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                                    FORM 10-Q/A


                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D. C. 20549
                            -----------------------


           [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                 For the quarterly period ended: March 31, 1996

                                       OR

         [  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


                         Commission file number 33-76368

                               BECKER GAMING, INC.
                              -------------------
             (Exact name of registrant as specified in its charter)

     Nevada                                                 88-0303849
     ------                                                 ----------
(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                         Identification No.)

740 S. Decatur
Las Vegas, Nevada                                           89107
-----------------                                           -----
(Address of principal                                    (Zip Code)
 executive offices)

                                 (702) 258-5200

              (Registrant's telephone number, including area code)

                                 Not Applicable
                                 --------------
             (Former name, former address and former fiscal year if
                           changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months,  and (2) has been subject to such filing  requirements
for the past 90 days.

     YES [X]                                        NO [ ]


Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

                                                  Outstanding at
Class of common stock                             April 30, 1996
---------------------                             --------------
  $.01 par value                                10,000,000 shares

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                      BECKER GAMING, INC. AND SUBSIDIARIES
                                    FORM 10-Q/A
                                      INDEX


PART I. FINANCIAL INFORMATION
Item 1.  Financial Statements (Unaudited)
                                                                           Page
BECKER GAMING, INC. AND SUBSIDIARIES

 Consolidated Balance Sheets as of March 31, 1996 and
  June 30, 1995 .........................................................    1
 Consolidated Statements of Operations and Retained Earnings
  (Deficit) for the Three-Month Periods Ended
  March 31, 1996 and 1995 and for the Nine-Month Periods
  Ended March 31, 1996 and 1995 .........................................    2
 Consolidated Statements of Cash Flows for the Nine-Month
  Periods Ended March 31, 1996 and 1995 .................................    3
 Notes to Consolidated Financial Statements .............................    4

ARIZONA CHARLIE'S, INC ..................................................
 Balance Sheets as of March 31, 1996 and June 30, 1995 ..................   10
 Statements of Operations and Retained Earnings (Deficit) for the
  Three-Month  Periods Ended March 31, 1996 and 1995 and for the
  Nine-Month Periods Ended March 31,
  1996 and 1995 .........................................................   11
 Statements of  Cash Flows for the Nine-Month Periods
  Ended March 31, 1996 and 1995 .........................................   12 
  Notes to Financial Statements .........................................   13

SUNSET COIN, INC ........................................................
 Balance Sheets as of March 31, 1996 and June 30, 1995 ..................   19
 Statements of Income and Retained Earnings for the Three-Month
  Periods Ended March 31, 1996 and 1995 and for the
  Nine-Month Periods Ended March 31, 1996 and 1995 ......................   20
 Statements of Cash Flows for the Nine-Month Periods Ended
  March 31, 1996 and 1995 ...............................................   21
 Notes to Financial Statements ..........................................   22

CAPITOL QUEEN & CASINO, INC .............................................
 Balance Sheets as of March 31, 1996 and June 30, 1995 ..................   28
 Statements of Loss Incurred During the Development Stage
  for the Three-Month Periods Ended March 31, 1996
  and 1995 and for the Nine-Month Periods Ended March 31, 1996
  and 1995 and for the period from January 20, 1993
  (the date of inception) through March 31, 1996 ........................   29
 Statements of Cash Flows for the for Nine-Month Periods Ended
  March 31, 1996 and 1995 and for the period from January 20,
  1993 (the date of inception) through March 31, 1996 ...................   30
 Notes to Financial Statements ..........................................   31



Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations
       
 Becker Gaming, Inc. ....................................................   37
 Arizona Charlie's, Inc. ................................................   37
 Sunset Coin, Inc. ......................................................   43
 Capitol Queen & Casino, Inc. ...........................................   46

Part II.  Other Information

 Item 1 Legal Proceedings ...............................................   48 
 Item 6 Exhibits and Reports on Form 8-K ................................   51

Signatures ..............................................................   52

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

                      BECKER GAMING, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                    (Dollars In Thousands, Except Share Data)

                                                March 31,     June 30,
ASSETS                                              1996        1995
                                                 --------    --------
                                                (Unaudited)
Current assets:
 Cash and cash equivalents ..................... $  8,197    $  6,657
 Restricted cash, in escrow account ............       40          40
 Trade and other accounts receivable ...........      639       1,088
 Receivables from related parties ..............      199          33
 Inventories ...................................      749         852
 Prepaid expenses ..............................    1,125       1,318
 Current portion of notes receivable ...........      196         233
                                                 --------    --------

   Total current assets ........................   11,145      10,221
                                                 --------    --------

Property and equipment:

 Land improvements .............................    1,628       1,628
 Building and improvements .....................   38,615      38,566
 Leasehold improvements ........................    1,098       1,098
 Furniture and equipment .......................   27,887      27,927
                                                 --------    --------
                                                   69,228      69,219

 Less, accumulated depreciation ................  (18,653)    (16,648)
                                                 --------    --------
                                                   50,575      52,571

 Land ..........................................      208         208
                                                 --------    --------
     Net property and equipment ................   50,783      52,779
                                                 --------    --------


Other assets:
 Assets held for sale ..........................   11,464      15,987
 Notes receivable, less current portion, net ...      510         502
 Receivables from related parties,
   less current portion ........................     --           165
 Deposits and other ............................    1,348       1,411
 Financing costs, net ..........................    3,204       3,721

                                                  --------    --------
     Total other assets ........................   16,526      21,786
                                                 --------    --------

     Total assets .............................. $ 78,454    $ 84,786
                                                 ========    ========


                                                  March 31,      June 30,
LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)       1996           1995
                                                ------------  -------------
                                                 (Unaudited)
Current liabilities:
 Trade accounts payable ......................... $  1,959    $  2,028
 Accrued expenses ...............................    6,927       3,674
 Notes payable ..................................      196         121
 Current portion of subordinated notes
   payable to stockholders ......................      800         800
 Current portion of long term debt ..............      389         356
 Long-term debt classified as current,
   net of unamortized original issue discount
   of $2,481 and $2,882, respectively ...........   17,519      17,118

 Current portion of obligations under
   capital leases ...............................      852         865
                                                  --------    --------
     Total current liabilities ..................   28,642      24,962
                                                  --------    --------

Long-term debt, less current portion ............   56,428      56,593
Subordinated notes payable to stockholders,
  less current portion ..........................    8,000       8,000

Obligations under capital leases,
  less current portion ..........................    1,295       2,001
                                                  --------    --------


    Total liabilities ...........................   94,365      91,556
                                                  --------    --------
Commitments and contingencies

Stockholders' equity(deficit):

 Common stock, $.01 par value, 20,000,000
   shares authorized, 10,000,000 shares
   issued and outstanding .......................      100         100
 Preferred stock, $1 par value, 5,000,000
   shares authorized, none issued and
   outstanding ..................................     --          --
 Additional paid-in capital .....................    9,006       9,006
 Retained earnings (deficit) ....................  (25,017)    (15,876)
                                                  --------    --------


     Total stockholders' equity (deficit) .......  (15,911)     (6,770)
                                                  --------    --------

     Total liabilities and
     stockholders' equity(deficit) .............. $ 78,454    $ 84,786
                                                   ========    ========

The accompany notes are an intergral part of these financial statements.
================================================================================

                      BECKER GAMING, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                         AND RETAINED EARNINGS (DEFICIT)
                  (Dollars In Thousands, Except Per Share Data)
                                   (Unaudited)

                                                    Three Months Ended March 31,
                                                           1996            1995 
                                                   ------------    ------------
Revenues:
  Gaming ........................................  $     15,831    $     15,236
  Food and beverage .............................         4,665           3,881
  Hotel .........................................           844             733
  Gift shop .....................................           150             150
  Other .........................................           359             337
                                                   ------------    ------------
   Gross revenues ...............................        21,849          20,337
Less, promotional allowances ....................        (2,468)         (1,890)
                                                   ------------    ------------
   Net revenues .................................        19,381          18,447
Operating expenses:
  Gaming ........................................         3,947           3,892
  Food and beverage .............................         5,507           4,751
  Hotel .........................................           428             401
  Gift shop .....................................           119             113
  Advertising and promotion .....................         1,120           1,070
  General and administrative ....................         5,102           5,487
  Rent expense paid to related party ............           103              94
  Depreciation and amortization .................         1,120           1,302
                                                   ------------    ------------
    Total operating expenses ....................        17,446          17,110
                                                   ------------    ------------
    Operating income ............................         1,935           1,337
                                                   ------------    ------------
Other income(expenses):
  Development costs and abandonment losses.......         4,275)           (138)
  Interest income ...............................            29             130
  Interest expense ..............................        (2,722)         (2,698)
  Interest capitalized ..........................          --              --   
  Other, net ....................................            12               1
                                                   ------------    ------------
    Total other income (expense) ................        (6,956)         (2,705)
                                                   ------------    ------------
    Loss before income taxes ....................        (5,021)         (1,368)
Provision for income taxes ......................          --              --   
                                                   ------------    ------------
    Net loss ....................................        (5,021)         (1,368)
Extraordinary item:
    Loss on early retirement of debt
     (no income tax benefit available) ..........          --            (4,089)
                                                   ------------    ------------
    Net income (loss) ...........................        (5,021)         (5,457)
    Retained earnings (deficit),
      beginning of period .......................       (19,996)         (8,751)
                                                   ------------    ------------

    Retained earnings (deficit), end of period ..  $    (25,017)   $    (14,208)
                                                   ============    ============
    Net loss per share of common stock ..........  $      (0.50)   $      (0.55)
                                                   ============    ============
    Weighted average common shares outstanding ..    10,000,000      10,000,000
                                                   ============    ============




                                                   Nine Months Ended March 31,
                                                        1996            1995 
                                                  ------------    ------------
Revenues:
  Gaming .......................................  $     47,212    $     40,435
  Food and beverage ............................        13,486          10,444
  Hotel ........................................         2,337           1,879
  Gift shop ....................................           457             414
  Other ........................................           907             630
                                                  ------------    ------------
   Gross revenues ..............................        64,399          53,802
Less, promotional allowances ...................        (6,936)         (4,538)
                                                  ------------    ------------
   Net revenues ................................        57,463          49,264
Operating expenses:
  Gaming .......................................        12,861          10,364
  Food and beverage ............................        16,143          12,896
  Hotel ........................................         1,243           1,128
  Gift shop ....................................           353             324
  Advertising and promotion ....................         3,482           3,021
  General and administrative ...................        15,824          15,012
  Rent expense paid to related party ...........           310             287
  Depreciation and amortization ................         3,382           4,032
                                                  ------------    ------------
    Total operating expenses ...................        53,598          47,064
                                                  ------------    ------------
    Operating income ...........................         3,865           2,200
                                                  ------------    ------------
Other income(expenses):
  Development costs ............................        (5,143)           (736)
  Interest income ..............................            59           1,102
  Interest expense .............................        (7,968)         (9,221)
  Interest capitalized .........................          --               676
  Other, net ...................................            46               7
                                                  ------------    ------------
    Total other income (expense) ...............       (13,006)         (8,172)
                                                  ------------    ------------
    Loss before income taxes ...................        (9,141)         (5,972)
Provision for income taxes .....................          --              --   
                                                  ------------    ------------
    Net loss ...................................        (9,141)         (5,972)
Extraordinary item:
    Loss on early retirement of debt
     (no income tax benefit available) .........          --            (4,089)
                                                  ------------    ------------
    Net income (loss) ..........................        (9,141)        (10,061)
    Retained earnings (deficit),
      beginning of period ......................       (15,876)         (4,147)
                                                  ------------    ------------

    Retained earnings (deficit), end of period .  $    (25,017)   $    (14,208)
                                                  ============    ============
    Net loss per share of common stock .........  $      (0.91)   $      (1.01)
                                                  ============    ============
    Weighted average common shares outstanding .    10,000,000      10,000,000
                                                  ============    ============


The accompany notes are an intergral part of these financial statements.
================================================================================

                      BECKER GAMING, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars In Thousands)
                                   (Unaudited)

                                                     Nine Months Ended March 31,
                                                              1996        1995
                                                          --------    --------
Cash flows from operating activities:
 Net loss ..............................................  $ (9,141)   $(10,061)
Adjustments to reconcile net loss to net cash
  (used in) provided by operating activities:
  Depreciation and amortization ........................     3,382       3,336
  Amortization of original issue discount ..............       401         696
  Abandonment loss .....................................     4,080        -- 
  Extraordinary loss on retirement of debt .............      --         4,089
  Net loss (gain) on sale of assets ....................        17          10
(Increase) decrease in operating assets:
  Receivables ..........................................       449        (562)
  Receivables from related parties .....................      --           134
  Inventories ..........................................       103        (201)
  Prepaid expenses .....................................       193         (40)
  Deposits and other assets ............................        63        (158)
Increase (decrease) in operating liabilities:
  Accounts payable .....................................        69         183
  Accrued expenses .....................................     3,253       1,985
                                                          --------    --------
   Total adjustments ...................................    12,010       9,472
                                                          --------    --------
  Net cash provided by (used in) operating activities ..     2,869        (589)
                                                          --------    --------

Cash flows from investing activities:
 Capital expenditures ..................................      (613)    (26,408)
 Proceeds from sale of equipment .......................        35          14
 Net reductions in restricted cash equivalents .........      --        49,080
 Issuance of notes receivable ..........................      --           147
 Payments of notes receivable ..........................        29        --
 Increase in deposits and other assets .................      --            12
                                                          --------    --------
  Net cash provided by (used in) investing activities ..      (549)     22,845
                                                          --------    --------

Cash flows from financing activities:
 Proceeds from notes payable ...........................       232         586
 Payments under notes payable ..........................      (293)    (20,535)
 Payments under capital lease obligations ..............      (719)       (775)
                                                          --------    --------
  Net cash used in financing activities ................      (780)    (20,724)
                                                          --------    --------
  Net increase in cash and cash equivalents ............     1,540       1,532
Cash and cash equivalents, beginning of period .........     6,657       6,455
                                                          --------    --------
Cash and cash equivalents, end of period ...............  $  8,197    $  7,987
                                                          ========    ========

Supplemental cash flow disclosures:

 Interest paid, net of amount capitalized ..............  $  5,909    $  7,241
                                                          ========    ========

 Income taxes paid .....................................        $-    $    346
                                                          ========    ========

  Capitalized lease obligations incurred ...............        $-    $      9
                                                          ========    ========

The accompany notes are an intergral part of these financial statements.
================================================================================

                      BECKER GAMING, INC. AND SUBSIDIARIES

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


1)       Basis of Presentation:

         The accompanying  consolidated  financial  statements of Becker Gaming,
Inc. and  subsidiaries  ("BGI" or the  "Company")  are  unaudited  and have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-Q and Article 10 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements.  In the opinion of management,  all adjustments and normal
recurring  accruals  considered  necessary  for a fair  presentation  have  been
included. Operating results for the three and nine-month periods ended March 31,
1996 are not necessarily  indicative of the results that may be expected for the
year ended June 30, 1996.  The  accompanying  unaudited  consolidated  financial
statements  and  footnotes  should  be read in  conjunction  with the  financial
statements  included in the  Company's  annual  report on Form 10-K for the year
ended June 30, 1995.

2)       Denial of Missouri Gaming License Application of Capitol Queen & 
         Casino, Inc.:

         Sunset  Coin,  Inc.  ("SC"),  a wholly  owned  subsidiary  of BGI,  has
guarantied  the 12% First  Mortgage  Notes due  November  15,  2000,  of Arizona
Charlie's,  Inc. ("AC"), another wholly owned subsidiary of BGI, until such time
as AC completes an  expansion of its casino  facilities  (which it has done) and
obtains a specified  fixed charge  coverage  ratio,  as defined in the indenture
governing  the AC First  Mortgage  Notes  (the "AC  Notes").  AC,  in turn,  has
guarantied the 12% First Mortgage Notes (the "CQC Notes") due November 15, 2000,
of Capitol Queen & Casino, Inc. ("CQC"), another wholly owned subsidiary of BGI,
until such time as CQC is licensed to conduct gaming in Missouri.

         CQC was  formed to  develop,  own,  and  operate  the  "Capitol  Queen"
riverboat  casino in Jefferson  City,  Missouri.  On September 28, 1994, CQC was
notified that its  application for a gaming license was rejected by the Missouri
Gaming  Commission (the  "Commission").  Under the Commission's  order, CQC, its
principal owners and affiliated companies cannot reapply for a gaming license in
Missouri prior to September 28, 1996.

     The Commission's decision was based on an August 1994 recommendation of its
staff  (the  "Staff")  that  CQC's  license  application  be denied  without  an
investigative   review  because  CQC  knowingly  failed  to  disclose  material,
substantive information in the application. The Commission did not find that CQC
knowingly  failed to  disclose  information,  but did find that the  application
contained  omissions of a  substantive  and material  nature.  Management of CQC
believes that its application was complete and accurate. Moreover, CQC has fully
disclosed the information cited by the Staff in post-application  filings, other
public  documents,  and  communications  with the Staff, all of which management
considers to be part of the licensing and related investigative  process.  Based
on the advice of legal counsel,  CQC believes that the Commission  acted outside
its authority in rejecting the application without a formal investigation.

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

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

     On June 26, 1995, the Circuit Court issued a peremptory (permanent) writ of
mandamus similar to the preliminary writ,  declaring the Commission's order void
and  ordering  the  Commission  to  proceed  with  an   investigation  of  CQC's
application  "with all  deliberate  speed."  On July 21,  1995,  the  Commission
appealed the Circuit  Court's  decision to the Missouri Court of Appeals for the
Western District, and on April 30, 1996, a three-judge panel of that Court ruled
that  mandamus  was not the proper  vehicle  for  challenging  the  Commission's
decision.  The Court of Appeals ruled that CQC may obtain  judicial  review only
after an  administrative  proceeding.  The Court of Appeals  also ruled that the
Commission could deny a license without  conducting an  investigation,  and that
the claim that the  Commission  broke its promise not to deny a license  without
first  investigating  should be raised in a breach  of  contract  action,  not a
mandamus petition.  The Court of Appeals did not address the merits; that is, it
did not decide whether the Commission acted  arbitrarily or whether its decision
was  justified  or a breach  of its  promises.  The  decision  has no  immediate
consequence  because of a Circuit Court's ruling in a separate action (discussed
below) voiding the Commission's  decision for the independent reason that it was
made in violation of Missouri's open meeting law. The Court of Appeals' decision
has no  effect  on that  ruling,  so the  Commission's  decision  remains  void.
Nevertheless,  an appeal to the  entire  nine-judge  Court of  Appeals or to the
Missouri Supreme Court is being considered.

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

     On March 24, 1995,  CQC filed an action  against the Commission in the Cole
County,  Missouri,  Circuit  Court,  alleging that the  Commission  had violated
Missouri's  open meeting law by  deliberating in a closed session before issuing
its decision denying CQC's license.  The petition requested an order voiding the
Commission's  decision.  On March 27, as a protective  measure against  possible
arguments  that Cole County is not the proper venue,  CQC filed a  substantively
identical action in the St. Louis County Circuit Court. In April, the Commission
filed answers to both  complaints  denying that it had violated the open meeting
law. On June 1, CQC moved for summary  judgment in the Cole County case.  In its
response,  the  Commission  stated  that  it "did  not  deliberately  intend  to
circumvent"  the open meeting law but had deliberated in closed session based on
erroneous advice of counsel. The Commission argued that the closed session could
nevertheless be justified under statutory  exceptions  allowing agencies to meet
privately with their lawyers to discuss confidential information and litigation.
The Circuit Court heard the motion for summary judgment on December 19, 1995. In
an order issued on April 23, 1996,  the Circuit Court granted the motion,  ruled
that the  Commission  had  violated  the open  meeting  law,  and  declared  the
Commission's order void.

         In January 1995, CQC engaged in settlement discussions initiated by the
Missouri  Attorney  General's  office,  legal counsel for the  Commission,  with
respect to the civil matters  involving the Commission.  The discussions,  which
terminated  in March  1995,  were  resumed in August  1995 and were  expanded to
include the misdemeanor  charges filed by the Missouri Attorney  General.  While
CQC and its lawyers  continue to seek a  negotiated  settlement  to the disputes
with the  Commission  and the  Attorney  General,  the  discussions  were  again
terminated by the Attorney General's office.

         At the time CQC was notified of the Staff's  position,  construction of
the riverboat  contemplated  under the project being developed by CQC was almost
completed.  CQC had also  obtained  the  necessary  permits  for the  land-based
development  portion of the project and had performed certain dredging and other
site  preparation  work.  In August 1994,  CQC  suspended  all further land site
development   activity   pending   resolution  of  the  review  of  its  license
application.  Management of CQC believes that the Commission's subsequent ruling
in September 1994 makes further development of the project unfeasible because of
significant  delays in the  ability  to operate  the  riverboat  casino,  either
through appeal of the decision or expiration of the two-year probation period.
Accordingly, on September 29,
1994,  management  decided to suspend  further  development of the Capitol Queen
project. As a result of that decision,  costs associated with the development of
the  project  which  had  been  deferred  during  the  development   stage  were
written-off  in the fourth  quarter of the fiscal year ended June 30, 1994,  and
the land site and riverboat were written down to their  estimated net realizable
value.

         Prior to its  suspension,  CQC had financed the Capitol  Queen  project
through  the  issuance  of  $40,000,000  in  principal  amount  of the 12% First
Mortgage  Notes due November 15, 2000. As of January 1, 1995,  the CQC Indenture
was amended to (i) eliminate CQC's  obligation to construct and open the Capitol
Queen and (ii) permit a two-step  purchase of the CQC Notes at 101% of principal
plus  accrued  and unpaid  interest  from a sale of assets.  The  repurchase  of
$20,000,000  principal amount of the CQC Notes (plus accrued and unpaid interest
thereon) was completed on January 17, 1995,  with funds from the project  escrow
account,  and an  aggregate  of  $20,000,000  principal  amount of the CQC Notes
remained outstanding. However, the dates by which CQC previously agreed with the
holders of the CQC Notes to effect the sale of its  assets  and  repurchase  the
remaining  CQC Notes  have  passed.  The CQC Notes  outstanding  require  annual
interest payments of $2,400,000,  payable in equal installments semi-annually on
May 15 and November 15. CQC was not able to make its scheduled  interest payment
of  $1,200,000  on November 15,  1995,  and AC did not have  available  funds to
advance on behalf of CQC. In  addition,  under the terms of the AC Notes,  AC is
required to offer to repurchase  up to $5,500,000 in principal  amount of the AC
Notes if AC's tangible net worth falls below certain limits.  At March 31, 1996,
AC had a stockholders'  deficiency and was subject to this requirement.  AC does
not have sufficient  financial resources to meet this requirement in addition to
its  guarantee  obligation  with to CQC.  Management of AC and CQC are currently
undergoing  discussions with an informal  committee  representing the holders of
the AC Notes and CQC Notes regarding a proposed  restructuring plan. However, an
agreement has not yet been reached.

         CQC had entered into an Asset Purchase  Agreement dated April 10, 1995,
for the sale of its assets to Aerie  Riverboat  Casinos of Missouri,  Inc., at a
purchase price of $18,000,000.  However,  the consummation of the Aerie purchase
agreement was subject to the satisfaction of several  conditions which could not
be satisfied timely, including, among others, that Jefferson City consent to the
assignment  of the  Development  Agreement,  that  Aerie  be  found  preliminary
suitable to hold a Missouri Gaming license and that riverboat  gaming is legally
permitted  in  Jefferson  City.  As a  result,  the  agreement  with  Aerie  was
terminated  without  penalty  when the  expiration  date of December  31,  1995,
passed.   CQC  is  currently  pursuing  offers  on  its  riverboat  assets  from
prospective buyers.

     On  November  7, 1995,  voters in  Jefferson  City  rejected  an  ordinance
permitting  riverboat  gambling,  reversing  the vote of an earlier  election in
which  Jefferson  City  voters  approved  riverboat   gambling.   Because  CQC's
Development  Agreement  with  Jefferson  City was entered  into  pursuant to the
earlier ordinance permitting riverboat gambling,  the Company believes that as a
matter of law the 1995 election does not affect the validity of the  Development
Agreement.  However,  it has not yet been determined whether Jefferson City will
honor the Agreement in light of the election without  litigation to uphold CQC's
position.  CQC is  exploring  its  legal  options  in the event  Jefferson  City
declines to honor the Development Agreement, but has not reached any decision. A
final  judicial  determination  that the 1995  vote  abrogates  the  Development
Agreement  would have a material  adverse  effect on CQC and its ability to sell
its assets.

         CQC is not expected to generate  sufficient  funds  through the sale of
its assets to repurchase all of the outstanding  CQC Notes.  AC, pursuant to its
guaranty of the CQC Notes, will be liable for the principal of, and interest on,
any remaining  outstanding CQC Notes. AC is restricted from selling assets under
the covenants  governing the AC Notes,  and  management  believes that access to
additional  capital  from  other  sources  is  restricted  as a  result  of  the
above-described circumstances.  As a result, management does not believe that AC
(nor SC, as  guarantor  of the AC Notes)  would  have  sufficient  resources  to
satisfy such obligation, should it be necessary.


3)       Assets Held For Sale:

         At  March  31,  1996,  BGI had  $15,544,000  of  assets  held  for sale
consisting of riverboat  assets of $11,834,000 and aviation assets of $3,710,000
 . The Company  intends to sell the aviation  asset,  the proceeds from which are
expected to be sufficient to extinguish the existing  capital lease  obligations
relating thereto.


4)       Abandonment Losses:

     BGI's subsidiary, Capitol Queen & Casino, Inc. ("CQC"), had contracted with
a shipbuilder  to construct the Capitol Queen  riverboat.  The total cost of the
riverboat was  $11,892,000,  including  construction  period  interest and other
assets. During the fiscal quarter ending March 31, 1996 (as restated),  based on
deteriorating  market  conditions,  CQC  recognized  a loss  of  $4,392,000  and
wrote-down  the carrying value of the  riverboat's  to $7,500,000.  Such revised
carrying value represents  management's best estimate of the riverboat's current
net  realizable  value  in a cash  sale,  based  on  information  obtained  from
shipbuilders,  marine  brokers,  and purchase  offers made to the CQC from third
parties.

     BGI's subsidiary,  Becker Gaming Group ("BGG"),  abandoned one of their bar
and  restaurants  due to  the  cancellation  of the  lease  that  was no  longer
affordable to the company. On April 21, 1996, Charlie's Saloon and Gambling Hall
was  closed  to the  public.  BGG and SC,  who  owned  all the  initial  opening
leasehold  improvements and furniture fixtures and equipment will each write-off
in the  fourth  quarter of the fiscal  year  ended June 30,  1996  approximately
$100,000 to reflect the disposal of assets which were not salvageable.


================================================================================
                             ARIZONA CHARLIE'S, INC.
               (A Wholly Owned Subsidiary Of Becker Gaming, Inc.)
                                 BALANCE SHEETS
                  (Dollars In Thousands Except Per Share Data)
                                  

                                                       March 31,     June 30,
                                                         1996          1995
                                                         ----          ----
                                                      (unaudited)   
                            ASSETS                               
                                                     
Current assets:
 Cash and cash equivalents ...........................   $  6,292    $  5,404
 Restricted cash, in escrow account ..................         10          10
 Trade and other accounts receivable .................        408         658
 Management fee receivable - Becker Gaming Inc. ......      1,454        --
 Receivable from related parties .....................      2,270         820
 Notes receivable from related party .................      4,416       4,416
 Inventories .........................................        583         661
 Prepaid expenses ....................................      1,025       1,162
                                                         --------    --------
   Total current assets ..............................     16,458      13,131
                                                         --------    --------

Property and equipment:
 Building and improvements ...........................     37,486      37,485
 Furniture and equipment .............................     22,525      22,609
 Land improvements ...................................      1,628       1,628
                                                         --------    --------
                                                           61,639      61,722
 Less, accumulated depreciation ......................    (15,491)    (13,572)
                                                         --------    --------


                                                           46,148      48,150
 Land ................................................        208         208
                                                         --------    --------
   Net property and equipment ........................     46,356      48,358
                                                         --------    --------
Other assets:
 Receivable from related party, noncurrent ...........        240
 Deposits and other ..................................        466         551
 Financing costs, less accumulated amortization
   of $1,294 at March 31, 1996 and $880 June 30, 1995       2,579       2,993
                                                         --------    --------

     Total other assets ..............................      3,045       3,784
                                                         --------    --------

     Total assets ....................................   $ 65,859    $ 65,273
                                                         ========    ========


                                                          March 31,    June 30,
                                                              1996        1995
                                                          --------    --------
                                                         (unaudited)

      LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)

Current liabilities:
  Trade accounts payable .............................   $  1,512    $  1,449
  Accounts payable to related parties ................          3           3
  Accrued expenses ...................................      4,439       3,097
  Management fees due Becker Gaming, Inc. ............      5,961       3,287
  Notes payable ......................................                196 121
  Notes payable to related party .....................      2,250       2,250
  Current portion of obligations
    under capital leases .............................          3           4
                                                         --------    --------
        Total current liabilities ....................     14,364      10,211
                                                         --------    --------

Long-term debt, less current portion .................     55,000      55,000
Subordinated notes payable to prior

  stockholders .......................................      5,000       5,000
Obligations under capital leases,

  less current portion ...............................          1           4
                                                         --------    --------

      Total liabilities ..............................     74,365      70,215
                                                         --------    --------

Commitments and contingencies

Stockholder's equity (deficit):
  Common stock, no par value, 2,500
    shares authorized, 1,000 shares
    issued and outstanding ...........................        469         469
  Retained earnings (deficit) ........................     (8,975)     (5,411)
                                                         --------    --------

      Total stockholder's equity (deficit) ...........     (8,506)     (4,942)
                                                         --------    --------

      Total liabilities and
      stockholder's equity (deficit) .................   $ 65,859    $ 65,273
                                                          ========    ========

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

                             ARIZONA CHARLIE'S, INC.
               (A Wholly Owned Subsidiary Of Becker Gaming, Inc.)

            STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
                             (Dollars In Thousands)
                                   (unaudited)


                                                   Three Months Ended March 31,
                                                          1996        1995 
                                                      --------    --------
Revenues:
  Gaming ..........................................   $ 13,454    $ 13,049
  Food and beverage ...............................      3,436       2,980
  Hotel ...........................................        844         733
  Gift shop .......................................        150         150
  Management fee from affiliates ..................        729        --
  Other ...........................................        338         320
                                                      --------    --------

      Gross revenues ..............................     18,951      17,232

Less, promotional allowances ......................     (2,033)     (1,569)
                                                      --------    --------

      Net revenues ................................     16,918      15,663
                                                      --------    --------

Operating expenses:
  Gaming ..........................................      3,445       3,313
  Food and beverage ...............................      4,164       3,732
  Hotel ...........................................        428         401
  Gift shop .......................................        119         113
  Advertising and promotion .......................      1,097       1,051
  General and administrative ......................      4,423       4,115
  Management fee - Becker Gaming, Inc. ............        912         859
  Rent expense paid to related party ..............         54          46
  Depreciation and amortization ...................        889         888
                                                      --------    --------

      Total operating expenses ....................     15,531      14,518
                                                      --------    --------
      Operating income ............................      1,387       1,145
                                                      --------    --------

Other income (expenses):
  Gain(Loss) on sale of assets ....................       --   
  Interest income .................................         74          95
  Interest expense ................................     (1,808)     (1,790)
  Interest capitalized ............................       --          --   
  Other, net ......................................         16        --   
                                                      --------    --------

      Total other expenses ........................     (1,718)     (1,695)
                                                      --------    --------
      Income (loss) before taxes ..................       (931)       (550)
Provision for income tax ..........................       --          --   
                                                      --------    --------
       Net (loss)income ...........................       (331)       (550)

Retained earnings (deficit), beginning of period ..     (8,644)     (2,314)
                                                      --------    --------

Retained earnings (deficit), end of period ........    ($8,975)   ($ 2,864)
                                                       ========    ========


                                                    Nine Months Ended March 31,
                                                          1996        1995 
                                                       --------    --------
Revenues:
  Gaming ...........................................   $ 39,988    $ 33,659
  Food and beverage ................................      9,807       7,664
  Hotel ............................................      2,337       1,879
  Gift shop ........................................        457         414
  Management fee from affiliates ...................       --         1,454
  Other ............................................        852         582
                                                       --------    --------

      Gross revenues ...............................     54,895      44,198

Less, promotional allowances .......................     (5,647)     (3,575)
                                                       --------    --------

      Net revenues .................................     49,248      40,623
                                                       --------    --------

Operating expenses:
  Gaming ...........................................     11,092       8,865
  Food and beverage ................................     12,054       9,815
  Hotel ............................................      1,243       1,128
  Gift shop ........................................        353         324
  Advertising and promotion ........................      3,392       2,941
  General and administrative .......................     14,147      10,812
  Management fee - Becker Gaming, Inc. .............      2,674       2,201
  Rent expense paid to related party ...............        164         139
  Depreciation and amortization ....................      2,668       2,525
                                                       --------    --------

      Total operating expenses .....................     47,787      38,750
                                                       --------    --------
      Operating income .............................      1,461       1,873
                                                       --------    --------

Other income (expenses):
  Gain(Loss) on sale of assets .....................        (10)       --   
  Interest income ..................................        218         490
  Interest expense .................................     (5,283)     (5,428)
  Interest capitalized .............................       --           676
  Other, net .......................................         50        --   
                                                       --------    --------

      Total other expenses .........................     (5,025)     (4,262)
                                                       --------    --------
      Income (loss) before taxes ...................     (3,564)     (2,389)
Provision for income tax ...........................       --          --   
                                                       --------    --------
       Net (loss)income ............................     (3,564)     (2,389)

Retained earnings (deficit), beginning of period ...     (5,411)       (475)
                                                       --------    --------

Retained earnings (deficit), end of period .........    ($8,975)   ($ 2,864)
                                                        ========    ========

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

                             ARIZONA CHARLIE'S, INC.
               (A Wholly Owned Subsidiary Of Becker Gaming, Inc.)
                            STATEMENTS OF CASH FLOWS
                             (Dollars In Thousands)
                                   (Unaudited)

                                                    Nine Months Ended March 31,
                                                         1996        1995
                                                      --------    --------
Cash flows from operating activities:
  Net income (loss) ................................. ($ 3,564)   ($ 2,389)
Adjustments to reconcile net income (loss)
  to net cash provided by operating activities:
  Depreciation and amortization .....................    2,668       2,525
  Provision for losses on related party receivables .    1,239        --
  (Gain) loss on sale of equipment ..................       11          (2)
(Increase) decrease in operating assets:
  Receivables .......................................   (2,203)        543
  Inventories .......................................       78        (134)
  Prepaid expenses ..................................      137         (79)
  Deposits and other ................................       85         (30)
Increase (decrease) in operating liabilities:
  Accounts payable ..................................       63        (216)
  Accrued expenses ..................................    1,342       2,201
  Management fees due to Becker Gaming, Inc. ........    2,674       1,967
                                                      --------    --------

     Total adjustments ..............................    6,094       6,775
                                                      --------    --------

      Net cash provided by operating activities .....    2,530       4,386
                                                      --------    --------

Cash flows from investing activities:
  Capital expenditures ..............................     (271)    (23,870)
  Increase in receivable from Becker Gaming, Inc. ...     --        (4,147)
  Increase in  management fee receivable
     from Becker Gaming, Inc. .......................   (1,454)       --
  Net (additions to) reductions in restricted
     cash equivalents ...............................     --        24,182
  Proceeds from assets sales ........................       12        --
                                                      --------    --------

       Net cash used in investing activities ........   (1,713)     (3,835)
                                                      --------    --------

Cash flows from financing activities:
    Proceeds from borrowing under notes payable .....       75       1,000
    Principal payments on notes payable .............     --          (140)
    Payments under capital lease obligations ........       (4)        (19)
                                                      --------    --------

       Net cash provided by financing activities ....       71         841
                                                      --------    --------

       Net increase in cash and cash equivalents ....      888       1,392

Cash and cash equivalents, beginning of the period ..    5,404       4,014
                                                      --------    --------

Cash and cash equivalents, end of the period ........ $  6,292    $  5,406
                                                      ========    ========

Supplemental cash flow disclosures:
    Interest paid, net of amount capitalized ........ $  5,282    $  3,685
                                                      ========    ========
    Income taxes paid ............................... $   --      $    136
                                                      ========    ========
    Capital lease obligations incurred .............. $   --      $      9
                                                      ========    ========


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

                             ARIZONA CHARLIE'S, INC.
               (A wholly owned subsidiary of Becker Gaming, Inc.)

                          NOTES TO FINANCIAL STATEMENTS
                                 ---------------
                                      
1)       Basis of Presentation:

         Arizona  Charlie's,  Inc. ("AC") is a wholly owned subsidiary of Becker
Gaming, Inc. ("BGI"). The accompanying  financial statements of AC are unaudited
and  have  been  prepared  in  accordance  with  generally  accepted  accounting
principles for interim  financial  information and with the instructions to Form
10-Q and Article 10 of Regulation S-X.  Accordingly,  they do not include all of
the  information  and  footnotes  required  by  generally  accepted   accounting
principles for complete financial statements. In the opinion of management,  all
adjustments  and  normal  recurring  accruals  considered  necessary  for a fair
presentation have been included.  Operating results for the three and nine-month
periods ended March 31, 1996 are not necessarily  indicative of the results that
may be expected for the year ended June 30,  1996.  The  accompanying  unaudited
financial  statements  and  footnotes  should  be read in  conjunction  with the
financial  statements  included in the Company's  annual report on Form 10-K for
the year ended June 30, 1995.

2)       Denial of Missouri Gaming License Application of Capitol Queen & 
         Casino, Inc.:

         Sunset  Coin,  Inc.  ("SC"),  a wholly  owned  subsidiary  of BGI,  has
guarantied  the 12% First Mortgage Notes due November 15, 2000, of AC until such
time as AC completes an expansion of its casino  facilities  (which it has done)
and obtains a specified fixed charge coverage ratio, as defined in the indenture
governing  the AC First  Mortgage  Notes  (the "AC  Notes").  AC,  in turn,  has
guarantied the 12% First Mortgage Notes (the "CQC Notes") due November 15, 2000,
of Capitol Queen & Casino, Inc. ("CQC"), another wholly owned subsidiary of BGI,
until such time as CQC is licensed to conduct gaming in Missouri.

         CQC was  formed to  develop,  own,  and  operate  the  "Capitol  Queen"
riverboat  casino in Jefferson  City,  Missouri.  On September 28, 1994, CQC was
notified that its  application for a gaming license was rejected by the Missouri
Gaming  Commission (the  "Commission").  Under the Commission's  order, CQC, its
principal owners and affiliated companies cannot reapply for a gaming license in
Missouri prior to September 28, 1996.

     The Commission's decision was based on an August 1994 recommendation of its
staff  (the  "Staff")  that  CQC's  license  application  be denied  without  an
investigative   review  because  CQC  knowingly  failed  to  disclose  material,
substantive information in the application. The Commission did not find that CQC
knowingly  failed to  disclose  information,  but did find that the  application
contained  omissions of a  substantive  and material  nature.  Management of CQC
believes that its application was complete and accurate. Moreover, CQC has fully
disclosed the information cited by the Staff in post-application  filings, other
public  documents,  and  communications  with the Staff, all of which management
considers to be part of the licensing and related investigative  process.  Based
on the advice of legal counsel,  CQC believes that the Commission  acted outside
its authority in rejecting the application without a formal investigation.

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

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

     On June 26, 1995, the Circuit Court issued a peremptory (permanent) writ of
mandamus similar to the preliminary writ,  declaring the Commission's order void
and  ordering  the  Commission  to  proceed  with  an   investigation  of  CQC's
application  "with all  deliberate  speed."  On July 21,  1995,  the  Commission
appealed the Circuit  Court's  decision to the Missouri Court of Appeals for the
Western District, and on April 30, 1996, a three-judge panel of that Court ruled
that  mandamus  was not the proper  vehicle  for  challenging  the  Commission's
decision.  The Court of Appeals ruled that CQC may obtain  judicial  review only
after an  administrative  proceeding.  The Court of Appeals  also ruled that the
Commission could deny a license without  conducting an  investigation,  and that
the claim that the  Commission  broke its promise not to deny a license  without
first  investigating  should be raised in a breach  of  contract  action,  not a
mandamus petition.  The Court of Appeals did not address the merits; that is, it
did not decide whether the Commission acted  arbitrarily or whether its decision
was  justified  or a breach  of its  promises.  The  decision  has no  immediate
consequence  because of a Circuit Court's ruling in a separate action (discussed
below) voiding the Commission's  decision for the independent reason that it was
made in violation of Missouri's open meeting law. The Court of Appeals' decision
has no  effect  on that  ruling,  so the  Commission's  decision  remains  void.
Nevertheless,  an appeal to the  entire  nine-judge  Court of  Appeals or to the
Missouri Supreme Court is being considered.

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

     On March 24, 1995,  CQC filed an action  against the Commission in the Cole
County,  Missouri,  Circuit  Court,  alleging that the  Commission  had violated
Missouri's  open meeting law by  deliberating in a closed session before issuing
its decision denying CQC's license.  The petition requested an order voiding the
Commission's  decision.  On March 27, as a protective  measure against  possible
arguments  that Cole County is not the proper venue,  CQC filed a  substantively
identical action in the St. Louis County Circuit Court. In April, the Commission
filed answers to both  complaints  denying that it had violated the open meeting
law. On June 1, CQC moved for summary  judgment in the Cole County case.  In its
response,  the  Commission  stated  that  it "did  not  deliberately  intend  to
circumvent"  the open meeting law but had deliberated in closed session based on
erroneous advice of counsel. The Commission argued that the closed session could
nevertheless be justified under statutory  exceptions  allowing agencies to meet
privately with their lawyers to discuss confidential information and litigation.
The Circuit Court heard the motion for summary judgment on December 19, 1995. In
an order issued on April 23, 1996,  the Circuit Court granted the motion,  ruled
that the  Commission  had  violated  the open  meeting  law,  and  declared  the
Commission's order void.

         In January 1995, CQC engaged in settlement discussions initiated by the
Missouri  Attorney  General's  office,  legal counsel for the  Commission,  with
respect to the civil matters  involving the Commission.  The discussions,  which
terminated  in March  1995,  were  resumed in August  1995 and were  expanded to
include the misdemeanor  charges filed by the Missouri Attorney  General.  While
CQC and its lawyers  continue to seek a  negotiated  settlement  to the disputes
with the  Commission  and the  Attorney  General,  the  discussions  were  again
terminated by the Attorney General's office.

         At the time CQC was notified of the Staff's  position,  construction of
the riverboat  contemplated  under the project being developed by CQC was almost
completed.  CQC had also  obtained  the  necessary  permits  for the  land-based
development  portion of the project and had performed certain dredging and other
site  preparation  work.  In August 1994,  CQC  suspended  all further land site
development   activity   pending   resolution  of  the  review  of  its  license
application.  Management of CQC believes that the Commission's subsequent ruling
in September 1994 makes further development of the project unfeasible because of
significant  delays in the  ability  to operate  the  riverboat  casino,  either
through appeal of the decision or expiration of the two-year  probation  period.
Accordingly,  on  September  29,  1994,  management  decided to suspend  further
development  of the Capitol Queen project.  As a result of that decision,  costs
associated  with the  development of the project which had been deferred  during
the development  stage were written-off in the fourth quarter of the fiscal year
ended June 30, 1994,  and the land site and riverboat were written down to their
estimated net realizable value.

         Prior to its  suspension,  CQC had financed the Capitol  Queen  project
through  the  issuance  of  $40,000,000  in  principal  amount  of the 12% First
Mortgage  Notes due November 15, 2000. As of January 1, 1995,  the CQC Indenture
was amended to (i) eliminate CQC's  obligation to construct and open the Capitol
Queen and (ii) permit a two-step  purchase of the CQC Notes at 101% of principal
plus  accrued  and unpaid  interest  from a sale of assets.  The  repurchase  of
$20,000,000  principal amount of the CQC Notes (plus accrued and unpaid interest
thereon) was completed on January 17, 1995,  with funds from the project  escrow
account,  and an  aggregate  of  $20,000,000  principal  amount of the CQC Notes
remained outstanding. However, the dates by which CQC previously agreed with the
holders of the CQC Notes to effect the sale of its  assets  and  repurchase  the
remaining  CQC Notes  have  passed.  The CQC Notes  outstanding  require  annual
interest payments of $2,400,000,  payable in equal installments semi-annually on
May 15 and November 15. CQC was not able to make its scheduled  interest payment
of  $1,200,000  on November 15,  1995,  and AC did not have  available  funds to
advance on behalf of CQC. In  addition,  under the terms of the AC Notes,  AC is
required to offer to repurchase  up to $5,500,000 in principal  amount of the AC
Notes if AC's tangible net worth falls below certain limits.  At March 31, 1996,
AC had a stockholders'  deficiency and was subject to this requirement.  AC does
not have sufficient  financial resources to meet this requirement in addition to
its  guarantee  obligation  with to CQC.  Management of AC and CQC are currently
undergoing  discussions with an informal  committee  representing the holders of
the AC Notes and CQC Notes regarding a proposed  restructuring plan. However, an
agreement has not yet been reached.

         CQC had entered into an Asset Purchase  Agreement dated April 10, 1995,
for the sale of its assets to Aerie  Riverboat  Casinos of Missouri,  Inc., at a
purchase price of $18,000,000.  However,  the consummation of the Aerie purchase
agreement was subject to the satisfaction of several  conditions which could not
be satisfied timely, including, among others, that Jefferson City consent to the
assignment  of the  Development  Agreement,  that  Aerie  be  found  preliminary
suitable to hold a Missouri Gaming license and that riverboat  gaming is legally
permitted  in  Jefferson  City.  As a  result,  the  agreement  with  Aerie  was
terminated  without  penalty  when the  expiration  date of December  31,  1995,
passed.   CQC  is  currently  pursuing  offers  on  its  riverboat  assets  from
prospective buyers.

         On November 7, 1995,  voters in  Jefferson  City  rejected an ordinance
permitting  riverboat  gambling,  reversing  the vote of an earlier  election in
which  Jefferson  City  voters  approved  riverboat   gambling.   Because  CQC's
Development  Agreement  with  Jefferson  City was entered  into  pursuant to the
earlier ordinance permitting riverboat gambling,  the Company believes that as a
matter of law the 1995 election does not affect the validity of the  Development
Agreement.  However,  it has not yet been determined whether Jefferson City will
honor the Agreement in light of the election without  litigation to uphold CQC's
position.  CQC is  exploring  its  legal  options  in the event  Jefferson  City
declines to honor the Development Agreement, but has not reached any decision. A
final  judicial  determination  that the 1995  vote  abrogates  the  Development
Agreement  would have a material  adverse  effect on CQC and its ability to sell
its assets.

         CQC is not expected to generate  sufficient  funds  through the sale of
its assets to repurchase all of the outstanding  CQC Notes.  AC, pursuant to its
guaranty of the CQC Notes, will be liable for the principal of, and interest on,
any remaining  outstanding CQC Notes. AC is restricted from selling assets under
the covenants  governing the AC Notes,  and  management  believes that access to
additional  capital  from  other  sources  is  restricted  as a  result  of  the
above-described circumstances.  As a result, management does not believe that AC
(nor SC, as  guarantor  of the AC Notes)  would  have  sufficient  resources  to
satisfy such obligation, should it be necessary.


3)       Relationship To Becker Gaming, Inc.:

         Due to the decision to suspend  development of CQC's  riverboat  casino
project and sell its assets, the majority of BGI's management and administrative
services are anticipated to benefit AC in the future. Accordingly, in late March
1995,  BGI  transferred  approximately  40 employees  involved in accounting and
administrative  functions  from  BGI  to AC.  These  employees  were  originally
employees  of  AC  and  were   transferred  to  BGI  in  June  1994,   when  the
Reorganization became effective.  The Company has reviewed the amount of the BGI
management  fee (currently 5% of gross  revenues) and determined  that effective
October 1, 1995 an amount equal to 4% of gross  revenues  will be returned to AC
from BGI for the services that AC provides for BGI's  subsidiaries  as mentioned
above.


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

                                 BALANCE SHEETS
                  (Dollars In Thousands Except Per Share Data)


ASSETS
                                                      March 31,  June 30,
                                                         1996       1995 
                                                      -------    -------
                                                    (Unaudited)
Current assets:
  Cash ............................................   $ 1,013    $   506
  Current portion of notes receivable .............       177        175
  Note receivable from related party ..............     2,250      2,250
  Other receivables ...............................       157        146
  Prepaid expenses ................................        23         46
                                                      -------    -------
      Total current assets ........................     3,620      3,123
                                                      -------    -------
Property and equipment:
  Building and leasehold improvements .............       509        461
  Furniture, fixtures and equipment ...............     2,969      2,984
                                                      -------    -------
                                                        3,478      3,445

  Less, accumulated depreciation ..................    (1,659)    (1,710)
                                                      -------    -------
      Net property and equipment ..................     1,819      1,735
                                                      -------    -------

Other assets:
Notes receivable, less current  portion ...........       248        267

Advances to related parties .......................       118         86

Other assets, less accumulated
  amortization of $20 at March 31, 1995,

  and $19 at June 30 , 1995 .......................        91        138
                                                      -------    -------

      Total assets ................................   $ 5,896    $ 5,349
                                                      =======    =======



LIABILITIES AND STOCKHOLDER'S EQUITY                                         
                                                   March 31, June 30,
                                                      1996     1995 
                                                    ------   ------
                                                   (Unaudited)
Current liabilities:
  Trade accounts payable .......................... $    0   $   69
 Accrued expenses .................................    284      594
Current portion of long term debt .................    287      255
                                                    ------   ------

Total current liabilities ..........................   881      608
                                                    ------   ------



Long-term liabilities:
   Long-term debt, less current portion ...........    575      664
   Subordinated notes payable to
     former stockholders ..........................  3,000    3,000
                                                    ------   ------
      Total liabilities ...........................  4,456    4,272
                                                    ------   ------
Commitments and contingencies


Stockholder's equity:
  Common stock, no par value, 2,500
  shares authorized, 400 shares
  issued and outstanding ..........................     27       27
Retained earnings .................................  1,413    1,050
                                                    ------   ------

      Total stockholder's equity ..................  1,440    1,077
                                                    ------   ------

      Total liabilities and stockholder's
      equity ...................................... $5,896   $5,349
                                                    ======   ======

The accompanying notes are an intergral part of these financial statement.
================================================================================

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

                   STATEMENTS OF INCOME AND RETAINED EARNINGS
                             (Dollars in Thousands )
                                   (Unaudited)


                                                    Three Months Ended March 31,
                                                            1996       1995
                                                         -------    -------
Revenues:
 Slot route:
    From locations controlled by
     related parties .................................   $   607    $   592
    Other ............................................        38         66
 Slot service fees:
    From related parties .............................        24         18
    Other ............................................         8         13
                                                         -------    -------
      Total revenues .................................       677        689
Operating expenses:
 Slot route and service ..............................       324        271
 General and administrative ..........................         4         19
 Management fee - Becker Gaming, Inc. ................        34         34
 Depreciation and amortization .......................        75         60
                                                         -------    -------
    Total operating expenses .........................       437        387
                                                         -------    -------
Operating income .....................................       240        302
                                                         -------    -------
Other income (expense):
 Interest income .....................................        44         41
 Interest expense ....................................       (96)       (87)
 Other income ........................................        24         22
                                                         -------    -------
    Total other income (expense) .....................       (28)       (24)
                                                         -------    -------
Net income before income tax .........................       212        278
Provision for income tax .............................       (72)       (95)
                                                         -------    -------
Net income ...........................................       140        183
Retained earnings, beginning of period ...............     1,273        718
                                                         -------    -------
Retained earnings, end of period .....................   $ 1,413    $   901
                                                         =======    =======



                                                     Nine Months Ended March 31,
                                                            1996       1995
                                                         -------    -------
Revenues:
 Slot route:
    From locations controlled by
     related parties .................................   $ 1,750    $ 1,719
    Other ............................................       112        208
 Slot service fees:
    From related parties .............................        72         54
    Other ............................................        25         46
                                                         -------    -------
      Total revenues .................................     1,959      2,027
Operating expenses:
 Slot route and service ..............................       939        777
 General and administrative ..........................        31         54
 Management fee - Becker Gaming, Inc. ................       102        112
 Depreciation and amortization .......................       224        173
                                                         -------    -------
    Total operating expenses .........................     1,296      1,116
                                                         -------    -------
Operating income .....................................       663        911
                                                         -------    -------
Other income (expense):
 Interest income .....................................       126        100
 Interest expense ....................................      (298)      (257)
 Other income ........................................        59         63
                                                         -------    -------
    Total other income (expense) .....................      (113)       (94)
                                                         -------    -------
Net income before income tax .........................       550        817
Provision for income tax .............................      (187)      (278)
                                                         -------    -------
Net income ...........................................       363        539
Retained earnings, beginning of period ...............     1,050        362
                                                         -------    -------
Retained earnings, end of period .....................   $ 1,413    $   901
                                                         =======    =======


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

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

                            STATEMENTS OF CASH FLOWS
                             (Dollars In Thousands)
                                   (Unaudited)

                                                     Nine Months Ended March 31,
                                                           1996       1995
                                                        -------    -------
Cash flows from operating activities:
  Net income ...........................................$   363    $   539
  Adjustments to reconcile net income to
   net cash provided by operating activities:
   Depreciation and amortization .......................    224        173
   Gain on sales of equipment ..........................     13         12
   (Increase) decrease in operating assets:
   Other receivables ...................................    (11)        20
   Prepaid expenses ....................................     23         14
   Deposits ............................................   --          (59)
  Increase (decrease) in operating liabilities:
   Accounts payable ....................................    (69)       (38)
   Notes payable .......................................   --           15
   Accrued expenses ....................................    310         (1)
                                                        -------    -------
     Total adjustments .................................    490        136
                                                        -------    -------

     Net cash provided by operating activities .........    853        675
                                                        -------    -------

Cash flows from investing activities:
  Capital expenditures .................................   (324)      (313)
  Proceeds from sales of equipment .....................     12         14
  Decrease (increase) in related party notes receivable    --       (1,000)
  Decrease (increase) in advances to related parties ...    (32)       (23)
  Repayments of notes receivable .......................     63        109
                                                        -------    -------
    Net cash used in investing activities ..............   (281)    (1,213)
                                                        -------    -------

Cash flows from financing activities:
  Proceeds from notes payable ..........................    157        237
  Principal payments on notes payable ..................   (222)       (72)
                                                        -------    -------
    Net cash provided by (used in) financing activities     (65)       165
                                                        -------    -------

    Net increase in cash ...............................    507       (373)

Cash, beginning of period ..............................    506      1,940
                                                        -------    -------
Cash, end of period ....................................$ 1,013    $ 1,567
                                                        =======    =======

Supplemental cash flow disclosures:
     Interest paid .....................................$   298    $   170
                                                        =======    =======
     Income taxes paid .................................     $-    $   102
                                                        =======    =======


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

                                SUNSET COIN, INC.
               (A wholly owned subsidiary of Becker Gaming, Inc.)

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


1)       Basis of Presentation:

         Sunset Coin, Inc.  ("SC") is wholly owned  subsidiary of Becker Gaming,
Inc. ("BGI"). The accompanying financial statements of SC are unaudited and have
been prepared in accordance with generally  accepted  accounting  principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation  S-X.  Accordingly,  they do not include all of the information
and footnotes required by generally accepted accounting  principles for complete
financial statements.  In the opinion of management,  all adjustments and normal
recurring  accruals  considered  necessary  for a fair  presentation  have  been
included. Operating results for the three and nine-month periods ended March 31,
1996 are not necessarily  indicative of the results that may be expected for the
year ended June 30, 1996. The accompanying  unaudited  financial  statements and
footnotes should be read in conjunction with the financial  statements  included
in the Company's annual report on Form 10-K for the year ended June 30, 1995.


2)       Denial of Missouri Gaming License Application of Capitol Queen & 
         Casino, Inc.:

         SC has  guarantied  the 12% First Mortgage Notes due November 15, 2000,
of Arizona Charlie's, Inc. ("AC"), another wholly owned subsidiary of BGI, until
such time as AC completes an  expansion of its casino  facilities  (which it has
done) and obtains a specified  fixed charge  coverage  ratio,  as defined in the
indenture  governing the AC First Mortgage Notes (the "AC Notes").  AC, in turn,
has  guarantied  the 12% First Mortgage Notes (the "CQC Notes") due November 15,
2000, of Capitol Queen & Casino,  Inc. ("CQC"),  another wholly owned subsidiary
of BGI, until such time as CQC is licensed to conduct gaming in Missouri.

         CQC was  formed to  develop,  own,  and  operate  the  "Capitol  Queen"
riverboat  casino in Jefferson  City,  Missouri.  On September 28, 1994, CQC was
notified that its  application for a gaming license was rejected by the Missouri
Gaming  Commission (the  "Commission").  Under the Commission's  order, CQC, its
principal owners and affiliated companies cannot reapply for a gaming license in
Missouri prior to September 28, 1996.

     The Commission's decision was based on an August 1994 recommendation of its
staff  (the  "Staff")  that  CQC's  license  application  be denied  without  an
investigative   review  because  CQC  knowingly  failed  to  disclose  material,
substantive information in the application. The Commission did not find that CQC
knowingly  failed to  disclose  information,  but did find that the  application
contained  omissions of a  substantive  and material  nature.  Management of CQC
believes that its application was complete and accurate. Moreover, CQC has fully
disclosed the information cited by the Staff in post-application  filings, other
public  documents,  and  communications  with the Staff, all of which management
considers to be part of the licensing and related investigative  process.  Based
on the advice of legal counsel,  CQC believes that the Commission  acted outside
its authority in rejecting the application without a formal investigation.

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

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

     On June 26, 1995, the Circuit Court issued a peremptory (permanent) writ of
mandamus similar to the preliminary writ,  declaring the Commission's order void
and  ordering  the  Commission  to  proceed  with  an   investigation  of  CQC's
application  "with all  deliberate  speed."  On July 21,  1995,  the  Commission
appealed the Circuit  Court's  decision to the Missouri Court of Appeals for the
Western District, and on April 30, 1996, a three-judge panel of that Court ruled
that  mandamus  was not the proper  vehicle  for  challenging  the  Commission's
decision.  The Court of Appeals ruled that CQC may obtain  judicial  review only
after an  administrative  proceeding.  The Court of Appeals  also ruled that the
Commission could deny a license without  conducting an  investigation,  and that
the claim that the  Commission  broke its promise not to deny a license  without
first  investigating  should be raised in a breach  of  contract  action,  not a
mandamus petition.  The Court of Appeals did not address the merits; that is, it
did not decide whether the Commission acted  arbitrarily or whether its decision
was  justified  or a breach  of its  promises.  The  decision  has no  immediate
consequence  because of a Circuit Court's ruling in a separate action (discussed
below) voiding the Commission's  decision for the independent reason that it was
made in violation of Missouri's open meeting law. The Court of Appeals' decision
has no  effect  on that  ruling,  so the  Commission's  decision  remains  void.
Nevertheless,  an appeal to the  entire  nine-judge  Court of  Appeals or to the
Missouri Supreme Court is being considered.

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

     On March 24, 1995,  CQC filed an action  against the Commission in the Cole
County,  Missouri,  Circuit  Court,  alleging that the  Commission  had violated
Missouri's  open meeting law by  deliberating in a closed session before issuing
its decision denying CQC's license.  The petition requested an order voiding the
Commission's  decision.  On March 27, as a protective  measure against  possible
arguments  that Cole County is not the proper venue,  CQC filed a  substantively
identical action in the St. Louis County Circuit Court. In April, the Commission
filed answers to both  complaints  denying that it had violated the open meeting
law. On June 1, CQC moved for summary  judgment in the Cole County case.  In its
response,  the  Commission  stated  that  it "did  not  deliberately  intend  to
circumvent"  the open meeting law but had deliberated in closed session based on
erroneous advice of counsel. The Commission argued that the closed session could
nevertheless be justified under statutory  exceptions  allowing agencies to meet
privately with their lawyers to discuss confidential information and litigation.
The Circuit Court heard the motion for summary judgment on December 19, 1995. In
an order issued on April 23, 1996,  the Circuit Court granted the motion,  ruled
that the  Commission  had  violated  the open  meeting  law,  and  declared  the
Commission's order void.

         In January 1995, CQC engaged in settlement discussions initiated by the
Missouri  Attorney  General's  office,  legal counsel for the  Commission,  with
respect to the civil matters  involving the Commission.  The discussions,  which
terminated  in March  1995,  were  resumed in August  1995 and were  expanded to
include the misdemeanor  charges filed by the Missouri Attorney  General.  While
CQC and its lawyers  continue to seek a  negotiated  settlement  to the disputes
with the  Commission  and the  Attorney  General,  the  discussions  were  again
terminated by the Attorney General's office.

         At the time CQC was notified of the Staff's  position,  construction of
the riverboat  contemplated  under the project being developed by CQC was almost
completed.  CQC had also  obtained  the  necessary  permits  for the  land-based
development  portion of the project and had performed certain dredging and other
site  preparation  work.  In August 1994,  CQC  suspended  all further land site
development   activity   pending   resolution  of  the  review  of  its  license
application.  Management of CQC believes that the Commission's subsequent ruling
in September 1994 makes further development of the project unfeasible because of
significant  delays in the  ability  to operate  the  riverboat  casino,  either
through appeal of the decision or expiration of the two-year  probation  period.
Accordingly,  on  September  29,  1994,  management  decided to suspend  further
development  of the Capitol Queen project.  As a result of that decision,  costs
associated  with the  development of the project which had been deferred  during
the development  stage were written-off in the fourth quarter of the fiscal year
ended June 30, 1994,  and the land site and riverboat were written down to their
estimated net realizable value.

         Prior to its  suspension,  CQC had financed the Capitol  Queen  project
through  the  issuance  of  $40,000,000  in  principal  amount  of the 12% First
Mortgage  Notes due November 15, 2000. As of January 1, 1995,  the CQC Indenture
was amended to (i) eliminate CQC's  obligation to construct and open the Capitol
Queen and (ii) permit a two-step  purchase of the CQC Notes at 101% of principal
plus  accrued  and unpaid  interest  from a sale of assets.  The  repurchase  of
$20,000,000  principal amount of the CQC Notes (plus accrued and unpaid interest
thereon) was completed on January 17, 1995,  with funds from the project  escrow
account,  and an  aggregate  of  $20,000,000  principal  amount of the CQC Notes
remained outstanding. However, the dates by which CQC previously agreed with the
holders of the CQC Notes to effect the sale of its  assets  and  repurchase  the
remaining  CQC Notes  have  passed.  The CQC Notes  outstanding  require  annual
interest payments of $2,400,000,  payable in equal installments semi-annually on
May 15 and November 15. CQC was not able to make its scheduled  interest payment
of  $1,200,000  on November 15,  1995,  and AC did not have  available  funds to
advance on behalf of CQC. In  addition,  under the terms of the AC Notes,  AC is
required to offer to repurchase  up to $5,500,000 in principal  amount of the AC
Notes if AC's tangible net worth falls below certain limits.  At March 31, 1996,
AC had a stockholders'  deficiency and was subject to this requirement.  AC does
not have sufficient  financial resources to meet this requirement in addition to
its  guarantee  obligation  with to CQC.  Management of AC and CQC are currently
undergoing  discussions with an informal  committee  representing the holders of
the AC Notes and CQC Notes regarding a proposed  restructuring plan. However, an
agreement has not yet been reached.

         CQC had entered into an Asset Purchase  Agreement dated April 10, 1995,
for the sale of its assets to Aerie  Riverboat  Casinos of Missouri,  Inc., at a
purchase price of $18,000,000.  However,  the consummation of the Aerie purchase
agreement was subject to the satisfaction of several  conditions which could not
be satisfied timely, including, among others, that Jefferson City consent to the
assignment  of the  Development  Agreement,  that  Aerie  be  found  preliminary
suitable to hold a Missouri Gaming license and that riverboat  gaming is legally
permitted  in  Jefferson  City.  As a  result,  the  agreement  with  Aerie  was
terminated  without  penalty  when the  expiration  date of December  31,  1995,
passed.   CQC  is  currently  pursuing  offers  on  its  riverboat  assets  from
prospective buyers.


         On November 7, 1995,  voters in  Jefferson  City  rejected an ordinance
permitting  riverboat  gambling,  reversing  the vote of an earlier  election in
which  Jefferson  City  voters  approved  riverboat   gambling.   Because  CQC's
Development  Agreement  with  Jefferson  City was entered  into  pursuant to the
earlier ordinance permitting riverboat gambling,  the Company believes that as a
matter of law the 1995 election does not affect the validity of the  Development
Agreement.  However,  it has not yet been determined whether Jefferson City will
honor the Agreement in light of the election without  litigation to uphold CQC's
position.  CQC is  exploring  its  legal  options  in the event  Jefferson  City
declines to honor the Development Agreement, but has not reached any decision. A
final  judicial  determination  that the 1995  vote  abrogates  the  Development
Agreement  would have a material  adverse  effect on CQC and its ability to sell
its assets.

         CQC is not expected to generate  sufficient  funds  through the sale of
its assets to repurchase all of the outstanding  CQC Notes.  AC, pursuant to its
guaranty of the CQC Notes, will be liable for the principal of, and interest on,
any remaining  outstanding CQC Notes. AC is restricted from selling assets under
the covenants  governing the AC Notes,  and  management  believes that access to
additional  capital  from  other  sources  is  restricted  as a  result  of  the
above-described circumstances.  As a result, management does not believe that AC
(nor SC, as  guarantor  of the AC Notes)  would  have  sufficient  resources  to
satisfy such obligation, should it be necessary.



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


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

                                 BALANCE SHEETS
                    (Dollars In Thousands, Except Share Data)

                                                            March 31,  June 30,
ASSETS                                                        1996       1995
                                                             -------   -------
                                                            (Unaudited)
Current assets:

  Cash and cash equivalents ..............................        $-   $    45
   Restricted cash, in escrow account ....................        30        30
                                                             -------   -------

      Total current assets ...............................        30        75
                                                             -------   -------
Other assets:

  Assets held for sale ...................................     7,754    12,146

  Financing costs, net of accumulated
    amortization of $310 at March 31, 1996
    and $212 at June 30, 1995 ............................       607       705
  Deposits and other assets ..............................        60        60
                                                             -------   -------

      Total other assets .................................     8,421    12,911
                                                             -------   -------


      Total assets .......................................    $8,451   $12,986
                                                             -------   -------




                                                           March 31,   June 30,
LIABILITIES & STOCKHOLDER'S EQUITY(DEFICIT)                  1995        1995 
                                                           --------    --------
                                                          (Unaudited)
Current liabilities:

  Accounts payable .......................................       $-    $    142
  Advances from related parties ..........................    1,252         404

  Accrued interest .......................................    2,159         395
  Notes payable to related parties .......................    1,200       1,200

  Long-term debt classified as current,
    net of unamortized original issue discount
    of $2,481 and $2,882, respectively ...................   17,519      17,118
                                                           --------    --------

         Total current liabilities .......................   22,130      19,259
                                                           --------    --------

Commitments and contingencies

Stockholder's equity(deficit):
  Common stock, $1.00 par value, 1,000 shares
   authorized, 100 shares issued and outstanding .........     --          --   
  Additional paid-in capital .............................   12,732      12,732

  Deficit accumulated during development stage ...........  (26,411)    (19,005)
                                                           --------    --------
      Total stockholder's equity (deficit) ...............  (13,679)     (6,273)
                                                           --------    --------


      Total liabilities and stockholder's equity(deficit)   $ 8,451    $ 12,986
                                                           --------    --------

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

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

            STATEMENTS OF LOSS INCURRED DURING THE DEVELOPMENT STAGE
                             (Dollars In Thousands)
                                   (Unaudited)
                                                                    
                                                                          
                                              Three Months Ended March 31,
                                                  1996        1995 
                                              --------    --------
Revenues ....................................       $-          $-

Operating expenses:
  Amortization of financing and other costs .       33         199
  Abandonment loss ..........................    4,080          --   
  Development costs .........................      195         137
                                              --------    --------

      Total operating expenses ..............    4,308         336
                                              --------    --------

Operating loss ..............................   (4,308)       (336)

Other income (expenses):
  Interest income ...........................     --            55
  Interest expense ..........................     (750)       (707)
  Interest capitalized ......................     --          --   
                                              --------    --------

Total other income (expense) ................     (750)       (652)
                                              --------    --------

Net loss before extraordinary item ..........    (5,058)      (988)
                                              --------    --------

Extraordinary item:
   Loss on early retirement of debt
     (no income tax benefit available) ......     --        (4,089)
                                              --------    --------
   Net loss ................................. $  (5,058)  $ (5,077)
                                               ========    ========


                                                                 For The Period
                                                               January 20, 1993
                                                                  (The Date Of
                                                                    Inception)
                                                                     Through
                                        Nine Months Ended March 31,  March 31,
                                             1996        1995        1996 
                                         --------    --------       --------
Revenues ..............................        $-          $-          $-

Operating expenses:
 Amortization of financing and
     other costs ......................        98         869         1,340
 Abandonment loss .....................     4,392          --        10,426
 Development costs ....................       751        736          1,957
                                         --------    --------      --------

     Total operating expenses .........     5,241       1,605        13,723
                                         --------    --------      --------

Operating loss ........................    (5,241)     (1,605)      (13,723)

Other income (expenses):
 Interest income ......................      --           610         1,265
 Interest expense .....................    (2,165)     (3,160)      (10,547)
 Interest capitalized .................      --          --             683
                                         --------    --------      --------

Total other income (expense) ..........    (2,165)     (2,550)       (8,599)
                                         --------    --------      --------

Net loss before extraordinary item ....    (7,406)     (4,155)      (22,322)
                                         --------    --------      --------

Extraordinary item:
 Loss on early retirement of debt
   (no income tax benefit available) ..      --        (4,089)       (4,089)
                                         --------    --------      --------
 Net loss .............................  $ (7,406)   $ (8,244)     $(26,411)
                                         ========    ========      ========

The accompanying notes are an intergral part of these financial statements.
================================================================================
                                                                        
                                            
                          CAPITOL QUEEN & CASINO, INC.
         ( A Development Stage Company And A Wholly Owned Subsidiary of
                              Becker Gaming, Inc.)

                            STATEMENTS OF CASH FLOWS
                             (Dollars In Thousands)
                                  (Unaudited)

                                                                                
                                                                                
                                                                                
                                                                               
                                                    Nine Months Ended March 31,
                                                             1996        1995  
                                                         --------    --------  

Cash flows from development stage activities:
 Net loss .............................................. $ (7,406)   $ (8,244)  
 Adjustments to reconcile net loss to net cash
   provided by (used in) development stage activities:

   Amortization of financing and other costs ...........       98         173   
   Amortization of original issue discount .............      401         696   
   Abandonment loss ....................................    4,392         --   
   Extraordinary loss on retirement of debt ............     --         4,089   
   Increase in accounts payable and accruals,
       net of amounts for capital expenditures .........    1,622         320   
  Increase in advances from related parties ............      848          35   
                                                         --------    --------   
       Total adjustments ...............................    7,361       5,313   
                                                         --------    --------   
       Net cash used in development stage activities ...      (45)     (2,931)  
                                                         --------    --------   

Cash flows from investing activities:
 Capital expenditures, net of construction .............     
   accounts payable                                          --        (1,680)  
 Net (additions to) reductions in restricted ...........    
   cash equivalents                                          --        24,898   
 Decrease (increase) in deposits and other assets ......     --            12   
 Capitalization of preopening costs ....................     --          --     
 Development costs .....................................     --          --     
                                                         --------    --------   
   Net cash provided by (used in) investing activities .       0       23,230   
                                                         --------    --------   

Cash flows from financing activities:
  Principal payments on First Mortgage Notes ...........      --      (20,200) 
  Proceeds from issuance of First Mortgage Notes,
    net of financing costs .............................      --          --    
  Proceeds from borrowings under notes payable to               
    related parties ....................................      --        1,200
  Equity contribution from Becker Gaming, Inc. .........
    relating to sale of warrants .......................      --          --    
                                                          --------    --------  
    Net cash provided by financing activities ..........         0    (20,200) 
                                                          --------    --------  

    Net (decrease) increase in cash and cash equivalents       (45)        99  

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

Cash and cash equivalents, end of period ...............        $-   $    132  
                                                          --------    --------  

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

Supplemental cash flow disclosures:
 Interest paid, net of amounts capitalized .............       $-    $  2,820   
                                                         --------    --------   

                                                         --------    --------   
 Original issue discount that did not affect cash ......       $-          $-   
                                                         --------    --------   

                                                         --------    --------   
 Equity contribution by Becker Gaming that did not
   affect cash .........................................       $-          $-   
                                                         --------    --------   

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

                                                            For The Period   
                                                           January 20, 1993 
                                                             (The Date Of     
                                                           Inception) Through
                                                               March 31,     
                                                                 1996       
                                                               --------       
                                                                              
Cash flows from development stage activities:                                 
 Net loss ..............................................      $(26,411)       
 Adjustments to reconcile net loss to net cash                                
   provided by (used in) development stage activities:                        
                                                                              
   Amortization of financing and other costs ...........         1,339        
   Amortization of original issue discount .............         1,900        
   Abandonment loss ....................................        10,426        
   Extraordinary loss on retirement of debt ............         4,089        
   Increase in accounts payable and accruals,                                 
       net of amounts for capital expenditures .........         2,171        
  Increase in advances from related parties ............         1,240        
                                                              --------        
       Total adjustments ...............................        21,165        
                                                              --------        
       Net cash used in development stage activities ...        (5,246)       
                                                              --------        
                                                                              
Cash flows from investing activities:                                         
 Capital expenditures, net of construction .............                      
   accounts payable                                            (12,936)       
 Net (additions to) reductions in restricted ...........                      
   cash equivalents                                                (31)       
 Decrease (increase) in deposits and other assets ......           (60)        
 Capitalization of preopening costs ....................          (340)       
 Development costs .....................................          (553)       
                                                              --------        
   Net cash provided by (used in) investing activities .       (13,920)       
                                                              --------        
                                                                              
Cash flows from financing activities:                                         
  Principal payments on First Mortgage Notes ...........        (20,200)      
  Proceeds from issuance of First Mortgage Notes,                             
    net of financing costs .............................         30,666       
  Proceeds from borrowings under notes payable to ......           --         
    related parties ....................................                      
  Equity contribution from Becker Gaming, Inc. .........                      
    relating to sale of warrants .......................          7,500       
                                                               --------       
    Net cash provided by financing activities ..........         19,166       
                                                               --------       
                                                                              
    Net (decrease) increase in cash and cash equivalents           --         
                                                                              
Cash and cash equivalents, beginning of period .........           --         
                                                               --------       
                                                                              
Cash and cash equivalents, end of period ...............             $-       
                                                               --------       
                                                                            
Supplemental cash flow disclosures:                                           
 Interest paid, net of amounts capitalized .............      $  5,807        
                                                              --------        
 Original issue discount that did not affect cash ......      $  7,500        
                                                              --------        
 Equity contribution by Becker Gaming that did not                            
   affect cash .........................................      $  5,232        
                                                              --------   
    
The accompanying notes are an intergral part of these financial statements.
================================================================================
 
                                                                           
                          CAPITOL QUEEN & CASINO, INC.
      (A Development stage company and a wholly owned subsidiary of Becker
                                 Gaming, Inc.)

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

1)       Basis of Presentation:

         Capitol  Queen & Casino,  Inc.  ("CQC") is wholly owned  subsidiary  of
Becker Gaming, Inc. ("BGI").  The accompanying  financial statements of CQC have
been prepared in accordance with generally  accepted  accounting  principles for
interim financial  information and with the instruction to Form 10-Q and Article
10 of Regulation  S-X.  Accordingly,  they do not include all of the information
and footnotes required by generally accepted accounting  principles for complete
financial statements.  In the opinion of management,  all adjustments and normal
recurring  accruals  considered  necessary  for a fair  presentation  have  been
included. Operating results for the three and nine-month periods ended March 31,
1996 are not necessarily  indicative of the results that may be expected for the
year ended June 30, 1996. The accompanying  unaudited  financial  statements and
footnotes should be read in conjunction with the financial  statements  included
in the Company's annual report on Form 10-K for the year ended June 30, 1995.

2)       Denial of Missouri Gaming License Application of Capitol Queen & 
         Casino, Inc.:

         Sunset  Coin,  Inc.  ("SC"),  a wholly  owned  subsidiary  of BGI,  has
guarantied  the 12% First  Mortgage  Notes due  November  15,  2000,  of Arizona
Charlie's,  Inc. ("AC"), another wholly owned subsidiary of BGI, until such time
as AC completes an  expansion of its casino  facilities  (which it has done) and
obtains a specified  fixed charge  coverage  ratio,  as defined in the indenture
governing  the AC First  Mortgage  Notes  (the "AC  Notes").  AC,  in turn,  has
guarantied the 12% First Mortgage Notes (the "CQC Notes") due November 15, 2000,
of CQC, until such time as CQC is licensed to conduct gaming in Missouri.

         CQC was  formed to  develop,  own,  and  operate  the  "Capitol  Queen"
riverboat  casino in Jefferson  City,  Missouri.  On September 28, 1994, CQC was
notified that its  application for a gaming license was rejected by the Missouri
Gaming  Commission (the  "Commission").  Under the Commission's  order, CQC, its
principal owners and affiliated companies cannot reapply for a gaming license in
Missouri prior to September 28, 1996.

     The Commission's decision was based on an August 1994 recommendation of its
staff  (the  "Staff")  that  CQC's  license  application  be denied  without  an
investigative   review  because  CQC  knowingly  failed  to  disclose  material,
substantive information in the application. The Commission did not find that CQC
knowingly  failed to  disclose  information,  but did find that the  application
contained  omissions of a  substantive  and material  nature.  Management of CQC
believes that its application was complete and accurate. Moreover, CQC has fully
disclosed the information cited by the Staff in post-application  filings, other
public  documents,  and  communications  with the Staff, all of which management
considers to be part of the licensing and related investigative  process.  Based
on the advice of legal counsel,  CQC believes that the Commission  acted outside
its authority in rejecting the application without a formal investigation.

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

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

     On June 26, 1995, the Circuit Court issued a peremptory (permanent) writ of
mandamus similar to the preliminary writ,  declaring the Commission's order void
and  ordering  the  Commission  to  proceed  with  an   investigation  of  CQC's
application  "with all  deliberate  speed."  On July 21,  1995,  the  Commission
appealed the Circuit  Court's  decision to the Missouri Court of Appeals for the
Western District, and on April 30, 1996, a three-judge panel of that Court ruled
that  mandamus  was not the proper  vehicle  for  challenging  the  Commission's
decision.  The Court of Appeals ruled that CQC may obtain  judicial  review only
after an  administrative  proceeding.  The Court of Appeals  also ruled that the
Commission could deny a license without  conducting an  investigation,  and that
the claim that the  Commission  broke its promise not to deny a license  without
first  investigating  should be raised in a breach  of  contract  action,  not a
mandamus petition.  The Court of Appeals did not address the merits; that is, it
did not decide whether the Commission acted  arbitrarily or whether its decision
was  justified  or a breach  of its  promises.  The  decision  has no  immediate
consequence  because of a Circuit Court's ruling in a separate action (discussed
below) voiding the Commission's  decision for the independent reason that it was
made in violation of Missouri's open meeting law. The Court of Appeals' decision
has no  effect  on that  ruling,  so the  Commission's  decision  remains  void.
Nevertheless,  an appeal to the  entire  nine-judge  Court of  Appeals or to the
Missouri Supreme Court is being considered.

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

     On March 24, 1995,  CQC filed an action  against the Commission in the Cole
County,  Missouri,  Circuit  Court,  alleging that the  Commission  had violated
Missouri's  open meeting law by  deliberating in a closed session before issuing
its decision denying CQC's license.  The petition requested an order voiding the
Commission's  decision.  On March 27, as a protective  measure against  possible
arguments  that Cole County is not the proper venue,  CQC filed a  substantively
identical action in the St. Louis County Circuit Court. In April, the Commission
filed answers to both  complaints  denying that it had violated the open meeting
law. On June 1, CQC moved for summary  judgment in the Cole County case.  In its
response,  the  Commission  stated  that  it "did  not  deliberately  intend  to
circumvent"  the open meeting law but had deliberated in closed session based on
erroneous advice of counsel. The Commission argued that the closed session could
nevertheless be justified under statutory  exceptions  allowing agencies to meet
privately with their lawyers to discuss confidential information and litigation.
The Circuit Court heard the motion for summary judgment on December 19, 1995. In
an order issued on April 23, 1996,  the Circuit Court granted the motion,  ruled
that the  Commission  had  violated  the open  meeting  law,  and  declared  the
Commission's order void.

         In January 1995, CQC engaged in settlement discussions initiated by the
Missouri  Attorney  General's  office,  legal counsel for the  Commission,  with
respect to the civil matters  involving the Commission.  The discussions,  which
terminated  in March  1995,  were  resumed in August  1995 and were  expanded to
include the misdemeanor  charges filed by the Missouri Attorney  General.  While
CQC and its lawyers  continue to seek a  negotiated  settlement  to the disputes
with the  Commission  and the  Attorney  General,  the  discussions  were  again
terminated by the Attorney General's office.

         At the time CQC was notified of the Staff's  position,  construction of
the riverboat  contemplated  under the project being developed by CQC was almost
completed.  CQC had also  obtained  the  necessary  permits  for the  land-based
development  portion of the project and had performed certain dredging and other
site  preparation  work.  In August 1994,  CQC  suspended  all further land site
development   activity   pending   resolution  of  the  review  of  its  license
application.  Management of CQC believes that the Commission's subsequent ruling
in September 1994 makes further development of the project unfeasible because of
significant  delays in the  ability  to operate  the  riverboat  casino,  either
through appeal of the decision or expiration of the two-year  probation  period.
Accordingly,  on  September  29,  1994,  management  decided to suspend  further
development  of the Capitol Queen project.  As a result of that decision,  costs
associated  with the  development of the project which had been deferred  during
the development  stage were written-off in the fourth quarter of the fiscal year
ended June 30, 1994,  and the land site and riverboat were written down to their
estimated net realizable value.

         Prior to its  suspension,  CQC had financed the Capitol  Queen  project
through  the  issuance  of  $40,000,000  in  principal  amount  of the 12% First
Mortgage  Notes due November 15, 2000. As of January 1, 1995,  the CQC Indenture
was amended to (i) eliminate CQC's  obligation to construct and open the Capitol
Queen and (ii) permit a two-step  purchase of the CQC Notes at 101% of principal
plus  accrued  and unpaid  interest  from a sale of assets.  The  repurchase  of
$20,000,000  principal amount of the CQC Notes (plus accrued and unpaid interest
thereon) was completed on January 17, 1995,  with funds from the project  escrow
account,  and an  aggregate  of  $20,000,000  principal  amount of the CQC Notes
remained outstanding. However, the dates by which CQC previously agreed with the
holders of the CQC Notes to effect the sale of its  assets  and  repurchase  the
remaining  CQC Notes  have  passed.  The CQC Notes  outstanding  require  annual
interest payments of $2,400,000,  payable in equal installments semi-annually on
May 15 and November 15. CQC was not able to make its scheduled  interest payment
of  $1,200,000  on November 15,  1995,  and AC did not have  available  funds to
advance on behalf of CQC. In  addition,  under the terms of the AC Notes,  AC is
required to offer to repurchase  up to $5,500,000 in principal  amount of the AC
Notes if AC's tangible net worth falls below certain limits.  At March 31, 1996,
AC had a stockholders'  deficiency and was subject to this requirement.  AC does
not have sufficient  financial resources to meet this requirement in addition to
its  guarantee  obligation  with to CQC.  Management of AC and CQC are currently
undergoing  discussions with an informal  committee  representing the holders of
the AC Notes and CQC Notes regarding a proposed  restructuring plan. However, an
agreement has not yet been reached.

         CQC had entered into an Asset Purchase  Agreement dated April 10, 1995,
for the sale of its assets to Aerie  Riverboat  Casinos of Missouri,  Inc., at a
purchase price of $18,000,000.  However,  the consummation of the Aerie purchase
agreement was subject to the satisfaction of several  conditions which could not
be satisfied timely, including, among others, that Jefferson City consent to the
assignment  of the  Development  Agreement,  that  Aerie  be  found  preliminary
suitable to hold a Missouri Gaming license and that riverboat  gaming is legally
permitted  in  Jefferson  City.  As a  result,  the  agreement  with  Aerie  was
terminated  without  penalty  when the  expiration  date of December  31,  1995,
passed.   CQC  is  currently  pursuing  offers  on  its  riverboat  assets  from
prospective buyers.

         On November 7, 1995,  voters in  Jefferson  City  rejected an ordinance
permitting  riverboat  gambling,  reversing  the vote of an earlier  election in
which  Jefferson  City  voters  approved  riverboat   gambling.   Because  CQC's
Development  Agreement  with  Jefferson  City was entered  into  pursuant to the
earlier ordinance permitting riverboat gambling,  the Company believes that as a
matter of law the 1995 election does not affect the validity of the  Development
Agreement.  However,  it has not yet been determined whether Jefferson City will
honor the Agreement in light of the election without  litigation to uphold CQC's
position.  CQC is  exploring  its  legal  options  in the event  Jefferson  City
declines to honor the Development Agreement, but has not reached any decision. A
final  judicial  determination  that the 1995  vote  abrogates  the  Development
Agreement  would have a material  adverse  effect on CQC and its ability to sell
its assets.

         CQC is not expected to generate  sufficient  funds  through the sale of
its assets to repurchase all of the outstanding  CQC Notes.  AC, pursuant to its
guaranty of the CQC Notes, will be liable for the principal of, and interest on,
any remaining  outstanding CQC Notes. AC is restricted from selling assets under
the covenants  governing the AC Notes,  and  management  believes that access to
additional  capital  from  other  sources  is  restricted  as a  result  of  the
above-described circumstances.  As a result, management does not believe that AC
(nor SC, as  guarantor  of the AC Notes)  would  have  sufficient  resources  to
satisfy such obligation, should it be necessary.


3)        Write-Down in Carrying Value of Assets Held for Sale

     The Company had  contracted  with a  shipbuilder  to construct  the Capitol
Queen  riverboat.  The total cost of the  riverboat was  $11,892,000,  including
construction period interest and other assets.  During the fiscal quarter ending
March 31, 1996 (as restated),  based on  deteriorating  market  conditions,  the
Company recognized a loss of $4,392,000 and wrote-down the carrying value of the
riverboat to $7,500,000.  Such revised  carrying value  represents  management's
best estimate of the  riverboat's  current net realizable  value in a cash sale,
based on information  obtained from shipbuilders,  marine brokers,  and purchase
offers made to the Company from third parties.

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


                                           
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                 OF FINANCIAL CONDITION AND RESULTS OF OPERATION


Becker Gaming, Inc.

     The Company  serves as a holding  company for, and provides  management and
administrative  services  to,  the Becker  family  gaming  interests,  including
Arizona Charlie's,  Inc. ("AC"),  Sunset Coin, Inc. ("SC"),  Becker Gaming Group
("BGG"),  and Capitol Queen & Casino, Inc. ("CQC").  The Company has not engaged
in any business other than providing such management and administrative services
to its subsidiaries.

         The Company's  prospects for the receipt of management  fee income from
CQC have been adversely impacted by events in Missouri adversely affecting CQC's
efforts to become  licensed  to conduct  riverboat  gaming in that  State.  As a
result of such events,  CQC proposes to sell its riverboat  casino project.  See
"Capitol Queen & Casino, Inc. - General."


Arizona Charlie's, Inc.

General

         AC's revenues are derived largely from gaming activities at its Arizona
Charlie's  casino-hotel,  and,  to a lesser  extent,  from  food  and  beverage,
lodging,  entertainment  and retail  sales.  AC generally  views its  non-casino
operations  as  complementary  to its core casino  operations.  Accordingly,  it
utilizes  entertainment  primarily  as a  casino  marketing  tool.  Further,  AC
maintains  food and  beverage  pricing  structures  designed  to benefit  casino
volumes,  often resulting in department  operating  losses. AC seeks to maximize
profits from its hotel operations,  however,  while maintaining  attractive room
rental rates. Gaming revenues represent the net win from gaming wins and losses.
The retail  value of  accommodations,  food and  beverage  provided to customers
without  charge is  included  in gross  revenues  and  deducted  as  promotional
allowance.


Results of Operations for the three and nine months ended March 31, 1996 and 
1995

         Results from  operations at AC decreased for both the  three-month  and
nine-month  periods  ended March 31, 1996  compared to the same periods in 1995,
despite increased  revenues,  as a result of increased operating expenses in the
more recent periods.  The increased revenues and expenses reflect the opening of
new and expanded  facilities at Arizona  Charlie's  from  September 1994 through
January 1995. In addition, the increase in expenses for the 1996 periods reflect
increased slot promotional activity, accrued costs that are attributable to CQC,
and the addition of staff personnel,  equipment and related  operating  expenses
transferred to AC from BGI.

         Net revenues at AC increased by $1,255,000,  or 8.0%, from  $15,663,000
to $16,918,000 for the  three-month  period ended March 31, 1996 compared to the
three-month   period  ended  March  31,  1995.  In  the  same   period-to-period
comparison,   operating  expenses,   including  depreciation  and  amortization,
increased by 11.1% to $16,131,000 from $14,518,000.  This resulted in a $358,000
decrease in  operating  income from  $1,145,000  to $787,000 for the more recent
three-month period.

         Net revenues at AC increased by $8,625,000,  or 21.2%, from $40,623,000
to $49,248,000  for the  nine-month  period ended March 31, 1996 compared to the
nine-month period ended March 31, 1995. In the same period-to-period comparison,
operating expenses, including depreciation and amortization,  increased by 28.7%
to  $49,887,000  from  $38,750,000.  This  resulted in a $2,512,000  decrease in
operating  income from  $1,873,000 to an operating loss of $639,000 for the more
recent nine-month period.

         Gaming revenues increased $405,000, or 3.1%, for the three-month period
ended March 31, 1996 compared to the same period in the prior year.  The largest
portion  of the  gaming  revenue  increase  is  attributable  to gaming  machine
revenues,   which  increased  4.8%  from  $10,939,000  to  $11,465,000  for  the
three-month period ended March 31, 1996,  reflecting increased levels of play as
a result of additional slot  promotional  events in the latter period.  Revenues
from table games decreased  24.1% from $1,412,000 to $1,071,000  during the more
recent three-month period as a result of a lower than normal hold percentage for
blackjack  games.  Poker revenues  remained  relatively flat at $158,000 for the
1996 three-month  period compared to $161,000 for the 1995  three-month  period.
Bingo revenues  increased by $143,000 for the three-month period ended March 31,
1996 when compared to the same period of the prior year as a result of increased
play and lower than normal payouts.

         The largest  portion of the  increase in  revenues  for the  nine-month
period ended March 31, 1996 is  attributable  to gaming revenues which increased
18.8% from  $33,659,000 to $39,988,000.  Specifically,  gaming machine  revenues
increased $5,467,000,  or 19.3%, from $28,293,000 to $33,760,000.  Revenues from
table games  increased  $10,716,  or 0.3%,  from  $3,496,000 to $3,506,000,  and
revenues  from  the  race & sports  book  increased  $364,000,  or  18.5%,  from
$1,967,000 to  $2,332,000.  These  increases are primary the result of increased
levels of play by patrons  and revenue  generated  from an  additional  399 slot
machines,  5 table games and an expanded race & sports book facility that offers
pari-mutual  wagering.  Bingo  revenues  also  increased by $254,000  during the
nine-month  period ended March 31, 1996 compared to the same period of the prior
year as a result of increased play and lower than normal payouts.

         Food  and  beverage   revenues   increased  15.3%  from  $2,980,000  to
$3,436,000  during the  three-month  period ended March 31, 1996 compared to the
same period in the prior year,  reflecting increased customer volumes at the two
specialty  restaurants,  Chin's  and the Yukon  Grill,  both of which  opened in
December of 1994.  For the  nine-month  period  ended March 31,  1996,  food and
beverage revenues increased $2,143,000,  or 28.0%, from $7,664,000 to $9,807,000
when compared to the nine-month  period of the prior year,  also  reflecting the
additional revenues from the two specialty restaurants.

         Hotel  revenues  increased  15.1% from $733,000 to $844,000  during the
three months  ended March 31, 1996  compared to the same  three-month  period in
1995.  The increased  revenue is due to a small  increase in room rates combined
with a 8.0%  increase in occupancy  rates.  During the  nine-month  period ended
March 31, 1996, hotel revenues increased by $458,000,  or 24.4%, from $1,879,000
to  $2,337,000  compared to the same  nine-month  period of 1995,  reflecting an
increase in room and  occupancy  rates,  and the  addition of 158 new rooms that
were opened in September 1994.

         Gift shop  revenues  remained flat at $150,000  during the  three-month
period  ended  March 31, 1996  compared  to the same period in 1995.  During the
nine-month period ended March 31, 1996, gift shop revenues increased $43,000, or
10.4%, from $414,000 to $457,000 compared to the same period in 1995,  primarily
as the  result of the  relocation  and  enlargement  of the gift shop in January
1995.

         Management  fees  from BGI were  $729,000  and  $1,454,000  and for the
three-month  and  nine-month  periods  ended  March  31,  1996.  Such  fees were
implemented on October 1, 1995 and are designed to recover  expenses  associated
with the addition of  approximately  40 employees  in the  accounting,  payroll,
personnel (and related  departmental  costs) and technical services  departments
and the  transfer of certain  executive  personnel  in March 1995 to the Company
from  BGI.  The  management  fee is also  designed  to  recover  other  expenses
transferred  from  BGI  to the  Company  including  the  maintenance  and  other
operating  expenses  associated  with an airplane and two boats.  Management fee
revenue to the Company from BGI is equal to 80% of the management fee expense to
BGI. The  management  fee is not collected  from BGI, but serves as a vehicle to
offset  the  above  described  additional  expenses  and costs  incurred  by the
Company.

         Other revenues which principally  include  entertainment cover charges,
ATM  commissions,  and  revenues  from PBX and  banquets,  increased  5.6%  from
$320,000 to $338,000 for the three-month period ended March 31, 1996 compared to
the same period in 1995.  During the  nine-month  period  ended March 31,  1996,
other  revenues  increased  by  $270,000,  or 46.4%,  from  $582,000 to $852,000
compared  to the same  nine-month  period of 1995.  The  increases  for the 1996
periods  reflect  higher   entertainment  cover-  charge  and  banquet  revenues
resulting  from the addition of the showroom  and the banquet  facilities  which
opened in  December  1994,  partially  offset by a  reduction  in the  number of
entertainment events conducted in the 1996 three-month period.

         Gaming  expenses  increased  by $132,000  and  $2,227,000,  or 4.0% and
25.12%,   from   $3,313,000  and  $8,865,000  to  $3,445,000  and   $11,092,000,
respectively,  for the three-month  and nine-month  periods ended March 31, 1996
compared to the same periods in the prior year. The higher levels of expense for
the 1996  three-month  period  reflect  the  additional  salaries  and wages and
certain costs associated with  Company-sponsored  promotional events for premium
players  totaling  $146,000.  For the  nine-month  period  ended March 31, 1996,
increased expenses include slot promotional expense of $1,142,000, higher gaming
tax and licenses fees of $464,000 along with the additional expense of the newly
created casino  marketing  department  totaling  $337,000.  As a result,  gaming
expenses  represented 25.6% and 27.7% of gaming revenues for the three-month and
nine-month  periods  ended  March 31,  1996,  compared to 25.4% and 26.3% of the
gaming revenues for the same periods ended March 31, 1995.

         Food and beverage  expenses  increased by $432,000 and  $2,239,000,  or
11.6.0%  and  22.8.0%,   from  $4,164,000  and  $12,054,000  to  $3,732,000  and
$9,810,000, respectively, for the three-month and nine-month periods ended March
31, 1996 when  compared to the same periods ended March 31, 1995, as a result of
increased food costs and the additional  departmental personnel required for the
two new  specialty  restaurants  and the sports  book deli that  opened in March
1995. As a result,  food and beverage expenses  represented 121.2% and 123.0% of
food and beverage  revenues for the  three-month  and  nine-month  periods ended
March 31, 1996  compared to 125.2% and 128.1% of the food and beverage  revenues
for the same periods ended March 31, 1995.  Management  anticipates  these costs
will  continue  to decline  as a  percentage  of  revenues  as these  facilities
continue to generate higher customer volumes.

         Hotel  expenses  increased by $27,000 and $115,000,  or 6.7% and 10.2%,
from $401,000 and $1,128,000 to $428,000 and $1,243,000,  respectively,  for the
three-month and nine-month  periods ended March 31, 1996 as compared to the same
periods in 1995,  reflecting  increased  salaries  and wages and the  additional
expense  associated  with the operation of the added rooms and suites.  However,
net  contribution by the hotel  department  (hotel revenues less hotel operating
expenses) improved to $416,000 and $1,094,000 for the three-month and nine-month
periods  ended March 31, 1996 from $332,000 and $751,000 for the same periods in
1995.

     General and  administrative  expenses increased by $308,000 and $3,345,000,
or 7.5% and 30.9%, from $4,115,000 and $10,812,000 to $4,423,000 and $14,147,000
respectively, for the three-month and nine-month periods ended March 31, 1996 as
compared to the same periods in 1995. The increases resulted from the additional
staffing  in  the  accounting,   payroll,   personnel  and  technical   services
departments  and the transfer of executive  personnel (and related  departmental
costs) in March 1995 to the Company from BGI.  Other expenses  transferred  from
BGI  to the  Company  include  the  maintenance  and  other  operating  expenses
associated  with an  airplane  and two boats.  Other  increases  to general  and
administrative expenses included accrued expenses and payments made on behalf of
CQC in the amounts of $194,000 and $847,000 for the  three-month  and nine-month
periods ended March 31, 1996. The Company accrued management fees payable to BGI
of $912,000 and $2,674,000  during the three-month and nine-month  periods ended
March 31, 1996.

         Advertising and promotional expenses increased by $46,000 and $451,000,
or 4.4% and 15.3%,  from  $1,051,000 and $2,941,000 to $1,097,000 and $3,392,000
during the three-month  and nine-month  periods ended March 31, 1996 compared to
the same periods in 1995. The increases in the 1996 periods are  attributable to
additional  television  advertising  expenses  and the costs of  casino  mailing
promotions.

         Depreciation  and  amortization   increased   slightly  by  $1,000  and
$143,000,  or 0.1% and 5.7%,  from  $888,000  and  $2,525,000  to  $889,000  and
$2,668,000  during the three-month  and nine-month  periods ended March 31, 1996
when  compared  to the  same  periods  in  1995,  primarily  due  to  additional
depreciation expense associated with new expansion assets.

         AC had other expenses of $1,718,000 and $5,025,000 for the  three-month
and  nine-month  periods  ended  March 31, 1996  compared  with  $1,695,000  and
$4,262,000  for the same  periods  in 1995.  The  increased  expense is due to a
reduction of interest income in the amount of $21,000 in the three-month  period
and a decrease in capitalized interest (other income) in the amount $676,000 for
the nine-month period ended March 31, 1996.


Income Taxes

         As a result of the  termination  of its  election to be treated as an S
corporation,  AC is liable  for  income  taxes on income  earned  from and after
January 1, 1995. Prior to such termination, AC did not incur or pay income taxes
but  distributed  cash to its  stockholders  in amounts  sufficient to pay their
income  tax  liability  in  respect  to income of AC.  Since  terminating  its S
corporation status, AC generated a net operating loss for income tax purposes of
approximately  $5,900,000.  Management  anticipates that, upon full operation of
its expanded facilities,  AC will generate taxable income and that its effective
federal  income tax rate will  approximate  the statutory  rate of 35%, prior to
consideration  of the  benefit  from  the net  operating  losses,  which  may be
utilized to offset taxable income.

Liquidity and Capital Resources

     At March 31, 1996, AC had working capital of $2,094,000 compared to working
capital of  $2,920,000  at June 30, 1995.  The  decrease in working  capital was
caused  primarily by  management  fees payable to BGI,  interest  expense on the
$2,250,000  short-term  note  payable to Sunset  Coin,  Inc.,  and a decrease in
prepaid expenses offset by an increase in receivable from related parties.

         For the  nine-month  period  ended  March 31,  1996,  cash  provided by
operating  activities  decreased by 42.3% to $2,530,000  from $4,386,000 for the
same period ended in 1995. The decrease is primarily  attributable to a net loss
of  $3,564,000  for the  nine-month  period  in 1996  compared  to a net loss of
$2,389,000  for the same period last year,  an increase in  operating  assets of
$1,903,000  from a decrease of $300,000  for the same period last year offset by
an increase in operating  liabilities to $4,079,000 for the nine-month period in
1996 from $3,952,000 for the same period in 1995.

         For the  nine-month  period  ended  March  31,  1996,  net cash used in
investing  activities  decreased by 55.3% to $1,713,000  from $3,835,000 for the
same period ended in 1995. The decrease is the result of a $23,599,000 reduction
in capital  expenditures,  offset by a  $24,182,000  net reduction to restricted
cash. Capital expenditures  decreased in the 1996 period because the majority of
the construction of the expanded facility occurred and was completed in the 1995
period.  Restricted  cash was  reduced in the period  ended  March 31, 1995 upon
payment for the construction of the expanded facility which also occurred in the
period ended March 31, 1995. Other decreases in investing  activities  reflect a
$4,147,000 net reduction in receivables  from BGI  attributable to a decrease in
cash advances to BGI from AC.

         Cash flows provided by financing  activities for the nine-month  period
ended  March 31,  1996 was  $71,000  reflecting  payments  on notes  payable and
capital  leases.  For the same period ended in 1995,  cash flows from  financing
activities provided $841,000 derived mostly from borrowing under notes payable.

         AC's  long-term  obligations,  approximately  $61,000,000  at March 31,
1996,  consist  of the AC Notes,  stockholder  notes and  capitalized  equipment
leases. AC has annual interest expenses aggregating $6,600,000 and $500,000 with
respect to the AC Notes and the stockholder notes, in addition to current annual
payment of $1,200,000 associated with capitalized equipment financing.  Further,
AC is expected to have annual capital expenditure  requirements of approximately
$600,000.

         AC has a substantial contingent obligation resulting from its guarantee
of the CQC Notes, $20,000,000 in principal amount of which are outstanding, as a
result of a September 28, 1994 ruling of the Missouri Gaming Commission  denying
CQC's gaming license  application.  Because CQC does not have significant funds,
AC is obligated to pay interest on the CQC Notes,  which  accrues at the rate of
$2,400,000  annually.  Such  interest  is  payable  semi-annually  on May 15 and
November 15 of each year.

         In addition,  unless the holders of the CQC Notes  otherwise  agree, AC
will be liable for any shortfall between the proceeds from any sale of assets by
CQC and the amount  required  to retire the CQC Notes.  Because  there can be no
assurances  that CQC will be able to sell its  assets  for an amount  which will
allow it to fully or substantially repay the CQC Notes, AC's liability under its
guarantee  of the CQC Notes may exceed that amount  which it could  support.  In
addition,  a default under the AC Notes would entitle the holders of 25% or more
in principal  amount  thereof to cause such AC Notes to become  accelerated,  in
which event they would become immediately due and payable in full.

         On November 15, 1995,  AC made an interest  payment due on the AC Notes
in the amount of $1,650,000,  an amount equal to 50% of the required amount due.
The remainder of the interest was paid on December 27, 1995. CQC was not able to
make its November 15, 1996 scheduled interest payment of $1,200,000,  and AC did
not have funds available to advance on behalf of CQC.  Further,  CQC will not be
able to make its May 15, 1996  scheduled  interest  payment of $1,200,000 and AC
will not have funds available to advance on behalf of CQC.  Management of AC and
CQC are currently undergoing discussions with an informal committee representing
the  holders of the AC Notes and CQC Notes  regarding  a proposed  restructuring
plan; however, an agreement has not yet been reached.

         AC's  management  believes that, if not required to make any large cash
payments under its guarantee of the CQC Notes,  AC has sufficient  funds to meet
its projected  needs for financing of existing  operations  and service its debt
obligations. However, AC's performance will be influenced by prevailing economic
conditions and financial,  business and competitive  factors,  many of which are
beyond its control.

Sunset Coin, Inc.

General

         SC derives its  revenues and profits  largely  from its gaming  machine
route pursuant to participation contracts and, to a lesser extent, space leases.
Under its participation  contracts, SC pays a percentage of the net win (amounts
wagered  less  winnings  paid) from its gaming  machines to the site owner.  The
balance is  retained  by SC.  Under its space  leases,  SC pays the site owner a
fixed space rental fee and retains all of the net win. SC gaming  revenues under
participation  contracts  represent  SC's share of the net win after payments to
the  location,  and under space  leases  represent  all  revenues  before  lease
payments,  which are treated as expenses. A majority of SC's gaming machines are
installed at locations  controlled by the Becker  family and the contracts  with
such locations are expected to be renewed as a matter of general course.

         In addition to the operation of its gaming machine  route,  SC services
gaming machines owned by other operators for fixed service fees.  Included among
its service  agreements  are  contracts  with six Becker  Gaming  Group  ("BGG")
locations and one  additional  location owned by an unrelated  party,  which are
expected to be renewed in general course except for Charlie's Saloon (a BGG bar)
which discontinued its operation on April 21, 1996.


Results of operations for the three and nine months ended March 31, 1996 
and 1995

         SC's results of operations  declined for the three-month and nine-month
periods  ended  March 31, 1996  compared to the same  periods in the prior year.
Revenues decreased by 1.7% to $677,000 for the three-month period and by 3.4% to
$1,959,000 for the nine-month period. The decreases in revenues are attributable
to the expiration of contracts that were not renewed with one  participation and
one service fee  location  in the more  recent  period,  the effect of which was
slightly  offset  by  the  addition  of  two  participation  locations  and  the
conversion of another location from a participation contract to a more favorable
space lease contract.  Additional  service  revenues were recognized in the 1996
periods due to the recently added BGG bar, Charlie's Bar Down Under.

         The total number of gaming machines operated during the three-month and
nine-month  periods  ended March 31, 1996 were 395  compared to 352 in the prior
year periods.  The total number of gaming machines at BGG locations  serviced by
SC was 130 for the  three-month  and  nine-month  periods  ended  March 31, 1996
compared to 95 for the same periods in 1995.  Slot service fees from BGG for the
three-month  and  nine-month  periods  ended  March 31,  1996 were  $24,000  and
$72,000, up from $18,000 and $54,000 for the same periods in the prior year.

         Gaming  machine  route  expenses  for the  three-month  and  nine-month
periods  ended March 31,  1996  increased  by 19.6% to $324,000  and by 20.8% to
$939,000  when  compared  to the  same  periods  in the  prior  year  reflecting
increased  salaries and wages, due to additional  staffing  requirements and the
transfer of management  personnel from BGI to SC, as well as additional security
guard wage  expense  in the more  recent  three-month  period.  Other  increased
expenses for repairs and maintenance, automotive and complimentary expenses were
partially  offset by a decrease in loss and damage,  advertising,  and  supplies
expenses.

         General and administrative  expenses for the three-month and nine-month
periods  decreased  by 78.9% and 42.6% to $4,000 and  $31,000  from  $19,000 and
$54,000,  reflecting  decreases  in  professional  fees,  donations,  office and
supplies expenses, and bad debts.

         Management fees (based upon gross revenues)  decreased by 8.1% and 8.9%
to $34,000 and $102,000 for the three-month  and nine-month  periods ended March
31, 1996 when  compared to the same periods in the prior year.  This decrease is
attributable to lower gross revenues in the more recent periods.

         Depreciation and  amortization  increased by 25.0% and 29.5% to $75,000
and $224,000 for the  three-month  and nine-month  periods ended March 31, 1996,
reflecting  additional  depreciation and amortization  costs associated with the
April 1995 opening of Charlie's Bar Down Under (a BGG bar). SC purchased certain
furniture, fixtures and equipment contained in this bar.

         During the three-month and nine-month  periods ended March 31, 1996, SC
had other expenses (net of other income) of  approximately  $28,000 and $113,000
compared to $24,000 and $94,000 for the same periods in 1995.  The increases are
attributable to increased interest expense relating to draws on a line of credit
to finance the  furniture,  fixtures and equipment  installed at Charlie's  Down
Under and slot machines for the new and existing locations.



Income Taxes

         As a result of the  termination  of its  election  to be  treated  as S
corporation,  SC became  liable for income taxes on income earned from and after
January 1, 1995. Prior to such termination, SC did not incur or pay their income
tax liability in respect to income of SC.  Estimated  income tax payable for the
three-month and nine-month  periods ended March 31, 1996 amounted to $72,000 and
$187,000  from $95,000 and $278,000 in the same period in the prior year.  These
were based on an anticipated effective federal income tax rate approximating the
statutory rate of 34%.



Liquidity and Capital Resources

         Cash provided by operating  activities for the nine-month  period ended
March 31, 1996  increased to $853,000  from $675,000 for the  nine-month  period
ended March 31, 1995,  mostly due to a net increase in operating  liabilities of
$265,000 and  depreciation  and  amortization of $51,000 offset by a decrease in
operating assets of $37,000, and revenues of $176,000.

         Cash flows used in investing activities for the nine months ended March
31, 1996  amounted to  $281,000,  including  repayment  of notes  receivable  of
$63,000, a decrease in advances to related parties of $32,000, purchases of slot
machines of $324,000, and proceeds from the sale of slot machines of $12,000.

         Cash flows used in  financing  activities  for the nine  months  ended 
March 31, 1996  amounted  to $65,000,  reflecting  note proceeds of $157,000 and
$222,000 in principal payments on notes payable.

         SC's indebtedness  includes  stockholder notes and notes collateralized
by its gaming  equipment  and other  assets.  The  stockholder  notes  aggregate
$3,000,000  in  principal  amount,  bear  interest  at an annual rate of 10% and
mature January 2001. The  collateralized  notes bear interest at annual rates of
approximately  10.89%,  in the case of fixed rate loans, or at prime plus 1.5% ,
in the  case of a  collateralized  line of  credit,  the  outstanding  aggregate
balance of which, $272,000, was converted to a note at July 1, 1994 with monthly
payments through June 1998. The fixed rate notes mature at various dates through
December 1995.

         In July 1994,  SC entered into an agreement  with a bank for a new $1.2
million  non-revolving  line of  credit.  Each  advance  under the line shall be
evidenced by a separate  promissory  note with  maturity  date not  exceeding 66
months from the date of the respective  advance  giving rise to the note.  Under
the agreement,  SC originally  could request  advances  through October 28, 1995
only, at which time its rights to advances under the agreement were  terminated.
In December 1995, the agreement was amended making  available the unused portion
of $1,200,000 until October 20, 1996. Advances under the agreement bear interest
at the bank's prime rate plus 1.5% up to a maximum rate of 2.0%. As of March 31,
1996,  the amount  outstanding  under the  non-revolving  line of credit totaled
$821,000.  SC's  management  believes that it has  sufficient  funds through the
non-revolving  line of  credit  and cash  generated  by  operations  to meet its
projected  needs for  existing  operations  and limited  expansion of its gaming
machine  route  business.  Should SC  determine to expand on more than a limited
basis,  it is likely that further  capital  would be  necessary.  SC's access to
additional  capital will be  significantly  restricted under the AC Indenture so
long as SC is a guarantor of the AC Notes.  SC has guaranteed the payment of the
AC Notes, which guarantee is subject to release upon attainment by AC of a fixed
charge  coverage  ratio  of 2.25 to 1. In  connection  with its  guarantee,  the
Indenture imposes restrictions on the distribution of earnings.  SC's management
believes that it has sufficient funds through the  non-revolving  line of credit
and cash  generated  by  operations  to meet its  projected  needs for  existing
operations and limited expansion of its gaming machine route business. Should SC
determine  to expand on more than a limited  basis,  it is likely  that  further
capital  would  be  necessary.   SC's  access  to  additional  capital  will  be
significantly  restricted under the AC Indenture so long as SC is a guarantor of
the AC Notes.

         AC may have liability  under its guarantee of the CQC Notes beyond that
which it could immediately support, AC may be in default of the AC Notes and SC,
as guarantor of the AC Notes,  would have liability  under its  guarantee.  Such
liability  would likely  exceed the amount which SC could  immediately  support,
including amounts available under its non-revolving line of credit.


Capitol Queen & Casino, Inc.

Analysis of  Development  Stage  Activities  for the period July 1, 1995 through
March 31, 1996

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

         As of January 1, 1995,  the CQC  Indenture was amended to (i) eliminate
CQC's  obligation  to  construct  and open the  Capitol  Queen and (ii) permit a
two-step  purchase of the CQC Notes at 101% of principal plus accrued and unpaid
interest from a sale of assets.  The repurchase of $20,000,000  principal amount
of the CQC Notes (plus  accrued and unpaid  interest  thereon) was  completed on
January 17, 1995 with funds from the project  escrow account and an aggregate of
$20,000,000 principal amount of the CQC Notes remained outstanding. However, the
dates by which CQC previously agreed with the holders of the CQC Notes to effect
the sale of its assets and repurchase  the remaining CQC Notes have passed.  The
CQC Notes outstanding require annual interest payments of $2,400,000, payable in
equal installments  semi-annually on May 15 and November 15. CQC was not able to
make its scheduled  interest payment of $1,200,000 on November 15, 1995 and also
will not be able to make the interest payment due May 15, 1996. AC does not have
available  funds to  advance  on  behalf  of CQC.  Management  of AC and CQC are
currently  undergoing  discussions with an informal  committee  representing the
holders of the AC Notes and CQC Notes regarding a proposed  restructuring  plan,
however, an agreement has not yet been reached.

         CQC had entered into an Asset Purchase  Agreement  dated April 10, 1995
for the sale of its assets to Aerie  Riverboat  Casinos of  Missouri,  Inc. at a
purchase price of $18,000,000.  However,  the consummation of the Aerie purchase
agreement was subject to the satisfaction of several  conditions which could not
be satisfied timely, including, among others, that Jefferson City consent to the
assignment  of the  Development  Agreement,  that  Aerie  be  found  preliminary
suitable to hold a Missouri Gaming license and that riverboat  gaming is legally
permitted  in  Jefferson  City.  As a  result,  the  agreement  with  Aerie  was
terminated without penalty when the expiration date of December 31, 1995 passed.
CQC is  currently  pursuing  offers on its  riverboat  assets  from  prospective
buyers.

     During the period from July 1, 1995 through  March 31, 1996,  CQC had total
operating expenses of $5,241,000  consisting primarily of amortization  expenses
of $98,000  associated  with debt issue costs and $5,143,000 of other  operating
costs.  Other  operating costs include a write-down in the carrying value of the
riverboat of $4,392,000  (including costs for  architectural  plans and dredging
costs) and approximately  $200,000 of costs associated with the November 8, 1995
election  campaign.  The  remaining  $500,000 in  operating  costs are legal and
professional  fees and $15,000 per month for boat storage and insurance  paid to
the shipbuilder.  For the same period, CQC incurred $2,165,000 of interest cost,
of which none was capitalized due to the decision to suspend  development of the
riverboat project.


Liquidity and Capital Resources

         For the period July 1, 1995 through  March 31,  1996,  net cash used by
development stage activities was $45,000. At March 31, 1996, CQC had expended a
total of  approximately  $21,400,000 on the development and  construction of the
Capitol Queen.

         CQC's  long-term  obligations  consist of the  $20,000,000 in principal
amount of the outstanding CQC Notes.  There can be no assurance that CQC will be
successful in its efforts to sell its assets or, that if a sale is effected, the
proceeds will be sufficient  to fully or  substantially  repay the CQC Notes and
accrued interest thereon. Moreover, CQC because it has not yet effected the sale
of its assets, is in default of the CQC Indenture.  As a result,  the holders of
25% or more in  principal  amount of the CQC Notes may cause the CQC Notes to be
accelerated,  in which event they would  become  immediately  due and payable in
full. If the CQC Notes were to be accelerated,  CQC would not be able to pay the
outstanding  CQC Notes without an infusion of capital,  which is not expected to
be available.  CQC is not expected to engage in any activities after the sale of
its assets,  although it may continue to pursue legal relief with respect to the
injury caused by the ruling of Missouri Gaming Commission and the recent vote in
Jefferson City. The cost of pursuing such relief is expected to be borne by BGI.


PART II. OTHER INFORMATION

Item 1. Legal Proceedings

         BGI, CQC, and the Nevada Operating Companies (Arizona Charlie's,  Inc.,
Becker  Gaming  Group,  and Sunset Coin,  Inc.) are parties to various  lawsuits
relating  to routine  matters  incidental  to their  respective  businesses,  in
addition  to the  litigation  discussed  below.  Based on the amounts and issues
believed to be in controversy and  management's  evaluation of the merits of the
claims after  consultation  with counsel,  management  does not believe that the
outcome of such  litigation,  in the  aggregate,  will have a  material  adverse
effect on the results of operations  or financial  condition of BGI, CQC, or the
Nevada Operating Companies.

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

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

         On June 26, 1995,  the Circuit  Court  issued a peremptory  (permanent)
writ of mandamus  similar to the preliminary  writ,  declaring the  Commission's
order void and ordering the Commission to proceed with an investigation of CQC's
application  "with all  deliberate  speed."  On July 21,  1995,  the  Commission
appealed the Circuit  Court's  decision to the Missouri Court of Appeals for the
Western District, and on April 30, 1996, a three-judge panel of that Court ruled
that  mandamus  was not the proper  vehicle  for  challenging  the  Commission's
decision.  The Court of Appeals ruled that CQC may obtain  judicial  review only
after an  administrative  proceeding.  The Court of Appeals  also ruled that the
Commission could deny a license without  conducting an  investigation,  and that
the claim  that the  Commission  broke its  promise  not to deny  without  first
investigating  should be raised in a breach of contract  action,  not a mandamus
petition.  The Court of Appeals did not address the merits;  that is, it did not
decide  whether the  Commission  acted  arbitrarily  or whether its decision was
justified or a breach of its promises. The decision has no immediate consequence
because of a Circuit  Court's  ruling in a  separate  action  (discussed  below)
voiding the Commission's decision for the independent reason that it was made in
violation of Missouri's open meeting law. The Court of Appeals'  decision has no
effect on that ruling, so the Commission's decision remains void.  Nevertheless,
an appeal to the entire  nine-judge  Court of Appeals or to the Missouri Supreme
Court is being considered.

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

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

         On March 24, 1995,  CQC filed an action  against the  Commission in the
Cole County, Missouri,  Circuit Court, alleging that the Commission had violated
Missouri's  open meeting law by  deliberating in a closed session before issuing
its decision denying CQC's license.  The petition requested an order voiding the
Commission's  decision.  On March 27, as a protective  measure against  possible
arguments  that Cole County is not the proper venue,  CQC filed a  substantively
identical action in the St. Louis County Circuit Court. In April, the Commission
filed answers to both  complaints  denying that it had violated the open meeting
law. On June 1, CQC moved for summary  judgment in the Cole County case.  In its
response,  the  Commission  stated  that  it "did  not  deliberately  intend  to
circumvent"  the open meeting law but had deliberated in closed session based on
erroneous advice of counsel. The Commission argued that the closed session could
nevertheless be justified under statutory  exceptions  allowing agencies to meet
privately with their lawyers to discuss confidential information and litigation.
The Circuit Court heard the motion for summary judgment on December 19, 1995. In
an order issued on April 23, 1996,  the Circuit Court granted the motion,  ruled
that the  Commission  had  violated  the open  meeting  law,  and  declared  the
Commission's order void.

         In January 1995, CQC engaged in settlement discussions initiated by the
Missouri  Attorney  General's  office,  legal counsel for the  Commission,  with
respect to the civil matters  involving the Commission.  The discussions,  which
terminated  in March  1995,  were  resumed in August  1995 and were  expanded to
include the misdemeanor  charges filed by the Missouri Attorney  General.  While
CQC and its lawyers  continue to seek a  negotiated  settlement  to the disputes
with the  Commission  and the  Attorney  General,  the  discussions  were  again
terminated by the Attorney General's office.



Item 6.  Exhibits and Reports on Form 8-K

         No exhibits are included herein:

         The  Company  did not file any reports on from 8-K during the Three and
Nine Month periods ended March 31, 1996.



                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



Becker Gaming, Inc.
(Registrant)



Date: May 15, 1996
/S/ Bruce F. Becker
-------------------
Bruce F. Becker
President, Chief Executive
Officer(Principal Executive Officer)



Date: May 15, 1996
/S/ Jerry Griffis
-----------------
Jerry Griffis
Chief Financial Officer
(Principal Financial and Accounting Officer)