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                                    FORM 10-Q


                       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: September 30, 1997

                                       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                            October 31, 1997
---------------------                             --------------
  $.01 par value                                10,000,000 shares

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<PAGE>

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


PART I. FINANCIAL INFORMATION
Item 1.  Financial Statements (Unaudited)

                                                                        

BECKER GAMING, INC. AND SUBSIDIARIES
    Consolidated Balance Sheets as of September 30, 1997 
     and June 30, 1997 ................................................. 
    Consolidated Statements of Operations and Retained 
     Earnings(Deficit) for the Three-Month Periods Ended
        September 30, 1997 and 1996 and for the Three-Month
    Periods Ended September 30, 1997 and 1996 .......................... 
    Consolidated Statements of Cash Flows for the Three-Month
        Periods Ended September 30, 1997 and 1996 ...................... 
    Notes to Consolidated Financial Statements ......................... 

ARIZONA CHARLIE'S, INC
    Balance Sheets as of September 30, 1997 and June 30, 1997........... 
    Statements of Operations and Retained Earnings (Deficit) for the
        Three-Month Periods Ended September 30, 1997
        and 1996 and for the Three-Month Periods Ended
        September 30, 1997 and 1996......................................
    Statements of  Cash Flows for the Three-Month Periods
        Ended September 30, 1997 and 1996................................
    Notes to Financial Statements........................................

SUNSET COIN, INC
    Balance Sheets as of September 30, 1997 and June 30, 1997............
    Statements of Income and Retained Earnings for the Three-Month
        Periods Ended September 30, 1997 and 1996 and for the
        Three-Month Periods Ended September 30, 1997 and 1996............
    Statements of Cash Flows for the Three-Month Periods Ended
        September 30, 1997 and 1996......................................
    Notes to Financial Statements........................................

CAPITOL QUEEN & CASINO, INC
    Balance Sheets as of September 30, 1997 and June 30, 1997............
    Statements of Loss Incurred During the Development Stage
        for the  Three-Month  Periods Ended  September 30, 
        1997 and 1996 and for the Three-Month Periods Ended 
        March 31, 1997 and 1996 and for the period from January 
        20, 1993 (the date of inception) through September 30,
        1997 ............................................................
    Statements of Cash Flows for the for Three-Month Periods 
        Ended September 30, 1997 and 1996 and for the period 
        from January  20,  1993 (the date of inception) through 
        September 30, 1997 ..............................................
    Notes to Financial Statements........................................


Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations



    Becker Gaming, Inc...................................................
    Arizona Charlie's, Inc...............................................
    Sunset Coin, Inc.....................................................
    Capitol Queen & Casino, Inc..........................................

Part II.  Other Information
    Item 1  Legal Proceedings............................................
    Item 5  Other Information ...........................................
    Item 6  Exhibits and Reports on Form 8-K.............................

Signatures...............................................................

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<PAGE>

                      BECKER GAMING, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                    (Dollars In Thousands, Except Share Data)



                                     ASSETS


                                                    September 30,      June 30,
                                                        1997              1997
                                                    ------------    ------------
                                                    (Unaudited)

Current assets:

 Cash and cash equivalents .......................      $  8,600       $  7,394
 Restricted cash, in escrow account ..............            41             41
 Trade and other accounts receivable .............           373            374
 Current portion receivables from related parties.            48             22
 Inventories .....................................           653            665
 Prepaid expenses ................................           939          1,119
 Current portion of notes receivable .............            90            256
 Assets held for sale ............................           370            382
                                                        --------       --------
     Total current  assets .......................        11,114         10,253
                                                        --------       --------
Property and equipment:
 Land improvements ...............................         1,628          1,628
 Building and improvements .......................        38,284         38,284
 Leasehold improvements ..........................           655            663
 Furniture and equipment .........................        29,843         29,013
                                                        --------       --------
                                                          70,410         69,588

 Less, accumulated depreciation ..................       (21,920)       (21,266)
                                                        --------       --------
                                                          48,490         48,322
 Land ............................................           208            208
 Construction in process .........................           480            443
                                                        --------       --------
     Net property and  equipment .................        49,178         48,973
                                                        --------       --------

Other assets:

 Assets held for sale ............................         7,754          7,754
 Notes receivable, less current portion, net .....           245            268
 Receivables from related parties, less
   current portion ...............................           165            165
 Deposits and other ..............................         1,202          1,187
 Financing costs, net ............................         2,236          2,409
                                                        --------       --------
     Total other assets ..........................        11,602         11,783
                                                        --------       --------
     Total assets ................................      $ 71,894       $ 71,009
                                                        ========       ========

<PAGE>

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)


                                                     September 30,     June 30,
                                                         1997             1997
                                                   ------------     ------------
                                                     (Unaudited)

Current  liabilities:
 Trade accounts payable ..........................      $  1,719       $  1,355
 Construction accounts payable ...................           153            443
 Accrued interest ................................        13,064          9,998
 Accrued expenses ................................         3,296          3,125
 Notes payable ...................................            43            106
 Current portion of subordinated notes
   payable to stockholders .......................           800            800
 Current portion of long term debt ...............         1,376            887
 Long-term debt classified as current, net of
   unamortized original issue discount of
    $1,975 and $2,092,  respectively .............        73,025         72,908
 Current portion of obligations
    under capital leases .........................           133            138
                                                        --------       --------
     Total current liabilities ...................        93,609         89,760

Long-term debt, less current portion .............         2,794          2,314
Subordinated notes payable to stockholders,
  less current portion ...........................         8,000          8,000
Obligations under capital leases, less
  current portion ................................           124             98
                                                        --------       --------
     Total liabilities ...........................       104,527        100,172
                                                        --------       --------

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) .....................       (41,739)       (38,269)
                                                        --------       --------
     Total stockholders' equity (deficit) ........       (32,633)       (29,163)
                                                        --------       --------
     Total liabilities and
     stockholders' equity (deficit) ...............     $ 71,894       $ 71,009
                                                        ========       ========


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

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



                                                Three Months Ended September 30,
                                                       1997              1996
                                                 ------------      ------------
Revenues:
   Gaming ..................................     $     13,535      $     14,430
   Food and beverage .......................            4,126             4,583
   Hotel ...................................              647               761
   Gift shop ...............................              160               131
   Other ...................................              256               271
                                                 ------------      ------------
        Gross revenues .....................           18,724            20,176
Less, promotional allowances ...............           (1,918)           (2,583)
                                                 ------------      ------------
        Net revenues .......................           16,806            17,593

Operating expenses:
   Gaming ..................................            4,349             5,059
   Food and beverage .......................            4,296             4,360
   Hotel ...................................              337               406
   Gift shop ...............................              138               124
   Advertising and promotion ...............            1,037             1,330
   General and administrative ..............            5,762             5,456
   Rent expense paid to related party ......              121               104
   Depreciation and  amortization ..........            1,080             1,022
                                                 ------------      ------------
        Total operating expenses ...........           17,120            17,861
                                                 ------------      ------------
        Operating income ...................             (314)             (268)
                                                 ------------      ------------
Other income (expenses):
   Development costs .......................             (143)              (73)
   Interest income .........................               13                31
   Interest expense ........................           (3,015)           (2,740)
   Other, net ..............................              (11)               30
   Provision for income taxes ..............               --                -- 
                                                 ------------      ------------
        Total other income (expense) .......           (3,156)           (2,752)
                                                 ------------      ------------
        Loss before income taxes ...........           (3,470)           (3,020)
        Provision for income taxes .........               --                --
                                                 ------------      ------------
        Net loss ...........................           (3,470)           (3,020)

        Retained earnings (deficit),
        beginning of period ................          (38,269)          (27,103)
                                                 ------------      ------------

        Retained earnings (deficit),
        end of period ......................     $    (41,739)     $    (30,123)
                                                 ============      ============

        Net loss per share of
        common stock .......................     $      (0.35)     $      (0.30)
                                                 ============      ============
        Weighted average common
        shares outstanding .................       10,000,000        10,000,000
                                                 ============      ============


The accompanying notes are an integral part of these consolidated
financial statements.
================================================================================
<PAGE>

                      BECKER GAMING, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                             (Dollars In Thousands)
                                   (Unaudited)

                                                Three Months Ended September 30,
                                                             1997          1996
                                                         --------      --------
Cash flows from operating activities:
  Net (loss) income ................................     $ (3,470)     $ (3,020)
  Adjustments to reconcile net (loss) income to net
     cash provided by operating activities:
     Depreciation and amortization .................        1,080         1,022
     Amortization of original issue discount .......          117           135

Increase (decrease) in operating assets:
    Receivables ....................................            1           160
    Receivables from related parties ...............          (26)          (11)
    Inventories ....................................           12           (11)
    Prepaid expenses ...............................          180           177
    Deposits and other assets ......................          (23)          (31)

Increase (decrease) in operating liabilities:
    Accounts payable, net of amounts for capital
     expenditures .................................           364           125
    Accrued expenses ...............................        3,237         2,698
                                                         --------      --------
            Total adjustments ......................        4,942         4,264
                                                         --------      --------
        Net cash provided by operating activities ..        1,472         1,244
                                                         --------      --------

Cash flows from investing activities:
  Capital expenditures, net of construction
    accounts payable ...............................         (668)         (233)
  Proceeds from sale of equipment ..................          168         3,315
  Payments of notes receivable .....................          189            30
                                                         --------      --------
    Net cash provided by (used in)
     investing activities ..........................         (311)        3,112
                                                         --------      --------

Cash flows from financing activities:
  Proceeds under notes payable .....................          390            -
  Payments under notes payable .....................         (287)         (129)
  Payments under capital lease obligations .........          (58)       (1,884)
                                                         --------      --------
    Net cash provided by (used in) financing 
    activities .....................................           45        (2,013)
                                                         --------      --------
    Net increase in cash and cash equivalents ......        1,206         2,343
Cash and cash equivalents, beginning of period .....        7,394         6,745
                                                         --------      --------
Cash and cash equivalents, end of period ...........     $  8,600      $  9,088
                                                         ========      ========

Supplemental cash flow disclosures:

   Interest paid ...................................     $    207      $    351
                                                         ========      ========
   Assets acquired through issuance of long-term
     debt and capital leases........................     $    882      $     -
                                                         ========      ========

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

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



1)   Basis of Presentation:

The accompanying consolidated financial statements of Becker Gaming, Inc. ("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 month period ended  September 30, 1997 are not necessarily
indicative of the results that may be expected for the year ended June 30, 1998.
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, 1997.

Certain  amounts in the 1996  financial  statements  have been  reclassified  to
conform with the 1997 presentation.


2)   Arizona Charlie's, Inc. Bankruptcy Filing

Arizona  Charlie's,  Inc.,  ("AC"),  is a wholly owned subsidiary of BGI and the
source of the majority of BGI's  operating  revenues and cash flows. On November
14, 1997, AC filed a voluntary petition under Chapter 11 of the U.S.  Bankruptcy
Court in Las  Vegas,  Nevada in order to provide it  protection  from  creditors
while it attempts to  negotiate a settlement  with the holders of certain  debt,
which is more fully described in Note 3.


3)   Missouri Gaming License,  Default Under  Indebtedness,  Management's Plans,
     and Going Concern:

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

On November 7, 1995,  voters in Jefferson City rejected an ordinance  permitting
riverboat gambling, reversing the vote of an earlier election in which Jefferson
City voters approved riverboat  gambling.  Management  ultimately  determined to
abandon the  project,  and is  currently  looking for  alternative  uses for the
riverboat, including opportunities to sell or lease it to another operator.

CQC financed the Capitol Queen project  through the issuance of  $40,000,000  in
principal  amount of 12% First  Mortgage  Notes due  November 15, 2000 (the "CQC
Notes").  As of January  1,  1995,  the  indenture  governing  the CQC Notes was
amended to (i)  eliminate  CQC's  obligation  to construct  and open the Capitol
Queen and (ii) permit a two-step  purchase of the CQC Notes at 101% of principal
plus  accrued  and  unpaid  interest  from a sale  of  assets.  The  first  step
repurchase of  $20,000,000  principal  amount of the CQC Notes (plus accrued and
unpaid  interest) was completed on January 17, 1995, with unexpended  funds from
the project escrow account, and an aggregate of $20,000,000  principal amount of
the CQC Notes remained  outstanding.  However, the dates by which CQC previously
agreed  with the  holders  of the CQC Notes to effect the sale of its assets and
repurchase  the remaining  CQC Notes have passed,  and CQC is thus in default of
the amended covenants.

The remaining CQC Notes require annual interest payments of $2,400,000,  payable
in equal installments  semi-annually on May 15 and November 15. CQC was not able
to make its scheduled  interest payments of $1,200,000 on November 15, 1995, May
15, 1996, November 15, 1996, May 15, 1997 and November 15, 1997 andAC (which has
guaranteed the CQC Notes as more fully  described  below) did not have available
funds to advance on behalf of CQC.

Concurrent with the issuance of the CQC Notes, AC completed a private  placement
debt financing of  $55,000,000  in principal  amount of 12% First Mortgage Notes
due November 15, 2000 (the "AC Notes").  The AC Notes  require  annual  interest
payments of $6,600,000,  payable in equal  installments  semi-annually on May 15
and  November  15. AC was not able to make its  scheduled  interest  payments of
$3,300,000 on May 15, 1997 and November 15, 1997 and Sunset Coin,  Inc.  ("SC"),
another  wholly owned  subsidiary of BGI (which has  guaranteed  the AC Notes as
more fully described below) did not have available funds to advance on behalf of
AC. AC is restricted  from selling  assets under the covenants  governing the AC
Notes and  management  believes  that access to  additional  capital  from other
sources is restricted as a result of the above described circumstances.  AC does
not have sufficient financial resources (including a guaranty of the AC Notes by
SC, as more fully described  below) to repay the AC Notes on a current basis and
satisfy its guaranty  obligation (as more fully described below) with respect to
the CQC Notes.

As of September 30, 1997, AC was in default of certain debt covenants  under the
Indenture  governing  the AC Notes.  These  covenant  violations  include  (i) a
failure  to meet a minimum  Fixed  Charge  Coverage  ratio,  as  defined  in the
Indenture;  (ii)  advances by AC to Becker  Gaming,  Inc.  which exceed  amounts
allowed for under the Indenture (which advances remain  outstanding at September
30, 1997);  (iii) beginning in the fourth quarter of fiscal 1997,  exceeding the
amount of new indebtedness allowed for under the Indenture;  (iv) beginning with
the quarter  ending  December 31, 1995, AC has not met the Minimum  Tangible Net
Worth Ratio of 1.5 to 1.0, as defined in the Indenture;  and (v) AC did not make
its required  semi-annual  interest  payments of  $3,300,000 on May 15, 1997 and
November 15, 1997. In addition,  beginning with the quarter ending  December 31,
1995, AC has not met the Minimum Tangible Net Worth  requirement  defined in the
Indenture.  Under the terms of the  Indenture,  AC was  technically  required to
offer to buy back  $38,500,000 of the outstanding AC Notes at September 30, 1997
due to the failure to meet this covenant,  increasing by $5,500,000  each fiscal
quarter.  AC has not made  such  offer.  As a result  of  these  defaults  under
covenants  and demand for payment  made by the  Trustee,  the AC Notes have been
classified as currently payable in the accompanying financial statements.

The CQC Notes are  guaranteed  by AC (which  guaranty is subject to release only
upon  licensing of the Capitol Queen,  which is not expected).  The AC Notes are
guaranteed  by SC (which  guaranty is subject to release upon  completion of the
Expansion, which management believes has been satisfied, and the attainment of a
fixed-coverage  ratio  by AC of  2.25  to 1  following  the  completion  of  the
Expansion, which has not been satisfied). The amount and extent of AC's guaranty
of the CQC Notes is in dispute. Legal counsel has advised management that, under
the terms of the CQC indenture regarding fraudulent conveyance and limitation of
guarantor's  liability,  the  guaranty  liability  of AC is not  expected  to be
material.

On July 3, 1997, CQC received a notice of  acceleration  (the "Notice") from the
trustee and collateral agent for the CQC Notes.  Pursuant to section 6.02 of the
indenture  governing the CQC Notes, due to certain  violations of the indenture,
all of the outstanding  CQC Notes are immediately due and payable  together with
all accrued and unpaid interest thereon.

On September 5, 1997, AC received a notice of acceleration  from the trustee and
collateral  agent for the AC Notes.  Pursuant to section  6.02 of the  indenture
governing  the AC Notes,  due to certain  violations of the indenture all of the
outstanding AC Notes are immediately  due and payable  together with all accrued
and unpaid interest thereon.

The CQC Indenture contains covenants that, among other things, limit the ability
of CQC and, in certain cases,  AC, to pay dividends or management fees, or incur
additional  indebtedness.  At  September  30,  1997,  CQC had a net  deficit  of
approximately $18,900,000.

The AC Indenture contains covenants that, among other things,  limit the ability
of AC and, in certain cases,  SC, to pay dividends or management  fees, or incur
additional indebtedness.  At September 30, 1997 approximately $2,100,000 of SC's
net assets  were  restricted  by such  Indenture  covenants;  while AC had a net
deficit of approximately $19,200,000.

In connection with the decision to abandon the project,  CQC had entered into an
Asset  Purchase  Agreement  dated April 10, 1995,  for the sale of its assets to
Aerie  Riverboat  Casinos of Missouri,  Inc. at a purchase price of $18,000,000,
which  price  exceeded  the  carrying  value  of the CQC  assets.  However,  the
consummation of the Aerie purchase  agreement was subject to the satisfaction of
several conditions which could not be satisfied timely, including, among others,
that Jefferson City consent to the assignment of its Development  Agreement with
CQC,  that  Aerie be found  preliminarily  suitable  to hold a  Missouri  Gaming
license,  and that riverboat gaming is legally permitted in Jefferson City. As a
result,  the  agreement  with  Aerie was  terminated  without  penalty  when the
December 31, 1995 expiration  date passed.  As more fully described in Note 3, a
further  write-down in the carrying value of the riverboat was recognized in the
third quarter of 1996,  after the election in Jefferson  City, the expiration of
the Aerie contract, and due to deteriorating market conditions.


CQC continues to market its riverboat  assets to  prospective  buyers.  Based on
current  market  conditions,  management  does not expect that CQC will generate
sufficient  funds  through  the  sale of its  assets  to  repurchase  all of the
outstanding CQC Notes.  These matters raise  substantial doubt about the ability
of the Company's principal subsidiaries (and, thus the Company) to continue as a
going concern. The final outcome of these matters is not presently  determinable
and the  September 30, 1997  financial  statements of the Company do not include
any adjustment that might result from the outcome of this uncertainty.

4).  Assets Held For Sale:

At September 30, 1997, BGI had $7,754,000 of assets held for sale, consisting of
land and riverboat  assets which were written down to a carrying  value based on
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.


5)   Becker Gaming Group Property Transactions:

Becker Gaming Group ("BGG") another wholly owned subsidiary of BGI, entered into
an agreement to sell one of its bars  ("Cantina  Charlie's")  to a  prospective,
unrelated  buyer,  subject to approval by Nevada Gaming  Authorities,  for which
licensing  and  operator  approval  is  pending.  The  sale  is  subject  to the
aforementioned requirements and satisfactory escrow procedures. Accordingly, the
fixed assets of Cantina  Charlie's  which total $370,000 have been classified as
assets held for sale in the accompanying financial statements.

A new BGG bar is currently  under  construction  and is expected to be opened in
December, 1997. At September 30, 1997, $480,000 has been expended on the project
and is  classified  as  Construction  in process on the  accompanying  financial
statements.


================================================================================
<PAGE>
                             ARIZONA CHARLIE'S, INC.

               (A Wholly Owned Subsidiary Of Becker Gaming, Inc. )
                                 BALANCE SHEETS
                             (Dollars In Thousands)



                                     ASSETS


                                               September 30,  June 30,
                                                     1997        1997
                                                 --------    --------
                                                 (unaudited)
Current assets:

   Cash and cash equivalents .................   $  6,089    $  5,481
   Restricted cash, in escrow account ........         10          10
   Trade and other accounts receivable .......        243         240
   Receivable from related  parties ..........      2,862       2,665
   Inventories ...............................        520         529
   Prepaid expenses ..........................        799         985
                                                 --------    --------
     Total current assets ....................     10,523       9,910
                                                 --------    --------

Property and equipment:

   Building and improvements .................     37,490      37,490
   Furniture and equipment ...................     24,974      23,916
   Land improvements .........................      1,629       1,629
                                                 --------    --------
                                                   64,093      63,035
   Less, accumulated  depreciation ...........    (19,041)    (18,303)
                                                 --------    --------
                                                   45,052      44,732
   Land ......................................        208         208
                                                 --------    --------
       Net property and equipment ............     45,260      44,940
                                                 --------    --------

Other assets:

   Receivable from related party, noncurrent..        210         210
   Deposits and other ........................        542         544
   Note receivable from related party.........      4,416       4,416
   Financing costs, less accumulated
   amortization of $2,063 at September 30,
   1997 and $1,923 June 30, 1997 .............      1,797       1,937
                                                 --------    --------
       Total other  assets ...................      6,965       7,107
                                                 --------    --------
       Total assets ..........................   $ 62,748    $ 61,957
                                                 ========    ========
<PAGE>

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)



                                                September,   June 30,
                                                     1997        1997
                                                 --------    --------
                                               (unaudited)


Current liabilities:
   Trade accounts payable ....................   $  1,282    $  1,047
   Accrued expenses ..........................      2,952       2,642
   Accrued interest ..........................      6,503       4,522
   Management fees due Becker Gaming, Inc. ...      5,505       5,347
   Notes payable, current portion.............         43         106
   Notes payable to related party ............      3,150       3,150
   Current portion of obligations
     under capital leases ....................         24          12
   Current portion of long-term ..............        935         464
   Long-term debt classified as current due
     to default under covenants ..............     55,000      55,000
                                                 --------    --------
           Total current liabilities .........     75,394      72,290

Long-term debt, less current portion .........      1,441       1,284
Subordinated notes payable to prior
  stockholders ...............................      5,000       5,000
Obligations under capital leases,
  less current portion .......................         80          29
                                                 --------    --------
           Total liabilities .................     81,915      78,603
                                                 --------    --------

Commitments and contingencies

Stockholders' equity (deficit):
  Common stock, no par value,
   2,500 shares authorized, 1,000
   shares issued and outstanding .............        469         469

  Retained earnings (deficit) ................    (19,636)    (17,115)
                                                 --------    --------

           Total stockholders' equity
           (deficit) .........................    (19,167)    (16,646)
                                                 --------    --------

           Total liabilities  and
           stockholders' equity (deficit) ....   $ 62,748    $ 61,957
                                                 ========    ========


The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
                             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 September 30,
                                                           1997            1996
                                                       --------        --------
Revenues:
  Gaming .......................................       $ 11,574        $ 12,229
  Food and beverage ............................          3,129           3,501
  Hotel ........................................            647             761
  Gift shop ....................................            160             131
  Other ........................................            247             258
                                                       --------        --------
      Gross revenues ...........................         15,757          16,880
Less, promotional allowances ...................         (1,584)         (2,195)
                                                       --------        --------
      Net revenues .............................         14,173          14,685
                                                       --------        --------

Operating expenses:
  Gaming .......................................          3,914           4,488
  Food and beverage ............................          3,288           3,166
  Hotel ........................................            337             406
  Gift shop ....................................            138             124
  Advertising and promotion ....................          1,017           1,287
  Provision for losses on related party
     receivables ...............................             79              73
  General and administrative ...................          4,837           4,590
  Management fee - Becker Gaming, Inc. .........            158             169
  Rent expense paid to related party ...........             57              55
  Depreciation and amortization ................            911             858
                                                       --------        --------
      Total operating expenses .................         14,736          15,216
                                                       --------        --------
      Operating income (loss)...................           (563)           (531)
                                                       --------        --------

Other income (expenses):
  Interest income ..............................             68              68
  Interest expense .............................         (2,031)         (1,811)
  Gain (loss) on sale of assets .................            (5)             --
  Other, net ...................................             10              30
                                                       --------        --------
      Total other expenses .....................         (1,958)         (1,713)
                                                       --------        --------
      Income (loss) before taxes ...............         (2,521)         (2,244)
                                                       --------        --------
      Provision for income taxes ...............             --              --
                                                       --------        --------
      Net (loss) income .........................      ($ 2,521)       ($ 2,244)

Retained earnings (deficit),
  beginning of period ..........................        (17,115)         (9,970)
                                                       --------        --------

Retained earnings (deficit),
   end of period ...............................       ($19,636)       ($12,214)
                                                       ========        ========
<PAGE>


The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
                             ARIZONA CHARLIE'S, INC.
               (A Wholly Owned Subsidiary Of Becker Gaming, Inc.)

                            STATEMENTS OF CASH FLOWS
                             (Dollars In Thousands)

                                   (Unaudited)


                                                Three Months Ended September 30,
                                                               1997        1996
                                                           --------    --------
Cash flows from operating activities:
    Net income (loss) ..................................   ($ 2,521)   ($ 2,244)

    Adjustments to reconcile net income 
     (loss) to net cash provided by operating
     activities:
    Provision for losses on related party receivables ..         79          73
    Depreciation and amortization ......................        911         858

(Increase) decrease in operating assets:
    Trade and related party receivables ................       (200)        169
    Inventories ........................................          9          (6)
    Prepaid expenses ...................................        186         168
    Deposits and other .................................          2         (12)

Increase (decrease) in operating liabilities:
    Accounts payable ...................................        235         (87)
    Management fees due to Becker Gaming, Inc. .........        158         169
    Accrued interest and other expenses ................      2,291       2,326
                                                           --------    --------
       Total adjustments ...............................      3,671       3,658
                                                           --------    --------
        Net cash provided by operating activities ......      1,150       1,414
                                                           --------    --------

Cash flows from investing activities:
    Capital expenditures ...............................       (386)       (104)
    Increase in related party notes receivables ........         --        (406)
    Proceeds from assets sales .........................         13          --
                                                           --------    --------
       Net cash provided by
          investing activities .........................       (373)       (510)
                                                           --------    --------

Cash flows from financing activities:
    Principal payments on notes payable ................       (154)        (65)
    Payments under capital lease obligations ...........        (15)         (4)
                                                           --------    --------
       Net cash provided by
          financing activities .........................       (169)        (69)
                                                           --------    --------
       Net increase in cash and cash equivalents .......        608         835
Cash and cash equivalents, beginning of the period .....      5,481       4,591
                                                           --------    --------
Cash and cash equivalents, end of the period ...........   $  6,089    $  5,426
                                                           ========    ========
Supplemental cash flow disclosures:
    Interest paid ......................................   $     67    $    129
                                                           ========    ========
    Assets acquired through issuance of long-term debt
     and captal leases .................................   $    797    $     -
                                                           ========    ========


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

<PAGE>

                              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" or the "Company") is a wholly owned subsidiary of
Becker Gaming, Inc. ("BGI").  The accompanying  financial  statements of AC 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 month period ended September 30, 1997
are not necessarily  indicative of the results that may be expected for the year
ended  June 30,  1998.  The  unaudited  financial  statements  should be read in
conjunction with the financial  statements and footnotes included in AC's annual
report on Form 10-K for the year ended June 30, 1997.

Certain  amounts in the 1996  financial  statements  have been  reclassified  to
conform with the 1997 presentation.


2)   Arizona Charlie's, Inc. Bankruptcy Filing

On November 14, 1997, AC filed a voluntary petition under Chapter 11 of the U.S.
Bankruptcy  Court in Las Vegas,  Nevada in order to provide it  protection  from
creditors  while it  attempts  to  negotiate  a  settlement  with the holders of
certain debt, which is more fully described in Note 3.


3)   Missouri Gaming License,  Default Under  Indebtedness,  Management's Plans,
     and Going Concern:

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

On November 7, 1995,  voters in Jefferson City rejected an ordinance  permitting
riverboat gambling, reversing the vote of an earlier election in which Jefferson
City voters approved riverboat gambling.  Management  subsequently abandoned the
project  and is  currently  looking  for  alternative  uses  for the  riverboat,
including opportunities to sell or lease it to another operator.

CQC financed the Capitol Queen project  through the issuance of  $40,000,000  in
principal  amount of 12% First  Mortgage  Notes due  November 15, 2000 (the "CQC
Notes").  As of January  1,  1995,  the  indenture  governing  the CQC Notes was
amended to (i)  eliminate  CQC's  obligation  to construct  and open the Capitol
Queen and (ii) permit a two-step  purchase of the CQC Notes at 101% of principal
plus  accrued  and  unpaid  interest  from a sale  of  assets.  The  first  step
repurchase of  $20,000,000  principal  amount of the CQC Notes (plus accrued and
unpaid  interest) was completed on January 17, 1995, with unexpended  funds from
the project escrow account, and an aggregate of $20,000,000  principal amount of
the CQC Notes remained  outstanding.  However, the dates by which CQC previously
agreed  with the  holders  of the CQC Notes to effect the sale of its assets and
repurchase  the remaining  CQC Notes have passed,  and CQC is thus in default of
the amended covenants.

The remaining CQC Notes require annual interest payments of $2,400,000,  payable
in equal installments  semi-annually on May 15 and November 15. CQC was not able
to make its scheduled  interest payments of $1,200,000 on November 15, 1995, May
15, 1996,  November  15, 1996,  May 15, 1997 and November 15, 1997 and AC (which
has  guaranteed  the CQC  Notes  as more  fully  described  below)  did not have
available funds to advance on behalf of CQC.

Concurrent with the issuance of the CQC Notes, AC completed a private  placement
debt financing of  $55,000,000  in principal  amount of 12% First Mortgage Notes
due November 15, 2000 (the "AC Notes").  The AC Notes  require  annual  interest
payments of $6,600,000,  payable in equal  installments  semi-annually on May 15
and  November  15. AC was not able to make its  scheduled  interest  payment  of
$3,300,000 on May 15, 1997 and November 15, 1997 and Sunset Coin,  Inc.  ("SC"),
another  wholly owned  subsidiary of BGI (which has  guaranteed  the AC Notes as
more fully described below) did not have available funds to advance on behalf of
AC. AC is also in  default  of  certain  covenants  under  the AC  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 result  of the  above-described  circumstances.  AC does not have
sufficient  financial resources (including a guarantee of the AC Notes by SC, as
more fully described below) to repay the AC Notes on a current basis and satisfy
its guarantee obligation (as more fully described below) with respect to the CQC
Notes.

The CQC Notes are  guaranteed by AC (which  guarantee is subject to release only
upon  licensing of the Capitol Queen,  which is not expected).  The AC Notes are
guaranteed by SC (which guarantee is subject to release upon the attainment of a
fixed-coverage  ratio by AC of 2.25 to 1,  which  has not been  satisfied).  The
amount and extent of AC's guaranty of the CQC Notes is in dispute. Legal counsel
has  advised  management  that,  under  the  terms  of CQC  indenture  regarding
fraudulent  conveyance,  the  guarantee  liability  of AC is not  expected to be
material.

On July 3, 1997 CQC received a notice of  acceleration  (the  "Notice") from the
trustee and collateral agent for the CQC Notes.  Pursuant to section 6.02 of the
indenture  governing the CQC Notes,  due to certain  violations of the indenture
(as  more  fully  described  above),  all  of  the  outstanding  CQC  Notes  are
immediately  due and  payable  together  with all  accrued  and unpaid  interest
thereon.

On September 5, 1997, AC received a notice of acceleration  from the trustee and
collateral  agent for the AC Notes.  Pursuant to section  6.02 of the  indenture
governing the AC Notes, due to certain  violations of the indenture,  all of the
outstanding AC Notes are immediately  due and payable  together with all accrued
and unpaid interest thereon.

As of September 30, 1997, AC was in default of certain debt covenants  under the
Indenture  governing  the AC Notes.  These  covenant  violations  include  (i) a
failure  to meet a minimum  Fixed  Charge  Coverage  ratio,  as  defined  in the
Indenture;  (ii)  advances by AC to Becker  Gaming,  Inc.  which exceed  amounts
allowed for under the Indenture (which advances remain  outstanding at September
30, 1997);  (iii) beginning in the fourth quarter of fiscal 1997,  exceeding the
amount of new indebtedness allowed for under the Indenture;  (iv) beginning with
the quarter  ending  December 31, 1995, AC has not met the Minimum  Tangible Net
Worth Ratio of 1.5 to 1.0, as defined in the Indenture;  and (v) AC did not make
its required  semi-annual  interest  payments of  $3,300,000 on May 15, 1997 and
November 15, 1997. In addition,  beginning with the quarter ending  December 31,
1995, AC has not met the Minimum Tangible Net Worth  requirement  defined in the
Indenture.  Under the terms of the  Indenture,  AC was  technically  required to
offer to buy back  $38,500,000 of the outstanding AC Notes at September 30, 1997
due to the failure to meet this covenant,  increasing by $5,500,000  each fiscal
quarter.  As a result of these defaults  under  covenants and demand for payment
made by the Trustee,  the AC Notes have been classified as currently  payable in
the accompanying financial statements.

CQC continues to market its riverboat  assets to  prospective  buyers.  Based on
current  market  conditions,  management  does not expect that CQC will generate
sufficient  funds  through  the  sale of its  assets  to  repurchase  all of the
outstanding CQC Notes.  These matters raise  substantial doubt about the ability
of AC to continue as a going concern.  The final outcome of these matters is not
presently  determinable and the September 30, 1997 financial statements of AC do
not  include  any  adjustment  that  might  result  from  the  outcome  of  this
uncertainty.


4)     Related-Party Transactions:

AC has advanced to BGI an aggregate of  approximately  $6,478,000  to fund BGI's
operating  expenses from June 1994 through  September  1997 of which  $4,416,000
represented  notes receivable that are interest bearing and have been classified
as noncurrent  based on  management's  expectation  for the timing of repayments
from BGI. At September  30, 1997,  accrued  interest  receivable on the interest
bearing portion of the advances to BGI totaled  $698,000.  The matters described
in Notes 2 and 3 raise  substantial  doubt about the ability of BGI's  principal
subsidiaries  (and,  thus  BGI) to  continue  as a going  concern.  Accordingly,
management of the Company believes it is reasonably  possible that a portion, or
the entire  balance,  of the notes  receivable  from BGI will be  uncollectible.
However,  an  estimate  of  the  loss  cannot  presently  be  determined  and no
adjustment  has been made to the carrying value or  classification  of the notes
receivable at September 30, 1997.


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

<PAGE>

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

                                 BALANCE SHEETS
                             (Dollars In Thousands)


                                     ASSETS


                                                        September 30,   June 30,
                                                                1997      1997
                                                             -------    -------
                                                         (Unaudited)
Current assets:
  Cash ...................................................   $   944    $   707
  Current portion of notes receivable ....................        47        222
  Note receivable from related party .....................     3,150      3,150
  Advances to related party ..............................       369        312
  Other receivables ......................................        30         27
  Interest receivable from related party .................       354        313
  Prepaid expenses .......................................        40         45
                                                             -------    -------
      Total current assets ...............................     4,934      4,776
                                                             -------    -------


Property and equipment:
  Building and leasehold improvements ....................       174        174
  Furniture, fixtures and equipment ......................     3,042      3,068
                                                             -------    -------
                                                               3,216      3,242
  Less, accumulated depreciation .........................    (1,588)    (1,604)
                                                             -------    -------
      Net property and equipment .........................     1,628      1,638
                                                             -------    -------

Other assets:
  Notes receivable, less current
    portion ..............................................        11         18

  Advances to related parties ............................       236        111

  Other assets, less accumulated
    amortization of $41 at September 30, 1997,
    and $37 at June 30, 1997 .............................        71         75
                                                             -------    -------

      Total other assets .................................        82         93
                                                             -------    -------
      Total assets .......................................   $ 6,644    $ 6,507
                                                             =======    =======
<PAGE>


                      LIABILITIES AND STOCKHOLDERS' EQUITY


                                                        September 30,  June 30,
                                                               1997     1997
                                                             ------   ------
                                                        (Unaudited)
Current liabilities:
  Trade accounts payable .................................   $   11   $   13
  Accrued expenses .......................................       65       39
  Accrued taxes payable to related party .................      818      779
  Current portion of long-term debt ......................      340      322
                                                             ------   ------
       Total current liabilities .........................    1,234    1,153


Long-term liabilities:
   Long-term debt, less current portion ..................      262      305
   Subordinated notes payable to former stockholders .....    3,000    3,000
                                                             ------   ------
      Total liabilities ..................................    4,496    4,458
                                                             ------   ------

Commitments and contingencies

Stockholders' equity:
  Common stock, no par value, 2,500 shares authorized,
  400 shares issued and outstanding ......................       27       27
Retained earnings ........................................    2,121    2,022
                                                             ------   ------
      Total stockholders' equity .........................    2,148    2,049
                                                             ------   ------

      Total liabilities and stockholders'
      equity .............................................   $6,644   $6,507
                                                             ======   ======

The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
                                SUNSET COIN, INC.
               (A Wholly Owned Subsidiary of Becker Gaming, Inc.)


                   STATEMENTS OF INCOME AND RETAINED EARNINGS
                             (Dollars in Thousands)



                                         Three Months Ended September 30,
                                              1997               1996
                                           -------            -------
Revenues:
    Slot route:
       From locations controlled
          by related parties ...........   $   599          $   567
       Other ...........................        34               35

    Slot service fees:
       From related parties ............        21               21
       Other ...........................         8                8
                                           -------          -------
         Total revenues ................       662              631

Operating expenses:
    Slot route and service .............       364              347
    General and administrative .........        29               23
    Management fee - Becker Gaming, Inc.        34               33
    Depreciation and amortization ......        78               71
                                           -------          -------
       Total operating expenses ........       505              474
                                           -------          -------
Operating income .......................       157              157
                                           -------          -------
Other income (expense):
    Interest income ....................        47               47
    Interest expense ...................       (90)             (91)
    Other income .......................        24               24
                                           -------          -------
       Total other income (expense) ....       (19)             (20)
                                           -------          -------
Net income before income tax ...........       138              137
Provision for income taxes..............       (39              (39)
                                           -------          -------
Net income .............................        99               98
Retained earnings,
beginning of period ....................     2,022            1,431
                                           -------          -------
Retained earnings, end of
period .................................   $ 2,121          $ 1,529
                                           =======          =======


The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
                                SUNSET COIN, INC.
               (A Wholly Owned Subsidiary of Becker Gaming, Inc.)


                            STATEMENTS OF CASH FLOWS
                             (Dollars In Thousands)

                                   (Unaudited)


                                        Three Months Ended September 30,
                                             1997              1996
                                          -------           -------
Cash flows from operating activities:
    Net income ........................   $     99         $    98

    Adjustments  to  reconcile  net  
     income to net cash  provided  by  
     operating activities:
     Depreciation and amortization ....         78               71

(Increase) decrease in operating assets:
    Other receivables .................        (44)              24
    Prepaid expenses ..................          5                7

Increase (decrease) in operating liabilities:
     Accounts payable .................         (2)             (32)
     Accrued expenses .................         65               29
                                           -------          -------
         Total adjustments ............        102               99
                                           -------          -------
         Net cash provided by
          operating activities ........        201              197
                                           -------          -------
Cash flows from investing activities:
   Capital expenditures ...............         (9)             (70)
   Proceeds from sales of equipment ...         31               --
   Decrease (increase) in related
     party notes receivable ...........        (60)              --
   Decrease (increase) in advances
     to related parties ...............         --              (29)
   Repayments of notes receivable .....        182               24
                                           -------          -------
        Net cash used in
          investing activities ........        144              (75)
                                           -------          -------
Cash flows from financing activities:
   Proceeds from notes payable .......          --               44
   Principal payments on notes payable        (108)             (81)
                                           -------          -------
        Net cash (provided by) used in
          financing activities ........       (108)             (37)
                                           -------          -------

        Net increase in cash ..........        237               85

Cash, beginning of period .............        707            1,122
                                           -------          -------
Cash, end of period ...................    $   944          $ 1,207
                                           =======          =======

Supplemental cash flow disclosures:
    Interest paid .....................    $    90          $    91
                                           =======          =======
    Assets acquired through issuance of
     long-term debt ...................    $    84          $    --
                                           =======          =======

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

================================================================================
<PAGE>
                                SUNSET COIN, INC.
               (A wholly owned subsidiary of Becker Gaming, Inc.)

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

1)   Basis of Presentation:

Sunset Coin, Inc. ("SC" or the "Company") is a 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 month period
ended September 30, 1997 are not necessarily  indicative of the results that may
be  expected  for the year  ended  June 30,  1998.  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, 1997.

Certain  amounts in the 1996  financial  statements  have been  reclassified  to
conform with the 1997 presentation.

2) Guarantee Obligation, Management's Plans, and Going Concern:

SC has guaranteed the payment of interest and  $55,000,000  principal  amount of
12% First  Mortgage  Notes due  November 15, 2000 issued by AC (the "AC Notes").
Arizona Charlie's,  Inc. ("AC") was in default of certain covenants under the AC
Notes as of  September  30,  1997.  On September 5, 1997 AC received a notice of
acceleration  from the trustee and collateral agent for the AC Notes, and all of
the  outstanding  AC Notes are  immediately  due and payable  together  with all
accrued and unpaid interest thereon. In addition,  AC has guaranteed the payment
of interest and principal of notes payable issued by CQC (the "CQC Notes"), (the
amount  and  extent  of which  guaranty  is in  dispute)  of  which  $20,000,000
principal  amount are  outstanding  at  September  30, 1997.  Capitol  Queen and
Casino,  Inc.  ("CQC") is a  development  stage  company which has abandoned its
project  to  develop,  own and  operate a  riverboat  casino,  and is  currently
attempting to sell its assets to  prospective  buyers.  Based on current  market
conditions,  management does not expect that CQC will generate  sufficient funds
through the sale of its assets to repurchase all of the  outstanding  CQC Notes.
These matters raise  substantial  doubt about the ability of SC to continue as a
going concern. The final outcome of these matters is not presently  determinable
and the  September  30,  1997  financial  statements  of SC do not  include  any
adjustment that might result from the outcome of this uncertainty.

On November 14, 1997, AC filed a voluntary petition under Chapter 11 of the U.S.
Bankruptcy  Court in Las Vegas,  Nevada in order to provide it  protection  from
creditors while it attempts to negotiate a settlement with the holders of the AC
Notes and the CQC Notes.


3) Related-Party Transactions:

Note receivable from related party consists of uncollateralized advances made by
the  Company to AC for  general  working  capital  purposes.  Due to the present
financial  condition of AC, as described  in Note 2,  management  of the Company
believes it is reasonably possible that a portion, or the entire balance, of the
notes receivable from AC will be uncollectible. However, an estimate of the loss
cannot  presently be determined  and no adjustment has been made to the carrying
value or classification  of the note receivable at September 30, 1997.  Interest
earned by SC on the note  receivable  from AC was  $42,000  and  $32,000 for the
three-month  periods  ended  September  30,  1997 and  1996,  respectively.  The
interest receivable from AC and payables to AC are included in other receivables
and advances to related parties, respectively.


================================================================================
<PAGE>
                          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)


                                     ASSETS


                                                        September 30,   June 30,
                                                                1997      1997
                                                             -------   -------
                                                               (Unaudited)
Current assets:


  Restricted cash, in escrow account ....................      $  31    $   31
                                                             -------   -------

      Total current assets ...............................        31        31
                                                             -------   -------

Other assets:

  Assets held for sale ...................................     7,754     7,754
  Financing costs, net of accumulated
    amortization of $478 at September 30,
    1997 and $445 at June 30, 1997 .......................       439       472
                                                             -------   -------

      Total other assets .................................     8,193     8,226
                                                             -------   -------

      Total assets .......................................   $ 8,224   $ 8,257
                                                             =======   =======


                  LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)

                                                       September 30,    June 30,
                                                              1997        1997
                                                          --------    --------
                                                       (Unaudited)

Current liabilities:

  Advances from related parties .......................   $  1,305     $ 1,226
  Accrued interest ....................................      6,561       5,788
  Notes payable to related parties ....................      1,200       1,200
  Long-term debt classified as current,
    net of unamortized original issue discount
    of $1,975 and $2,092, respectively ................     18,025      17,908
                                                          --------    --------
         Total current liabilities ....................     27,091      26,122
                                                          --------    --------
         Total liabilities ............................     27,091      26,122
                                                          --------    --------
Commitments and contingencies

Stockholders' 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 ........    (31,599)    (30,597)
                                                          --------    --------
      Total stockholders' equity (deficit) ............    (18,867)    (17,865)
                                                          --------    --------

      Total liabilities and stockholders'
         equity (deficit) ..............................  $  8,224    $  8,257
                                                          ========    ========


The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
                          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 September 30,
                                                  1997       1996
                                               -------    -------
Revenues .............................              $-         $-

Operating expenses:
  Amortization of financing and
    other costs ......................               33         33
  Abandonment loss ...................               --         --
  Development costs ..................               79         73
                                                -------    -------

      Total operating expenses .......              112        106
                                                -------    -------

Operating loss .......................             (112)      (106)

Other income (expenses):
  Interest income ....................               --         --
  Interest expense ...................             (890)      (752)
  Interest capitalized ...............               --         --
                                                -------    -------

Total other (expense) ................             (890)      (752)
                                                -------    -------

Net loss before extraordinary item
                                                 (1,002)      (858)
Extraordinary item:
  Loss on early retirement of debt (no
    income tax benefit available) ....               --         --
                                                -------    -------
   Net loss ..........................          $(1,002)   $  (858)
                                                =======    =======

<PAGE>


                                            For The Period
                                          January 20, 1993
                                            (The Date Of
                                             Inception)
                                              Through
                                           September 30,
                                               1997
                                       ------------------
Revenues ...........................                   $-


Operating expenses:
  Amortization of financing and
    other costs ....................                1,507
  Abandonment loss .................               10,426
  Development costs ................                2,070
                                       ------------------

      Total operating expenses .....               14,003
                                       ------------------
Operating loss                                    (14,003)

Other income (expenses):
  Interest income ..................                1,266
  Interest expense .................              (15,456)
  Interest capitalized .............                  683
                                       ------------------

Total other income (expense) .......              (13,507)
                                       ------------------

Net loss before extraordinary item .              (27,510)
                                       ------------------
Extraordinary item:
  Loss on early retirement of
     debt (no income tax benefit ...
     available) ....................               (4,089)
                                       ------------------

   Net loss ........................   $          (31,599)
                                       ==================


The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
                          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)





                                                  Three Months Ended
                                                     September 30,
                                                    1997       1996
                                                 -------    -------

Cash flows from development stage activities:
 Net loss ....................................   $(1,002)   $  (858)
 Adjustments to reconcile net loss
    to net cash provided by (used in)
    development stage activities:
 Amortization of financing and other costs ...        33         33
 Amortization of original issue discount .....       117        135
 Abandonment losses and write-downs of assets
     held for sale ...........................        --         --
 Extraordinary loss on retirement of debt ....        --         --
 Increase (cash) provided decrease) in accounts 
     payable and accruals, net of amounts for 
     capital expenditures ....................       773        617
 Increase in advances from related parties ...        79         73
                                                 -------    -------
       Total adjustments .....................     1,002        858
                                                 -------    -------
       Net cash used in development
         stage activities ....................        --         --
                                                 -------    -------

Cash flows from investing activities:
 Capital expenditures, net of construction
     accounts payable .........................       --         --
 Deposits and other assets ....................
 Capitalization of preopening costs ...........       --         --
 Development costs ............................       --         --
 Net (additions to) reductions in restricted
     cash equivalents .........................       --         --

                                                 -------    -------
     Net cash provided by
       (used in) investing activities ........        --         --
                                                 -------    -------

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

     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 ...        $-         $-
                                                ========    ========
 Original issue discount that
    did not affect cash ......................        $-         $-
                                                ========    ========
 Equity contribution by Becker Gaming
    that did not affect cash .................        $-         $-
                                                ========    ========
<PAGE>

                                                       For The Period
                                                      January 20, 1993
                                                        (The Date Of
                                                         Inception)
                                                           Through
                                                         September 30,
                                                              1997
                                                           --------

Cash flows from development stage activities:
 Net loss ....................................  $(31,599)
 Adjustments to reconcile net loss
    to net cash provided by (used in)
    development stage activities:
 Amortization of financing and other costs ...     1,507
 Amortization of original issue discount .....     2,406
 Abandonment losses and write-downs of assets
     held for sale ...........................    10,486
 Extraordinary loss on retirement of debt ....     4,089
 Increase (decrease) in accounts payable and
     accruals, net of amounts for capital
     expenditures ............................     6,573
 Increase in advances from related parties ...     1,293
                                                 -------
       Total adjustments .....................    26,354
                                                 -------
       Net cash used in development
         stage activities ....................    (5,245)
                                                 -------

Cash flows from investing activities:
 Capital expenditures, net of construction
     accounts payable .........................  (12,936)
 Deposits and other assets ....................      (60)
 Capitalization of preopening costs ..........      (340)
 Development costs ...........................      (553)
 Net (additions to) reductions in restricted
     cash equivalents .........................      (32)
                                                 -------
     Net cash provided by
       (used in) investing activities ........   (13,921)
                                                 -------

Cash flows from financing activities:
 Principal payments on First Mortgage Notes ..   (20,200)
 Proceeds from issuance of First Mortgage
     Notes, net of financing costs ...........    30,666
 Proceeds from borrowings under
    notes payable to  related parties ........     1,200
 Equity contribution from Becker Gaming, Inc.
      relating to sale of warrants ...........     7,500
                                                 -------
     Net cash (used in 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 .................  $  5,233
                                                ========


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

<PAGE>

                           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"  or the  "Company")  is a  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 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 month period
ended September 30, 1997 are not necessarily  indicative of the results that may
be expected for the year ended June 30, 1998. The unaudited financial statements
should  be read in  conjunction  with the  financial  statements  and  footnotes
included in CQC's annual report on Form 10-K for the year ended June 30, 1997.

2)   Arizona Charlie's, Inc. Bankruptcy Filing

Arizona  Charlie's,  Inc.,  ("AC"),  is a wholly owned subsidiary of BGI, is the
guarantor of certain  debt of CQC. On November  14,  1997,  AC filed a voluntary
petition under Chapter 11 of the U.S.  Bankruptcy Court in Las Vegas,  Nevada in
order to provide it protection  from creditors  while it attempts to negotiate a
settlement  with the holders of such CQC debt and certain  debt of AC,  which is
more fully described in Note 3.


3)   Missouri   Gaming  License,  Default  Under  Indebtedness,
     Management's Plans, and  Going     Concern:

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

On November 7, 1995,  voters in Jefferson City rejected an ordinance  permitting
riverboat gambling, reversing the vote of an earlier election in which Jefferson
City voters approved riverboat  gambling.  Management has abandoned the project,
and is  currently  looking for  alternative  uses for the  riverboat,  including
opportunities to sell or lease it to another operator.

CQC financed the Capitol Queen project  through the issuance of  $40,000,000  in
principal  amount of 12% First  Mortgage  Notes due  November 15, 2000 (the "CQC
Notes").  As of January  1,  1995,  the  indenture  governing  the CQC Notes was
amended to (i)  eliminate  CQC's  obligation  to construct  and open the Capitol
Queen and (ii) permit a two-step  purchase of the CQC Notes at 101% of principal
plus  accrued  and  unpaid  interest  from a sale  of  assets.  The  first  step
repurchase of  $20,000,000  principal  amount of the CQC Notes (plus accrued and
unpaid  interest) was completed on January 17, 1995, with unexpended  funds from
the project escrow account, and an aggregate of $20,000,000  principal amount of
the CQC Notes remained  outstanding.  However, the dates by which CQC previously
agreed  with the  holders  of the CQC Notes to effect the sale of its assets and
repurchase  the remaining  CQC Notes have passed,  and CQC is thus in default of
the amended covenants.

The remaining CQC Notes require annual interest payments of $2,400,000,  payable
in equal installments  semi-annually on May 15 and November 15. CQC was not able
to make its scheduled  interest payments of $1,200,000 on November 15, 1995, May
15, 1996,  November  15, 1996,  May 15, 1997 and November 15, 1997 and AC (which
has  guaranteed  the CQC Notes as more  fully  described  in below) did not have
available funds to advance on behalf of CQC.

Concurrent with the issuance of the CQC Notes, AC completed a private  placement
debt financing of  $55,000,000  in principal  amount of 12% First Mortgage Notes
due November 15, 2000 (the "AC Notes").  The AC Notes  require  annual  interest
payments of $6,600,000,  payable in equal  installments  semi-annually on May 15
and  November  15. AC was not able to make its  scheduled  interest  payments of
$3,300,000 on May 15, 1997 and November 15, 1997 and Sunset Coin,  Inc.  ("SC"),
another  wholly owned  subsidiary of BGI (which has  guaranteed  the AC Notes as
more fully described below) did not have available funds to advance on behalf of
AC. AC is also in  default  of  certain  covenants  under  the AC  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.  AC does not have
sufficient  financial resources including a guarantee of the AC Notes by SC, (as
more fully described below) to repay the AC Notes on a current basis and satisfy
its guarantee obligation (as more fully described below) with respect to the CQC
Notes.

The CQC Notes are  guaranteed by AC (which  guarantee is subject to release only
upon  licensing of the Capitol Queen,  which is not expected).  The AC Notes are
guaranteed by SC (which  guarantee is subject to release upon  completion of the
Expansion, which management believes has been satisfied, and the attainment of a
fixed-coverage  ratio  by AC of  2.25  to 1  following  the  completion  of  the
Expansion, which has not been satisfied). The amount and extent of AC's guaranty
of the CQC Notes is in dispute. Legal counsel has advised management that, under
the  terms of CQC  indenture  regarding  fraudulent  conveyance,  the  guarantee
liability of AC is not expected to be material.

On July 3, 1997 the Company  received a notice of  acceleration  (the  "Notice")
from the trustee  and  collateral  agent for the CQC Notes.  Pursuant to section
6.02 of the Indenture, due to certain violations of the Indenture by the Company
(as more fully described above) all of the outstanding CQC Notes are immediately
due and  payable,  together  with  all  accrued  and  unpaid  interest  thereon.
Accordingly,  the CQC  Notes  have  been  classified  as  currently  payable  at
September 30, 1997.

On September 5, 1997, AC received a notice of acceleration  from the trustee and
collateral  agent for the AC Notes.  Pursuant to section  6.02 of the  indenture
governing the AC Notes, due to certain  violations of the indenture,  all of the
outstanding AC Notes are immediately  due and payable  together with all accrued
and unpaid interest thereon.

In connection with the decision to abandon the project,  CQC had entered into an
Asset  Purchase  Agreement  dated April 10, 1995,  for the sale of its assets to
Aerie  Riverboat  Casinos of Missouri,  Inc. at a purchase price of $18,000,000,
which  price  exceeded  the  carrying  value  of the CQC  assets.  However,  the
consummation of the Aerie purchase  agreement was subject to the satisfaction of
several conditions which could not be satisfied timely, including, among others,
that Jefferson City consent to the assignment of its Development  Agreement with
CQC,  that  Aerie be found  preliminarily  suitable  to hold a  Missouri  gaming
license,  and that riverboat gaming is legally permitted in Jefferson City. As a
result,  the  agreement  with  Aerie was  terminated  without  penalty  when the
December 31, 1995 expiration  date passed.  As more fully described in Note 3, a
further  write-down in the carrying value of the riverboat was recognized in the
fourth quarter of 1996,  after the election in Jefferson City, the expiration of
the Aerie contract, and due to deteriorating market conditions.

CQC continues to market its riverboat assets to prospective  buyers.  Based on
current  market  conditions,  management  does not expect that CQC will generate
sufficient  funds  through  the  sale of its  assets  to  repurchase  all of the
outstanding CQC Notes.  These matters raise  substantial doubt about the ability
of CQC to continue as a going concern. The final outcome of these matters is not
presently determinable and the September 30, 1997 financial statements of CQC do
not  include  any  adjustment  that  might  result  from  the  outcome  of  this
uncertainty.


4)   Assets Held For Sale:

At September 30, 1997, CQC had $7,754,000 of assets held for sale, consisting of
land and riverboat  assets which were written down to a carrying  value based on
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.


<PAGE>


                      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").

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

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

      On November 14, 1997,  AC filed a voluntary  petition  under Chapter 11 of
the U.S. Bankruptcy Court in Las Vegas, Nevada in order to provide it protection
from creditors  while it attempts to negotiate a settlement  with the holders of
the AC Notes and the CQC Notes.


Arizona Charlie's, Inc.

General

       AC's revenues are derived  largely from gaming  activities at its Arizona
Charlie's  casino-hotel,  and,  to a lesser  extent,  from  food  and  beverage,
lodging,  entertainment  and retail  sales.  AC generally  views its non- casino
operations  as  complementary  to its core casino  operations.  Accordingly,  it
utilizes  entertainment  primarily  as a  casino  marketing  tool.  Further,  AC
maintains  food and  beverage  pricing  structures  designed  to benefit  casino
volumes,  often resulting in departmental operating losses. 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-months ended September 30, 1997 and 1996

     Net  revenues at AC decreased by $512,000,  or 3.5%,  from  $14,685,000  to
$14,173,000 for the three-month  period ended September 30, 1997 compared to the
three-month  period  ended  September  30,  1996.  In the same  period to period
comparison,   operating  expenses,   including  depreciation  and  amortization,
decreased by 3.2% to $14,736,000 from  $15,216,000.  This resulted in a increase
in operating losses of $32,000 from a loss of $531,000 to a loss of $563,000 for
the more recent period.

      Gaming  revenues  decreased  5.4% from  $12,229,000  to  $11,574,000.  The
largest  portion of the decrease in gaming  revenues is  attributable  to gaming
machine  revenues  which  decreased  $287,000,   or  2.7%  from  $10,472,000  to
$10,185,000. The decrease reflects lesser play from slot patrons during the more
recent  period.  Revenues  from table games  decreased  $208,000,  or 17.1% from
$1,215,000  to  $1,007,000.  The  decrease  in  table  games  revenues  for  the
three-month  period ended  September  30, 1997 is also the result of lesser play
from patrons.  Race and sports book revenues  decreased by $12,000,  or 2.0%, to
$585,000  from  $597,000 for the  three-month  period ended  September  30, 1997
compared to the same period in 1996.  Bingo  revenues  decreased by $128,000 for
the three-month period ended September 30, 1997 when compared to the same period
of the prior year due to higher than normal payouts  combined with a decrease in
play by patrons.

       Food and beverage revenues  decreased 10.6% to $3,129,000 from $3,501,000
for the three-month  period ended September 30, 1997 compared to the same period
of the prior year.  The  decrease in  revenues of $372,000 is  primarily  due to
decreased  complimentary  sales in the amount  $463,000  in the food  department
partially  offset by an increase in cash sales of $91,000.  Complimentary  sales
are included in revenues at retail value and are then  deducted as a promotional
allowance.  Decreased  complimentary sales in the food and beverage  departments
are the result of a new  patron  complimentary  policy put into  effect in June,
1997  utilizing  the newly  acquired  computerized  slot  reporting  and  player
tracking system to better evaluate and document patron play and reward qualified
patrons with complimentary items.

      Hotel revenues  decreased  from $761,000 to $647,000 for the  three-months
ended  September 30, 1997  compared to the same period in 1996.  The decrease of
15.0% in the 1997 period is primarily due to a decrease in occupancy and average
room rates of 72.0% and $38.89, respectively,  compared to 91% and $40.40 in the
1996 period.

      Gift  shop   revenues   increased   from  $131,000  to  $160,000  for  the
three-months  ended  September 30, 1997 compared to the same period in 1996. The
increase of 22.1% is primarily due to  increasing  the hours of operation in the
1997 period.

       Other revenues,  which include receipts from entertainment cover charges,
ATM  commissions  and  revenues  from PBX  operations  and  banquets,  decreased
slightly from $258,000 to $247,000 for the three-months ended September 30, 1997
compared to the same period in the prior year. The decrease of 4.3% is primarily
the result of decreases in entertainment  cover charge revenues reflecting fewer
entertainment events and musical concerts in the 1997 period.

      Gaming  expenses  decreased by $574,000,  or 12.8%,  to $3,914,000 for the
three-month  period ended September 30, 1997 from $4,488,000 for the same period
of the prior year  reflecting a reduction in staffing levels for the table games
department and lower gaming tax and license fees associated with the decrease in
gaming revenues.

      Food & beverage expenses increased by $122,000, or 3.9%, to $3,288,000 for
the  three-month  period ended  September 30, 1997 from  $3,166,000 for the same
period of the prior year,  due  primarily to increased  food and beverage  costs
reflecting an adjustment of complimentary expense items in the 1997 period.

      Hotel  expenses  decreased  by  $69,000,  or 17.0%,  to  $337,000  for the
three-month period ended September 30, 1997 from $406,000 for the same period of
the prior  year.  The  decrease  is  primarily  due to  decreases  of $54,000 in
salaries and wages and $26,000 in repairs and  maintenance,  offset by increased
advertising and promotion expense of $11,000 in the 1997 period.

       General and administrative  expenses  increased by $247,000,  or 5.4%, to
$4,837,000 for the  three-month  period ended September 30, 1997 from $4,590,000
for the same period of the prior year.  The increase is primarily  the result of
the  creation of the  "Charlie  Card Club"  department  in June,  1997 to better
evaluate and reward patrons with complimentary items for slot, table games, race
& sports play. During the 1997 period the Charlie Card Club accrued $322,000 for
future patron complimentaries earned by patron play in the casino.

       Advertising  and promotion  expenses  decreased by $270,000,  or 21.0% to
$1,017,000 for the  three-month  period ended September 30, 1997 from $1,287,000
for the same period of the prior year.  The  decreased  expense is the result of
fewer  monthly  promotions  in the  1997  period  and  redirecting  some  of the
promotional and patron expense to the Charlie Card Club.

      Depreciation and amortization  increased by $53,000,  or 6.2%, to $911,000
for the  three-month  period ended September 30, 1997 from $858,000 for the same
period  of the  prior  year,  as a result  of  increased  depreciation  expenses
associated  with the  purchases of new slot machines and the  computerized  slot
reporting and player tracking system.
      Gift shop  expenses  increased by $14,000,  or 11.3%,  to $138,000 for the
three-month  period ended  September  30, 1997 compared to $124,000 for the same
period of the prior year reflecting increases in wholesale item costs associated
with the gift shop operation.

      Management fees to BGI decreased by $11,000,  or 6.5%, to $158,000 for the
three-month period ended September 30, 1997 from $169,000 for the same period in
the prior year.  Currently,  management fees are equal to 1.0% of gross revenues
of AC. As such,  decreased  gross  revenues bring about lower  management  fees.
Since inception of the management fees agreement, management fees payable to BGI
have  been and  continue  to be  accrued  by AC,  and may not be paid  under the
Indenture governing the AC Notes until such time that AC meets a specified fixed
charged coverage ratio. Rent expense paid to related parties increased  slightly
from $55,000 to $57,000  reflecting small yearly  adjustments in the annual base
rents.

      Other  expense  (net of  other  income)  amounted  to  $1,958,000  for the
three-month  period ended September 30, 1997 compared to $1,713,000 for the same
period in the prior  year.  The  increase  in  expense  of  $245,000,  or 14.4%,
reflects  additional  interest  costs  associated  with  the  AC  notes  due  to
additional  default interest  expense  associated with the May 15, 1997 interest
payment which was not made, and additional  interest costs  associated  with the
financing  of  the  computerized  slot  reporting  and  player  tracking  system
purchased in May, 1997.


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, 1994, prior to such termination, AC did not incur or pay income taxes
but  distributed  cash to its  stockholders  in amounts  sufficient to pay their
income  tax  liability  in  respect  to income of AC.  Since  terminating  its S
corporation status, AC generated a net operating loss for income tax purposes of
approximately  $19,500,000.  Due to low  operating  margins,  high  interest and
depreciation costs, management does not anticipate that AC will generate taxable
income in the foreseeable future.


Liquidity and Capital Resources

     At September  30, 1997,  AC had a working  capital  deficit of  $64,871,000
compared to a working  capital  deficit of  $62,380,000  at June 30,  1997.  The
decrease in working capital in the amount of $2,491,000 was caused  primarily by
increased  accruals on the AC Notes and accrued  management fees payable to BGI,
plus additional short term notes payable for slot machines.


      For the  three-month  period ended  September  30, 1997,  cash provided by
operating activities decreased  approximately  $264,000, or 18.7%, to $1,150,000
from  $1,414,000 for the same period in 1996. The decrease in the 1997 period is
primarily attributable to a increase in net loss of $277,000 and slower payments
on accounts  receivable  of  $369,000.  This is  partially  offset by  increased
accounts payable liability of $322,000.

      For the  three-month  period ended  September  30, 1997,  net cash used in
investing  activities  decreased to $373,000 compared with $510,000 for the same
period in 1996.  The  decrease of $137,000  was caused  primarily  by a $406,000
increase in a prior period  related party  receivable  offset by increased  cash
capital expenditures of $282,000 in the current year period.

      Cash flows used in financing  activities for the three-month  period ended
September  30, 1997 was  $169,000,  up from $69,000 for the same period in 1996.
The increase is primarily the result of higher principal  payments on additional
notes payable

     AC's long-term obligations, approximately $6,521,000 at September 30, 1997,
consist of the stockholder  notes,  capitalized  equipment  leases and long-term
debt on slot equipment.  AC has annual interest expense  aggregating  $6,600,000
and $500,000 with respect to the AC Notes  (classified as current due to default
under covenants) and the stockholder notes, however, AC did not make its May 15,
1997 and November 15, 1997  semi-annual  interest  payments on the AC Notes, and
has  suspended  monthly  payments  on the  stockholder  notes  since May,  1997.
Further,  AC is expected  to have annual  capital  expenditure  requirements  of
approximately $1,200,000.


Claims by Trustee

      AC currently has  outstanding  $55,000,000 of 12% First Mortgage Notes due
2000.  SC has issued a limited  guaranty  with  respect to the AC Notes (the "SC
Limited  Guaranty").  CQC currently  has  outstanding  $20,000,000  of 12% First
Mortgage  Notes due 2000.  AC has issued a limited  guaranty with respect to the
CQC Notes (the "AC Limited Guaranty"). The amount and extent of AC's guaranty of
the CQC Notes is in dispute due to certain  provisions  of the  Indenture  under
which the CQC Notes were issued,  as well as certain  provisions of State and/or
Federal  Law  that  may  be   applicable   in  or  with   respect  to  financial
restructuring. It is AC's position that, based on advice from legal counsel, its
limited  guaranty  does not  create  a  material  liability  on its part for the
payment of the obligations under the CQC Notes.

     IBJ Schroder Bank & Trust Company,  as Trustee under the  Indentures  under
which such Notes are outstanding, has declared the AC Notes and the CQC Notes to
be in default and has declared all such Notes to be immediately due and payable.
The Trustee has also notified AC that the purported  obligations of AC under its
guaranty have been accelerated and has declared the obligations of AC thereunder
to be due.  Management of AC and CQC and the holders of the Notes are discussing
possible  financial  restructuring  of the AC and CQC  obligations,  but no such
restructuring has yet been agreed to. The Trustee has taken no further action to
enforce the Notes or the  purported  guaranties  thereof or to  foreclose on any
assets of AC or CQC. No assurance can be given,  however,  that the Trustee will
not do so.

       AC is currently in default  under the  Indenture  governing  the AC Notes
because it has not made its required semi-annual interest payments in the amount
of  $3,300,000  due on May 15,  1997  and  November  15,  1997  and has  neither
maintained  the required  minimum level of  consolidated  tangible net worth nor
offered to  repurchase  a portion of the AC Notes as  required  if such  minimum
level of consolidated tangible net worth is not maintained.  In addition, AC has
failed to maintain the minimum consolidated fixed charge coverage ratio required
under the  Indenture  and has  advanced  funds to BGI in  excess of the  amounts
permitted to be so advanced  under the  Indenture.  Also,  AC incurred new notes
payable  (in the  amount of  approximately  $2,545,000)  for the  purchase  of a
computerized reporting and player club system and new slot machines in excess of
the  $1,000,000  allowed.  See Arizona  Charlie's,  Inc. - Liquidity and Capitol
Resources - Claims by Trustee".

     AC has a contingent  obligation resulting from a limited guaranty issued by
it on the CQC Notes,  an aggregate of $20,000,000  in principal  amount of which
remain outstanding.  The amount and extent of such guaranty are in dispute. As a
result of a September  1994 ruling of the  Missouri  Gaming  Commission  denying
CQC's gaming license application,  CQC has adopted a plan to sell its assets for
the purpose of repaying,  to the extent possible,  the outstanding CQC Notes and
accrued interest  thereon.  See "Business - Capitol Queen & Casino,  Inc." There
can be no  assurance  that CQC will be  successful  in its  efforts  to sell its
assets or, that if a sale is effected,  the proceeds will be sufficient to fully
or substantially repay the CQC Notes and accrued interest thereon. To the extent
any funds CQC may  realize  from the sale of its  assets are not  sufficient  to
repay the CQC Notes and accrued interest thereon,  AC may be obligated under the
AC Limited Guaranty of the CQC Notes to fund the a portion of shortfall.

      Moreover,  because it has failed to pay  interest  due on the Notes and it
has not yet effected the sale of its assets, CQC is in default of the CQC Notes.
CQC is not able to pay the outstanding CQC Notes without an infusion of capital,
which is not expected to be available.  If AC is obligated  under the AC Limited
Guaranty  to pay a  portion  of the CQC  Notes  it is not  expected  to have the
resources to satisfy such obligation should it materialize.  If the AC Notes and
the CQC Notes are  accelerated,  substantial  doubt exists about AC's ability to
continue  as a going  concern.  See  "Notes to  Financial  Statements  - Arizona
Charlie's,   Inc.  -  Missouri  Gaming  License,   Default  Under   Indebtedness
Management's Plans, and Going Concern".

      AC's ability to obtain  capital,  is  significantly  restricted  under the
Indentures  governing  the AC Notes  and the CQC  Notes.  The  ability  of AC to
service its debt obligations  (and to comply with the consolidated  tangible net
worth covenant) will be dependent upon its future performance, which performance
will be influenced by prevailing economic conditions and financial, business and
competitive factors, many of which are beyond AC's control.

      On November 14, 1997,  AC filed a voluntary  petition  under Chapter 11 of
the U.S. Bankruptcy Court in Las Vegas, Nevada in order to provide it protection
from creditors  while it attempts to negotiate a settlement  with the holders of
the AC Notes and the CQC Notes.


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 five Becker  Gaming Group  ("BGG")
locations and one  additional  location owned by an unrelated  party,  which are
expected to be renewed in general course.


Results  of operations for the three months ended  September
30, 1997 and 1996

      SC's results of operations  increased  slightly for the three-month period
ended  September  30, 1997  compared to the same period in the prior year.  Slot
route revenues  increased by 5.6% from $567,000 for the 1996 three-month  period
to  $599,000  for the 1997  three-month  period.  The  increase  in  revenues is
attributable to the addition of three  participation  locations partially offset
by the loss of one participating  location in July of 1997. Another small factor
offsetting  the increase  was the  conversion  of one space lease  location to a
participation contract.

      The average  number of gaming  machines  operated  during the  three-month
period  ended  September  30,  1997 was 267  compared  to 254 in the prior  year
period.  The average number of gaming  machines at BGG locations  serviced by SC
was 115 for the  three-month  period ended September 30, 1997 unchanged from the
same period in 1996. Accordingly, slot service fees from BGG for the three-month
period ended  September 30, 1997 were  $29,000,  identical to the same period in
the prior year.

      Gaming machine route expenses for the  three-month  period ended September
30, 1997  increased by 4.9% to $364,000  when compared to the same period in the
prior year  reflecting  annual  merit  increases  in salaries  and wages.  Other
increased  expenses  for loss and damage,  advertising  and rent  expenses  were
partially  offset by a decrease  in repair  and  maintenance  and  complimentary
expenses.

     General and administrative expenses for the three-month period increased by
26.1% to $29,000 from $23,000, the direct result of increased supply expenses.

      Management fees (based upon gross  revenues)  increased by 3.0% to $34,000
for the  three-month  period ended  September 30, 1997 when compared to the same
period in the prior year. This increase is attributable to higher gross revenues
in the more recent period.

      Depreciation  and  amortization  increased  by 9.9% from  $71,000  for the
three-month  period  ended  September  30, 1996 to $78,000  for the  three-month
period  ended  September  30,  1997,   reflecting  increased   depreciation  and
amortization  costs associated with the purchase of additional slot machines and
vehicles.

     During the  three-month  period  ended  September  30,  1997,  SC had other
expenses (net of interest and other income) of approximately $19,000 compared to
$20,000  for the same period in 1996.  The small  decrease  is  attributable  to
reduced interest expense relating to notes payable paid in the previous year for
existing  locations plus the result of most new notes payable from venders being
interest free..


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 both
three-month periods ended September 30, 1996 and September 30, 1997 was $39,000.
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  three-month  period ended
September  30, 1997  increased to $201,000  from  $197,000  for the  three-month
period  ended  September  30,  1996,  mostly due to a net  increase in operating
liabilities of $66,000 and  depreciation  and amortization of $7,000 offset by a
decrease in operating assets of $70,000.

      Cash  flows  used in  investing  activities  for the  three  months  ended
September 30, 1997 amounted to $144,000, including repayment of notes receivable
of $182,000 and proceeds on sale of  equipment  of $31,000.  These  sources were
offset by capital expenditures of $9,000 and increased advances to related party
of $60,000.

      Cash  flows  used in  financing  activities  for the  three  months  ended
September 30, 1997 increased to $108,000,  resulting from  additional  principal
payments of $108,000.

      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.

      In  July  1994,  SC  entered  into  an  agreement  with a  bank  for a new
$1,200,000  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
until the defaults  under the AC and CQC Notes are resolved.  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  September  30,  1997,  the  amount  outstanding  under the non-
revolving line of credit totaled $435,000.

      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,  however,  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.

      Because AC is in default under the Indenture  governing the AC Notes,  the
AC Notes have been  accelerated.  See "Arizona  Charlie's,  Inc.--Liquidity  and
Capital  Resources Claims by Trustee." AC does not have the resources to pay the
AC Notes.  In  addition,  AC may have  limited  liability  under the AC  Limited
Guaranty of the CQC Notes which may exceed the amount which it could immediately
support or repay.  In either case,  SC, as  guarantor of the AC Notes,  may have
liability  under the SC Limited  Guaranty,  and such liability  could exceed the
amount which it could immediately support. Accordingly, substantial doubt exists
about SC's  ability to  continue  as a going  concern if the  Trustee for the AC
Notes and CQC Notes is able to enforce its acceleration  thereof.  See "Notes to
Financial  Statements  Sunset Coin,  Inc. - Guarantee  Obligation,  Management's
Plans and Going Concern."

      On November 14, 1997,  AC filed a voluntary  petition  under Chapter 11 of
the U.S. Bankruptcy Court in Las Vegas, Nevada in order to provide it protection
from creditors  while it attempts to negotiate a settlement  with the holders of
the AC Notes and the CQC Notes.


Capitol Queen and Casino, Inc.

Analysis of  Development  Stage  Activities for the period January 20, 1993 (the
date of inception) through September 30, 1997

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

     As of January 1, 1995, the CQC Indenture was amended to (i) eliminate CQC's
obligation  to construct  and open the Capitol  Queen and (ii) permit a two-step
purchase of the CQC Notes at 101% of principal plus accrued and unpaid  interest
with funds  remaining in the project  escrow account and the net proceeds from a
sale of assets. The repurchase of $20,000,000  principal amount of the CQC Notes
(plus  accrued and unpaid  interest  thereon) was  completed on January 17, 1995
with funds from the project escrow account at a total cost of  $20,200,000.  CQC
incurred an extraordinary loss of approximately  $4,089,000 in 1995,  reflecting
the premium  paid to retire the debt of $200,000  and the  write-off of related,
unamortized  debt issue costs and original  issue  discount in the  aggregate of
$3,889,000.  At September 30, 1997, approximately $31,000 remained in the escrow
account  and an  aggregate  of  $20,000,000  principal  amount  of the CQC Notes
remained outstanding. However, the dates by which CQC previously agreed with the
holders of the CQC Notes to effect the sale of its  assets  and  repurchase  the
remaining CQC Notes have passed.

      The CQC Notes outstanding  require annual interest payments of $2,400,000,
payable in equal  installments  semi-annually on May 15 and November 15. CQC was
not  able to make its  scheduled  interest  payments  of  $1,200,000  on each of
November 15, 1995,  May 15, 1996,  November 15, 1996,  May 15, 1997 and November
15, 1997. Further, AC does not have available funds to advance on behalf of CQC.
See "Liquidity and Capital Resources - Capitol Queen & Casino,  Inc. - Claims by
Trustee".

      During the period from inception through September 30, 1997, CQC had total
operating expenses of $14,003,000 consisting primarily of an abandonment loss of
$6,034,000  arising from the denial of the  company's  license  application  and
management's subsequent decision to terminate the Capitol Queen project and sell
its assets.  Also,  at March,  1996,  CQC  wrote-down  the cost of the riverboat
assets  to  their  net  realizable  value  based  on  estimates  provided  by  a
shipbuilder and marine brokers which resulted in an additional  abandonment loss
of $4,392,000 in the 1996 fiscal year.  Also included in operating  expenses are
amortization  expense  of  $1,507,000  associated  with  debt  issue  costs  and
$2,070,000  of project  development  costs.  For the same  period,  CQC incurred
$15,456,000  of interest  cost,  of which  $683,000  was  capitalized  by CQC as
required by generally accepted accounting  principles,  as part of the riverboat
construction.  CQC earned  interest  income of  $1,266,000  for the period  from
inception to September 30, 1997.


Liquidity and Capital Resources

      For the period from inception through September 30, 1997, net cash used in
development  stage  activities  was  $5,245,000.  Cash flows  used in  investing
activities for the period was $13,921,000 which included  $12,936,000 of capital
expenditures related to the construction of the riverboat and acquisition of the
Jefferson  City land site.  At September  30, 1997,  CQC had expended a total of
approximately  $21,760,000 on the  development  and  construction of the Capitol
Queen project including on-going maintenance and insurance costs.

       CQC's  obligations  consist of the $20,000,000 in principal amount of the
outstanding  CQC Notes and past due interest  thereon of $6,402,000 at September
30, 1997,  which includes  amounts accrued on unpaid  interest.  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. Additionally, on
July 3, 1997 CQC received a notice of  acceleration  from the trustee of the CQC
Notes. Moreover,  CQC, because it has not paid certain interest due on its Notes
and has not yet  effected  the  sale of its  assets,  is in  default  of the CQC
Indenture.  As a result of the above items the CQC Notes have been classified as
a current liability as of September 30, 1997 and June 30, 1997.

Claims by Trustee

      AC currently has outstanding  $55,000,000 of 12% First Mortgages Notes due
2000.  SC has issued a limited  guaranty  with  respect to the AC Notes (the "SC
Limited  Guaranty").  CQC currently  has  outstanding  $20,000,000  of 12% First
Mortgage  Notes due 2000.  AC has issued a limited  guaranty with respect to the
CQC Notes (the "AC Limited Guaranty"). The amount and extent of AC's guaranty of
the CQC Notes is in dispute due to certain  provisions  of the  Indenture  under
which the CQC Notes were issued,  as well as certain  provisions of State and/or
Federal  Law  that  may  be   applicable   in  or  with   respect  to  financial
restructuring. It is AC's position that, based on advice from legal counsel, its
limited  guaranty  does not  create  a  material  liability  on its part for the
payment of the obligations under the CQC Notes.

     IBJ Schroder Bank & Trust Company,  as Trustee under the  Indentures  under
which such Notes are outstanding, has declared the AC Notes and the CQC Notes to
be in default and has declared all such Notes to be immediately due and payable.
The Trustee has also notified AC that the purported  obligations of AC under its
guaranty have been accelerated and has declared the obligations of AC thereunder
to be due.  The Trustee has taken no further  action to enforce the Notes or the
purported  guaranties  thereof or to  foreclose  on any assets of AC or CQC.  No
assurance can be given, however, that the Trustee will not do so.

      On November 14, 1997,  AC filed a voluntary  petition  under Chapter 11 of
the U.S. Bankruptcy Court in Las Vegas, Nevada in order to provide it protection
from creditors  while it attempts to negotiate a settlement  with the holders of
the AC Notes and the CQC Notes.

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

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

      By letters dated July 3, 1997 and July 17, 1997, IBJ Schroder Bank & Trust
Company,  the  trustee  on the CQC  Indenture  dated as of  November  15,  1993,
declared all of the  Securities  (as defined in the Indenture) to be immediately
due and  payable,  together  with  all  accrued  and  unpaid  interest  thereon.
Subsequent  letters from IBJ Schroder Bank & Trust Company,  dated  September 5,
1997,  provided  notices  of  defaults  by CQC  and AC  under  their  respective
Indentures  and also served  Notice of  Acceleration  on AC with  respect to its
Securities  and its Limited  Guaranty of the CQC debt.  CQC and AC have retained
counsel to assist them in dealing with the  Bondholders  and on July 16, 1997, a
proposal for the  financial  restructuring  of the CQC and AC  indebtedness  was
presented to the Bondholders through the Trustee and Counsel to one of the major
Bondholders. The Bondholders have orally responded to such offer as of September
10, 1997 and the company is currently evaluating such responses and the possible
actions  to be taken  by AC and CQC as a result  of that  response.  No  further
action by the  Trustee  has been taken to  foreclose  on the assets of CQC or to
collect on any claims against any purported guarantees of the CQC debt issued by
AC.

      On November 14, 1997,  Arizona  Charlie's,  Inc. (the "Company") filed for
bankruptcy  protection in the United States Bankruptcy Court for the District of
Nevada in Las Vegas,  Nevada (the  "Bankruptcy  Court")  under Chapter 11 of the
United States  Bankruptcy  Code (Case No.  97-28781 LBR) to pursue the financial
reorganization  of the Company.  The Company  currently  is operating  under the
Bankruptcy Code as debtor-in-possession. The Bankruptcy Court has entered orders
allowing  the  Company  to  honor  certain  of the  pre-  petition  debts of its
customers (such as hotel room deposits and outstanding  gaming chips) and to pay
the  pre-petition  wages of its  employees.  As a result,  the Company  does not
expect any  immediate  changes in the  operations of Arizona  Charlie's  Hotel &
Casino,  located  in Las  Vegas,  Nevada,  which is owned  and  operated  by the
Company.


Item 5.  Other Information

Bankruptcy or Receivership

      On November 14, 1997,  Arizona  Charlie's,  Inc. (the "Company") filed for
bankruptcy  protection in the United States Bankruptcy Court for the District of
Nevada in Las Vegas,  Nevada (the  "Bankruptcy  Court")  under Chapter 11 of the
United States  Bankruptcy  Code (Case No.  97-28781 LBR) to pursue the financial
reorganization  of the Company.  The Company  currently  is operating  under the
Bankruptcy Code as debtor-in-possession. The Bankruptcy Court has entered orders
allowing  the  Company  to  honor  certain  of the  pre-  petition  debts of its
customers (such as hotel room deposits and outstanding  gaming chips) and to pay
the  pre-petition  wages of its  employees.  As a result,  the Company  does not
expect any  immediate  changes in the  operations of Arizona  Charlie's  Hotel &
Casino,  located  in Las  Vegas,  Nevada,  which is owned  and  operated  by the
Company.



Item 6.  Exhibits and Reports on Form 8-K

Exhibit Number      Description
--------------      -----------

99.1                 Press  Release  of  the  Company  dated November 14, 1997


     The Company  did not file any  reports on form 8-K during the  Three-Months
ended September 30, 1997.






================================================================================
                                   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:    November 19, 1997                  /S/ Bruce F. Becker
         ---------------------             -------------------
                                           Bruce F. Becker
                                           President, Chief Executive
                                           Officer (Principal Executive Officer)






Date:    November 19, 1997                  /S/ Jerry Griffis
         ----------------                   -----------------
                                            Jerry Griffis
                                            Chief Financial Officer
                                            (Principal Financial and
                                            Accounting Officer)
================================================================================


                                    EXHIBIT

                      PRESS RELEASE - FOR IMMEDIATE RELEASE

                             ARIZONA CHARLIE'S, INC.
                                November 14, 1997

Contact:  Bruce F. Becker

Telephone:     258-5115

Arizona  Charlie's,  Inc.,  announced  today  that it has filed for  Chapter  11
Bankruptcy  protection in the U.S. Bankruptcy Court in Las Vegas,  Nevada, while
pursuing a financial  reorganization of the Company. Bruce F. Becker,  President
and Chief  Executive  Officer of the Company,  which owns and  operates  Arizona
Charlie's Casino & Hotel at 740 S. Decatur Boulevard in Las Vegas, Nevada, said,
"the action was taken to give the Company time to  negotiate a  settlement  with
the holders of First  Mortgage Notes issued by Arizona  Charlie's,  Inc., and an
affiliated company, Capitol Queen & Casino, Inc., in 1993, to fund the expansion
of Arizona  Charlie's and to fund Capitol  Queen & Casinos'  efforts to constuct
and operate a riverboat casino in Jefferson City, Missouri.  While the expansion
of Arizona Charlie's has been successfully completed, Capitol Queen & Casino was
unable to secure the required  Missouri  gaming  licenses  for  operation of the
Jefferson  City  casino and has been unable to sell the  gambling  boat that was
constructed  for use in  Missouri."  The  inability of Capitol Queen & Casino to
complete its Missouri expansion plans resulted in substantial debt and no liquid
resources for repayment.  Mr. Becker further stated, "Capitol Queen & Casino has
been in default for some time under the terms of the bonds it issued in 1993 and
claims  now have been made  against  Arizona  Charlie's  by the  holders  of the
Capitol Queen bonds under the terms of a limited  guarantee  executed by Arizona
Charlie's  in 1993.  In order to preserve all of our legal rights to contest the
validity and extent of those  guarantees,  the Company had no choice but to file
the bankruptcy action."

Mr. Becker states:  "The filing will not result in any changes in the operations
of Arizona  Charlie's  and  business  will  continue as usual.  There will be no
layoffs or other impact on employees and customers of Arizona Charlie's will see
no difference in the  operations of the Company as a result of this action.  Our
customers should be assured that the action taken by Arizona Charlie's will have
absolutely no impact on them,  and they can continue to enjoy our  facilities to
the fullest extent without concern."

The Company is negotiating  with various  sources for the funding of all or part
of its  financial  reorganization  plan and  expects  to  announce  shortly  its
refinancing terms. This release contains forward looking statements that involve
risks and  uncertainties.  These statements may differ from actual future events
or results.
================================================================================

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