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                  U.S. SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C.  20549

                                FORM 10-KSB

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                    THE SECURITIES EXCHANGE ACT OF 1934
                FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996

Commission File Number 1-12780

                            BOARDWALK CASINO, INC.
               (Name of small business issuer in its charter)

          NEVADA                                              88-0304201
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                         Identification Number)

      3750 LAS VEGAS BLVD. SOUTH
          LAS VEGAS, NEVADA                                     89109
(Address of principal executive offices)                      (Zip Code)

Issuer's telephone number, including area code:  (702) 735-2400

Securities registered under Section 12(b) of the Exchange Act:

     TITLE OF EACH CLASS              NAME OF EACH EXCHANGE ON WHICH REGISTERED
 Common Stock, $.001 Par Value                 Pacific Stock Exchange
Common Stock Purchase Warrants                 Pacific Stock Exchange

Securities registered under Section 12(g) of the Exchange Act:

                       COMMON STOCK, $.001 PAR VALUE
                              (Title of Class)

                       COMMON STOCK PURCHASE WARRANTS
                              (Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
                                  ---             ---

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will 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-KSB or any amendment to
this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year:  $27,911,557.

State the aggregate market value of the voting stock held by non-affiliates of
the Registrant:  As of January 7, 1997:  $15,862,000*.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:  $.001 Par Value Common Stock--
7,179,429 shares as of January 7, 1997.

Transitional Small Business Disclosure Format: Yes    ; No  X 
                                                   ---     ---

     *   The aggregate market value was determined by multiplying the number of
         outstanding shares (excluding those shares held of record by officers,
         directors and greater than five percent shareholders) by $4.8125, the
         last sales price of the Registrant's common stock as of January 7,
         1997, such date being within 60 days prior to the date of filing.

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                                        PART I

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

ITEM 1.  DESCRIPTION OF BUSINESS.

GENERAL

    Boardwalk Casino, Inc. (the "Company") is a Nevada corporation that owns
and operates the Holiday Inn-Registered Trademark- Casino Boardwalk in Las
Vegas, Nevada and leases the 1.07 acre shopping center next to the hotel-casino.
The Holiday Inn-Registered Trademark- Casino Boardwalk is situated on a 7.8-acre
site on the Las Vegas Strip between Flamingo Road and Tropicana Avenue.  It
includes 653 hotel rooms, approximately 33,000 square feet of casino space, a
coffee shop, a full-service restaurant, a snack bar, an entertainment lounge,
two bars, two outdoor swimming pools and 1,125 garage and surface parking spaces
(including those spaces acquired with the shopping center lease).  It also
contains a small gift shop under lease to Holiday Gifts, Inc., a Nevada
corporation owned by Norbert W. Jansen and Avis P. Jansen, the executive
officers, directors and principal shareholders of the Company.  The Company has
recently completed a substantial hotel and casino renovation and expansion
program.

    Boardwalk Casino, Inc. was incorporated under the laws of the State of
Nevada on July 27, 1993; Holiday Gifts, Inc. was incorporated under the laws of
the State of Nevada on December 23, 1971.  The Company's principal executive
office is located at 3750 Las Vegas Boulevard South, Las Vegas, Nevada 89109 and
its telephone number is (702) 735-2400.

LOCATION

    The Holiday Inn-Registered Trademark- Casino Boardwalk is strategically
located to take advantage of the development and construction of adjacent mega-
hotel/casino projects.  Las Vegas Boulevard, more commonly known as "The Strip,"
is currently the center of gambling activity in Las Vegas.  There are other
concentrations of casinos located in downtown Las Vegas and suburban locations. 
The Las Vegas Strip has the highest concentration of casino space and hotel
rooms in Southern Nevada and it is the location of substantially all of the
premier Las Vegas hotels.

    The Company believes that its highly visible and accessible location is an
important factor in attracting visitors as gaming customers.

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BACKGROUND

    Holiday Gifts, Inc. ("HGI") began gaming operations in 1977 under the trade
name "The Slot Joyn't" when it was granted a restricted Nevada gaming license
for 15 slot machines.  In 1980, HGI was granted a nonrestricted Nevada gaming
license and expanded its operations at The Slot Joyn't to 35 slot machines.  In
1985, VC, Ltd., Limited Partnership, an affiliated limited partnership of which
HGI was the general partner, acquired the adjacent Holiday Inn property and
began operating it under the trade name "Viscount Hotel."  Thereafter, HGI
constructed a physical connection between the hotel and casino and, in 1989,
changed the trade name of the combined businesses to the Boardwalk Hotel &
Casino.  In September 1995, the Company substantially completed a renovation of
the casino by expanding the casino floor space by 18,000 square feet and
remodeling the front facade of the property.  In May 1996, the Company
substantially completed the development and construction of a new 16-story 
451-room hotel tower on its property in addition to the existing four- and 
six-story towers.  As a result of these expansions and other incremental 
additions, the Holiday Inn-Registered Trademark- Casino Boardwalk currently 
consists of a 653-room hotel and a casino of approximately 33,000 square feet 
with 647 slot machines, 20 table games and a full-service race and sports book.

BUSINESS STRATEGY

    Management believes that the following key principles have been and will
continue to be integral to its success as a gaming operator.

  TARGETED CUSTOMER BASE

    The Company's business strategy emphasizes attracting and retaining
customers from two primary market segments, tourism and local patronage.  As the
Company's property has developed by the increase of its room base from 202 rooms
to 653 rooms and the completion of its boardwalk exterior facade, the Company
has focused its emphasis on marketing a larger room base and capturing the added
traffic generated by the development of the mega resorts surrounding the
Boardwalk Casino.  The Boardwalk Casino is disproportionately large in relation
to its room count, thus allowing for the increase in pedestrian traffic
generated by the room base of surrounding mega resorts and new mega resorts
under construction.  The Company believes that its visitor patrons are
discerning customers who enjoy the Company's hotel and casino as an alternate to
the larger surrounding attractions on the Las Vegas Strip.

  FOCUS ON REPEAT CUSTOMERS

    Generating customer satisfaction and loyalty is a critical component of the
Company's business strategy.  The Company attracts customers from both the
tourist and local markets by offering significant value in its dining
experiences and its promotional programs.  The Company markets its rooms through
the Holiday Inn reservation system and its internal group tour, meeting and
travel department.  The Company believes the local market is primarily
influenced by the actual value of its food operations coupled with specific
promotions.  Although perceived value attracts customers to the Holiday
Inn-Registered Trademark- Casino Boardwalk initially, actual value generates
customer loyalty and satisfaction.  Management believes that actual value
becomes apparent during the customer's visit through an enjoyable and high
quality entertainment experience.

  AFFORDABLE QUALITY

    Because the Company targets the frequent repeat customer, management is
committed to providing a quality entertainment experience for its customers at
an affordable price.  Dining is a primary motivation 

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for a majority of all casino visits by both tourists and local residents, and 
management believes that the value offered by the Company's restaurants, 
deli, ice cream parlor and snack bar is a major factor in attracting its 
customers.  The Company offers generous portions of high quality food at 
reasonable prices.  In addition, the Company provides a high level of value 
to its hotel guests by offering moderately priced rooms which are 
well-appointed relative to comparably priced Las Vegas hotels. Management 
believes that providing affordable quality to customers contributes 
significantly to casino patronage.

  STRATEGIC LOCATION

    Management believes that the location of the Holiday Inn-Registered
Trademark- Casino Boardwalk provides the Company with a significant competitive
edge.  With 436 feet of frontage on The Strip, the Company is able to offer
inviting opportunities for the pedestrian traffic generated by the surrounding
mega resorts.  The July 1996 opening of the 3,000-room Monte Carlo Hotel and
Casino immediately south of the Company and the Country Star restaurant to its
north have significantly increased the pedestrian traffic on the boardwalk.  The
2,200-room New York-New York Hotel and Casino (expected to open in January 1997)
and the 2,000-room addition to the Luxor Hotel and Casino are also expected to
improve pedestrian traffic.

  EMPHASIS ON SLOT PLAY

    An integral part of the Company's business strategy is an emphasis on slot
machine play.  The Company's target market consists of frequent gaming patrons
who seek not only a friendly atmosphere and convenience, but also higher-than-
average payout rates.  Accordingly, the Company's slot machine play provides
players with payout rates that are higher than the Las Vegas Strip average
payout rates.

EXPANSION MASTER PLAN

    Currently, the Holiday Inn-Registered Trademark- Casino Boardwalk consists
of a 33,000 square feet casino and a hotel containing a total of 653 rooms
within a four-story, a six-story and a 16-story building located on the property
site.  The Company's master expansion plan for the Holiday Inn-Registered
Trademark- Casino Boardwalk consisted of three phases:  (i) the renovation and
refurbishment of the original hotel rooms, which was completed in May 1994, (ii)
the expansion of the casino, which was substantially completed in September
1995, and (iii) the development and construction of a 16-story, 451-room hotel
tower, a parking garage and surface parking (accommodating 1,125 cars) and the
completion of the 27,000 square foot second floor of the casino.  The
development and construction of the 16-story, 451-room hotel tower was
substantially completed in May 1996.  The Company anticipates that the
development and construction of the 27,000 square foot second floor of the
casino should be completed by April 1997.

    The Company has expanded the casino floor space from 15,000 square feet to
33,000 square feet and increased the number of slot machines from 212 to 647 and
the number of table games from six to 20.  In addition, the casino also features
a full-service race and sports book.  As part of the casino expansion project,
the Company relocated and increased the seating capacities of its restaurant and
its new coffee shop.  Management believes that this expansion was necessary to
respond to its expanding customer base and target markets.

    As part of its expansion master plan, the Company remodeled the front
facade of the Holiday Inn-Registered Trademark- Casino Boardwalk to present a
"Coney Island Amusement Park" theme conforming to the historical character and
general architecture of Coney Island, New York's famous amusement park.  The
casino has been combined with the new construction, creating a new exterior with
436 feet of horizontal frontage and an estimated height of 53 feet.  The
"boardwalk" consists of amusement games and specialty food and/or 

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gift shops. New state-of-the-art outdoor signage has completed the design 
renovation and casino expansion.

    The boardwalk consists of a total of 6,000 square feet of retail space,
including shops, amusement games and food services.  Each of the shops along the
boardwalk offers access into the casino.  The facade features a full-size model
roller coaster rising 90 feet above the boardwalk.  A rotating ferris wheel,
complete with mannequins, is in place on the facade above the boardwalk, as is a
parachute drop with mannequins.  The facade features the Company's logo, Jocko
the Clown, whose face stands approximately 45 feet high and whose likeness is
reproduced on certain of the retail merchandise which is sold by the Company's
retail shops.

    In May 1996, the Company substantially completed the development and
construction of a new 16-story 451-room hotel tower on its property in addition
to the existing four- and six-story towers.  The new 27,000 square foot second
level of the existing casino is currently under construction and will provide a
large buffet area and additional meeting rooms.  This new second floor will also
provide a walkway to the parking garage.

    On December 16, 1993, the Company entered into a license agreement with
Holiday Inns Franchising, Inc. to operate a "Holiday Inn-Registered Trademark-"
hotel at its location.  The agreement, as amended, required the Company to
perform certain construction and renovation work and to open 200 rooms as a
Holiday Inn by May 1, 1994 and a minimum of 300 additional rooms as a Holiday
Inn by April 1, 1996.  Thereafter, the Company may open a maximum of 1,000 rooms
as a Holiday Inn by October 1, 1998.  The agreement provides that the Company
will pay (i) a monthly royalty of 5% of the gross rooms revenues; (ii) a
"marketing contribution" of 1.5% of the gross rooms revenues; (iii) a
"reservation contribution" of 1.0% of the gross rooms revenues; and (iv) a
monthly Holidex fee of $6.43 for each guest room on the Holidex reservation
system.  The license granted under the agreement expires ten years from the date
of the opening of the hotel under the "Holiday Inn" system (June 16, 1994),
subject to earlier termination as set forth therein.

$40 MILLION FIRST MORTGAGE NOTE OFFERING

    On April 12, 1995, the Company completed the private sale of a $40 Million
16.5% First Mortgage Note due 2005 (the "Note").  The Note was issued under the
Indenture between Boardwalk Casino, Inc., Issuer and Shawmut Bank, N.A., Trustee
for $40,000,000 16.5% First Mortgage Notes Due March 31, 2005, Dated as of April
7, 1995 (the "Indenture").  The Note is a senior secured obligation of the
Company, limited in aggregate principal amount to $40,000,000, secured by all of
the current property and assets of the Company.  The Note bears interest at the
rate of 16.5% per annum, payable in cash semi-annually on March 31 and September
30 of each year, commencing on September 30, 1995.  Interest will be paid to the
holder of the Note at the close of business on the March 15 or the September 15,
as the case may be, immediately preceding the respective interest payment date,
or if no interest has yet been paid, on the date of original issue.

    Pursuant to a Disbursement and Escrow Agreement entered into by and among
the Trustee, the Company, Bank of America Nevada and Nevada Construction
Services, Inc., the Company deposited $25,845,054 of the net proceeds derived
from the issuance and sale of the Notes into the Collateral Account.  The funds
were disbursed on the terms provided in the Disbursement and Escrow Agreement to
pay for construction of the 16-story 451-room hotel tower and related
improvements.  All funds in the Collateral Account were pledged as security for
the repayment of the Note.

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    The Company may not redeem or prepay the Note without penalty prior to the
date of its Stated Maturity.  Commencing on September 30, 2001, the Company may
redeem the Note in whole but not in part at a redemption price equal to (i) the
remaining principal amount thereof, plus (ii) accrued interest to the date of
redemption, plus (iii) a premium equal to the Yield Maintenance Premium.  The
Indenture contains certain covenants of the Company, including limitations on
use of proceeds, limitations on restricted payments, limitations on incurrence
of additional indebtedness, limitations on restrictions on distributions from
Restricted Subsidiaries, limitations on capital stock of Restricted
Subsidiaries, limitations on transactions with Affiliates, limitations on Liens,
limitations on activities, limitations on sales of assets, limitation on merger,
sale or consolidation and maintenance of consolidated net worth.

    The foregoing summary of the Note and the Indenture does not purport to be
complete and is subject to, and is qualified in its entirety by, reference to
all of the provisions of the Note and the Indenture, including the definitions
contained therein of certain terms and those terms made part of the Indenture by
reference to the Trust Indenture Act of 1939 as in effect on the date of the
Indenture.  Capitalized terms used herein and not otherwise defined have the
meanings ascribed to them in the Indenture.

    As part of the private sale of the Note, the Company issued to the Note
purchaser 1,281,869 common stock purchase warrants exercisable to purchase
1,281,869 shares of Common Stock at $6.00 per share anytime before April 11,
2005.  Further, in connection with the private placement and sale of the Note,
the Company issued to the Placement Agent and Financial Advisor (and its
affiliates) an aggregate of 626,823 common stock purchase warrants exercisable
to purchase 626,823 shares of Common Stock at $6.00 per share anytime before
April 11, 2000.

    The proceeds of the Note were applied to (i) finance approximately $29.6
million of construction costs for the 16-story 451-room hotel tower, parking
facility, 27,000 square foot second level addition to the existing casino and
related improvements; (ii) finance the retirement of approximately $5.9 million
of existing indebtedness; (iii) pay approximately $1.5 million of fees and
expenses incurred in connection with the offering and sale of the Note; and (iv)
provide approximately $3.0 million for working capital and other corporate
purposes.

PRIVATE FINANCING WITH DIVERSIFIED OPPORTUNITIES GROUP LTD.

    On September 25, 1996, the Company completed a private transaction (the
"Transaction") entered into by and among Diversified Opportunities Group Ltd.,
an Ohio limited liability company ("Diversified"), the Company, and Norbert W.
Jansen, individually and as trustee under an agreement dated July 14, 1993
("Jansen").  Pursuant to the terms of a Purchase Agreement dated as of September
24, 1996 (the "Purchase Agreement") among Diversified, the Company and Jansen,
the first phase of the Transaction was consummated on September 25, 1996.  In
the first phase of the Transaction, the Company sold to Diversified 571,429
shares of common stock (the "Shares") at a price of $7.00 per share for a total
purchase price of $4,000,000 and issued to Diversified a convertible
subordinated note (the "Note") in the principal amount of $5,000,000.  In the
first phase, Jansen also sold to Diversified 182,411 Shares pursuant to the
terms of an Option and Proxy Agreement (the "Option Agreement").  In addition,
as of September 24, 1996, the Company and Diversified also executed a
Registration Agreement (the "Registration Agreement").

    The following is a summary of certain terms of the Purchase Agreement, the
Note, the Option Agreement and the Registration Agreement (collectively, "the
Transaction Documents").  This summary of the Transaction Documents is qualified
in its entirety by reference to the Transaction Documents, copies of which have
been filed as exhibits to this Report on Form 10-KSB.

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    The principal business of Diversified is developing and acquiring
investments in the gaming industry and managing, supervising, selling or
otherwise disposing of such investments and engaging in activities incidental or
ancillary thereto.  There are two members of Diversified, (i) Gary L. Bryenton
and Jeffrey P. Jacobs, as trustees under the Opportunities Trust Agreement dated
February 1, 1996 (the "Trust") and (ii) Jacobs Entertainment Ltd., an Ohio
limited liability company ("Entertainment").  Entertainment is the Manager of
Diversified.  Jeffrey P. Jacobs ("Jacobs") and Jacobs Entertainment Inc. (a
corporation in which Jacobs owns 100% of the outstanding capital stock) are the
members of Entertainment and Jacobs is the manager of Entertainment.  Both the
Trust and Entertainment were formed primarily to hold their interest in
Diversified.

    The first phase of the Transaction closed on September 25, 1996.  At such
time, Boardwalk sold to Diversified 571,429 Shares.  Pursuant to the Option
Agreement, Jansen sold to Diversified 182,411 Shares.  In addition, Boardwalk
issued the Note to Diversified.  Diversified has the right, at its option, to
convert the Note into Shares at any time following its receipt of all necessary
licensing approvals from the Nevada State Gaming Control Board (the "Gaming
Board"), the Nevada Gaming Commission (the "Commission") and local licensing
authorities.  The Note is convertible into a number of Shares determined by
dividing the then unpaid principal balance of the Note by $7.50.  The Note
provides for a variable interest rate of LIBOR plus 2% and interest thereon is
payable on a quarterly basis.  The principal of the Note is due and payable in
September 1998.

    On November 25, 1996, Diversified was advised by the Gaming Board that the
second phase of the Transaction will not result in a change in control of the
Company pursuant to the regulations of the Gaming Board and the Commission.  On
December 2, 1996, phase two of the Transaction was consummated.  In phase two,
Diversified purchased an additional 317,589 Shares from Jansen pursuant to the
Option Agreement, and the Company's Board of Directors (the "Board") was
expanded to six directors, with Jacobs being appointed as the sixth director.

    The final phase of the Transaction provides Diversified the option to
acquire an additional 1,000,000 Shares from Jansen pursuant to the Option
Agreement.  The exercise of this option is subject to Diversified obtaining all
necessary licensing approvals from the Gaming Board, the Commission and the
Nevada local licensing authorities.  At such time as Diversified acquires a
total of 1,000,000 Shares from Jansen pursuant to the Option Agreement, the
Company's Board will be expanded to seven directors with the additional director
being designated by Diversified.

    The Option Agreement further provides for first refusal and first offer
rights for Diversified on Shares to be sold by Jansen, his estate and family. 
The Option Agreement requires that Jansen vote all of his Shares and any other
securities of the Company over which he has control and that he take all
necessary or desirable actions within his control so that: (i) the Board is
established at six directors; (ii) Jacobs is elected to the Board as one of the
six directors; and (iii) once Diversified acquires 1,000,000 or more Shares from
Jansen pursuant to the Option Agreement, the Board is expanded to seven
directors with the additional director to be designated by Diversified. 
Diversified is also granted an irrevocable proxy to vote Jansen's Shares if
Jansen fails to comply with the terms of the Option Agreement relating to the
Board, or any restrictive covenants imposed on the Company pursuant to the Note.

    The Registration Agreement gives Diversified certain rights with respect to
registering for sale under the Securities Act of 1933, as amended (the "Act"),
and applicable state laws the Shares that it may acquire pursuant to the
Transaction.  The Registration Agreement gives Diversified the right, through
September 24, 2001, to demand that the Company effect up to three registrations
(two of which are to be paid by the Company and one of which will be paid by
Diversified) of such Shares subject to the conditions set forth in the
Registration Agreement.  In addition, Diversified has the right to have such

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Shares included in certain registrations under the Act that the Company may
effect other than pursuant to such demand, subject to the conditions set forth
in the Registration Agreement.

MARKETING

    The Holiday Inn-Registered Trademark- Casino Boardwalk has historically
relied upon limited casino and other promotions designed to appeal to local
residents.  With the completion of the expansion of the casino and the hotel,
the Company has implemented an aggressive marketing plan to promote the hotel
and the casino.  The Company believes that the "Coney Island" theme exterior
facade will enhance its ability to attract pedestrian traffic currently
generated by the existing mega resorts as well as those mega resorts under
construction and in the planning phase which surround the Holiday Inn-Registered
Trademark- Casino Boardwalk.  With its oversized casino in relation to its room
inventory, the "Coney Island" facade, and the Company's inexpensive dining value
offerings, the Company believes that it is positioned to attract the mega resort
customer as an addition to its established local and hotel customer bases.

CURRENT OPERATIONS

    GAMING.  Historically, the casino has accounted for approximately 40% of
the net revenues of the Holiday Inn-Registered Trademark- Casino Boardwalk. 
These revenues were primarily derived from the 212 slot machines and four table
games.  With the newly expanded casino, it is anticipated that the gaming
revenue provided by slot machines will continue to be the primary component of
the Company's gaming revenues and income from operations.  Currently, the
Holiday Inn-Registered Trademark- Casino Boardwalk has 647 slot machines and 20
table games on its casino floor and operates a full-service race and sports
book.  On average, the preponderance of the weekly gaming net revenues are
generated on weekends.  The gaming revenues are provided by a broad base of
customers and are not dependent on high-stakes players.

    In connection with its gaming activities, the Company follows a policy of
stringent controls in compliance with the standards set by the Nevada Gaming
Authorities.  As a matter of policy, the Company does not extend credit to its
gaming customers.

    NON-GAMING.  The Holiday Inn-Registered Trademark- Casino Boardwalk has 653
rooms, two outdoor pools and a retail gift shop leased to HGI.  The Company
offers its hotel rooms at modest prices (as of September 30, 1996, the average
room rate was approximately $60.00).  For fiscal year 1995, the Holiday
Inn-Registered Trademark- Casino Boardwalk's average occupancy was approximately
59.42%.  For the fiscal year ended September 30, 1996, the average occupancy was
approximately 76.44%.  See "Item 6. Management's Discussion and Analysis or Plan
of Operation" for more information regarding the Company's gaming and non-gaming
operations and revenues.

    The Company offers a full service restaurant, a coffee shop, a snack bar,
an entertainment lounge and two bars for its casino and restaurant patrons.  As
with its hotel accommodations, the Company's food and beverage services are
moderately priced.

COMPETITION

    There is intense competition among companies in the gaming industry, many
of which have significantly greater financial resources than the Company.  The
Holiday Inn-Registered Trademark- Casino Boardwalk faces competition from all
other casinos and hotels in the Las Vegas areas.  The Holiday Inn-Registered
Trademark- Casino Boardwalk competes directly with a number of other operations
targeted to local residents.  Indirectly and to a lesser extent, its operations
compete generally with gaming operations in other parts of the State of Nevada,
such as Reno, Laughlin and Lake Tahoe, with facilities in Atlantic City, New
Jersey and other 

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parts of the world and with state-sponsored lotteries, on- and off-track 
wagering, card parlors, riverboat and Native American gaming ventures and 
other forms of legalized gambling.  Certain states have recently legalized, 
and several other states are currently considering legalizing, casino gaming 
in designated areas.  Legalized casino gaming in other states and on Native 
American reservations represents additional competition to the Company and 
could adversely affect the Company's operations, particularly if such gaming 
were to occur in areas close to the Company's operations.

EMPLOYEES

    As of September 30, 1996, the Company employed 600 full-time employees,
including its three executive officers, 40 managers and supervisors, 160 casino
personnel, 220 food and beverage personnel, 157 hotel personnel and 20
administrative personnel.  The Company occasionally employs part-time workers as
needed.  None of the Company's employees is covered by a collective bargaining
agreement.  The Company believes that its relationship with its employees is
excellent.

REGULATION AND LICENSING

    The ownership and operation of casino gaming facilities in Nevada are
subject to (i) the Nevada Gaming Control Act and the regulations promulgated
thereunder (the "Nevada Act") and (ii) various local regulations.  The Company's
gaming operations are subject to the licensing and regulatory control of the
Nevada Gaming Commission (the "Nevada Commission"), the Nevada State Gaming
Control Board (the "Nevada Board") and the Clark County Liquor and Gaming
Licensing Board (the "CCB").  The Nevada Commission, the Nevada Board and the
CCB are collectively referred to as the "Nevada Gaming Authorities."

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

    The Company is required to be licensed by the Nevada Gaming Authorities. 
The gaming licenses require the periodic payment of fees and taxes and are not
transferable.  The Company is also required to be registered by the Nevada
Commission as a publicly traded corporation ("Registered Corporation") and as
such, it is required periodically to submit detailed financial and operating
reports to the Nevada Commission and furnish any other information that the
Nevada Commission may require.

    The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company in order to
determine whether such individual is suitable or should be licensed as a
business associate of a gaming licensee.  Officers, directors and certain key
employees of the Company must file applications with the Nevada Gaming
Authorities and 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.  An applicant for
licensing or an applicant for a finding 

                                     9

<PAGE>

of suitability must pay all 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 
licensing, the Nevada Gaming Authorities have the 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 the Company, the Company would have to sever all relationships
with such person.  In addition, the Nevada Commission may require the Company to
terminate the employment of any person who refused to file appropriate
applications.  Determinations of suitability or questions pertaining to
licensing are not subject to judicial review in Nevada.

    The Company is required to submit detailed financial and operating reports
to the Nevada Commission.  Substantially all material loans, leases, sales of
securities and similar financing transactions of the Company must be reported
to, or approved by, the Nevada Commission.

    If it were determined that the Nevada Act was violated by the Company, the
gaming licenses it holds could be limited, conditioned, suspended or revoked,
subject to compliance with certain statutory and regulatory procedures.  In
addition, the Company 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 Company's gaming property and, under certain
circumstances, earnings generated during the supervisor's appointment (except
for the reasonable rental value of the gaming property) could be forfeited to
the State of Nevada.  Limitation, conditioning or suspension of any gaming
license of the Company or the appointment of a supervisor could (and revocation
of any gaming license would) have a material adverse effect on the Company's
gaming operations.

    Any beneficial holder of Common Stock or any other voting security of the
Company ("Company Voting Securities") regardless of the number of shares owned,
may be required to file an application, be investigated, and have such person's
suitability as a beneficial holder of Company 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 the 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 Company Voting Securities to report the acquisition to the
Nevada Commission.  The Nevada Act requires that beneficial owners of more than
10% of Company Voting Securities apply to the Nevada Commission for a finding of
suitability within thirty days after the Chairman of the Nevada Board mails the
written notice requiring such filing.  Under certain circumstances, an
"institutional investor," as defined in the Nevada Act, which acquires
beneficial ownership of more than 10%, but not more than 15%, of Company Voting
Securities may apply to the Nevada Commission for a waiver of such finding of
suitability if such institutional investor holds Company Voting Securities for
investment purposes only.  An institutional investor shall not be deemed to hold
Company Voting Securities for investment purposes unless Company Voting
Securities were acquired and are held in the ordinary course of business as an
institutional investor and not for the purpose of causing, directly or
indirectly, the election of a majority of the members of the Board of Directors
of the Company, any change in the Company's corporate charter, bylaws,
management, policies or operations of the Company, or any other action which the
Nevada Commission finds to be inconsistent with holding Company 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 

                                     10

<PAGE>

of the type normally made by securities analysts for informational purposes 
and not to cause a change in 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, limited 
partnership, limited liability company 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.  Norbert W. 
Jansen, the Company's largest stockholder, has been found suitable as a 
controlling stockholder of the Company.

    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
by 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 Company Voting
Securities beyond such period of time as may be prescribed by the Nevada
Commission may be guilty of a criminal offense.  The Company is subject to
disciplinary action if, after it receives notice that a person is unsuitable to
be a stockholder or to have any other relationship with the Company, the Company
(i) pays that person any dividend or interest upon any Company Voting
Securities; (ii) allows that person to exercise, directly or indirectly, any
voting right conferred through securities held by that person; (iii) pays
remuneration in any form to that person for services rendered or otherwise; or
(iv) fails to pursue all lawful efforts to require such unsuitable person to
relinquish the voting securities for cash at fair market value.  Additionally,
the CCB has the authority to approve all persons owning or controlling the stock
of any corporation controlling a gaming licensee.

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

    The Company is 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.  The Company is also required to render maximum
assistance in determining the identity of the beneficial owner of any Company
Voting Securities.  The Nevada Commission has the power to require the Company's
stock certificates to bear a legend indicating that the securities are subject
to the Nevada Act.  However, to date, the Nevada Commission has not imposed such
a requirement on the Company.

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

                                     11


<PAGE>

    Changes in control of the Company through merger, consolidation, stock or
asset acquisitions, management or consulting agreements, or any act or conduct
by a person whereby such person obtains control, may not occur without the prior
approval of the Nevada Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Nevada Board and Nevada Commission in a
variety of stringent standards prior to assuming control of such Registered
Corporation. 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.

    The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and corporate defense
tactics affecting Nevada gaming licenses, and Registered Corporations that are
affiliated with those operations, may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming operators and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environment for the orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the Nevada
Commission before the Company 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 the Company's
Board of Directors in response to a tender offer made directly to its
stockholders for the purpose of acquiring control of the Company.

    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 Company's 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 operators where entertainment is furnished in connection with the
selling of food or refreshments.  Nevada Corporate Licensees that hold a license
as an operator of a slot route, or a manufacturer's or distributor's license
also pay certain fees and taxes to the State of Nevada.

    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 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 of the Licensee's participation in such foreign gaming.  The
revolving fund is subject to increase or decrease in the discretion of the
Nevada Commission.  Thereafter, Licensees are required to comply with certain
reporting requirements imposed by the Nevada Act.  A Licensee is also subject to
disciplinary action by the Nevada Commission if it knowingly violates any laws
of the foreign jurisdiction pertaining to the foreign gaming operation, fails to
conduct the foreign gaming operation in accordance with the standards of honesty
and integrity required of Nevada gaming operations, engages in activities that
are harmful to the State of Nevada or its ability to collect gaming taxes and
fees, or employs a person in the foreign operation who has been denied a license
or finding of suitability in Nevada on the ground of personal unsuitability.

    The sale of alcoholic beverages by the Company is subject to licensing,
control and regulation by applicable local regulatory agencies.  All licenses
are revocable and are not transferable.  The agencies 


                                      12

<PAGE>

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 upon the operations of the Company.

ITEM 2.  DESCRIPTION OF PROPERTY.

    See "Item 1.  Description of Business" for a complete description of the
Company's property.

    Effective October 1, 1996, in connection with the private transaction with
Diversified Opportunities Group Ltd., the Company entered into a lease agreement
(the "Lease Agreement") as the tenant with The Jansen Trust (as hereinafter
defined) as the landlord.  The Lease Agreement covers certain land to the north
of the hotel and casino (the "Property") which enables the Company to control
the use of the Property and provides the Company with an option to purchase the
Property for possible expansion of the hotel and casino.

    The Property consists of approximately 1.07 acres of land and has 150 feet
of frontage on the Strip.  It currently contains a two-story office building
which is leased to several retail and office tenants, including the executive
and administrative offices of the Company.  The Lease Agreement commenced
October 1, 1996 and has a term of 24 months, with an option to extend the lease
term for an additional five years and a second, successive, option to extend it
an additional 23 years.  The base rent of $70,000 per month ($840,000 per year)
is subject to adjustment after five years.  In addition, the Lease Agreement
grants the Company an option to purchase the Property under certain terms and
conditions.  The Company believes that the terms of the Lease Agreement are fair
and reasonable and on as beneficial terms as could be obtained from an
unaffiliated third party consistent with other rentals assessed in the market
area for similar facilities.

    The Company does not invest in, and has not adopted any policy with respect
to investments in, real estate or interests in real estate, real estate
mortgages or securities of or interests in persons primarily engaged in real
estate activities.  It is not the Company's policy to acquire assets primarily
for possible capital gain or primarily for income.


ITEM 3.  LEGAL PROCEEDINGS.

    There are no material pending legal proceedings, other than routine
litigation incidental to the Company's business, to which the Company is a party
or of which any of its property is the subject.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

    No matter was submitted 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.


                                      13

<PAGE>

                                   PART II


ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

    (a)  The Common Stock is traded in the over-the-counter market and is
quoted on the Nasdaq SmallCap Market under the symbol "BWLK" and on the Pacific
Stock Exchange under the symbol "BWK".  For the past two fiscal years, the high
and low bid prices of the Common Stock as reported to the Company by the
National Association of Securities Dealers, Inc. were as follows:

    FYE 1996 QUARTER ENDED:               HIGH      LOW
    ----------------------                ----      ---
    December 31, 1995                    6 5/8     5 1/4
    March 31, 1996                       8 1/2     5 3/4
    June 30, 1996                        8 9/16    7 1/2
    September 30, 1996                   6 5/8     5 3/4

    FYE 1995 QUARTER ENDED:               HIGH      LOW
    ----------------------                ----      ---
    December 31, 1994                    6         5 1/4
    March 31, 1995                       5 5/8     5 1/4
    June 30, 1995                        8 5/8     7 1/2
    September 30, 1995                   8 5/8     7 3/8


    The over-the-counter quotations set forth herein reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not represent
actual transactions.

    The Warrants are traded in the over-the-counter market and are quoted on
the Nasdaq SmallCap Market under the symbol "BWLKW" and on the Pacific Stock
Exchange under the symbol "BWKW."

    (b)  On January 7, 1997, the last sale price of the Common Stock as
reported by Nasdaq was $4.8125 per share.  As of January 7, 1997, there were at
least 1,900 record and beneficial holders of the Common Stock.

    (c)  The Company has not paid any dividends on its Common Stock and does
not presently anticipate paying dividends in the foreseeable future.  The
Company currently intends to retain all of its earnings from operations for use
in expanding and developing its business.  Any future decision as to the payment
of dividends will be at the discretion of the Company's Board of Directors and
will depend upon the Company's earnings, financial position, capital
requirements and such other factors as the Board of Directors deems relevant. 
Further, the Indenture between the Company as Issuer and Shawmut Bank, N.A. as
Trustee for $40,000,000 16.5% First Mortgage Notes Due March 31, 2005, Dated as
of April 7, 1995 and the Note issued to Diversified Opportunities Group Ltd.
contain significant limitations on the Company's ability to pay dividends on its
capital stock.

    (d)  In June 1996, the Company completed a private offering of 15 Units,
each Unit consisting of 10,000 shares of Common Stock valued at $6.25 per share
and 5,000 warrants valued at $0.25 per warrant, for total gross proceeds of
$956,250.  Each warrant entitles the holder to purchase one unregistered share
of Common Stock at a price of $7.50 at any time until June 17, 2000.  The
issuance of the foregoing securities was made without registration under the
Securities Act in reliance upon the 


                                      14

<PAGE>

exemption provided by Section 4(2) of the Securities Act and in compliance 
with Rule 506 of Regulation D under the Securities Act.  No underwriter was 
involved in the distribution of these securities, and no commissions were 
paid in connection therewith.  The purchasers of the Units were Tina Hunt 
Coots (2 Units), James D. Hunt, Jr. (2 Units), James D. Hunt (4 Units), 
Glenna K. Hunt (2 Units), Carl Arfa and Judith Arfa (1 Unit) and Grove, Inc. 
(4 Units).

         On September 25, 1996, the Company sold to Diversified Opportunities
Group Ltd. ("Diversified"), an Ohio limited liability company, 571,429 shares of
Common Stock at a price of $7.00 per share for a total purchase price of
$4,000,000 and issued to Diversified a convertible subordinated note (the
"Note") in the principal amount of $5,000,000.  Subject to regulatory approvals,
the Note is convertible into a number of shares determined by dividing the then
unpaid principal balance of the Note by $7.50.  The principal of the Note is due
and payable in September 1998.  The issuance of the foregoing securities was
made without registration under the Securities Act in reliance upon the
exemption provided by Section 4(2) of the Securities Act.  No underwriter was
involved in the distribution of these securities, and no commissions were paid
in connection therewith.





















                                      15

<PAGE>

ITEM 6.   MANAGEMENT'S  DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

GENERAL

     Boardwalk Casino, Inc. ("BCI" or the "Company") was formed in
July 1993 for the purpose of operating a casino and a hotel in Las
Vegas, Nevada. See "Notes to Financial Statements".


                                                YEAR ENDED         YEAR ENDED
                                               SEPTEMBER 30,      SEPTEMBER 30,
                                                   1996              1995
                                               -------------      -------------
REVENUES:
 Casino........................................ $16,897,527       $ 2,128,345 
 Rooms.........................................   7,224,324         2,824,534
 Food and beverage ............................   4,031,278         1,513,466
 Other.........................................     837,895           138,607 
                                                -----------       -----------
   Gross revenues .............................  28,991,024         6,604,952 
 Promotional allowances .......................  (1,079,467)         (280,502)
                                                -----------       -----------
                                                 27,911,557         6,324,450 
COSTS AND EXPENSES:
 Casino........................................  10,787,868         2,415,562 
 Rooms.........................................   3,460,334         1,675,696 
 Food and beverage.............................   4,168,259         1,745,572 
 Other.........................................     173,138            64,032 
 Selling, general and administrative...........   5,174,502         2,209,374 
 Depreciation and amortization.................   2,525,044           840,168 
                                                -----------       -----------
                                                 26,289,145         8,950,404 
                                                -----------       -----------

Income (loss) from operations..................   1,622,412        (2,625,954)
                                                -----------       -----------
OTHER (INCOME) EXPENSE:
 Interest income...............................    (395,416)         (653,740)
 Interest expense..............................   7,874,115         3,463,556 
 Interest capitalized..........................  (1,442,493)       (1,243,558)
 Loss on disposal of fixed assets..............         -           1,100,585 
                                                -----------       -----------
                                                  6,036,206         2,666,843 
                                                -----------       -----------
Income (loss) before income taxes &
 extraordinary item ........................... $(4,413,794)      $(5,292,797)
                                                -----------       -----------

                                       16
<PAGE>

RESULTS OF OPERATIONS 
 
     The Company is engaged in a three-phase project to expand and renovate 
the former existing hotel and casino facilities (the "Expansion").   Phase 
one of the Expansion was completed in May 1994 which was the renovation of 
the original 202 existing hotel rooms.

     Phase two of the Expansion was completed in September 1995 with the 
completion of a new casino facility that increased floor space from 15,000 
square feet to 33,000 square feet.

     The third phase of the Expansion consisted of development and 
construction of a new 16-story (451 room) hotel tower, the completion of the 
27,000 square foot buffet and meeting rooms on the second floor of the 
casino, the completion of 4,500 square feet of meeting room space on the 
first floor of the tower, entertainment lounge and the construction of two 
parking garages as more fully described below.

     The hotel tower was opened in stages under a temporary certificate of 
occupancy permit with an additional 128 rooms on February 23, 1996 added to 
the existing 202 rooms. Additional rooms were added every few weeks through 
May 3, 1996 totaling 642 rooms. The remaining 16th floor, comprised of  11 
suites, was available for occupancy by  late July 1996.

     On December 22, 1995, the first of two parking garages, consisting of 
550 spaces, was available for complete use.  The second garage, consisting of 
440 spaces, was available for complete use on May 3, 1996.

     On November 28, 1995, the 105 seat Lighthouse Lounge opened starring 
"The Unknown Comic" and additional entertainment throughout the year.

     Phase three of the Expansion was substantially completed, excluding the 
buffet and meeting rooms  on the first and second floors, which are currently 
under construction.   Of the total estimated cost to complete the buffet and 
meeting rooms, the Company has expended approximately $4,171,000 as of 
September 30, 1996, leaving an unexpended balance of approximately 
$3,600,000.  The balance of the construction will be financed using existing 
cash, operating cash flow and cash available from other sources as more fully 
described in "Liquidity and Capital Resources."

YEAR ENDED SEPTEMBER 30, 1996 COMPARED WITH YEAR ENDED SEPTEMBER 30, 1995

     The results of operations for the year ended September 30, 1996 reflect 
the revenues and costs associated with the new casino facility open for the 
entire year and the additional 451 rooms for approximately  one half of the 
year.  The Company incurred a net loss in the year ended September 30, 1996 
of $4,413,794 compared to a net loss of $5,336,826 in the prior year, a 
decrease in the net loss of $923,032 (17.3%).  The decrease in loss was 
attributable to a $4,248,366 (161.8%) increase in income from operations, to 
an operating profit of $1,622,412 in 1996 from an operating loss of  
$2,625,954 in 1995 which was offset by an increase in net other expenses and 
income of $3,369,363.

     Net revenues at BCI increased $21,587,107 (341.3%), to $27,911,557 in 
1996 from $6,324,450 in 1995. The increase in revenues for fiscal 1996 was 
attributable to the following: (i) an increase of $14,769,182 in casino 
revenues due to the opening of the new casino which included the opening of a 
new  race and sports book, (ii) $4,399,790 in additional room revenue due to 
the completion during the year of the new hotel tower, (iii) an increase in 
food and beverage revenues of $2,517,812 due to increased facilities and a 
greater number of patrons, (iv) an increase in other revenues by $699,288 and 
(v) offset by the increase in promotional allowances of $798,965. Operating 
expenses, including depreciation and amortization, increased $17,338,741 
(193.7%) to $26,289,145 in 1996 from $8,950,404 in the prior year.   The 
increase in operating expenses was due primarily to the addition of a new 
casino facility and start-up and increased operating costs of the new hotel 
tower.

                                      17
<PAGE>

CASINO OPERATIONS

     For fiscal 1996, casino revenues increased $14,769,182 or 693.9% to 
$16,897,527.  The increase is attributable to  (i) a $7,164,793 increase in 
revenue from the race and sports books to $7,150,487 in fiscal 1996 from a 
loss of  $14,306 for the same period in 1995, (ii) a $5,662,847 increase in 
slot machine revenues to $7,401,869 in fiscal 1996 from $1,739,022 for the 
same period in 1995 and (iii) a $1,941,542 increase in revenue from table 
games to $2,345,171 in fiscal 1996 from $403,629 for the same period in 1995.

     
     Casino expenses increased $8,372,306 (346.6%) to $10,787,868 for fiscal 
year 1996 from $2,415,562 for the same period of 1995. The increase in casino 
expenses was due to: (i) a new race and sports department which was open for 
the entire year with $4,675,063 in additional expense, (ii) the increased 
number of table games resulted in increased wages, benefits and taxes of 
$1,085,504, (iii) the additional slot machines and table games increased 
gaming taxes and participation expenses by $1,157,659 (iv) the cost of 
providing complimentary services increased $663,935, (v) the number of casino 
and cage personnel was increased to service the additional slot machine 
patrons at an additional cost of $469,181 and (vi) a new promotions 
department was added at a cost of $228,423.

ROOM OPERATIONS

     Room revenues increased $4,399,790, or 155.8%, to $7,224,324 for fiscal 
1996 from $2,824,534 for the comparable 1995 period.   The increase in room 
revenues reflects an  increase  in room nights sold by 77,431, or 176.2%, to 
121,386 for fiscal 1996 from 43,955 for the comparable 1995 period.  This 
increase was partially offset by a decrease in the average daily room rate by 
$4.74 to $59.52 for fiscal 1996 from $64.26 for the same period of 1995.  
Fiscal year 1996 had an additional 85,438 room nights available for rental 
compared to fiscal year 1995.   These additional rooms available during 1996 
over 1995 was due to the hotel tower opening in stages with the first 128 
additional rooms on February 23, 1996 which added to the existing 202 rooms. 
Additional rooms were added every few weeks through May 3, 1996 bringing the 
total to 642 rooms. The 16th floor, which is comprised of 11 suites, was 
available for occupancy by  late July 1996.  During the year the Company had 
retained a professional sales department which had opened several corporate 
accounts, including a national airline for its flight crews. Despite the 
85,438 additional room nights available, the hotel occupancy percentage 
increased 27.3% to 76.4% for the fiscal year 1996 compared to 60% for fiscal 
1995.

     Rooms expense increased $1,784,638, or 106.5%, for fiscal 1996 to 
$3,460,334 from $1,675,696 for the same period in 1995.   This increase is 
primarily attributable to (i) an increase in personnel to service the new 
hotel tower at a cost of $1,141,238, (ii) additional franchise fees and 
travel agent commissions on the additional revenues totaled $433,574, (iii) 
additional linen, laundry and room supplies totaled  $221,688 and (iv) and 
additional credit card fees, uniforms, 800 phone lines and maintenance and 
repair costs.

FOOD AND BEVERAGE OPERATIONS

     Food and beverage revenues increased by  $2,517,812 (166.4%), to 
$4,031,278 for fiscal 1996 from $1,513,466 for the comparable 1995 period.    
The increase is primarily a result of the new casino facility which had a 
full year of operations during fiscal 1996, as well as the opening of the new 
hotel tower which had approximately six months of operations during fiscal 
1996.

     Food and beverage expenses increased $2,422,687 (138.8%),  to $4,168,259 
for fiscal 1996 from $1,745,572 for 1995 reflecting increases in food and 
beverage costs associated with the increased sales.

                                     18
<PAGE>

Food and beverage expenses as a percentage of gross food and beverage 
revenues decreased to 103.4% for fiscal 1996 from 115.3% for fiscal year 
1995.  This decrease is a result of increased casino promotional activity 
with an increase in food and beverage served on a complimentary basis, which 
food and beverage costs are included in casino expense.

OTHER OPERATING REVENUES AND EXPENSES

     Other revenues increased by $699,288 (504.5%) to $837,895 for fiscal 
1996 compared to $138,607 for 1995.  The increase was attributable to (i) an 
increase of $238,285 in rental income due to the new retail facilities, (ii) 
an increase of $226,894 in telephone and movie revenues and (iii) the balance 
of the increased revenues from arcade  and vending facilities.

     The other costs increased $109,106 (170.4%) to $173,138 in fiscal 1996 
compared to $64,032 in fiscal 1995.   The increase is due primarily to the 
additional costs of long-distance service and  increased cost of movies 
purchased.

DEPRECIATION AND AMORTIZATION

     Depreciation and amortization totaled $2,525,044 in 1996, reflecting a 
$1,684,876 (200.5%) increase over the 1995 amount of $840,168.  The increase 
was due to the following: (i) a new casino facility was opened in September 
1995 at a cost of $10,897,881, (ii) a new hotel tower was placed in service 
May 1996 at a cost of $19,893,988, (iii) two new parking facilities were 
completed during the fiscal year at a cost of  $6,268,874, (iv) a central 
plant was completed September 1995 at a cost of $1,825,842 and (iv) 
additional gaming devices and casino equipment at a cost of  $3,321,176 were 
placed in service starting in September 1995 through fiscal year 1996.

SELLING, GENERAL AND ADMINISTRATIVE

     Selling, general and administrative expenses increased  $2,965,128 
(134.2%) to $5,174,502 in 1996 from $2,209,374 in 1995.  The increase in 
administrative expenses were due to (i) increase in administrative staffing 
costs of $1,551,137, (ii) utilities increased $535,604, (iii) facility 
maintenance and operating costs increased $335,991, (iv) advertising expenses 
increased $195,007 and (v) business insurance increased $152,506 due to the 
increased facilities.

OTHER (INCOME) EXPENSE AND EXTRAORDINARY ITEM

     In 1996, the Company received $395,416 in interest income as compared to 
$653,740 in 1995.   The $258,324 (39.5%) decrease is attributable to the 
lower invested balance of marketable securities in the 1996 period.

     Interest expense increased to $7,874,115 in 1996 from $3,463,556 in 1995 
(an increase of $4,410,559 or 127.3%). The increase was the result of 
additional borrowing and a full year of interest expense on the BCI Notes in 
1996 compared to approximately six months of interest cost on the BCI Notes 
in 1995.    Approximately $1,442,493 of interest was capitalized in 1996 in 
connection with the Expansion compared to $1,243,558 of interest that was 
capitalized in 1995.

     During 1995  as part of the Expansion, the Company disposed of certain 
property and equipment resulting in a loss on disposal of fixed assets of 
approximately $1,101,000.

     The Company extinguished certain indebtedness during 1995, resulting in 
a net extraordinary loss on early extinguishment of $44,029, comprised of (i) 
a loss on the extinguishment of the Company's 

                                      19
<PAGE>

12% promissory notes due August 1995, of $64,153; (ii) a loss on indebtedness 
repaid with the proceeds of the BCI Notes of $60,827; and (iii) a gain on the 
early settlement of a capital lease obligation in the amount of $80,951.   

LIQUIDITY AND CAPITAL RESOURCES

     In June of 1996, the Company completed a private placement equity 
offering in which it sold 15 units (each unit consisting of 10,000 shares of 
common stock and 5,000 warrants).  The private placement generated net 
proceeds of $956,250.

     In September 1996, the Company executed a $5,000,000 subordinated, 
convertible promissory note.  Interest is payable quarterly at the applicable 
Eurodollar rate plus 2% with principal due September 23, 1998 if not 
converted by the noteholder. Prior to payment in full by the Company and 
subject to regulatory approval,  the noteholder may convert the unpaid 
principal balance of the note into common shares of the Company.  The number 
of shares into which the note may be converted shall be determined by 
dividing the unpaid principal balance by $7.50.

     In September 1996,  the Company completed a private placement offering 
of 571,429 shares of its common stock at a selling price of $7.00 per share.  
The Company received net proceeds of $3,735,195 for the stock, after 
deducting offering expenses.   

     The net loss for fiscal 1996 of $4,414,000 and the reduction of 
construction related accounts payable resulted in a negative cash flow of 
approximately $2,728,000 from operating activities.  Although the net loss 
for the year ended September 30, 1995 was $5,337,000, the Company had 
generated a positive cash flow of approximately $500,000, which was due to 
the accruing of interest payable on September 30, 1995 of $2,599,668 on the 
$40,000,000 private placement, which was subsequently paid during fiscal year 
1996.

     Investing activities for fiscal 1996 used approximately $3,425,000, 
which was comprised of approximately $21,210,000 expended for the 
construction and furnishing of a 16-story 451 room hotel tower and the second 
parking garage and restricted cash of approximately $18,000,000 was used to 
meet the expansion obligations.

     Financing activities provided approximately $14,641,000 from 
additional borrowings as well as the issuance of common stock and the 
exercise of warrants during the year.  Such proceeds were offset by $7,366,000 
of principal payments on long-term debt notes payable and capital leases during
fiscal 1996.

     The Company had unrestricted cash assets of $4,772,549 (7.6% of total 
assets) at September 30, 1996 compared to $3,650,236 (6.3% of total assets) 
at September 30, 1995.  The ratio of current assets to current liabilities 
was .82 to 1 at September 30, 1996 and .52 to 1 September 30, 1995.

     With the completion of the new hotel tower and expanded casino, 
restaurant, buffet and meeting rooms opened and the presence of its neighbors 
(Monte Carlo - June 21, 1996 and New York, New York, - January 3, 1997),  
management expects to generate cash flows from operations to improve on its 
working capital position in fiscal 1997.

     The Company has also arranged for up to $4,000,000 of available working 
capital borrowings which

                                      20
<PAGE>

has been made available by a director and a group of other private investors 
who have provided other short-term financing to the Company in the past.  
Such uncollateralized borrowings are available to the Company on an as-needed 
basis through December 31, 1997 on terms substantially similar to those which 
had been available to the Company during 1996.

     Management believes that the combination of expected cash flows from 
operations in 1997, and the proceeds from the private placement transactions,
are sufficient to meet the Company's obligations as they become due during
fiscal 1997. The outstanding warrants to purchase common stock at September 30,
1996 also represent a potential significant source of capital to the Company,
although management cannot control or accurately predict the timing of proceeds
from the exercise of warrants.







                                      21
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS.


                        INDEX TO FINANCIAL STATEMENTS

                   YEARS ENDED SEPTEMBER 30, 1996 AND 1995

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



Report Of Independent Accountants


Financial Statements:

Balance Sheets As Of September 30, 1996 And 1995

Statements Of Income (Loss) For The Years Ended September 30, 1996 And 1995

Statements Of Cash Flows For The Years Ended September 30, 1996 And 1995

Statements Of Shareholders' Equity For The Years Ended September 30, 1996 
 And 1995


Notes To Financial Statements






                                      22
<PAGE>


                      REPORT OF INDEPENDENT ACCOUNTANTS

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



Board of Directors
Boardwalk Casino, Inc.
Las Vegas, Nevada


We have audited the accompanying balance sheets of Boardwalk Casino, Inc. as 
of September 30, 1996 and 1995, and the related statements of income (loss), 
shareholders' equity and cash flows for the years ended September 30, 1996 
and 1995.  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 generally accepted auditing 
standards.  Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement.  An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements.  
An audit also includes assessing the accounting principles used and 
significant estimates made by management, as well as evaluating the overall 
financial statement presentation.  We believe that our audits provide a 
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in 
all material respects, the financial position of Boardwalk Casino, Inc. as of 
September 30, 1996 and 1995, and the results of its operations and its cash 
flows for the years ended September 30, 1996 and 1995 in conformity with 
generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

Las Vegas, Nevada
November 27, 1996, except for
   Notes 6 and 7 as to which the
   date is January 6, 1997 



                                      23
<PAGE>

                           BOARDWALK CASINO, INC.
                               BALANCE SHEETS
                         SEPTEMBER 30, 1996 AND 1995

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

<TABLE>
                                                                                               1996          1995
                                                                                          ------------   -----------
<S>                                                                                            <C>          <C>

                                    A S S E T S:
Current assets:
  Cash and cash equivalents                                                               $  4,772,549   $ 3,650,236
  Restricted cash equivalents, in escrow accounts                                                  -       1,464,008
  Receivables, net of allowance for doubtful accounts of $17,105 (1996) and $5,400 (1995)      439,857        31,087
  Inventory                                                                                     73,719        65,551
  Prepaid expenses                                                                             573,964       433,962
                                                                                          ------------   -----------
      Total current assets                                                                   5,860,089     5,644,844
                                                                                          ------------   -----------
Property and equipment, net of accumulated depreciation of $5,705,685 (1996) and 
 $3,340,364 (1995)                                                                          55,486,285    34,132,377
                                                                                          ------------   -----------
Other assets:
  Restricted cash equivalents, in escrow accounts                                                  -      16,459,115
  Deferred costs, net of accumulated amortization of $239,436 (1996) and $79,714 (1995)      1,645,090     1,379,993
  Other                                                                                        179,485        77,682
                                                                                          ------------   -----------
      Total other assets                                                                     1,824,575    17,916,790
                                                                                          ------------   -----------
      Total assets                                                                        $ 63,170,949   $57,694,011
                                                                                          ------------   -----------
                                                                                          ------------   -----------
                             LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
  Accounts payable                                                                        $  1,281,657   $ 1,150,830
  Construction accounts payable                                                                171,283     2,904,205
  Accrued expenses                                                                           2,547,615       765,434
  Accrued interest expense                                                                         -       2,600,297
  Notes payable                                                                                    -       2,589,628
  Current portion of obligations under capital leases                                        3,115,522       861,616
                                                                                          ------------   -----------
      Total current liabilities                                                              7,116,077    10,872,010
                                                                                          ------------   -----------
Long-term debt                                                                              40,909,523    35,731,451
Obligations under capital leases, less current portion                                       3,400,234     1,474,041
                                                                                          ------------   -----------
      Total liabilities                                                                     51,425,834    48,077,502
                                                                                          ------------   -----------
Commitments and contingencies

Shareholders' equity:
  Preferred stock, $.001 par value; 15,000,000 shares authorized; none issued                      -             -
  Common stock, $.001 par value; 15,000,000 shares authorized; 7,179,429 (1996) 
   and 6,077,800 (1995) shares issued and outstanding                                            7,179         6,078
  Additional paid-in capital                                                                22,435,083    15,893,784
  Accumulated deficit                                                                      (10,697,147)   (6,283,353)
                                                                                          ------------   -----------
      Total shareholders' equity                                                            11,745,115     9,616,509
                                                                                          ------------   -----------
      Total liabilities and shareholders' equity                                          $ 63,170,949   $57,694,011
                                                                                          ------------   -----------
                                                                                          ------------   -----------
</TABLE>


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

                                        24
<PAGE>

                             BOARDWALK CASINO, INC.
                          STATEMENTS OF INCOME (LOSS)
               FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995

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

<TABLE>
                                                                                 1996          1995
                                                                             -----------   -----------
<S>                                                                               <C>          <C>
Revenues:
  Casino                                                                     $16,897,527   $ 2,128,345
  Rooms                                                                        7,224,324     2,824,534
  Food and beverage                                                            4,031,278     1,513,466
  Other                                                                          837,895       138,607
                                                                             -----------   -----------

      Gross revenue                                                           28,991,024     6,604,952

Less promotional allowances                                                   (1,079,467)     (280,502)
                                                                             -----------   -----------

                                                                              27,911,557     6,324,450
                                                                             -----------   -----------
Costs and expenses:
  Casino                                                                      10,787,868     2,415,562
  Rooms                                                                        3,460,334     1,675,696
  Food and beverage                                                            4,168,259     1,745,572
  Other                                                                          173,138        64,032
  Selling, general and administrative                                          5,174,502     2,209,374
  Depreciation and amortization                                                2,525,044       840,168
                                                                             -----------   -----------

                                                                              26,289,145     8,950,404
                                                                             -----------   -----------

Income (loss) from operations                                                  1,622,412    (2,625,954)
                                                                             -----------   -----------

Other (income) expense:
  Interest income                                                               (395,416)     (653,740)
  Interest expense                                                             7,874,115     3,463,556
  Interest capitalized                                                        (1,442,493)   (1,243,558)
  Loss on disposal of property and equipment                                         -       1,100,585
                                                                             -----------   -----------

                                                                               6,036,206     2,666,843
                                                                             -----------   -----------
      Income (loss) before extraordinary item                                 (4,413,794)   (5,292,797)

Extraordinary item - loss on early retirement of debt (no current tax 
 benefit available)                                                                  -         (44,029)
                                                                             -----------   -----------
      Net income (loss)                                                      ($4,413,794)  ($5,336,826)
                                                                             -----------   -----------
                                                                             -----------   -----------
Income (loss) per share of common stock:
  Income (loss) before extraordinary item                                    $      (.70)  $      (.90)

  Extraordinary item - loss on early retirement of debt                              -            (.01)
                                                                             -----------   -----------
      Net income (loss) per share of common stock                            $      (.70)  $      (.91)
                                                                             -----------   -----------
                                                                             -----------   -----------
      Weighted average common shares outstanding                               6,292,287     5,902,033
                                                                             -----------   -----------
                                                                             -----------   -----------
</TABLE>


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

                                      25
<PAGE>

                       BOARDWALK CASINO, INC.
                      STATEMENTS OF CASH FLOWS
           FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995

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

<TABLE>
                                                                 1996             1995     
                                                             ------------     ------------ 
<S>                                                          <C>              <C>
Cash flows from operating activities:
  Net income (loss)                                          ($4,413,794)    ($5,336,826)
  Adjustments to reconcile net income (loss) to net
   cash provided by (used in) operating activities:
    Depreciation and amortization                              2,525,044         840,168 
    Provision for doubtful accounts                               11,705           -     
    Loss on disposition of property and equipment                  -           1,100,585 
    Amortization of original issue discount                      462,472          77,223 
    Extraordinary loss on early retirement of debt                 -              44,029 
    Changes in operating assets and liabilities:
      (Increase) decrease in receivables                        (420,475)         18,737 
      (Increase) in inventory                                     (8,168)        (29,149)
      (Increase) in prepaid expenses                            (197,331)         (8,685)
      Increase in accounts payable, net of amounts
       for capital expenditures                                  130,827         913,353 
      Increase in accrued expenses                             1,782,181         288,199 
      (Decrease) increase in accrued interest payable         (2,600,297)      2,589,864 
                                                            ------------    ------------ 
 
        Net cash (used in) provided by operating activities   (2,727,836)        497,498 
                                                            ------------    ------------ 

Cash flows from investing activities:
  Capital expenditures, net of amounts in accounts payable   (21,209,818)    (20,546,214)
  Net (additions) deductions to restricted cash
   equivalents in escrow accounts                             17,923,123     (17,923,123)
  (Increase) in deferred costs                                   (93,812)          -     
  (Increase) decrease in other assets                            (44,474)         18,551 
                                                            ------------    ------------ 

        Net cash used by investing activities                 (3,424,981)    (38,450,786)
                                                            ------------    ------------ 

Cash flows from financing activities:
  Proceeds from notes payable borrowings                       3,429,611       2,515,600 
  Principal payments of notes payable                         (6,303,639)     (1,196,593)
  Proceeds from long-term debt borrowings,
   net of issuance costs                                       4,668,993      35,272,021 
  Principal payments of long-term debt                             -          (4,644,818)
  Principal payments of capital lease obligations             (1,062,235)       (568,699)
  Proceeds from issuance of common stock and warrants,
   net of issuance costs                                       6,542,400       5,365,046 
                                                            ------------    ------------ 

        Net cash provided  by financing activities             7,275,130      36,742,557 
                                                            ------------    ------------ 

        Net increase (decrease) in cash and cash
         equivalents                                           1,122,313      (1,210,731)

Cash and equivalents, beginning of period                      3,650,236       4,860,967 
                                                            ------------    ------------ 

Cash and equivalents, end of period                         $  4,772,549    $  3,650,236 
                                                            ------------    ------------ 
                                                            ------------    ------------ 

Supplemental cash flow information:
  Cash paid for interest                                    $10,474,412    $     796,471 
                                                            -----------    ------------- 
                                                            -----------    ------------- 

Schedule of non-cash investing and financing activities:
  Property and equipment acquisitions included in
   accounts payable                                         $   171,283    $   2,904,205 
                                                            -----------    ------------- 
                                                            -----------    ------------- 

  Capitalized lease obligations incurred                    $ 5,242,336    $   2,262,050 
                                                            -----------    ------------- 
                                                            -----------    ------------- 

  Prepaid insurance financed by note payable                $     -        $      94,474 
                                                            -----------    ------------- 
                                                            -----------    ------------- 
</TABLE>

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

                                      26
<PAGE>

                       BOARDWALK CASINO, INC.
                 STATEMENTS OF SHAREHOLDERS' EQUITY
           FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995

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

<TABLE>
                                        Common Stock
                                    --------------------   Additional
                                       Shares                Paid-In     Accumulated
                                    Outstanding   Amount     Capital       Deficit         Total
                                    -----------   ------   -----------   ------------   -----------
<S>                                 <C>           <C>      <C>           <C>            <C>
Balances, September 30, 1994         5,915,000    $5,915   $10,528,901      ($946,527)  $ 9,588,289

  Issuance of warrants to purchase
   common stock in conjunction
   with bridge loans                     -         -           374,400          -           374,400

  Issuance of warrants to purchase
   common stock in conjunction with
   BCI Notes, net of issuance costs      -         -         4,177,366          -         4,177,366

  Exercises of warrants, net of
   issuance costs                      162,800       163       813,117          -           813,280

  Net loss                               -         -             -         (5,336,826)   (5,336,826)
                                     ---------    ------   -----------   ------------   -----------

Balances, September 30, 1995         6,077,800     6,078    15,893,784     (6,283,353)    9,616,509
                                     ---------    ------   -----------   ------------   -----------

  Issuance of warrants to purchase
   common stock                          -         -            51,617          -            51,617

  Issuance of common stock, net of
   issuance costs                      721,429       721     4,639,107          -         4,639,828

  Exercises of warrants, net of
   issuance costs                      380,200       380     1,850,575          -         1,850,955

  Net loss                               -         -             -         (4,413,794)   (4,413,794)
                                     ---------    ------   -----------   ------------   -----------

Balances, September 30, 1996         7,179,429    $7,179   $22,435,083   ($10,697,147)  $11,745,115
                                     ---------    ------   -----------   ------------   -----------
                                     ---------    ------   -----------   ------------   -----------
</TABLE>

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

                                      27
<PAGE>

                             BOARDWALK CASINO, INC.
                        NOTES TO FINANCIAL STATEMENTS

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

1.   Summary Of Significant Accounting Policies:

     NATURE OF OPERATIONS

     Boardwalk Casino, Inc. ("BCI" or the "Company") is a Nevada corporation 
     and was formed in July 1993 for the purpose of operating a casino and a 
     hotel (collectively, the "Boardwalk Hotel and Casino") in Las Vegas, 
     Nevada.

     CASINO REVENUE

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

     PROMOTIONAL ALLOWANCES

     The retail value of hotel accommodations and food and beverage provided to
     customers without charge is included in gross revenues and then deducted
     as promotional allowances to arrive at net revenues.  The estimated costs
     of providing such promotional allowances have been classified as gaming
     expenses through interdepartmental allocations, as follows:

                                                        Year Ended September 30,
                                                        ------------------------
                                                           1996       1995 
                                                           ----       ----
     Rooms                                             $   79,615   $    --
     Food and beverage                                    923,362    359,042
                                                       ----------   --------
                                                       $1,002,977   $359,042
                                                       ----------   --------
                                                       ----------   --------

     CASH EQUIVALENTS AND CONCENTRATION OF CREDIT RISK

     The Company considers all highly liquid investments with an original 
     maturity of three months or less to be cash equivalents.  The Company's 
     restricted cash was invested in shares of the Pacific Horizon Treasury 
     Fund which is collateralized by securities issued by the United States 
     Government.  In addition, approximately $2,534,000 of the Company's 
     unrestricted cash is also invested in shares of the Pacific Horizon 
     Treasury Fund.  At September 30, 1996, the Company has approximately 
     $3,556,000 on deposit with a single financial institution in excess 
     of federally insured limits.

     INVENTORIES

     Inventories are stated at the lower of cost or market.  Cost is determined 
     by the first-in, first-out (FIFO) method.

Continued

                                      28
<PAGE>

                             BOARDWALK CASINO, INC.
                   NOTES TO FINANCIAL STATEMENTS, Continued

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

1.   Summary Of Significant Accounting Policies, Continued:

     PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost.  Depreciation is computed 
     using the straight-line method.  Estimated useful lives for property 
     and equipment are 10 to 40 years for buildings and improvements and 5 
     to 7 years for furniture and equipment. Accelerated depreciation 
     methods are generally used for income tax purposes.  Repairs and 
     maintenance are charged to expense when incurred.

     A gain or loss is recognized upon disposal of property and equipment, 
     and the asset and related accumulated depreciation and amortization 
     amounts are removed from the accounts.

     PREOPENING COSTS

     Preopening costs associated with the expansion of the hotel-casino are 
     expensed as incurred.

     DEFERRED COSTS

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

     INCOME TAXES

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

     EARNINGS PER SHARE

     Earnings per share is based on the weighted average number of shares of 
     common stock outstanding during each period.  Warrants and options to 
     purchase common stock which were issued in 1996, 1995 and 1994 were
     excluded from the calculation of earnings (loss) per share, as their
     inclusion would have been anti-dilutive (by reducing the loss per share).

     STOCK-BASED COMPENSATION

     In October 1995, Statement of Financial Accounting Standards No. 123 
     ("SFAS 123") was issued.  SFAS 123 established fair value-based 
     financial accounting and reporting standards for all transactions in 
     which a company acquires goods or services by issuing its equity 
     instruments or by incurring a liability to its supplier in amounts 
     based on the price of its common stock or other equity instruments.

Continued

                                      29
<PAGE>

                             BOARDWALK CASINO, INC.
                   NOTES TO FINANCIAL STATEMENTS, Continued

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

1.   Summary Of Significant Accounting Policies, Continued:

     STOCK-BASED COMPENSATION, Continued

     SFAS 123 provides that companies may continue to account for employee 
     stock compensation plans using the accounting prescribed by Accounting 
     Principles Board Opinion No. 25, "Accounting for Stock Issued to 
     Employees" ("APB 25").  Companies that elect not to adopt the 
     fair-value based accounting approach under SFAS 123 for employee stock 
     compensation plans must nevertheless comply with certain disclosure 
     requirements and disclose pro forma net income and earnings per share 
     as if such approach under SFAS 123 had been adopted.

     The disclosure requirements of SFAS 123 are effective for financial 
     statements for fiscal years beginning after December 15, 1995 and the 
     pro forma disclosure requirements are effective for stock awards 
     granted in the first fiscal year beginning after December 15, 1994.

     The Company plans to utilize the disclosure option allowed by SFAS 123 
     and continue to account for stock-based compensation under APB 25.

     USE OF ESTIMATES

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

     RECLASSIFICATIONS

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

2.   Casino Expansion And Related Construction Obligations:

     The Company is currently engaged in a three-phase project to expand and 
     renovate its existing hotel and casino facilities (the "Expansion").

     Phase one of the Expansion was the renovation and refurbishment of  202 
     previously existing hotel rooms, which was completed in May 1994 at an 
     approximate cost of $2,100,000.

     Phase two of the Expansion was the renovation of the casino by 
     expanding the casino floor space from 15,000 square feet to 33,000 
     square feet, and increasing the number of slot machines and table 
     games.  In addition, the renovated casino also features a full-service 
     race and sports book.  Phase two of the Expansion was substantially 
     completed in September 1995 at an approximate cost of $13,924,000.

Continued

                                      30
<PAGE>

                             BOARDWALK CASINO, INC.
                   NOTES TO FINANCIAL STATEMENTS, Continued

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

2.   Casino Expansion And Related Construction Obligations, Continued:

     Phase three of the Expansion is the development and construction of a 
     new 16-story 451-room hotel tower, the completion of 27,000 square 
     feet of space on the second floor of the casino which is to provide a 
     buffet area, meeting rooms and entertainment facilities and the 
     construction of two parking garages.  A general contractor has been 
     engaged for the construction activities relating to phase three of the 
     Expansion.  Completion of the hotel tower portion of phase three of the 
     Expansion was substantially completed in May 1996 at an approximate 
     cost of $19,334,000.  Of the total estimated construction cost of the 
     second floor of the casino, the Company has expended approximately 
     $4,171,000 as of September 30, 1996, leaving an unexpended balance of 
     approximately $3,600,000.  The balance of the construction will be 
     financed using existing cash, operating cash flow and cash available 
     from other sources, as more fully described in Note 3.

3.   Operating Results, Financial Condition And Management's Plans:

     The results of operations for 1996 and 1995 reflect the impact of 
     construction-related activity which restricted customer access to the 
     Company's facilities, and thus negatively impacted operating revenues 
     and operating results during those years.  In addition, in April 1995, 
     the Company completed a $40 million debt financing of the BCI Notes (as 
     more fully described in Note 6), which resulted in an annual debt 
     service requirement, excluding principal, of approximately $6,600,000.  
     The Company had no significant source of cash flow during 1996 and 1995 
     prior to the opening of the new hotel tower, to service the increased 
     interest obligation related to the BCI Notes.  The Company raised funds 
     to meet its interest and other cash obligations in 1996 and 1995 
     through private placement equity offerings and through short-term notes 
     payable and bridge loans.  As a result of these developments, Boardwalk 
     Casino, Inc. incurred significant interest expense and net losses of 
     approximately $4,414,000 and $5,337,000 in 1996 and 1995, respectively,
     and has a working capital deficiency of approximately $1,256,000 at 
     September 30, 1996.  Management plans to generate cash from operations 
     based upon the recent completion and opening in 1996 of the hotel and 
     casino facilities under its expansion program.

     The Company has arranged for up to $4,000,000 of available working 
     capital borrowings which has been made available by a director and a 
     group of private investors who have provided other short-term financing
     to the Company during 1996 and 1995.  Such uncollateralized borrowings 
     are available to the Company on an as-needed basis through December 31,
     1997 on terms substantially similar to those which had been made 
     available to the Company during 1996.

     Management believes that the combination of existing cash, cash flows 
     from operations and the available borrowing capacity are sufficient to 
     meet the Company's obligations as they become due during fiscal 1997.

Continued

                                      31
<PAGE>

                             BOARDWALK CASINO, INC.
                   NOTES TO FINANCIAL STATEMENTS, Continued

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

4.   Property And Equipment:

     Property and equipment consists of the following:

                                                            September 30,
                                                           ---------------
                                                        1996          1995 
                                                        ----          ----
          Land and improvements                     $ 3,042,769   $ 2,478,414
          Buildings and improvements                 38,736,144    17,582,058
          Gaming equipment                            6,163,617     4,808,135
          Furniture and other equipment               8,077,178     3,830,737
          Construction-in-progress                    5,172,262     8,773,397
                                                    -----------    ----------

                                                      61,191,970   37,472,741
          Less: accumulated depreciation              (5,705,685)  (3,340,364)
                                                     -----------  -----------

                                                     $55,486,285  $34,132,377
                                                     -----------  -----------
                                                     -----------  -----------

     Construction-in-progress at September 30, 1996 is comprised of 
     construction of phase three of the Company's expansion plan, as more 
     fully described in Note 2.  During 1995, as part of the refurbishment 
     of the existing facilities, the Company disposed of certain property 
     and equipment resulting in a loss of approximately $1,101,000.

5.   Leases:

     The Company has entered into capital lease agreements whereby the 
     Company leases various equipment under two-, three-, five-, seven- and 
     twenty-year leases which expire at various dates through 2015.
 
     Capital lease obligations consists of the following:

                                                            September 30,
                                                           ---------------
                                                        1996          1995 
                                                        ----          ----
     Capital lease obligation, interest rate 
       of prime plus 3%, monthly principal and 
       interest payments of $107,267 through 
       August 1997, collateralized by slot 
       equipment                                    $1,519,684     $1,602,000

     Capital lease obligation, with effective 
       interest rate of 12.50% due in monthly 
       installments of $41,817, including 
       interest, through November 1998, 
       collateralized by casino and hotel 
       equipment                                       948,248             --

     Capital lease obligation, interest rate of 
       10%, semi-annual principal and interest 
       payments of $20,721 through August 2015, 
       uncollateralized                                337,988        355,556

     Capital lease obligation, with effective 
       interest rate of 12.50% due in monthly 
       installments of $23,418 through May 1999, 
       collateralized by slot equipment                600,732             --


Continued

                                      32
<PAGE>
                                      
                            BOARDWALK CASINO, INC.
                   NOTES TO FINANCIAL STATEMENTS, Continued 

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


5.  Leases, Continued:

<TABLE>
                                                                                       September 30,
                                                                                ------------------------
                                                                                    1996         1995
                                                                                -----------   ----------
     <S>                                                                            <C>           <C>
    Capital lease obligation, with effective interest rate of 12.50% due 
     in monthly installments of $61,794 through September 1999, 
     collateralized by hotel furniture, fixtures and equipment                  $ 1,822,938          -
 
    Capital lease obligations with effective interest rates ranging from 
     9.36% to 12.90%, due in aggregate monthly installments of $7,619, 
     and ending at various times in 2001, collateralized by phone equipment         346,070   $  130,198

    Capital lease obligation, with effective interest rate of 12.50% due 
     in monthly installments of $9,083 through October 2000, 
     collateralized by signage equipment                                            347,222          -

    Other                                                                           592,874      247,903
                                                                                -----------   ----------

                                                                                  6,515,756    2,335,657
    Less amounts classified as current                                           (3,115,522)    (861,616)
                                                                                -----------   ----------

                                                                                $ 3,400,234   $1,474,041
                                                                                -----------   ----------
                                                                                -----------   ----------
</TABLE>

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

<TABLE>
                                                                                    1996         1995
                                                                                -----------   ----------
     <S>                                                                            <C>           <C>
          Cost of equipment under capital leases                                $ 7,001,501   $1,961,088
          Less, accumulated depreciation                                         (1,018,864)     (30,986)
                                                                                -----------   ----------

                                                                                $ 5,982,637   $1,930,102
                                                                                -----------   ----------
                                                                                -----------   ----------
</TABLE>





Continued

                                      33
<PAGE>
                                      
                            BOARDWALK CASINO, INC.
                   NOTES TO FINANCIAL STATEMENTS, Continued 

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


5.  Leases, Continued:

    Future minimum lease payments, by year and in the aggregate, under capital 
    leases with initial or remaining terms of one year or more consist of the 
    following at September 30, 1996.

         1997                                                  $ 3,676,551
         1998                                                    1,909,832
         1999                                                    1,289,360
         2000                                                      368,727
         2001                                                      134,706
         Thereafter                                                580,188
                                                               -----------

             Total minimum lease payments                        7,959,364
         Less amount representing interest                      (1,443,608)
                                                               -----------

             Present value of minimum lease payments             6,515,756
         Less current portion                                   (3,115,522)
                                                               -----------

             Long-term obligations under capital leases        $ 3,400,234
                                                               -----------
                                                               -----------

    The Company leases as lessor certain retail space in its casino 
    facilities under operating lease agreements.  The leases are short-term 
    and renewable based upon mutual agreement between the Company and the 
    lessee.  Rental income under these agreements totaled $230,566 and 
    $12,000 for the years ended September 30, 1996 and 1995, respectively.

6.  Long-Term Debt:

    Long-term debt consists of the following:

<TABLE>
                                                                                    September 30,
                                                                             -------------------------
                                                                                 1996          1995
                                                                             -----------   -----------
    <S>                                                                         <C>            <C>
    16.50% First Mortgage Notes due March 31, 2005 (the "BCI Notes") with 
      interest payable semi-annually, net of unamortized original issue 
      discount of $4,090,477 (1996) and $4,268,549 (1995) (see below)        $35,909,523   $35,731,451

    Eurodollar rate plus 2% convertible subordinated note payable due 
      September 23, 1998 with interest payable quarterly (see below)           5,000,000           -
                                                                             -----------   -----------

                                                                             $40,909,523   $35,731,451
                                                                             -----------   -----------
                                                                             -----------   -----------
</TABLE>



Continued

                                      34
<PAGE>

                            BOARDWALK CASINO, INC.
                   NOTES TO FINANCIAL STATEMENTS, Continued 


6.  Long-Term Debt, Continued:

    On April 11, 1995, the Company completed a private placement of the BCI 
    Notes.  The offering generated net proceeds of approximately $30,652,000 
    (after deducting debt issue costs and approximately $4,620,000 used to 
    repay principal and accrued interest on existing indebtedness).  The BCI 
    Notes are collateralized by a first mortgage on substantially all of the 
    assets of the Company, including the expansion project.  The Company 
    recorded an original issue discount of $4,345,772 in connection with the 
    BCI Notes, related to the issuance of 1,908,692 warrants to purchase 
    common stock (exercisable at $6.00 per share), based on the estimated 
    market value of the warrants at the date of issuance.  Terms of the 
    warrants are more fully described in Note 7.

    The indenture governing the BCI Notes (the "Indenture") limited the use 
    of the net proceeds from the offering to fund the cost of the hotel and 
    casino expansion.  The proceeds were placed in escrow with a trustee 
    pending draw-downs for qualifying project expenditures and were 
    classified as restricted cash equivalents, in escrow accounts, in the 
    accompanying financial statements.  All of the proceeds from the BCI 
    Notes have been used as of September 30, 1996.  The BCI Notes are not 
    subject to mandatory redemption, except upon a change of control, decline 
    in net worth, or certain asset sales, all as defined in the Indenture.  
    The Company has the option to redeem the BCI Notes, beginning after 
    September 2001 at a premium, as defined in the Indenture.

    The Indenture contains covenants that, among other things, limit the 
    ability of the Company to pay dividends or incur additional indebtedness. 
    Additional indebtedness is limited to $5,000,000 of additional 
    uncollateralized debt issuances and $7,000,000 of equipment leases of 
    which the recourse portion cannot exceed $2,000,000.  As of September 30, 
    1996, the Company had equipment leases with recourse totaling 
    approximately $6,178,000.  In December 1996, the terms of the Indenture 
    were modified to allow for an increase in the $2,000,000 recourse portion 
    of the Indenture for the additional obligations entered into during 1996.

    The Indenture also requires the Company to maintain a minimum net worth.  
    The net worth can be no less than the sum of $6,000,000 plus the proceeds 
    from the sale of common stock and 50% of the net income of the Company 
    for all periods beginning after April 1, 1995 (any net loss during that 
    period may not be deducted for purposes of the calculation).

    In September 1996, the Company executed a $5,000,000 subordinated, 
    convertible promissory note collateralized by a second deed of trust on 
    the assets of the Company.  Interest is payable quarterly at the 
    applicable Eurodollar rate plus 2% with principal due September 23, 1998 
    if not converted by the noteholder.  Prior to payment in full by the 
    Company and subject to regulatory approval, the noteholder may convert 
    the unpaid principal balance of the note into common shares of the 
    Company.  The number of shares into which the note may be converted shall 
    be determined by dividing the unpaid principal balance by $7.50.

                                      35
<PAGE>
                                      
                            BOARDWALK CASINO, INC.
                   NOTES TO FINANCIAL STATEMENTS, Continued 

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


6.  Long-Term Debt, Continued:

    Maturities of BCI's long-term debt are as follows:

        Year Ending
       September 30,
       -------------
           1997                               $       -
           1998                                 5,000,000
           1999                                       -
           2000                                       -
           2001                                       -
           Thereafter                          40,000,000
                                              -----------
                                              $45,000,000
                                              -----------
                                              -----------


7.  Shareholders' Equity:

    A summary of the Company's equity transactions and issuances of warrants 
    to purchase common stock are summarized in the following paragraphs.  At 
    September 30, 1996 and 1995, the Company had the following warrants to 
    purchase shares of common stock outstanding:

<TABLE>
                                                                    Warrants Issued      Warrants Issued
                                                Warrants Issued      In Connection        In Connection
                                 1994 Bridge     In Connection       With Issuance         With Private
                                  Financing        With Notes            Of BGI             Placement
                                 And IPO (a)       Payable (b)          Notes (c)          Offering (d)         Total
                                 -----------    ---------------     ---------------      ---------------        -----
<S>                                 <C>              <C>                <C>                    <C>               <C>
    Exercise price                   $5.00       $5.625,$6.00              $6.00                $7.50
                                                    and $8.00

    Expiration date              Feb. 1998       Mar. 1996 to         April 2000 to         June 2000
                                                   Sept. 2000          Apr. 1, 2005

Balances, September 30, 1994     4,130,000                -                  -                    -           4,130,000

    Issued                             -              208,000          1,908,692                  -           2,116,692

    Exercised                     (162,800)               -                  -                    -            (162,800) 
                                 ---------            -------          ---------               ------         ---------

Balances, September 30, 1995     3,967,200            208,000          1,908,692                  -           6,083,892

    Issued                             -                  -                  -                 75,000            75,000

    Exercised                     (380,200)               -                  -                    -            (380,200)
                                 ---------            -------          ---------               ------         ---------

Balances, September 30, 1996     3,587,000            208,000          1,908,692               75,000         5,778,692
                                 ---------            -------          ---------               ------         ---------
                                 ---------            -------          ---------               ------         ---------
</TABLE>



Continued

                                       36
<PAGE>
                                      
                           BOARDWALK CASINO, INC.
                NOTES TO FINANCIAL STATEMENTS, Continued 

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


7.   Shareholders' Equity, Continued:

     (a)  1994 bridge financing, common stock offering and warrant exercises:

          In 1994 the Company issued 450,000 warrants to purchase its common 
          stock in connection with a bridge financing (the "Bridge Warrants").
          Each Bridge Warrant entitles the holder thereof to purchase one share
          of common stock at an exercise price of $5.00 per share and expires in
          February 1998.  The Bridge Warrants contain provisions that protect 
          the bridge warrantholders against dilution by adjustment of the 
          exercise price in certain events including, but not limited to, stock
          dividends, stock splits, reclassifications or mergers. Upon completion
          of the initial public offering of the Company's common stock in 
          February 1994, the Bridge Warrants were automatically converted into 
          warrants identical to the Offering Warrants (described below).  A 
          bridge warrantholder does not possess any rights as a shareholder of 
          the Company.

          The Company may redeem the Bridge Warrants at a price of $0.001 per 
          Bridge Warrant upon 60 days' prior written notice if the closing bid 
          quotation of the common stock has been at least $10.00 on all 20 of 
          the trading days ending on the third day prior to the day on which 
          notice of redemption is given.

          On February 11, 1994, the Company completed an initial public offering
          of its common stock.  The Company issued 1,840,000 shares of common 
          stock at a selling price of $5.00 per share and issued 3,680,000 
          warrants (the "Offering Warrants") at a selling price of $0.10 per 
          warrant.  The Company received net proceeds of $7,706,109 for the 
          stock and warrants, after deducting underwriters' commissions and 
          offering expenses.

          Each Offering Warrant entitles the holder thereof to purchase one 
          share of common stock at a price of $5.00 per share until February 11,
          1998, at which time the Offering Warrant expires.  The Offering 
          Warrants contain provisions that protect the warrantholders against 
          dilution by adjustment of the exercise price in certain events 
          including, but not limited to, stock dividends, stock splits, 
          reclassifications or mergers.  A warrantholder does not possess any 
          rights as a shareholder of the Company.

          The Company may redeem the Offering Warrants at a price of $0.001 per 
          Warrant upon 60 days' prior written notice if the closing bid 
          quotation of the common stock has been at least $10.00 on all 20 of 
          the trading days ending on the third day prior to the day on which 
          notice of redemption is given.

          In connection with the offering, the Company also sold the 
          underwriter, for $100, an option (the "Option") to purchase 160,000
          shares of common stock and 320,000 Warrants.  The Option has an 
          exercise price of $7.00 per share of common stock and $0.14 per 
          Warrant (140% of the respective original offering prices).  The Option
          is exercisable for a 36-month period, commencing on February 11, 1995 
          and expiring on February 11, 1998.

          During 1996 and 1995, respectively, 380,200 and 162,800 warrants to 
          purchase the Company's common stock were exercised for an equal number
          of shares of the Company's common stock.  All of the warrants had an 
          exercise price of $5.00, resulting in net proceeds to the Company of 
          $1,850,955 and $813,280 after issuance costs in 1996 and 1995, 
          respectively.


Continued

                                      37
<PAGE>
                                      
                           BOARDWALK CASINO, INC.
                NOTES TO FINANCIAL STATEMENTS, Continued 

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


7.   Shareholders' Equity, Continued:

     (b)  1995 bridge financing transactions:

          The Company issued 50,000 warrants to purchase its common stock in 
          connection with $1,000,000 of bridge loans, which loans have been 
          repaid.  Each warrant entitles the holder thereof to purchase one 
          share of common stock at an exercise price of $6.00 per share.  The
          warrants expire in February 2000.  The warrants contain provisions 
          that protect the warrantholders against dilution by adjustment of the
          exercise price in certain events including, but not limited to, stock
          dividends, stock splits, reclassifications or mergers. A warrantholder
          does not possess any rights as a shareholder of the Company.

          The Company issued 150,000 warrants to purchase its common stock in 
          connection with a 10% note payable issued in 1995, which note has 
          been repaid.  Each warrant entitles the holder thereof to purchase one
          share of common stock at an exercise price of $5.625 per share.  The 
          warrants are exercisable between March 1996 and September 2000. The 
          warrants contain provisions that protect the warrantholders against 
          dilution by adjustments of the exercise price in certain events 
          including, but not limited to, stock dividends, stock splits, 
          reclassifications or mergers.  A warrantholder does not possess any 
          rights as a shareholder of the Company.

          The Company issued 8,000 warrants to purchase its common stock in 
          connection with a $400,000, 12% note payable issued in 1995, which 
          note has been repaid.  Each warrant entitles the holder thereof to 
          purchase one share of common stock at an exercise price of $8.00 per 
          share.  The warrants expire in September 2005.  A warrantholder does 
          not possess any rights as a shareholder of the Company.

     (c)  BCI Notes offering:

          As discussed in Note 6, the Company issued 1,908,692 warrants to 
          purchase its common stock in connection with the BCI Notes.  Each
          warrant entitles the holder thereof to purchase one share of common
          stock at an exercise price of $6.00 per share and 626,823 and 
          1,281,869 of the warrants expire in April 2000 and April 2005,
          respectively.  The warrants contain provisions that protect the 
          warrantholders against dilution by adjustment of the exercise price in
          certain events including, but not limited to, stock dividends, stock 
          splits, reclassifications or mergers.  A warrantholder does not 
          possess any rights as a shareholder of the Company.

     (d)  1996 private placement equity offering:

          During 1996, the Company completed a private placement offering in 
          which it issued 150,000 shares of its common stock for $6.25 per 
          share.  In connection with the issuance of the common stock, the 
          Company also sold 75,000 warrants to purchase common stock for $.25 
          per warrant.  Each warrant entitles the holder thereof to purchase one
          share of common stock at a price of $7.50 per share until June 2000, 
          at which time the warrant expires.  The Company received net proceeds
          of $956,250 for the issuance of the stock and warrants.

Continued

                                      38
<PAGE>
                                      
                           BOARDWALK CASINO, INC.
                NOTES TO FINANCIAL STATEMENTS, Continued 

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


7.   Shareholders' Equity, Continued:

     SEPTEMBER 1996 PRIVATE PLACEMENT EQUITY OFFERING

     In September 1996, the Company completed a private placement offering of 
     571,429 shares of its common stock at a selling price of $7.00 per share.
     The Company received net proceeds of $3,735,195 for the stock, after 
     deducting offering expenses.

     INCREASE IN AUTHORIZED SHARES OF COMMON STOCK

     In December 1996, the Company's shareholders voted to amend the Company's 
     articles of incorporation to increase the number of authorized shares of 
     common stock from 15,000,000 to 50,000,000. 

     STOCK OPTION PLANS

     On April 26, 1994, the Board of Directors adopted (and on March 15, 1995 
     the shareholders approved) the 1994 Stock Compensation Plan (the "1994 
     Plan").  The 1994 Plan provides that incentive stock options and 
     nonqualified stock options may be granted to certain officers, directors 
     (other than Outside Directors), employees and advisors of the Company or 
     its subsidiaries, if any, selected by the Compensation Committee.

     The Company has granted a total of 745,000 options exercisable at prices 
     ranging from $6.25 to $9.00 expiring between April 26, 1999 and September
     26, 2005.  The options were granted at exercise prices equal to the fair 
     market value (or in the case of options granted to the president and 
     majority shareholder at 110% of market value) as of the date of grant.  The
     options vest in 25% increments annually, subject to acceleration upon a 
     change in control of the Company, as defined in the 1994 Plan agreement. 

     The grants of 450,000 of the options described above were subject to 
     shareholder approval of an increase in the authorized number of shares 
     reserved for issuance under the 1994 Plan to 2,000,000 shares.  Such 
     approval was received during 1996.

     OUTSIDE DIRECTORS STOCK OPTION PLAN

     On April 26, 1994, the Board of Directors adopted (and on March 15, 1995
     the shareholders approved) the Outside Directors Stock Option Plan
     (the "Plan").

     The Company has granted nonqualified options to three of its directors to 
     purchase 100,000 shares of the Company's common stock.  The options are 
     exercisable at prices of $6.75 and $6.25 expiring between April 26, 2004
     and April 26, 2005.  The foregoing options were granted at an exercise 
     price equal to the fair market value of the common stock as of the date of
     grant.  The options vest in 25% increments annually, subject to 
     acceleration upon a change in control of the Company, as defined in the 
     Plan agreement.

Continued

                                      39
<PAGE>
                                      
                           BOARDWALK CASINO, INC.
                NOTES TO FINANCIAL STATEMENTS, Continued 

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


8.   Income Taxes:

     The following is a reconciliation of income taxes at the Federal statutory
     rate with income taxes recorded by the Company:

                                                     1996            1995     
                                                  -----------    ------------ 
     Tax benefit computed at federal statutory 
      income tax rate (35%)                       ($1,545,000)   ($1,868,000)
     Unrecognized tax benefit from operating 
      losses                                        1,494,000      1,852,000 
     Other, net                                        51,000          6,000 
                                                  -----------    ----------- 
            Total income tax provision (benefit)   $        -     $        - 
                                                  -----------    ----------- 
                                                  -----------    ----------- 


     Deferred income taxes reflect the net effects of temporary differences 
     between the carrying amounts of assets and liabilities for financial 
     reporting purposes and the amounts used for income tax purposes.

     Significant components of the Company's deferred tax assets and liabilities
     consist of the following at September 30, 1996 and 1995:

                                                     1996           1995     
                                                  -----------    ----------- 
     DEFERRED TAX ASSETS: 
        Federal net operating loss carryforward   $ 3,524,000    $ 2,051,000 
        Write-off of existing casino facilities 
          during expansion                                  -        307,000 
        Gaming tax assessment                         175,000              -
        Other                                          30,000         48,000 
                                                  -----------    ----------- 
            Total deferred tax assets               3,729,000      2,406,000 
                                                  -----------    ----------- 
     DEFERRED TAX LIABILITIES:
        Depreciation                                 (674,000)      (490,000)
                                                  -----------    ----------- 
            Total deferred tax liabilities           (674,000)      (490,000)

     Valuation allowance                           (3,055,000)    (1,916,000)
                                                  -----------    ----------- 
            Net deferred taxes                    $         -    $         - 
                                                  -----------    ----------- 
                                                  -----------    ----------- 

     No income tax provision (benefit) has been recorded in the 1996 and 1995 
     financial statements, and the Company operates wholly in Nevada and, 
     therefore, has no state income tax liability.

     As of September 30, 1996, the Company had a federal net operating loss 
     carryforward of approximately $10,568,000 which expires between 2009 and 
     2011.

9.   Commitments And Contingencies:

     The Company has pending certain legal actions and claims incurred in the 
     normal course of business and is actively pursuing the defense thereof.  In
     the opinion of management, these actions and claims are either without 
     merit or are covered by insurance and will not have a material adverse 
     effect on the Company's financial position, results of operations or cash
     flows.

Continued

                                       40
<PAGE>
                                      
                           BOARDWALK CASINO, INC.
                NOTES TO FINANCIAL STATEMENTS, Continued 

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


9.   Commitments And Contingencies, Continued:

     HOLIDAY INN-REGISTERED TRADEMARK- FRANCHISE AGREEMENT

     The Company was granted a Holiday Inn-Registered Trademark- ten-year 
     franchise license on June 16, 1994 after completing renovation of its 
     existing hotel, consisting of 126 rooms in a high-rise tower and 75 annex 
     rooms.  The  agreement required an application fee of $77,500, (which is 
     reflected in other assets and is being amortized over the life of the 
     agreement).  The agreement provides that the Company will pay to Holiday 
     Inn-Registered Trademark- (i) a monthly royalty of 5% of the gross rooms 
     revenues; (ii) a  "marketing contribution" of 1.5% of the gross rooms 
     revenues; (iii) a "reservation contribution" of 1.0% of the gross rooms 
     revenues; and (iv) a monthly Holidex fee of $6.43 for each guest room.  
     The license granted under the agreement expires ten years from the date 
     of the opening of the hotel under the "Holiday Inn" system, subject to 
     earlier termination as set forth therein.

     GAMING TAX ASSESSMENT

     During the last two quarters of 1996, based on the advice of legal counsel,
     the Company accrued a total loss contingency of $500,000 related to an 
     anticipated gaming tax assessment from the Nevada Gaming Control Board 
     ("NGCB").  The NGCB has audited the Company's gaming tax returns in 1996
     and the Company believes it is probable that the NGCB will determine that
     the Company has improperly deducted certain promotional wagers by patrons
     in calculating gross revenue for gaming tax purposes.  The Company plans to
     appeal an assessment; however, the likelihood of a successful outcome 
     cannot be determined.

10.  Related-Party Transactions:

     OFFICE SPACE LEASE

     During 1996 and 1995, the Company leased office space and storage 
     facilities for its corporate offices from the majority shareholders for 
     approximately $8,375 per month.  For the years ended September 30, 1996 
     and 1995, rent expense under this lease was $101,375 and $43,874, 
     respectively.

     Effective October 1, 1996, the Company amended the lease and the monthly 
     rental increased to approximately $70,000 per month.  The lease term is 
     for two years and allows the Company to use the facilities for any purpose.
     The Company has options to extend the lease up to an additional 28 years.  
     The lease agreement provides the Company with the first right of refusal to
     purchase the land and building at their fair value should the shareholders 
     decide to sell them.  The lease agreement also entitles the Company to the 
     rental income from the existing lessees during the lease term.  The 
     existing lessees are on short-term renewable leases with current rents
     totaling approximately $39,000 per month.

     RECEIVABLE FROM HOLIDAY GIFTS, INC.

     During the period from October 1, 1993 through February 11, 1994, the 
     Company paid certain overhead and general and administrative expenses on 
     behalf of Holiday Gifts, Inc. ("HGI"), a company affiliated through common
     ownership.  As of September 30, 1996 and 1995, the receivable balance was 
     $3,499 and $12,682, respectively.

Continued

                                       41
<PAGE>
                                      
                           BOARDWALK CASINO, INC.
                NOTES TO FINANCIAL STATEMENTS, Continued 

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


10.  Related-Party Transactions, Continued:

     RECEIVABLE FROM HOLIDAY GIFTS, INC., Continued

     The Company leases retail space to HGI.  During the years ended September 
     30, 1996 and 1995, rental income from HGI was $11,000 and $12,000, 
     respectively.  Effective October 1, 1996, rental income from HGI increased 
     to $5,000 per month.

11.  Bridge Loans And Related Extraordinary Losses:

     1995 BRIDGE LOANS 

     In February 1995, the Company, in a private placement offering, completed 
     the issuance of 12% promissory notes aggregating $1,000,000.  In connection
     with the financing, the Company issued lenders 50,000 warrants to purchase 
     common stock (exercisable at $6.00 per share).  These notes were repaid in 
     April 1995 from the proceeds of the BCI Notes.

     Original issue discount of these notes was attributable to the 50,000 
     warrants and totaled $90,000 of which $25,847 was amortized through April 
     1995.  The balance of the original issue discount ($64,153) was written-
     off upon early extinguishment of the debt, and was treated as an 
     extraordinary loss.

     EARLY EXTINGUISHMENT OF INDEBTEDNESS

     The Company repaid certain other indebtedness with proceeds from the BCI 
     Notes in 1995.  Unamortized debt issuance costs ($60,827) which had been 
     capitalized were written-off upon early extinguishment.  Additionally, a 
     settlement was reached with a vendor for an outstanding capital lease 
     obligation.  The settlement of the obligation was for less than the amount 
     outstanding which resulted in a gain on early extinguishment of debt of 
     $80,951.  Because the Company is in a tax loss carryforward position, no 
     tax benefit has been recognized for the net extraordinary losses in 1996.

     1996 BRIDGE LOANS

     In November 1995, the Company executed a $600,000, 10% uncollateralized 
     promissory note with principal and interest due in May 1996.  The note was
     paid off with no gain or loss in September 1996 with proceeds from the 
     $5,000,000 subordinated, convertible note payable executed in September 
     1996 as more fully described in Note 6.

     In December 1995, the Company executed a $500,000, 12% uncollateralized 
     promissory note to the Company's majority shareholder and CEO with 
     principal and interest due in September 1996.  The note was paid off with
     no gain or loss in September 1996 with proceeds from the $5,000,000 
     subordinated, convertible note payable executed in September 1996 as more
     fully described in Note 6.

     In March 1996, the Company executed a $500,000, 10% uncollateralized 
     promissory note to a director of the Company with principal and interest 
     due in September 1996.  The note was paid off with no gain or loss in 
     September 1996 with proceeds from the $5,000,000 subordinated, convertible
     note payable executed in September 1996 as more fully described in Note 6.

Continued

                                      42
<PAGE>
                                      
                           BOARDWALK CASINO, INC.
                NOTES TO FINANCIAL STATEMENTS, Continued 

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


11.  Bridge Loans And Related Extraordinary Losses, Continued:

     1996 BRIDGE LOANS, Continued

     In March 1996, the Company executed a $750,000, 12% uncollateralized 
     promissory note to the Company's majority shareholder and CEO with 
     principal and interest due in September 1996.  The note was paid off with 
     no gain or loss in September 1996 with proceeds from the $5,000,000 
     subordinated, convertible note payable executed in September 1996, as more
     fully described in Note 6.

12.  Fair Value Of Financial Instruments:

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




                                      43
<PAGE>

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

    Not applicable.


                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

DIRECTORS AND EXECUTIVE OFFICERS

    The following table sets forth the names and ages of the Company's
directors and executive officers and the positions they hold with the Company. 
All directors are elected at the annual meeting of stockholders to serve one
year or until their successors are elected and qualified.

NAME                        AGE             POSITION
----                        ---             --------
Norbert W. Jansen*           78             Chief Executive Officer and
                                            Chairman of the Board of Directors

Forrest J. Woodward, II      54             President and Chief Operating
                                            Officer

Avis P. Jansen               69             Vice President and Director

Louis J. Sposato             46             Chief Financial Officer, Secretary,
                                            Treasurer and Director

James Scibelli               46             Director

Keven J. Picardo             40             Director

Jeffrey P. Jacobs            43             Director

--------
* Mr. Jansen died on January 6, 1997. The Company has not yet acted to appoint
  a new Chief Executive Officer or Chairman of the Board of Directors.

    NORBERT W. JANSEN served as the Chairman of the Board of Directors and 
the Chief Executive Officer of the Company until his death on January 6, 
1997.  He had been employed in the gaming industry in various capacities and 
at various times since 1947, working first as a race book writer and "21" and 
craps dealer, before becoming slot manager at the Silver Slipper in Las Vegas 
in 1956.  From 1964 to 1967, Mr. Jansen was an owner and officer of the 
Pioneer Club in downtown Las Vegas.  In the 1960s and early 1970s, Mr. Jansen 
was a developer of the Holiday Inn-Center Strip, now Harrah's Las Vegas.  Mr. 
Jansen had been investigated and licensed by state and local gaming 
authorities on numerous occasions.  In 1977, Mr. Jansen was licensed as 
landlord of The Slot Joyn't, the small casino that subsequently became part 
of the Holiday Inn-Registered Trademark- Casino Boardwalk.  In 1988 and 1990, 
Mr. Jansen was granted limited nonrestricted licenses as an owner, officer 
and director of HGI.  In 1992, the Nevada Gaming Authorities granted Mr. 
Jansen an unlimited nonrestricted license.

    FORREST J. WOODWARD, II serves as the President and Chief Operating Officer
of the Company.  Mr. Woodward began his gaming career in 1966, serving as
controller of the Pioneer Club and Pioneer 


                                      44

<PAGE>

Hotel in Las Vegas until 1969.  From 1969 to 1972, he served as controller 
and, thereafter, executive vice president of the Flamingo Hotel.  From 1972 
to 1977, Mr. Woodward served as executive vice president and assistant 
general manager of the Thunderbird Hotel.  From 1978 to 1985, he served as 
executive vice president and assistant general manager of the Desert Inn 
Country Club and Spa, with responsibility for all aspects of gaming and hotel 
marketing.  From 1986 to 1988, Mr. Woodward served as executive vice 
president of the Dunes Hotel and Country Club, with responsibility for the 
management of the hotel and gaming areas.  During 1990, he served as general 
manager of the Landmark Hotel and Casino, having been appointed by the 
Federal Bankruptcy Court to operate the property.  In addition, from 1987 to 
1993, Mr. Woodward served as chairman, president and majority shareholder of 
Las Vegas Resorts Corporation, a public company engaged in land acquisitions 
related to casino hotels.  From 1992 to 1993, Mr. Woodward served as senior 
vice president - administration for the Stars' Desert Inn Hotel and Country 
Club.  Thereafter, from 1993 until joining the Company in August 1995, he 
served as senior vice president - administration for Sheraton Desert Inn.  
His responsibilities at the Desert Inn included all domestic casino 
marketing, marketing and operations of gaming activities and operations of 
the country club, security and surveillance. Mr. Woodward received his 
Bachelor of Science degree from the University of Nevada at Las Vegas in 1968.

    AVIS P. JANSEN serves as the Vice President and a director of the Company. 
Since 1971, she has served as the president, secretary and treasurer of Holiday
Gifts, Inc., the former operator of the Company's casino.  Ms. Jansen is the
wife of Norbert W. Jansen.

    LOUIS J. SPOSATO serves as the Chief Financial Officer, Secretary,
Treasurer and a director of the Company.  He received his Bachelor of Science
degree in accounting from Fordham University in 1972.  From 1983 to 1988, Mr.
Sposato served as comptroller of Union Plaza Hotel & Casino, Las Vegas, Nevada,
where he directed the hotel and casino's administrative functions and compliance
requirements, including Nevada Gaming Commission Regulation 6 (internal control
procedures for all licensees) and Regulation 6A (casino currency transaction
recordkeeping and reporting requirements).  From 1988 to 1989, Mr. Sposato
served as assistant controller for Electronic Data Technologies, Las Vegas,
Nevada, with responsibility for implementing their slot machine route accounting
system.  From 1989 to 1990, he served as assistant controller of Alexis Park
Resort Hotel, Las Vegas, Nevada, with responsibility for all accounting
functions.  Since 1990, Mr. Sposato has also served as controller of Holiday
Gifts, Inc.

    JAMES SCIBELLI serves as a director of the Company.  Since March 1986, Mr.
Scibelli has served as president of Roberts & Green, Inc., a New York investment
banking firm offering a variety of investment services.  Since August 1991, he
has also been an officer and director of SG Capital Corp., a financial
consulting company.  Mr. Scibelli serves as a director and a member of the
compensation committee of Acclaim Entertainment, Inc. and a director of B.U.M.
International, Inc.  Mr. Scibelli devotes such time as is necessary to the
affairs of the Company.

    KEVEN J. PICARDO serves as a director of the Company.  From 1984 to 1990,
Mr. Picardo served as an investment advisor and mutual fund director for Paine
Webber Incorporated.  From 1990 to 1994, he served as an associate vice
president of Kemper Securities, Inc.  During 1994, Mr. Picardo served as senior
vice president of USA Capital Management Group, Inc., Las Vegas, Nevada.  Since
October 1995, he serves as senior financial consultant with Signal USA
Securities, Inc., Las Vegas, Nevada.  Mr. Picardo devotes such time as is
necessary to the affairs of the Company.

    JEFFREY P. JACOBS serves as a director of the Company.  Beginning in 1984,
Mr. Jacobs developed the riverfront entertainment district, known as the
"Flats", in Cleveland, Ohio.  He also has developed, owns and manages several
apartment complexes in Cleveland and throughout Ohio.  In 1996, Mr. Jacobs
became the Chief Executive Officer and Co-Chairman of the Board of Directors of
BlackHawk Gaming 


                                      45

<PAGE>

& Development Co. ("BlackHawk"), a publicly traded gaming company 
headquartered in Boulder, Colorado that is co-owner and manager of the Gilpin 
Hotel & Casino in BlackHawk, Colorado.  Additionally, BlackHawk has begun 
construction of a new casino/hotel project in BlackHawk, Colorado that is 
scheduled to open in early 1998.  In 1996, Mr. Jacobs became the Chief 
Executive Officer and Chairman of the Board of Directors of Colonial Downs, 
which presently owns and operates two off-track betting parlors in the State 
of Virginia, has plans to open four more parlors and is constructing the 
first horse racing track in the state, which is scheduled to open in 1997.  
Mr. Jacobs received his Bachelor of Business Administration degree from the 
University of Kentucky in 1975, his Masters of Business Administration from 
Ohio State University in 1977 and his Masters of Urban Planning from 
Cleveland State University in 1979.  He served as a member of the Ohio House 
of Representatives from 1984 through 1986.  Mr. Jacobs devotes such time as 
is necessary to the affairs of the Company.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

    Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company pursuant to Rule 16a-3(e) during its most recent fiscal
year and Forms 5 and amendments thereto furnished to the Company with respect to
its most recent fiscal year, and any written representation from the reporting
person (as hereinafter defined) that no Form 5 is required, the Company is not
aware of any person who, at any time during the fiscal year, was a director,
officer, beneficial owner of more than ten percent of any class of equity
securities of the Company registered pursuant to Section 12 of the Exchange Act
("reporting person"), that failed to file on a timely basis, as disclosed in the
above Forms, reports required by Section 16(a) of the Exchange Act during the
most recent fiscal year.

COMMITTEES OF THE BOARD OF DIRECTORS

    The Board of Directors has not established any separate nominating
committee.  The Board has established a Compensation Committee, which consists
of Avis P. Jansen and James Scibelli.  Its functions are to review and approve
annual salaries and bonuses for all executive officers, review, approve and
recommend to the Board of Directors the terms and conditions of all employee
benefits or changes thereto, and manage and administer the Company's 1994 Stock
Compensation Plan.

    The Board of Directors has established an Audit Committee, which consists
of Messrs. Scibelli, Picardo and Sposato.  The functions of the Audit Committee
are to recommend annually to the Board of Directors the appointment of the
independent public accountants of the Company, discuss and review the scope and
the fees of the prospective annual audit and review the results thereof with the
independent public accountants, review and approve non-audit services of the
independent public accountants, review compliance with existing accounting and
financial policies of the Company, review the adequacy of the financial
organization of the Company and review management's procedures and policies
relative to the adequacy of the Company's internal accounting controls and
compliance with federal and state laws relating to financial reporting.

    The Board of Directors has also established a Stock Option Committee, 
which consisted of Messrs. Jansen and Sposato as of September 30, 1996.  The 
function of the Stock Option Committee is to manage and administer the 
Company's Outside Directors Stock Option Plan.

                                      46

<PAGE>

ITEM 10.  EXECUTIVE COMPENSATION.

     The following table, and the accompanying explanatory footnotes, includes
annual and long-term compensation information on (i) the Company's Chief
Executive Officer for services rendered in all capacities during the fiscal
years ended September 30, 1996, 1995 and 1994 and (ii) each executive officer
who received total annual salary and bonus for the fiscal year ended September
30, 1996 in excess of $100,000.

                              SUMMARY COMPENSATION TABLE


<TABLE>
                                                                                   LONG TERM
                                                ANNUAL COMPENSATION              COMPENSATION
                                 ----------------------------------------------  ------------
      NAME AND
      PRINCIPAL                  FISCAL                            OTHER ANNUAL     OPTIONS
      POSITION                    YEAR      SALARY        BONUS    COMPENSATION     GRANTED
      --------                   ------    --------      ------    ------------  ------------
<S>                               <C>         <C>          <C>         <C>             <C>
Norbert W. Jansen, Chief 
Executive Officer                 1996     $238,000         0           0              0

                                  1995      225,000         0           0           170,000

                                  1994      200,000      20,000         0           170,000

Forrest J. Woodward, Chief        1996      180,000         0           0              0
Operating Officer                 1995       21,000         0           0           130,000
</TABLE>

EMPLOYMENT AGREEMENTS

    Effective as of February 11, 1994, the Company entered into a five-year 
employment agreement with Norbert W. Jansen as Chief Executive Officer of the 
Company which provided for an annual base salary of $275,000 as of September 
30, 1996. Effective as of January 1, 1995, the Company entered into a 
three-year employment agreement with Louis J. Sposato as Chief Financial 
Officer, Secretary and Treasurer of the Company which currently provides for 
an annual base salary of $95,000.  Effective as of August 15, 1995, the 
Company entered into a five-year employment agreement with Forrest J. 
Woodward, II as President and Chief Operating Officer of the Company which 
currently provides for an annual base salary of $180,000.  On each annual 
anniversary of the commencement date of each agreement, the period of 
employment is automatically extended for one year unless notified in writing 
by either party thereto.

DIRECTORS' COMPENSATION

    Each non-employee director of the Company receives $1,000 for each meeting
of the Board of Directors attended.  In addition, pursuant to the Outside
Directors Stock Option Plan, Avis P. Jansen, James Scibelli and Keven J. Picardo
have each been granted options to purchase shares of Common Stock (subject to
certain vesting requirements).  See "- The Outside Directors Stock Option Plan."

THE 1994 STOCK COMPENSATION PLAN

    The Company and its shareholders have adopted and approved the 1994 Stock
Compensation Plan, as amended (the "1994 Plan").  Options granted pursuant to
the 1994 Plan constitute either incentive stock 


                                      47

<PAGE>

options within the meaning of Section 422 of the Internal Revenue Code of 
1986, as amended (the "Code"), or options which constitute nonqualified 
options at the time of issuance of such options.  The 1994 Plan provides that 
incentive stock options and/or nonqualified stock options may be granted to 
certain officers, directors (other than Outside Directors), employees and 
advisors of the Company or its subsidiaries, if any, selected by the 
Compensation Committee.  A total of 2,000,000 shares of Common Stock are 
authorized and reserved for issuance under the 1994 Plan, subject to 
adjustment to reflect changes in the Company's capitalization in the case of 
a stock split, stock dividend or similar event. The 1994 Plan is administered 
by the Compensation Committee which has the sole authority to interpret the 
1994 Plan and make all determinations necessary or advisable for 
administering the 1994 Plan.  The exercise price for any incentive option 
must be at least equal to the fair market value of the shares covered thereby 
as of the date of grant of such option.  Upon the exercise of the option, the 
exercise price thereof must be paid in full either in cash, shares of Common 
Stock of the Company or a combination thereof.  If and to the extent that any 
option to purchase reserved shares shall not be exercised by an optionee for 
any reason or if such option to purchase shall terminate as provided by the 
1994 Plan, such shares which have not been so purchased thereunder shall 
again become available for the purposes of the 1994 Plan unless the 1994 Plan 
shall have been terminated.

    During the fiscal year ended September 30, 1994, the Company had granted an
aggregate of 295,000 options, including the following options to its executive
officers and Keven J. Picardo (subsequently appointed to the Board of
Directors):  Norbert W. Jansen - incentive options to purchase 59,256 shares at
$7.43 per share until April 26, 1999 and nonqualified options to purchase
110,744 shares at $6.75 per share until April 26, 2004; Louis J.
Sposato - incentive options to purchase 90,000 shares at $6.75 per share until
April 26, 2004; and Keven J. Picardo - nonqualified options to purchase 10,000
shares at $6.75 per share until April 26, 2004.  Each of the foregoing options
was granted at an exercise price equal to the fair market value of the Common
Stock as of the date of grant (110% with respect to the 59,256 incentive options
granted to Norbert W. Jansen).  Further, the options vest and may be exercised
in 25% cumulative increments annually from the date of grant on April 26, 1994,
subject to earlier termination or extension.

    During the fiscal year ended September 30, 1995, the Company granted an
aggregate of 455,000 additional options, including the following options to its
executive officers: Norbert W. Jansen - incentive options to purchase 64,000
shares at $6.88 per share until April 26, 2000 and nonqualified options to
purchase 106,000 shares at $6.25 per share until April 26, 2005; Forrest J.
Woodward, II - incentive options to purchase 130,000 shares at $6.00 per share
until May 15, 2005; and Louis J. Sposato - incentive options to purchase 90,000
shares at $6.25 per share until April 26, 2005.  Each of the foregoing options
was granted at an exercise price equal to the fair market value of the Common
Stock as of the date of grant (110% with respect to the 64,000 incentive options
granted to Norbert W. Jansen).  Further, the options vest and may be exercised
in 25% cumulative increments annually from the date of grant subject to earlier
termination or extension.

    During the fiscal year ended September 30, 1996, the Company did not grant
any options under the 1994 Plan.

THE OUTSIDE DIRECTORS STOCK OPTION PLAN

    The Company and its shareholders have adopted and approved the Outside
Directors Stock Option Plan, as amended (the "Plan").  The Plan was adopted in
order to enhance the Company's ability to secure and retain highly qualified and
experienced individuals who are not regularly salaried employees of the Company
to serve as directors of the Company.  The Plan provides generally that:  (i)
the purchase price of the Common Stock under each option granted shall not be
less than the fair market value of the 


                                      48

<PAGE>

Common Stock on the date of grant; (ii) no director may be granted during any 
calendar year options to purchase more than 20,000 shares of Common Stock; 
(iii) no option may be granted for a period of greater than ten years from 
the date of grant; and (iv) a maximum of 400,000 shares of Common Stock have 
been authorized and reserved for issuance under the Plan.

    During the fiscal year ended September 30, 1994, the Company had granted to
each of Avis P. Jansen and James Scibelli nonqualified options to purchase
20,000 shares at $6.75 per share until April 26, 2004.  During the fiscal year
ended September 30, 1995, the Company had granted to each of Avis P. Jansen,
James Scibelli and Keven J. Picardo nonqualified options to purchase 20,000
shares at $6.25 per share until April 26, 2005.  Each of the foregoing options
was granted at an exercise price equal to the fair market value of the Common
Stock as of the date of grant.  Further, the options vest in 25% increments
annually from the date of grant, subject to earlier termination or extension. 
During the fiscal year ended September 30, 1996, the Company did not grant any
options under the Plan.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

    The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of December 20, 1996, by (i) all persons known
by the Company to be the owner, of record or beneficially, of more than five
percent of the outstanding Common Stock, (ii) each executive officer and
director of the Company and (iii) all directors and executive officers as a
group.  Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities.  Shares of Common Stock subject to options
currently exercisable or exercisable within 60 days of December 20, 1996 are
deemed outstanding for computing the percentage of the person holding such
securities but are not outstanding for computing the percentage of any other
person.

    As far as is known to management of the Company, no person owned
beneficially more than five percent of the outstanding shares of Common Stock as
of December 20, 1996 except as set forth below.

                                        SHARES BENEFICIALLY
    NAME                                        OWNED          PERCENT OF SHARES
    ----                                -------------------    -----------------

Norbert W. Jansen and Avis Jansen,            2,750,000               38.3
  Trustees u/a/d 07/14/93 (1)

Norbert W. Jansen (1)                         2,892,500 (3)           39.5

Avis P. Jansen (1)(2)                         2,892,500 (3)           39.5

Forrest J. Woodward (9)                          42,500 (4)              *

Louis J. Sposato (9)                             67,500 (5)              *

James Scibelli (9)                              420,000 (6)            5.6

Keven J. Picardo (9)                             12,000 (7)              *

Jeffrey P. Jacobs (10)                        1,071,429               14.9


                                      49

<PAGE>

Franklin Custodian Funds, Inc. -              1,281,869 (8)           15.1
  Income Series (9)

Diversified Opportunities Group
  Ltd. (10)                                   1,071,429               14.9

All Executive Officers and Directors
as a group (7 persons)                        4,505,929               57.8

-------------------
*    Represents beneficial ownership of less than 1% of the outstanding shares
     of Common Stock.

(1)  The business address of Norbert W. Jansen and Avis Jansen, Trustees u/a/d
     07/14/93 (the "Jansen Trust"), Norbert W. Jansen and Avis P. Jansen is 3750
     Las Vegas Boulevard South, Las Vegas Nevada 89109.  Such shares are held of
     record and beneficially by The Jansen Trust but may be deemed to also be
     beneficially owned by Mr. Jansen (within the meaning of Rule 13d-3 under
     the Securities Exchange Act of 1934, as amended) since, as trustee of The
     Jansen Trust, Mr. Jansen has the power to direct the voting and disposition
     of such shares.

(2)  Avis P. Jansen is the spouse of Norbert W. Jansen and is also deemed to
     beneficially own the 2,750,000 shares beneficially owned by Norbert W.
     Jansen and the Jansen Trust.

(3)  Includes options currently exercisable to acquire 127,500 shares of Common
     Stock owned by Norbert W. Jansen and options currently exercisable to
     acquire 15,000 shares of Common Stock owned by Avis P. Jansen.

(4)  Includes options currently exercisable to acquire 32,500 shares of Common
     Stock.

(5)  Includes options currently exercisable to acquire 67,500 shares of Common
     Stock.

(6)  Includes options currently exercisable to acquire 15,000 shares of Common
     Stock and 355,000 redeemable common stock purchase warrants sold by the
     Company in its initial public offering dated February 11, 1994 (the
     "Warrants").  Each Warrant entitles the holder thereof to purchase one
     share of Common Stock at $5.00 per share at any time until February 11,
     1998, subject to earlier redemption under certain circumstances.

(7)  Includes options currently exercisable to acquire 10,000 shares of Common
     Stock.

(8)  Represents warrants currently exercisable to acquire 1,281,869 shares of
     Common Stock.

(9)  The business address of Messrs. Woodward, Sposato, Scibelli and Picardo is
     3750 Las Vegas Boulevard South, Las Vegas, Nevada 89109.  The business
     address of Franklin Custodian Funds, Inc. - Income Series is 777 Mariners
     Island Blvd., San Mateo, California 94404.

(10) The business address of Jeffrey P. Jacobs and Diversified Opportunities
     Group Ltd. ("Diversified") is c/o Jacobs Entertainment Ltd., 425 Lakeside
     Avenue, Cleveland, Ohio 44114.  Such shares are held of record and
     beneficially by Diversified but may be deemed to also be beneficially owned
     by Mr. Jacobs (within the meaning of Rule 13d-3 under the Securities
     Exchange Act of 1934, as amended) since Mr. Jacobs has the power to direct
     the voting and disposition of such shares.



                                      50

<PAGE>

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

    Effective October 1, 1993, the Company entered into a subscription
agreement (the "VC Subscription Agreement") with all of the partners of VC,
Ltd., Limited Partnership, an affiliated Nevada limited partnership ("VC").  The
sole general partner of VC was Holiday Gifts, Inc., a Nevada corporation ("HGI")
whose sole shareholders are Norbert W. Jansen and Avis P. Jansen, founders,
directors, executive officers and the principal shareholders of the Company.  VC
owned certain real property upon which VC owned and operated the Boardwalk
Hotel.  Pursuant and subject to the terms and conditions of the VC Subscription
Agreement, the Company acquired all of the VC partners' interests in and to VC,
including the real property and the Boardwalk Hotel (the "Hotel Assets"), by the
issuance to the VC partners of an aggregate of 1,485,714 unregistered shares of
Common Stock.  Of these 1,485,714 shares, HGI received 757,714 shares as general
partner of VC and 16,000 shares as a limited partner.

    As a result of the foregoing transaction, the Company acquired all of the
liabilities of VC, including the obligations of VC to Bank of America Nevada
f/k/a Valley Bank of Nevada pursuant to certain promissory notes of VC dated
April 25, 1985 in the original principal amount of $4,000,000 and dated December
1, 1987 in the original principal amount of $1,000,000 (collectively, the "Bank
Loans").

    Effective October 1, 1993, the Company entered into a purchase and sale
agreement (the "Jansen Acquisition Agreement") with Norbert W. Jansen
("Jansen"), the then president, principal shareholder and a director of the
Company.  Jansen owned certain real property upon which HGI operated the
Boardwalk Casino.  Pursuant and subject to the terms and conditions of the
Jansen Acquisition Agreement, the Company acquired all of Jansen's interests in
and to the real property and the Boardwalk Casino (the "Casino Assets") by the
issuance to Jansen of 1,605,250 unregistered shares of Common Stock.  As a
result of this transaction and as part of the consideration paid by the Company,
the Casino Assets continued to secure the obligations of VC to Bank of America
Nevada f/k/a Valley Bank of Nevada in connection with the Bank Loans.

    Effective October 1, 1993, the Company entered into a purchase and sale
agreement (the "HGI Acquisition Agreement") with HGI.  Pursuant to prior leases
formerly with VC, Jansen and the Company, HGI operated, among other things, the
casino and related facilities at the Holiday Inn-Registered Trademark- Casino
Boardwalk and was the owner of certain gaming equipment and related assets used
in connection therewith.  Pursuant and subject to the terms and conditions of
the HGI Acquisition Agreement, the Company acquired all of HGI's interests in
and to the casino leases and its gaming equipment and devices (the "Gaming
Assets") by the issuance to HGI of 759,036 unregistered shares of Common Stock.

    The Company did not obtain any independent market appraisal nor engage an
investment banker to render any opinion with respect to the fairness to the
Company from a financial point of view of the consideration paid by the Company
in each of the foregoing transactions.  However, the Company believes that the
terms of each of the foregoing agreements are at least as favorable as could
have been obtained from non-affiliated third parties.

    A personal loan to the Jansens, the proceeds of which were advanced to the
Company in 1987, was collateralized by a second trust deed on certain real and
personal property of the Company.  Monthly payments of $3,330, including 14%
interest, were made to the Jansens through September 30, 1993.  On October 1,
1993, the Jansens converted their outstanding loans and advances to equity,
including this loan with a balance of $195,483; the loan was paid in full in
August 1994.

                                     51

<PAGE>

    In 1993, a parcel of land was quitclaimed to Norbert W. Jansen and,
accordingly, Mr. Jansen's loans and advances were reduced by the fair market
value of the land, which exceeded its historical cost by $115,000.

    From October 1, 1993 through February 11, 1994, HGI operated the casino
business of the Company subject to a lease (the "Interim Lease").  The Interim
Lease provided for monthly rentals of $32,500.  During this period, the Company
paid certain overhead and general and administrative expenses on behalf of HGI
aggregating $56,780.  This amount was recorded by the Company as a receivable
from HGI.  Upon the completion of the initial public offering, the Interim Lease
terminated and the Company acquired possession of the casino and title to the
gaming assets for a nominal amount.

    In October 1994, the Company agreed to assume the $95,000 liability of Mr.
Jansen in connection with the settlement of certain litigation covering a claim
for architectural fees allegedly incurred in designing a building to be built
upon property owned by the Company.  The settlement resulted in a significant
discount of the fees sought and the acquisition of the intellectual property
rights in the building and plans.  The Company agreed to assume Mr. Jansen's
liability since his efforts to build the building were undertaken on behalf of
the Company, and not in his individual capacity.

    On January 10, 1996, the Company borrowed $500,000 from Mr. Norbert Jansen
and issued to Mr. Jansen a 12% uncollateralized promissory note payable upon the
earlier of the completion of a proposed private placement equity offering or
September 30, 1996.  The Company utilized the proceeds of this loan to repay, in
part, a note payable to an unaffiliated third party.  On September 25, 1996, the
Company repaid the loan to Mr. Jansen in full.

    On March 29, 1996, the Company borrowed $500,000 from Mr. Norbert Jansen
and issued to Mr. Jansen a 12% uncollateralized promissory note payable upon the
earlier of the completion of a proposed private placement equity offering or
September 30, 1996.  In addition, on March 29, 1996, the Company borrowed
$500,000 from Mr. James Scibelli and issued to Mr. Scibelli a 10%
uncollateralized promissory note payable upon the earlier of the completion of a
proposed private placement equity offering or November 1, 1996.  The Company
utilized the proceeds of these loans to satisfy certain indebtedness due April
1, 1996.  On September 25, 1996, the Company repaid the loans to Messrs. Jansen
and Scibelli in full.

    In April 1996, the Company borrowed $250,000 from Mr. Norbert Jansen and
issued to Mr. Jansen a 10% uncollateralized promissory note payable on demand
after 90 days.  The Company utilized the proceeds of this loan as working
capital.  On September 25, 1996, the Company repaid the loan to Mr. Jansen in
full.

    During the fiscal years ended September 30, 1995 and 1996, the Company
leased office space for certain executive and administrative employees from
Norbert W. Jansen for approximately $8,375 per month, totaling $43,874 and
$101,375, respectively.  The Company believes that the rent charged was fair and
reasonable and on as beneficial terms as could have been obtained from an
unaffiliated third party consistent with other rentals assessed in the market
area for similar facilities.

    Effective October 1, 1996, in connection with the private transaction with
Diversified Opportunities Group Ltd., the Company entered into a lease agreement
(the "Lease Agreement") as the tenant with The Jansen Trust as the landlord.
The Lease Agreement covers certain land to the north of the hotel and casino
(the "Property") which enables the Company to control the use of the Property
and provides the Company with an option to purchase the Property for possible
expansion of the hotel and casino.

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<PAGE>

    The Property consists of approximately 1.07 acres of land and has 150 feet
of frontage on the Strip.  It currently contains a two-story office building
which is leased to several retail and office tenants, including the executive
and administrative offices of the Company.  The Lease Agreement commenced
October 1, 1996 and has a term of 24 months, with an option to extend the lease
term for an additional five years and a second, successive, option to extend it
an additional 23 years.  The base rent of $70,000 per month ($840,000 per year)
is subject to adjustment after five years.  In addition, the Lease Agreement
grants the Company an option to purchase the Property under certain terms and
conditions.  The Company believes that the terms of the Lease Agreement are fair
and reasonable and on as beneficial terms as could be obtained from an
unaffiliated third party consistent with other rentals assessed in the market
area for similar facilities.

    In September 1996, the Company entered into a long term lease with HGI with
respect to the gift shop within the hotel-casino covering approximately 1,000
square feet for an initial term of ten years, with a 5-year option, at a base
monthly lease payment of the greater of $5.00 per square foot or 10% of the
tenant's gross sales.  Prior to September 1996, the Company leased to HGI a
different and smaller store on its property as a gift shop at a monthly rental
of $1,000.

    All future transactions with affiliates will be on terms no less favorable
than could be obtained from unaffiliated parties.  Any loans to officers,
affiliates and/or shareholders of the Company are subject to the approval by a
majority of the disinterested directors of the Company.


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

    (a)  EXHIBITS.

         3.1  Restated Articles of Incorporation of the Registrant.*

         3.2  Certificate of Amendment of Articles of Incorporation of the
              Registrant.**

         3.3  Bylaws of the Registrant.*

         4.1  Form of Warrant Agreement.*

         4.2  Indenture between Boardwalk Casino, Inc., Issuer and Shawmut
              Bank, N.A., Trustee for $40,000,000 16.5% First Mortgage Notes
              Due March 31, 2005, Dated as of April 7, 1995.*

         10.1 Outside Directors Stock Option Plan of Boardwalk Casino, Inc.**

         10.2 1994 Stock Compensation Plan of Boardwalk Casino, Inc.**

         10.3 Employment Agreement between Boardwalk Casino, Inc. and Norbert
              W. Jansen.**

         10.4 Employment Agreement between Boardwalk Casino, Inc. and Louis J.
              Sposato.**

         10.5 Employment Agreement between Boardwalk Casino, Inc. and Forrest
              J. Woodward, II.***

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<PAGE>

         10.6  Subscription Agreement between the Company and the Partners of
               VC, Ltd., Limited Partnership (the "VC Subscription Agreement").*

         10.7  Acquisition Agreement between the Company and Norbert W. Jansen
               (the "Jansen Acquisition Agreement").*

         10.8  Acquisition Agreement between the Company and Holiday Gifts, Inc.
               (the "HGI Acquisition Agreement").*

         10.9  Holiday Inns Franchising, Inc. License Agreement with the
               Company.*

         10.10 Purchase Agreement dated as of September 24, 1996, by and
               among Diversified, Jansen and the Company.

         10.11 Convertible Subordinated Note dated September 24, 1996,
               executed by the Company in favor of Diversified.

         10.12 Option and Proxy Agreement dated as of September 24, 1996,
               by and among Diversified, Jansen and the Company.

         10.13 Registration Agreement dated as of September 24, 1996, by
               and between Diversified and the Company.

         10.14 Lease Agreement effective as of October 1, 1996, by and
               between Jansen and the Company.

         23.1  Consent of Coopers & Lybrand L.L.P., independent public
               accountants, to the incorporation by reference in the
               Registration Statements on Form S-8 (file numbers 333-05019 and
               333-05021) of their report dated November 27, 1996, included in
               the Registrant's Report on Form 10-KSB for the fiscal year ended
               September 30, 1996.

         27.1  Financial Data Schedule.

    __________

     * - incorporated by reference to the Exhibits to the Registration
         Statement on Form SB-2 and Post Effective Amendments thereto,
         file number 33-71816-LA, declared effective February 11, 1994,
         June 29, 1995 and February 6, 1996.

    ** - incorporated by reference to the Report on Form 10-KSB for the fiscal
         year ended September 30, 1994, file number 1-12780.

   *** - incorporated by reference to the Report on Form 10-KSB for the
         fiscal year ended September 30, 1995, file number 1-12780.


    (b)  REPORTS ON FORM 8-K.  The Company did not file any reports on Form 8-K
         during the last quarter of the period covered by this report.

                                     54

<PAGE>

                                      SIGNATURES

    In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                       BOARDWALK CASINO, INC.
                                            Registrant


Date: 1/13/97                          By: /s/ FORREST J. WOODWARD
                                          -----------------------------------
                                          Forrest J. Woodward, President and
                                          Chief Operating Officer


    In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

    NAME                                    TITLE                       DATE
    ----                                    -----                       ----

DECEASED                          Chief Executive Officer and
-----------------------------     Chairman of the Board of Directors
Norbert W. Jansen

/s/ AVIS P. JANSEN                Vice President and Director          1/13/97
-----------------------------
Avis P. Jansen


/s/ LOUIS J. SPOSATO              Chief Financial Officer,             1/13/97
-----------------------------     Secretary, Treasurer and Director
Louis J. Sposato

/s/ JAMES SCIBELLI                Director                             1/13/97
-----------------------------
James Scibelli

/s/ KEVEN J. PICARDO              Director                             1/13/97
-----------------------------
Keven J. Picardo


/s/ JEFFREY P. JACOBS             Director                             1/13/97
-----------------------------
Jeffrey P. Jacobs

                                     55