EXHIBIT 99.2





                         UNITED STATES BANKRUPTCY COURT

                          FOR THE DISTRICT OF COLORADO


In re:   )
         )        Case No. 97-15695-SBB
         )        PAPONE'S PALACE LLC
         )        EIN: 84-1204410
         )        Chapter 11
         )     Debtor.



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                    DISCLOSURE STATEMENT TO ACCOMPANY PLAN OF
                       REORGANIZATION DATED JULY 22, 1997

                                  INTRODUCTION

         This  Disclosure  Statement has been prepared by Papone's Palace LLC, a
Colorado  corporation   ("Papone's"  or  "Debtor")  to  accompany  its  Plan  of
Reorganization  dated July 22,  1997  ("Plan")  which has been filed in Papone's
Chapter 11 case.  This  Disclosure  Statement is being provided to all creditors
and  interest  holders of  Papone's.  This  Disclosure  Statement  is subject to
approval  pursuant to 11 U.S.C.  Section  1125 by the United  States  Bankruptcy
Court for the District of Colorado as containing adequate  information to enable
creditors and interest holders to determine whether to accept the Papone's Plan.
The Court's approval of this Disclosure Statement does not constitute a decision
on the merits of the Papone's Plan. Issues related to the merits of the Plan and
its  confirmation  will  be the  subject  of a  confirmation  hearing  which  is
scheduled for ____________________,  1997 AT ________ ___.m. in Courtroom _____,
United States Bankruptcy  Court, U.S. Customs House, 721 - 19th Street,  Denver,
Colorado.
         THIS DISCLOSURE  STATEMENT HAS BEEN NEITHER APPROVED NOR DISAPPROVED BY
THE  SECURITIES  AND EXCHANGE  COMMISSION.  THE  COMMISSION  HAS  SIMILARLY  NOT
REVIEWED THE ACCURACY OR ADEQUACY OF THIS DISCLOSURE STATEMENT.
         This  Disclosure  Statement  is  provided  to you along  with a copy of
Papone's  Plan and a Ballot to be used for voting on the Plan.  Please  complete
the Ballot according to the  instructions  contained on the Ballot if you intend
to vote for or against  Papone's Plan. Each creditor or interest holder may vote
on the Plan by  completing  the enclosed  Ballot and returning it to counsel for
Papone's:

                           Lee M. Kutner, Esq.
                           Joan B. Burleson, Esq.
                           Rubner & Kutner, P.C.
                           303 East 17th Avenue
                           Suite 500
                           Denver, CO 80203


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This  Ballot  must  be  received  by  Rubner  &  Kutner,   P.C.  no  later  than
______________,  1997,  which  date has been set by the Court as the last day to
vote on the Plan. Terms contained in this Disclosure Statement which are defined
in the Plan, have the same meaning as set forth in the  definitional  section of
the Plan, Article II.

                                              CHAPTER 11 AND PLAN CONFIRMATION
         Chapter 11 of the United  States  Bankruptcy  Code is designed to allow
for the rehabilitation  and  reorganization of financially  troubled entities or
individuals.   Chapter  11  allows  the  Debtor  to  retain  its  assets  during
administration  of its Chapter 11 case as a  Debtor-in-Possession  and following
confirmation of a Plan as a reorganized  Debtor or as provided in the Plan. Once
confirmation of a Plan of  Reorganization  is approved by the Court, the Plan of
Reorganization  is  the  permanent   restructuring  of  the  Debtor's  financial
obligations.  The Plan also  provides  a means  through  which the  Debtor  will
restructure  or repay its  obligations.  The Plan will provide  Papone's with an
opportunity  to remain in business and satisfy its debts as  restructured  under
the Plan. Funding for the Plan will be derived from Papone's ongoing operations,
and from infusions of capital from LS Capital Corp.
         The Plan of Reorganization  divides creditors into classes of similarly
situated  creditors.  All  creditors  of the same class are treated in a similar
fashion.  All member interests are also classified and treated alike. Each class
of  creditors or interest  holders is either  impaired or  unimpaired  under the
Plan. A class is  unimpaired if the Plan leaves  unaltered the legal,  equitable
and  contractual  rights  to which  each  creditor  in the  class  is  entitled.
Alternatively,  a claimant is  unimpaired if the Plan provides for the cure of a
default and  reinstatement of the maturity date of the claim as it existed prior
to the default.
         The Bankruptcy Court has entered an Order setting a bar date for filing
Proofs of Claim as  ________________,  1997.  The Plan  provides that claims and
interests  of all classes  shall be allowed  only if evidenced by a timely filed
Proof of Claim or Interest or which  otherwise  appear in the Schedules filed by
Papone's and are not scheduled as disputed,  contingent or  unliquidated  unless
subsequently  allowed  by the  Court.  Creditors  may check as to whether or not
their claims have been  scheduled as disputed,  contingent  or  unliquidated  by
reviewing  the  Schedules  filed by  Papone's  in the  Bankruptcy  Court for the
District of Colorado.


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Alternatively,  creditors may contact counsel for Papone's or Papone's  directly
in order to determine how they have been scheduled.
         Chapter  11 does not  require  that each  holder of a claim  against or
interest in Papone's vote in favor of the Plan in order for the Court to confirm
the Plan. The Plan, however,  must be accepted by at least one impaired class of
claims by a  majority  in number and two  thirds in  amount,  without  including
insider  acceptance,  of those claims of such class actually voting on the Plan.
Assuming one impaired  class votes to accept the Plan, it may be confirmed  over
its  rejection  by other  classes  if the  Court  finds  that the Plan  does not
discriminate  unfairly and is fair and equitable,  with respect to each class of
claims or interests that is impaired under and has not accepted the Plan.
         The  Bankruptcy  Code  requires  that if  interest  holders  retain  an
interest or receive anything under the Plan, then the unsecured creditor classes
must  either be paid the full value of their  claims or vote to accept the Plan.
This provisions is not applicable  because,  under the Papone's Plan, new member
interests  will be issued to LS Capital  Corporation  (" LS Capital  Corp.") and
Papone's  Palace  Acquisition  Corp.  ("PPAC") in proportion to the value of new
capital  contributed  in order to facilitate  the Plan.  All  interests  held by
pre-confirmation  members  of the  Debtor  will be  cancelled.  Since  the  Plan
provides for payment in full to be made to non-insider  unsecured  creditors who
would  likely  receive  only a  portion  of their  claims,  or  nothing  under a
liquidation, all creditors are urged to vote to accept the Plan.
         If all  classes of claims and  interests  vote to accept the Plan,  the
Court may confirm the Plan.  Section 1129 of the Bankruptcy  Code sets forth the
requirements for  confirmation.  Among other things,  Section 1129 requires that
the Plan be in the best  interest of the holders of claims and  interests and be
feasible  through a showing that  confirmation  will not be followed by the need
for further financial reorganization of the Debtor.

               BACKGROUND AND EVENTS LEADING TO CHAPTER 11 FILING
     Papone's  was formed to own and  operate a small  casino in  Central  City,
Colorado.  Papone's  was  originally  started  by the  Hill  Family,  long  time
residents  of  Central  City,  in the early  1990's.  The casino was set up as a
limited  liability  company  owned and  operated  by the Hill Family  Trust.  In
January,  1992,  the Hill Family  Trust sold a 49%  interest in Papone's to Earl
Neudecker ("Neudecker") and Randall Gose ("Gose"). Neudecker

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and Gose paid some cash to the Hill Family Trust and executed a promissory  note
payable to the Hill Family Trust in the principal  amount of $1,450,000  due and
payable on January 14, 1997 (the "Neudecker/Gose Note"). The Neudecker/Gose Note
was secured by a Deed of Trust on their 49% interest in the casino  building and
real property.
         On or about November 30, 1992, a number of events transpired:
         1.       The Hill  Family  Trust  gave an  option  to  acquire  its 51%
                  interest in Papone's Palace as well as the Neudecker/Gose Note
                  to   American   Pacific   Management   Corporation,   a  Texas
                  corporation;
         2.       Gose gave an option to acquire his 24.5%  interest in Papone's
                  Palace to American Pacific Management Corporation, in exchange
                  for a  $500,000  note from  PPAC,  secured  by a Deed of Trust
                  against the Property;
         3.       American Pacific Management  Corporation  assigned its options
                  on  Papone's  Palace and the  Neudecker/Gose  Note to Virology
                  Testing Sciences, Inc., a Delaware corporation.

         On or about December 31, 1992, Virology Testing Sciences, Inc. assigned
its options to acquire an interest in Papone's Palace and in the  Neudecker/Gose
Note to Papone's Palace Acquisition Corporation, a Colorado corporation ("PPAC")
and a wholly owned  subsidiary of Lone Star Casino  Corporation  ("Lone  Star").
Lone  Star  bacame  a  liscensed  casino  owner,  and as of  June  10,1993,  the
acquisition of these  interests was completed.  Thereafter,  Papone's Palace LLC
was 75.5% owned by PPAC and 24.5% owned by Neudecker.  Paul Montle ("Montle") is
the chairman of PPAC and CEO of Lone Star.  Lone Star has since changed its name
to LS Capital Corporation.
         From  the  outset,  there  were a number  of  problems  experienced  by
Papone's.  The  closing  with the Hill  Family  Trust for the  purchase  did not
officially take place until the second quarter,  1993. Papone's did not show any
net profits and accordingly the deferred payments on the Neudecker/Gose Note due
to the Hill Family  Trust were  reduced on at least two  occasions.  During this
time, a dispute  arose between  Neudecker and the Hills over the Note  payments,
construction costs and profitability of the Casino,  which resulted in Neudecker
filing a civil  action  against  the  Hills and  Papone's  in  Jefferson  County
District Court, Case No 93-CV-775.


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         To meet a serious cash flow  deficiency,  in October,  1994, Lone Star,
PPAC and Papone's borrowed $1 million from Leslie Alexander,  assigned the first
deed of trust to Mr.  Alexander on the casino and real  property,  and granted a
third deed of trust on the Property as well.  The proceeds of the loan were used
to pay operating  deficiencies,  and to repay LS Capital for operating  loans it
had previously funded to Papone's.
         Over time,  Alexander made additional advances to Papone's,  obtained a
personal  guaranty  from  Montle  for  $50,000  of the  loan,  and  obtained  an
assignment  of Lone  Star's  7%  Membership  interest  in  Manning  Real  Estate
Associates,  LLC ("Manning").  Manning is a California Limited Liability Company
with approximately 35 members. Manning owned a card club in Fowler,  California,
which essentially operated a casino, with non-bank card games.
         Papone's was unable to repay the Alexander loan when due, and defaulted
on  payments  thereunder  in  December  of  1995.  The  parties  entered  into a
Settlement Agreement dated August 5, 1996. The Settlement Agreement restructured
the Loan,  accepted an absolute conveyance of the 7% Manning Membership interest
for a  credit  to the Loan in the  amount  of  $590,000,  thereby  reducing  the
principal amount of the Loan to approximately $1,126,337.00.
         The  Settlement  Agreement  was expressly  subject to PPAC  obtaining a
court  determination  that PPAC had the  authority to enter into the  Settlement
Agreement,  since  Neudecker had alleged  otherwise.  An action was commenced in
Gilpin  County  District  Court,  Case  No  96-CV-80,  to  obtain  the  required
declaratory relief in September of 1996.  Neudecker  responded to the Complaint,
alleging that the Alexander Loan was improperly  incurred,  and that amounts due
under the Neudecker  Note to PPAC were in dispute.  Neudecker  requested and was
granted authority to file a third party complaint against Montle,  Papone's,  LS
Capital Corp, Lone Star Acquisition Corporation,  and Alexander.  That action is
pending at this time.
         At the time the Neudecker Note was acquired by PPAC in June,  1993, the
balance due was  $725,000.  As of its maturity on January  14,1997,  the balance
due,  including  principal  of  $725,000,  accrued  interest  of  $742,395,  and
Neudecker's  members share of operating losses of $285,486,  was  $1,752,881.00.
Neudecker did not pay the Note when it came due, and PPAC commenced an action in
Denver County District Court, Action #97-CV-1021 to collect the Note.


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         As a result of the  effort to collect  the  Neudecker  Note,  Neudecker
refused to sign the 1997 liscense  renewal,  and Papone's was unable to obtain a
renewal of its gaming license from the Colorado Gaming commission.  Papone's was
therefore unable to reopen for business in May, 1997 as planned.

                   EVENTS OCCURRED SINCE FILING OF BANKRUPTCY
         Since April 23, 1997 when the within  bankruptcy was filed,  the Debtor
has filed its  Schedules and  Statement of Financial  Affairs,  and employed the
firm of Rubner & Kutner,  P.C. as its  attorneys.  It has further  requested and
been granted approval to enter into an insurance premium finance agreement,  and
has  obtained  $10,000 in  unsecured  debt from LS Capital as an  administrative
expense, in order to pay insurance and other administrative costs. No Creditors'
Committee has been formed.

                                                    DESCRIPTION OF ASSETS
         The Debtor's  primary asset consists of a 6,000 square foot building on
Main Street in Central City,  Colorado,  where Papone's  Palace Casino  operated
from July 1, 1993 through September 30, 1996 (hereinafter,  the "Property"). The
Property  is owned in fee  simple,  but is subject to deeds of trust in favor of
Neudecker, Randall Gose and Alexander. The Debtor also owns furniture,  fixtures
and equipment,  including casino and restaurant  equipment.  The Debtor has been
unable to renew its gaming  license  to date,  as a result of the  dispute  with
Neudecker, as described above.
         It is believed that the market value of the property exceeds the amount
of the secured  claims  against the  property,  depending on the value given the
Alexander claim, and the value given the personal property.




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                           DESCRIPTION OF LIABILITIES
         The Debtor's pre-petition liabilities include the following:
         A.       Alexander Loan.
         In accordance  with the Settlement  Agreement dated August 5, 1996, the
Debtor is indebted to Leslie Alexander in the principal amount of $1,126,337.00.
In accordance with the terms of the Alexander Loan,  interest has accrued at 45%
per annum. There may be a dispute regarding the amount of an offset contemplated
in the Settlement  Agreement,  which was credited to outstanding interest on the
loan. This debt is secured by a first deed of trust in the real property.
         B.       Randall Gose.
         Randall  Gose  holds a  promissory  note dated  June 10,  1993,  in the
outstanding amount of approximately $410,000,  which is secured by a second deed
of trust in the real property.
         C.       Wages.
         The Debtor owes approximately $4,946 in unsecured priority wage claims.
         D.       Taxes.
         The Debtor owes  approximately  $16,450 to Gilpin County,  Colorado for
1996 taxes,  which constitutes a lien against the Property.  Taxes for 1997 have
not been calculated at this time.
         E.       License Fees.
         The Debtor owes approximately $303.00 to Central City for license fees.
         F.       Unsecured Debt.
         The Debtor holds approximately  $850,000 in unsecured debt,  $39,361.55
of which is trade debt incurred  prior to the closing of Papone's.  Insider debt
is estimated to be $757,773.00,  not including disputed advances from Neudecker.
A list of all  claims  expected  to be filed in this  case is  attached  to this
Disclosure Statement as Exhibit A.

                             DESCRIPTION OF THE PLAN
         The Debtor has filed its Plan of Reorganization  with the United States
Bankruptcy  Court for the District of Colorado  herewith.  The Plan provides for
the reorganization of the Debtor. Creditors will be paid from cash


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infusions  provided by LS Capital Corp,  and from an assignment of the Neudecker
Note, which is owned by PPAC.
         The Plan provides for the  specification and treatment of all creditors
and  interest  holders.  The Plan  identifies  whether each class is impaired or
unimpaired.  A class is unimpaired only if the Plan leaves  unaltered the legal,
equitable  or  contractual  obligations  between  the Debtor and the  unimpaired
claimant or interest  holder.  The following is a brief summary of the Plan. The
actual text of the Plan should be reviewed for more specific detail.

Priority Claims
         The holders of claims  which are costs and  expenses of  administration
shall  receive  cash equal to the allowed  amount of the claim on the  Effective
Date of the Plan. Any cost and expense of administration  claim which is allowed
by the Court after the  Effective  Date of the Plan will be paid within ten (10)
days of its allowance. The Debtor expects that the following creditors will hold
claims  which  constitute  cost and expense of  administration  claims as of the
Confirmation Date for the Plan which is estimated to be November 1, 1997.

Claimant                         Nature of Claim                   Claim Amount

Rubner & Kutner, P.C.            Legal Fees-Bankruptcy Counsel      $20,000.00
Office of United States Trustee  Fees                               $   250.00


         At the time the Debtor filed its Chapter 11 bankruptcy  case,  Rubner &
Kutner,  P.C. ("R&K") was paid a pre-petition  retainer in the amount of $14,559
from LS Capital Corp. An additional $800 was paid to R&K for the Debtor's filing
fee for this Chapter 11 case. The Debtor and R&K anticipate  that the total fees
and costs for the Chapter 11 case will not exceed  $20,000.  However,  the total
amount of fees and costs in the case are dependent upon the amount of litigation
which is undertaken in connection  with gaining  confirmation  of the Plan.  The
legal fees and costs could increase  substantially  should the Debtor  encounter
difficulties or engage in substantial litigation to gain approval of its Plan.
         The Debtor  expects to pay all quarterly  fees due to the United States
Trustee's  Office pursuant to 28 U.S.C.  Section 1930. Any such fees outstanding
as of the Confirmation Date will be paid on the Effective Date


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of the Plan. Additional quarterly fees may be due following  confirmation of the
Plan until the case is closed. Such quarterly fees will be paid by the Debtor as
they become due.
         The Plan  provides  that the unsecured  claims of  governmental  taxing
authorities,   entitled  to  priority  status,  other  than  the  Gilpin  County
Treasurer,  will be paid on the Effective  Date of the Plan. It is expected that
the only priority claims that will exist in this case are the claims of the City
of Central in the amount of $303.00,  and two  priority  wage  claimants  in the
total amount of $4,946.

Class 2, Gilpin County Treasurer
         Class 2 consists of the allowed claim of the Gilpin  County  Treasurer,
in the approximate  amount of $ 16,450.00 for 1996 taxes.  This claimant holds a
secured claim against the real property.

Class 3, Randall F. Gose
         Class 3 consists of the secured  claim held by Randall F. Gose,  in the
approximate amount of $410,000. The Class 3 claim is unimpaired. The balance due
on the Class 3 claim shall be  amortized  over a six year period at the interest
rate  contained in the original  promissory  note of June 10, 1993, or 7.5%, and
shall  be  paid  in  equal  monthly  installments  of  principal  and  interest.
Notwithstanding  the amortization  term, the entire balance of the Class 3 claim
shall be due and payable on the seventh anniversary of the Effective Date of the
Plan.  Class 3 shall retain all liens that secure its claim.  The enforcement of
any  guaranties  held by the Class 3 claimant  against any insider of the Debtor
shall be stayed during the term of the Plan.

Class 4, Leslie Alexander
         The Class 4 claim held by Leslie  Alexander  is  impaired,  and will be
         treated as follows:  The principal  amount of the Class 4 claim will be
         allowed in an amount determined by the Court at the
confirmation  hearing,  or agreed upon by the Debtor and the Class 4 claimant on
or before the  confirmation  date. On the Effective Date of the Plan,  PPAC will
assign and transfer to the Class 4 claimant both the Neudecker Note and the Deed
of Trust which secures the Neudecker  Note. It is estimated that after crediting
the  Class  4  claimant  for  $590,000  as  agreed  upon by the  parties  in the
Settlement Agreement dated August 1, 1996, the value of that


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Note is $1,126,337.00. The Class 4 claim will be reduced by an amount determined
by the Court at the  confirmation  hearing to reflect the value of the Neudecker
Note,  which is  estimated  to be  $1,752,882.  After  that  offset,  the Debtor
estimates  that no  further  amount  will  remain  due and owing to Class 4. The
remaining balance due, if any, shall be amortized over a 20 year period, at 7.5%
per annum,  and paid in equal  monthly  installments  of principal and interest.
Notwithstanding the amortization term, the entire remaining balance of the Class
4 claim,  if any,  shall be due and  payable on the seventh  anniversary  of the
Effective  Date of the Plan.  The Class 4 claimant  shall  retain any liens that
secure its claim.

Class 5, Unsecured Creditors
         Class 5 consists of unsecured  creditors with allowed  claims.  Class 5
shall receive a pro rata distribution of the greater of the full amount of their
claims, or the total sum of $50,000, to be made within ten days of the Effective
Date of the Plan. The pro rata distribution to Class 5 shall be the sole payment
made to the Class 5 creditors, and shall be in total satisfaction of the Class 5
claims.

Class 6, LS Capital Corporation
         Class 6 consists of the unsecured claim of LS Capital Corp.  On the 
Effective Date of the Plan, Class 6 shall be deemed satisfied.

Class 7, Pre-Confirmation Members of the Debtor
         Class 7 consists of the interests held by  pre-confirmation  members of
the Debtor,  including LS Capital Corp. and Earl Neudecker.  Class 7 is impaired
by the Plan.  On the  Effective  Date of the Plan,  all member  interests in the
Debtor will be cancelled, and Class 7 claimants shall neither receive nor retain
any property on account of their Class 7 pre-confirmation membership interests.

                       MEANS FOR IMPLEMENTATION OF A PLAN


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         Operation of Business. The Debtor will retain ownership of the Property
and  will  proceed  to  reopen  casino  operations  at  the  Property  following
confirmation  of the Plan.  The  Debtor  will  operate as a  reorganized  Debtor
following confirmation.
         The  Debtor  will  utilize  cash on hand,  in  addition  to new  equity
provided in connection with  confirmation of the Plan and the Debtor's  issuance
of new member interests for new consideration, to fund the Plan.
         Recapitalization  of Company.  On the Effective  Date of the Plan,  new
member  interests  in the Debtor will be issued for new  consideration.  The new
member  interests will be issued to the following  entities in proportion to the
relative  value,  determined  on the  Confirmation  Date,  of their new  capital
contributions, for the consideration stated:
a. LS Capital  Corp.  - New  consideration  consisting  of:  (i)  release of its
administrative expense claim; (ii) payment of $50,000 in additional funds; (iii)
release of its unsecured  Class 6 claim;  and (iv) guaranty of up to $200,000 of
payments due under this Plan,  which  guaranty will be applied to creditors pari
passu with other  creditors.  Any amounts funded  ----------  pursuant to the LS
Capital Corp. guaranty will constitute a  post-confirmation  debt of the Debtor.
Any such obligation will be subject to the following terms: (a) interest at 7.5%
per annum;  (b) paid in  monthly  installments,  (c) due in full on the  seventh
anniversary  of the  Effective  Date of the Plan;  (d) LS Capital shall have the
option to convert the  obligation  to  membership  interests in the  reorganized
Debtor on terms to be determined by LS Capital Corp. and the reorganized Debtor.
b.  PPAC  - New  consideration  consisting  of  transfer  to the  Debtor  on the
Effective Date of the Neudecker Note and related Deed of Trust.  The transfer of
the Neudecker Note will only be treated as new  consideration to the extent that
the Court finds that the Note has a value on the Confirmation  Date of an amount
in excess of the account  receivable  due to the Debtor from PPAC.  If the Court
finds  that the  Neudecker  Note has a value  less than or equal to the  account
receivable, PPAC will not receive any new member interest in the Debtor.

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         Once the Plan is confirmed and new member interests are issued, the new
members will apply for  appropriate  licenses from the Colorado  Limited  Stakes
Gaming Commission to enable the Debtor to reopen its casino.
         Settlement of Account  Receivable.  On the Effective  Date of the Plan,
PPAC shall assign to the Debtor,  all of its right, title and interest in and to
the Neudecker Note and the Deed of Trust which secures the Neudecker  Note. Such
assignment shall be made in satisfaction of the account  receivable owed by PPAC
to the Debtor,  which is estimated to be $211,696.00 In the event that the Court
finds that the Neudecker Note has a value on the Effective Date in excess of the
amount of the  account  receivable,  the  difference  shall  represent a capital
contribution  to the  Debtor  which  will  entitle  PPAC to receive a new member
interest in the Debtor computed as set forth herein.
         Disputed Claim  Procedure.  Distributions to any class of creditor will
only be made on account of Allowed Claims.  In the event that  distributions are
made at a time that a claim  objection is pending before the Court or a judgment
has entered to  establish a claim and the  judgment is on appeal or subject to a
certiorari proceeding, the portion of the distribution that would be paid to the
disputed claimant will be held by the Debtor in an interest bearing Bank account
until the claim is allowed or disallowed. If allowed, the claim will be paid its
appropriate  share of the withheld  payment with interest.  If  disallowed,  the
withheld  distribution will be paid on a pro rata basis to the remaining allowed
claimants.
         Claims and Litigation.  All claim  objections and avoidance  actions in
the case must be filed no later than 120 days  following the  Effective  Date of
the Plan.
         All applications for allowance and payment of administrative  expenses,
including  professional  fees,  must  be  filed  within  45 days  following  the
Effective Date of the Plan.
         Monthly Installments. Whenever the Plan provides for payment in monthly
installments  or a payment due in a certain  month,  the payment shall be due on
the last day of the calendar month in which the payment is due. The Debtor shall
then have a five day grace  period  within  which the  monthly  payment  must be
received by the payee before the Debtor shall be in default.
         Final Decree.  The Debtor will request entry of a final decree  closing
the case on or before the later of the date all claim objections and any pending
litigation is concluded or 180 days after the Effective Date of the Plan.


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         Liquidation  Option.  In the event  the  Debtor  determines  that it is
prudent to close its casino or sell the Property, the Debtor has the right to do
so. The Debtor will provide notice to all remaining creditors as of the date the
decision is made to close the casino or sell the Property.
         Injunction.  Except as expressly  provided for in the Plan, all persons
and entities, including, but not limited to, the holders of any and all charges,
debts, liabilities,  encumbrances, security interests, Claims, equity interests,
contingent or unliquidated,  known or unknown, foreseen or unforeseen,  existing
or  hereafter   arising,   (including  any  claims  of  successor  or  successor
liability),  shall be precluded and permanently  enjoined from asserting against
the Reorganized Debtor, PPAC, LS Capital Corp., the officers,  directors, agents
and  professionals  of either PPAC or LS Capital Corp.,  their  designee  and/or
participants, the Debtor, and any successors and assigns of any of the foregoing
and/or the respective assets and property, including the Property, of any of the
foregoing any Claim, charge, debt, liability, encumbrance, security interest, or
lien  based  on  any  document,  instrument,   judgment  award,  act,  omission,
transaction  or other  activity of any kind or nature that occurred prior to the
Confirmation  Date. Such injunction  shall also preclude any act, in any manner,
at any place whatsoever,  that does not conform to or comply with the provisions
of the Plan. The injunction, discharge and releases described in Article VIII of
this Plan shall apply  regardless of whether or not a proof of claim or proof of
interest  based on any  Claim,  debt,  liability,  security  interest  or equity
interests  is filed or whether or not a Claim or equity  interest  based on such
Claim,  debt,  liability  or  equity  interest  is  allowed.  Therefore,  on the
Effective Date of the Plan, a Co-Debtor  stay, or Injuction,  will be imposed to
protect PPAC and LS Capital  Corp.  from  collection  activity  from Class 3 and
Class 4  claimants.  LS  Capital  Corp.  and  PPAC,  as  parties  providing  new
consideration  to facilitate  the Plan, are critical to the success of the Plan.
The Co-Debtor stay will be limited in time to five years following the Effective
Date of the Plan.  The intent of this  provision is to allow PPAC and LS Capital
Corp. to participate  meaningfully  in the Plan, to fund Plan  payments,  and to
facilitate  reorganization of the Debtor. In the event the Debtor defaults under
the  terms of the Plan with  respect  to  payments  due Class 3 or Class 4, this
Injunction will terminate. Plan Feasibility
         The  Debtor  believes  that the Plan,  as  proposed,  is  feasible.  In
assessing  the  feasibility  of the Plan,  it is  important  to note two primary
considerations: First, is that the Debtor's ability to fund the Plan at the time
it is


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<PAGE>






confirmed is dependent upon the  contribution  of LS Capital  Corp.,  which will
provide for payment of all  administrative  and priority claims,  as well as the
$50,000  distribution to Class 5 unsecured  creditors.  Second,  is the Debtor's
ability to generate  sufficient  cash in the future to fund ongoing  obligations
under the Plan. Upon issuance of new member  interests,  the Debtor will be in a
position to regain its gaming license, and to reopen the Papone's Palace Casino.
The Debtor estimates that, upon opening the casino, cash flow will be sufficient
to pay ongoing plan payments.
         The Debtor  estimates  that it will  require  approximately  $50,000 in
liquid assets as of the Effective  Date of the Plan to fund the Plan. LS Capital
Corp. has committed to contribute these funds to facilitate  confirmation of the
Plan.  Attached  to this  Disclosure  Statement  as  Exhibit  B is a cash  basis
projection of the Debtor's  expected income and expenses for the six year period
following  the  Effective  Date.  This exhibit  forms the basis for the Debtor's
projections to justify  payments to secured  creditors  over time.  Based on the
Debtor's prior performance, as well as the Debtor's expected performance once it
is  permitted  to reopen  the  casino,  the  Debtor  believes  that it will have
sufficient income with which to fund any required payments to Classes 3 and 4.

                      LIQUIDATION ANALYSIS UNDER CHAPTER 7
         The principal alternative to the Debtor's  reorganization under Chapter
11 is a conversion of the case to Chapter 7 of the  Bankruptcy  Code.  Chapter 7
provides for a liquidation of the Debtor's  assets by a trustee who is appointed
by the United States  Trustee's  Office.  In a Chapter 7 case, the trustee would
take  over  control  of the  assets,  they  would be  liquidated,  and  proceeds
distributed to creditors in the order of their priority.
         The amount of secured  claims  pending  against the real  property  are
approximately $2.5 million,  prior to any offset from contribution of non-estate
assets. The Debtor believes that, although the going concern value of the casino
was approximately $2.2 million based upon a September, 1995 appraisal, in a fire
sale liquidation scenario, the Property would bring no more than $600,000. After
costs of sale, it appears that few if any funds would be available from the sale
of the Property to pay unsecured creditors.
         Likewise,  in a  "fire  sale"  liquidation  of  the  Debtor's  personal
property,  it is estimated that  furniture,  fixtures and equipment  would bring
approximately  20% of their  current  depreciated  cost.  This would result in a
recovery of approximately $20,000.00 by the trustee. The PPAC account receivable
is deemed to be collectable,


                                                             45

<PAGE>






based upon it's primary asset,  the Neudecker  Note. This would leave a total of
$231,696.00 available for distribution to unsecured creditors.
         Given the  alternative  under  the  Chapter 7  scenario,  the  Debtor's
proposed  Chapter 11 Plan provides a  substantially  better  proposition for all
creditors.  Under the proposed Plan, the secured  creditors will be paid in full
either  through  assignment of non-estate  assets,  or over time,  and unsecured
creditors will be paid the total amount of their claim,  or $50,000,  within ten
days following the Effective Date of the Plan.
<TABLE>
<CAPTION>

                                    Liquidation                                         Available
Property                            Value                     Encumbrances              for Creditors

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

Real Property                       $ 600,000.                $2,523,370.               $600,000.

Personal Property
    FF&E                            $ 20,000.                 0                         $ 20,000.
    PPAC A/R                        $211,696.                 0                         $211,696.



</TABLE>








                          TAX CONSEQUENCES OF THE PLAN
         The tax  effects  of the  proposed  Plan  upon  each  creditor  must be
determined  separately  by  each  creditor  for  itself.  The  Debtors  make  no
representations  with respect to the tax aspects of the proposed  Plan and it is
suggested that each creditor consult its tax counselor on this matter.

DATED:  July 23, 1997.


                                                             46

<PAGE>






                                                  PAPONE'S PALACE LLC



                                                   By:/s/ Paul Montle
                                                   Paul Montle, Manager





























                                                             47

<PAGE>






         Rubner & Kutner, P.C. ("R&K") has acted as legal counsel to Papone's on
bankruptcy  matters during the Chapter 11 case. R&K has prepared this Disclosure
Statement  with  information  provided  primarily by Papone's.  The  information
contained  herein has been  approved by Papone's.  R&K has not made any separate
independent  investigation  as to the  veracity or  accuracy  of the  statements
contained herein.

Counsel to Papone's Palace LLC
Debtor-in-Possession:

RUBNER & KUTNER, P.C.



By:
         Lee M. Kutner
         Joan B. Burleson
         303 East 17th Avenue, Suite 500
         Denver, CO 80203
         Telephone: (303) 832-2400