Board may grant incentive stock options
and restricted stock options as it deems appropriate. Each Plan terminates after
20 years.

         Under the Plans, the Directors' Compensation Committee may either
recommend granting of qualified incentive stock options ("ISOs") as defined in
Section 422 of the Internal Revenue Code or non-qualified stock options. In the
case of ISOs, the exercise price of the option may not be less than the fair
market value of the Common Stock on the date on which the option is granted,
unless the employee is a ten percent shareholder, in which case the exercise
price must equal 110% or more of the fair market value of the Common Stock on
the date the option is issued. For purposes of the Plans, the "fair market
value" of a share of Common Stock on any date is deemed to be the last sales
price on that date or the average of the bid and asked prices quoted in the
over-the-counter market on that date, unless the Common Stock becomes traded on
a national securities exchange, in which case the "fair market value" equals the
average of the highest and lowest price at which the Common Stock traded on that
exchange on that date. In the case of non-qualified options, the exercise price
may not be less than the fair market value, as determined above, of a share of
Common Stock on the date that the option is granted.

                                       56
<PAGE>   82

         Finally, the Board may issue restricted stock options that will vest
upon the occurrence of certain conditions recommended by the Compensation
Committee. Generally, restricted stock is issued subject to the participant
remaining employed by the Company for a period of time. Restricted stock options
may also be subject to the fulfillment of certain individual or corporate
performance criteria within a specified period of time.

         Options may be exercised during any period as recommended by the
Compensation Committee at the time of the grant, or at such earlier time as the
Compensation Committee may subsequently determine. Options must expire on the
earlier of ten years (five years in the case of an incentive option granted to a
ten percent shareholder) from the date of the grant, or the date recommended by
the Compensation Committee at the time of the grant. If a grant or award of
options under the Incentive Plan expires, terminates or is forfeited, the shares
subject to such award or grant will become available for further award or grant
under the Plan. Options acquired under the Plan are not transferable except by
will or the laws of descent and distribution.

                                       57
<PAGE>   83



         Options granted to the Executive Officers named in the table above
during 2000 were as follows:

                     OPTION/SAR GRANTS IN LAST FISCAL YEAR*
<TABLE>
<CAPTION>

                             Individual Grants
----------------------------------------------------------------------------
                                     Percent of                                Potential Realizable Value    Alternative to
                       Number of        Total                                  at Assumed Annual Rates        (f) and (g)
                      Securities       Options/                               of Stock Price Appreciation      Grant Date
                      Underlying         SARs                                       for Option Term              Value
                       Options/       Granted to                              ----------------------------  ----------------
                         SARs          Employees     Exercise or      Expi-
                       Granted         in Fiscal     Base Price      ration                                   Grant Date
Name                     (#)             Year          ($/Sh)         Date        5% ($)      10% ($)       Present Value $
(a)                      (b)             (c)             (d)          (e)          (f)          (g)              (h)
--------              ----------     ------------    -----------     -------     -------     --------       ---------------
<S>                     <C>              <C>            <C>          <C>         <C>         <C>                 <C>
Jeffrey P. Jacobs       45,000           100            6.40         1-1-06      $79,569     $175,826             N/A
</TABLE>


         No options were exercised by the Executive Officer named in the table
above during 2000 and no options were repriced. The following table provides
information regarding unexercised stock options held by the Executive Officers
named above as of December 31, 2000.

             AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
                        FISCAL YEAR END OPTION/SAR VALUES

<TABLE>
<CAPTION>
                                                                              Number of
                                                                             Securities                  Value of
                                                                             Underlying                Unexercised
                                                                             Unexercised               in-the-Money
                                                                             Options/SARs              Options/SARs
                                       Shares                            at Fiscal Year End          at Fiscal Year End
                                      Acquired                                   (#)                        ($)
                                         on                   Value
                                      Exercise              Realized        Exercisable/                Exercisable/
  Name                                   (#)                   ($)          Unexercisable              Unexercisable

   (a)                                   (b)                   (c)               (d)                        (e)
--------                             ----------             ---------    -------------------        -------------------

<S>                                     <C>                   <C>           <C>                        <C>
Jeffrey P. Jacobs                        --                    --            70,000/45,000              78,400/13,050

Stephen R. Roark                         --                    --           167,500/30,000             168,100/14,100

Stanley Politano                         --                    --            75,000/10,000               79,100/5,000
</TABLE>


                COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*


                                       58
<PAGE>   84


               AMONG BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
                THE S&P 500 INDEX AND THE DOW JONES CASINOS INDEX

<TABLE>
<CAPTION>
                                                            Dow Jones                   Black Hawk Gaming &
                              S&P 500                    Casinos Index              Development Company, Inc.
                              -------                    -------------              -------------------------

<S>                        <C>                              <C>                              <C>
12/31/00                       233.99                       134.12                           125.58
12/31/99                       256.77                       106.72                           109.30
12/31/98                       212.08                        65.01                           146.51
12/31/97                       164.36                        87.02                           120.93
12/31/96                       123.18                        83.04                            90.70
12/31/95                       100.00                       100.00                           100.00
</TABLE>
---------------
* $100 INVESTED ON DECEMBER 31, 1995 IN STOCK OR INDEX--INCLUDING REINVESTMENT
OF DIVIDENDS.


                                       59
<PAGE>   85


Item 12. Security Ownership of Certain Beneficial Owners and Management.
-------  --------------------------------------------------------------

         The following table sets forth certain information regarding the
beneficial ownership of our common stock as of March 9, 2001 for: (a) each of
our directors and our executive officers; (b) all of our directors and executive
officers as a group; (c) each person known by us to be a beneficial owner of
more than 5% of our common stock. All information with respect to beneficial
ownership by our directors, executive officers or beneficial owners has been
furnished by the respective director, officer or beneficial owner, as the case
may be. Unless indicated otherwise, each of the stockholders has sole voting and
investment power with respect to the shares of common stock beneficially owned.

<TABLE>
<CAPTION>
                                                                                              Percentage of
                                                                                              Common Stock
                                                          Beneficially Owned              Beneficially Owned(3)
                                             ------------------------------------------   ---------------------
        Name                                 Shares           Options(1)
        ----                                 ------           -------

<S>                                         <C>                <C>                                <C>
Jeffrey P. Jacobs                           1,333,333(2)       85,000                             33.7%
Diversified Opportunities Group Ltd.
c/o Jacobs Entertainment Ltd.
425 Lakeside Avenue
Cleveland, Ohio  44114

Stephen R. Roark                               28,571         182,500                              4.9%
240 Main Street
Black Hawk, Colorado  80422

Stanley Politano                                  619          75,000                              1.8%
240 Main Street
Black Hawk, Colorado  80422

Frank B. Day                                  476,922          20,000                             12.0%
248 Centennial Parkway, Suite 100
Louisville, Colorado  80302

J. Patrick McDuff                               1,513          13,250                               *
1375 Walnut
Boulder, Colorado  80302

Robert H. Hughes                                1,701          15,000                               *
27459 Hemlock Drive
West Lake, Ohio  44145
</TABLE>


                                       60
<PAGE>   86

<TABLE>

<S>                                         <C>                <C>                                <C>
Timothy Knudsen                                 1,102           1,000                               *
213 Vista Circle
North Olmstead, Ohio  44070

Stephen P. Owendoff, Esq.                         419             --                                *
Hahn Loeser & Parks LLP
3300 BPAmerica Building
300 Public Square

Robert D. Greenlee                            483,113             --                              11.7%
2060 Broadway, Suite 400
Boulder, Colorado  80302

Officers and Directors as                   1,844,180        391,750                              49.5%
  a group (eight persons)

</TABLE>

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

*less than 1%

(1) Represents shares underlying options which are exercisable within 60 days.

(2) These shares are held by Diversified Opportunities Group, Ltd., an affiliate
    of Mr. Jacobs, and are therefore deemed beneficially owned by him.

(3) All percentages are computed in accordance with Rule 13d-3 adopted under the
    Securities Exchange Act of 1934.

         SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Based on a
review of the record, the Company believes that all reports on Forms 3 and 4
have been timely filed by its officers and directors.



                                       61
<PAGE>   87


Item 13. Certain Relationships and Related Transactions.
-------  ----------------------------------------------

         In 1996 we formed Black Hawk/Jacobs Entertainment LLC ("LLC"), a
Colorado limited liability company owned 75% by us, 24% by Black Hawk
Entertainment Ltd. and 1% by Diversified Opportunities Group Ltd., affiliates of
Jeffrey P. Jacobs, our Chief Executive Officer, for the purpose of developing
and operating The Lodge Casino. We share with the Jacobs' affiliates a
management fee of 5% of adjusted gross gaming proceeds for the gaming operations
of the LLC on a 50%-50% basis. We also share profits and losses with the Jacobs'
affiliates on a basis of 75% to us and 25% to them. During the year ended
December 31, 2000, the Jacobs' affiliates received $1,453,473 in management fees
from the LLC and they were allocated $2,059,744 in profits.

         In order to assist us in our efforts to research, develop, perform due
diligence and possibly acquire new gaming opportunities, we entered into an
agreement with Premier One Development Company, Inc. ("Premier") effective
October 1, 1997. Premier is an affiliate of Mr. Jacobs and it employs several
people to perform the services set forth above. This agreement was renewed at
the same annual rate for a two year period effective January 1, 2000. The amount
paid or accrued by us during calendar 2000 for these services was $225,000.

         The agreements described above were negotiated at arm's length between
Mr. Jacobs and his affiliates and our disinterested officers and directors and
are deemed by our management to be fair and in our best interests and that of
our shareholders.


         See Items 1 and 3 above for information concerning an offer by the
Jacobs' affiliates to acquire shares of our stock which they do not currently
own.

                                       62
<PAGE>   88

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

 (a)     (1)     Financial Statements.
                 --------------------

                 See Item 8 hereof

         (2)     Financial Statement Schedules--None

 (b)     Reports on Form 8-K Filed During the Registrant's
         -------------------------------------------------
         Fourth Fiscal Quarter:
         ----------------------

                 None


 (c)     Exhibits Filed Herewith or Incorporated by Reference to
         -------------------------------------------------------

         Previous Filings with the Securities and Exchange Commission:
         -------------------------------------------------------------

         (1)      The following exhibits were included with our initial filing
                  of our Registration Statement #33-57342 effective May 15, 1993
                  and are hereby incorporated by reference:

<TABLE>
<CAPTION>


EXHIBIT
NUMBER                             EXHIBIT
------                             -------
<S>     <C>
  1.1   Form of Underwriting Agreement
  1.2   Form of Agreement Among Underwriters
  1.3   Form of Selected Dealer's Agreement
  1.4   Consulting Agreement--Walford
  1.5   Underwriter's Warrant
  3.1   Articles of Incorporation of the Registrant and Amendments thereto
  3.2   Bylaws of the Registrant
  4.1   Designation of Rights of Preferred Stockholders
  4.2   Form of 14% Convertible Promissory Note
  5     Form of Opinion of and Consent of Jones & Keller, P.C.
  10.1  Shareholders Agreement and Form of Voting Trust with Stock Option Grants
  10.2  Note Payable--Southwest State Bank
  10.3  Gilpin Hotel and Millsite 29 Purchase Agreement
  10.4  Millsite 30 Purchase Agreement and Related Documents
  10.5  Homesite Placer Purchase Agreement and Related Documents
  10.6  Copy of Colorado Gaming License
  10.7  Copy of Black Hawk, Colorado Liquor License
  10.8  Gilpin Hotel Joint Venture Agreement
  10.9  Gilpin Hotel Development, Management and Consulting Agreement
  10.10 Gilpin Hotel Ground Lease Agreement
  10.11 Equipment Lease Agreements
</TABLE>


                                       63
<PAGE>   89

-------------------
(2) Filed as Exhibits to Amendment No. 1 to our Registration Statement,
    identified above, were the following which are also incorporated by
    reference:
<TABLE>
<CAPTION>

EXHIBIT
NUMBER                             EXHIBIT
------                             -------
<S>       <C>
  1.1     Revised Form of Underwriting Agreement
  1.2     Revised Form of Agreement Among Underwriters
  1.3     Revised Form of Selected Dealer's Agreement
  1.4     Termination of Walford Agreement
  1.5:1   Revised Underwriter's Warrant
  1.5A    Underwriter's Class A Warrant
  1.5B    Underwriter's Class B Warrant
  4.3A    Class A Warrant Certificate
  4.3B    Class B Warrant Certificate
</TABLE>

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

(3)  Filed as exhibits to our Reports on Form 8-K are the following, which are
     incorporated by reference:
<TABLE>
<CAPTION>

     DATE OF
     FILING                            EXHIBIT
     --------                          --------
<S>                             <C>
   March 1, 1994                Item 5.  Other Events--Contract to purchase
                                Millsite 31.
   August 10, 1994              Item 5.  Other Events--Completion of contract to
                                purchase Bricktown and substantially completed contract to
                                purchase "Maverick Poker" n/k/a Prospector JackPot Poker.
   September 6, 1994            Item 5.  Other Events--Two option agreements, through
                                the Gilpin Hotel Venture, to purchase land, buildings
                                and equipment of Dolly's Casino, Inc.
   October 6, 1994              Item 5.  Other Events--Agreement, through the Gilpin
                                Hotel Venture, with Cloverleaf Kennel Club.
   November 14, 1994            Item 2.  Acquisition or Disposition of Assets (Dolly's
                                Casino, Inc. Pro Forma Financial Statements).
   December 30, 1994            Item 5.  Other Events--Jacobs Entertainment, Inc. Joint
                                Venture and Purchase of Millsite 32.
</TABLE>

                                       64
<PAGE>   90
<TABLE>

<S>                             <C>
   March 24, 1995               Item 5. Other Events--Amendment of Jacobs Entertainment,
                                Inc./Black Hawk Gaming Joint Venture agreement.
   December 4, 1996             Item 5.  Other Events--Amended and Restated Purchase
                                Agreement and several ancillary agreements with Jacobs'
                                affiliates.
   March 27, 1997               Item 5.  Other Events--Wells Fargo Bank
                                Credit Agreement
   November 20, 1997            Item 5.  Other Events--Letter of Intent re:  GHV
                                acquisition.
   January 1, 1998              Item 2.  Acquisition of Gilpin Ventures,
                                Inc.--Definitive Agreement.
                                Item 5.  Other Events--Conversion of notes by
                                officers.
   April 28, 1998               Item 2.  Acquisition of Gilpin Ventures, Inc.--
                                Stock Purchase Agreement.
                                Item 5.  Other Events--Wells Fargo Credit Agreement.
   June 1, 1998                 Item 7.  Pro Forma Financial Statements--GVI acquisition.
   April 16, 1999               Item 5.  Other Events--Wells Fargo Credit Agreement.
   December 15, 1999            Item 5.  Other Events--Amendment No. 1 to Understanding
                                as to Joint Venture Agreement
   January 19, 2000             Item 5.  Other Events--Asset Purchase Agreement-Gold
                                Dust West.
   January 10, 2001             Items 2 and 7.  First Amendment to Credit Agreement.
</TABLE>

(4) Filed as an Exhibit to our Report on Form 10-Q is the following,
    incorporated herein by reference.
<TABLE>
<CAPTION>

    Date of Filing                              Exhibit
    --------------                              -------
<S>                           <C>
    July 29, 1999             10.99.1--Employment Agreement--Stephen R. Roark
</TABLE>


                                       65
<PAGE>   91


(5) Filed as Exhibits to our Annual Report on Form 10-K for the year ended
    December 31, 1999 and incorporated herein by reference.
<TABLE>
<CAPTION>

  Exhibit No.                         Description
  -----------                         -----------
<S>                    <C>
  10.99-2              Executive Employment Agreement--
                       Jeffrey P. Jacobs
  10.99-3              Amendment No. 1 to Executive Employment
                       Agreement--Stephen R. Roark
  10.99-4              Employment Agreement--Stanley Politano
  10.99-5              Agreement--Premier One Development Company, Inc.
</TABLE>

(6) Filed herewith:
<TABLE>
<CAPTION>

  Exhibit No.                          Description
 ------------                          -----------
<S>                    <C>
  01.10-23-1           Accountants' Consent
</TABLE>

d. Financial Statement Schedules Required Pursuant to Regulation S-X filed
   herewith:

   None


                                       66
<PAGE>   92


                                   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.

                                    BLACK HAWK GAMING &
                                    DEVELOPMENT COMPANY, INC.


Date:  March 29, 2001                   By:/s/ Jeffrey P. Jacobs
                                           ------------------------------------
                                   Jeffrey P. Jacobs, Chairman and
                                             Chief Executive Officer


Date:  March 29, 2001                      /s/ Stephen R. Roark
                                           ------------------------------------
                                           Stephen R. Roark, President
                                           and Chief Financial  and
                                           Accounting Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

        Signature                                 Title                            Date
        ---------                                 ------                           -----

<S>                                              <C>                              <C>
/s/ Jeffrey P. Jacobs                             Director                        March 29, 2001
-----------------------------------
Jeffrey P. Jacobs

/s/ Stephen R. Roark                              Director                        March 29, 2001
---------------------------------
Stephen R. Roark

/s/ Frank B. Day                                  Director                        March 29, 2001
-------------------------------------
Frank B. Day

/s/ J. Patrick McDuff                             Director                        March 29, 2001
------------------------------------
J. Patrick McDuff

/s/ Robert H. Hughes                              Director                        March 29, 2001
---------------------------------
Robert H. Hughes

/s/ Timothy Knudsen                               Director                        March 29, 2001
---------------------------------
Timothy Knudsen

/s/ Stephen P. Owendoff                           Director                        March 29, 2001
--------------------------------
Stephen P. Owendoff
</TABLE>

                                       67
<PAGE>   93



                                  EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No.                        Description
-----------                        -----------
<S>                       <C>
01.10-23-1                Consent of Deloitte & Touche LLP
</TABLE>





















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