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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: March 31, 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                            April 30, 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)

                                                                        Page

BECKER GAMING, INC. AND SUBSIDIARIES
    Consolidated Balance Sheets as of March 31, 1997 and
        June 30, 1996 ..................................................  1
    Consolidated Statements of Operations and Retained Earnings
        (Deficit) for the Three-Month Periods Ended
        March 31, 1997 and 1996 and for the Nine-Month Periods
        Ended March 31, 1997 and 1996 ..................................  2
    Consolidated Statements of Cash Flows for the Nine-Month
        Periods Ended March 31, 1997 and 1996 ..........................  3
    Notes to Consolidated Financial Statements .........................  4

ARIZONA CHARLIE'S, INC
    Balance Sheets as of March 31, 1997 and June 30, 1996............... 10
    Statements of Operations and Retained Earnings (Deficit) for the
        Three-Month Periods Ended March 31, 1997
        and 1996 and for the Nine-Month Periods Ended
        March 31, 1997 and 1996..........................................11
    Statements of  Cash Flows for the Nine-Month Periods
        Ended March 31, 1997 and 1996....................................12
    Notes to Financial Statements........................................13

SUNSET COIN, INC
    Balance Sheets as of March 31, 1997 and June 30, 1996................19
    Statements of Income and Retained Earnings for the Three-Month
        Periods Ended March 31, 1997 and 1996 and for the
        Nine-Month Periods Ended March 31, 1997 and 1996.................20
    Statements of Cash Flows for the Nine-Month Periods Ended
        March 31, 1997 and 1996..........................................21
    Notes to Financial Statements........................................22

CAPITOL QUEEN & CASINO, INC
    Balance Sheets as of March 31, 1997 and June 30, 1996................27
    Statements of Loss Incurred During the Development Stage
        for the Three-Month Periods Ended  March 31, 1997
        and 1996 and for the Nine-Month Periods Ended March
        31, 1997 and 1996 and for the period  from  January 20,
        1993 (the date of inception) through March 31, 1997..............28
    Statements of Cash Flows for the for Nine-Month Periods Ended
        March 31, 1997 and 1996  and for the period from January 20,
        1993 (the date of inception) through March 31, 1997..............29
    Notes to Financial Statements........................................30


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



    Becker Gaming, Inc....................................................35
    Arizona Charlie's, Inc................................................35
    Sunset Coin, Inc......................................................41
    Capitol Queen & Casino, Inc...........................................44

Part II.  Other Information
    Item 1  Legal Proceedings.............................................45
    Item 6  Exhibits and Reports on Form 8-K..............................47

Signatures................................................................48

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<PAGE>

                      BECKER GAMING, INC. AND SUBSIDIARIES

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



                                     ASSETS


                                                      March 31,        June 30,
                                                        1997              1996
                                                    ------------    ------------
                                                    (Unaudited)

Current assets:

 Cash and cash equivalents .......................      $  7,225       $  6,745
 Restricted cash, in escrow account ..............            40             40
 Trade and other accounts
   receivable ....................................           749            626
 Receivables from related parties ................            34             33
 Inventories .....................................           704            729
 Prepaid expenses ................................         1,034          1,244
 Current portion of notes
   receivable ....................................           133            153
 Assets held for sale ............................            --          3,233
                                                        --------       --------
     Total current  assets .......................         9,919         12,803
                                                        --------       --------
Property and equipment:
 Land improvements ...............................         1,628          1,628
 Building and improvements .......................        38,282         38,282
 Leasehold improvements ..........................           983            983
 Furniture and equipment .........................        28,294         27,773
                                                        --------       --------
                                                          69,187         68,666

 Less, accumulated depreciation ..................       (21,553)       (19,078)
                                                        --------       --------
                                                          47,634         49,588
 Land ............................................           208            208
                                                        --------       --------
     Net property and  equipment .................        47,842         49,796
                                                        --------       --------

Other assets:

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

 Notes receivable, less ..........................           419            472
   current portion, net
 Receivables from related parties, less ..........           168            165
   current portion
 Deposits and other ..............................         2,073          1,375
 Financing costs, net ............................         2,597          3,112
                                                        --------       --------
     Total other assets ..........................        13,011         12,878
                                                        --------       --------
     Total assets ................................      $ 70,772       $ 75,477
                                                        ========       ========

<PAGE>

                 LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)


                                                     March  31,        June 30,
                                                         1997             1996
                                                   ------------     ------------
                                                     (Unaudited)

Current  liabilities:
 Trade accounts payable ..........................      $  1,398       $  1,761
 Accrued expenses ................................        10,887          6,409
 Notes payable ...................................           190            110
 Current portion of
   subordinated notes
   payable to stockholders .......................           800            800
 Current portion of
   long term debt ................................           426            381
 Long-term debt classified as
    current, net of unamortized
    original issue discount of
    $2,068 and $2,474,  respectively .............        72,932         72,526
 Current portion of obligations
    under capital leases .........................           151          1,960
                                                        --------       --------
     Total current liabilities ...................        86,784         83,947

Long-term debt, less
  current portion ................................         1,085          1,330
Subordinated notes payable
 to stockholders,
 less current portion ............................         8,000          8,000
Obligations under capital
 leases, less current portion ....................           114            197
                                                        --------       --------
     Total liabilities ...........................        95,983         93,474
                                                        --------       --------

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) .....................       (34,317)       (27,103)
                                                        --------       --------
     Total stockholders' equity (deficit) ........       (25,211)       (17,997)
                                                        --------       --------
     Total liabilities and
     stockholders' equity(deficit) ...............      $ 70,772       $ 75,477
                                                        ========       ========


The accompanying notes are an integral part of these financial statements.
================================================================================
<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 March 31,
                                                       1997              1996
                                                 ------------      ------------
Revenues:
   Gaming ..................................     $     13,929      $     15,831
   Food and beverage .......................            4,344             4,665
   Hotel ...................................              854               844
   Gift shop ...............................              135               150
   Other ...................................              191               359
                                                 ------------      ------------
        Gross revenues .....................           19,453            21,849
Less, promotional allowances ...............           (2,355)           (2,468)
                                                 ------------      ------------
        Net revenues .......................           17,098            19,381

Operating expenses:
   Gaming ..................................            3,556             3,947
   Food and beverage .......................            5,039             5,507
   Hotel ...................................              421               428
   Gift shop ...............................              137               119
   Advertising and promotion ...............            1,124             1,120
   General and administrative ..............            4,910             5,102
   Rent expense paid to related party ......              105               103
   Depreciation and  amortization ..........            1,031             1,120
                                                 ------------      ------------
        Total operating expenses ...........           16,323            17,446
                                                 ------------      ------------
        Operating income ...................              775             1,935
                                                 ------------      ------------
Other income(expenses):
   Development costs .......................             ( 41)           (4,275)
   Interest income .........................               41                29
   Interest expense ........................           (2,925)           (2,722)
   Other, net ..............................               75                12
                                                 ------------      ------------
        Total other income (expense) .......           (2,850)           (6,956)
                                                 ------------      ------------
        Loss before income taxes ...........           (2,075)           (5,021)
Provision for income taxes .................              --               --
                                                 ------------      ------------
        Net loss ...........................           (2,075)           (5,021)

        Retained earnings (deficit),
        beginning of period ................          (32,242)          (19,996)
                                                 ------------      ------------

        Retained earnings(deficit),
        end of period ......................     $    (34,317)     $    (25,017)
                                                 ============      ============

        Net loss per share of
        common stock .......................     $      (0.21)     $      (0.50)
                                                 ============      ============
        Weighted average common
        shares outstanding .................       10,000,000        10,000,000
                                                 ============      ============
<PAGE>


                                                    Nine Months Ended March 31,
                                                         1997              1996
                                                 ------------      ------------
Revenues:
   Gaming ..................................     $     42,828      $     47,212
   Food and beverage .......................           13,665            13,486
   Hotel ...................................            2,540             2,337
   Gift shop ...............................              404               457
   Other ...................................              756               907
                                                 ------------      ------------
        Gross revenues .....................           60,193            64,399
Less, promotional allowances ...............           (7,641)           (6,936)
                                                 ------------      ------------
        Net revenues .......................           52,552            57,463

Operating expenses:
   Gaming ..................................           11,078            12,861
   Food and beverage .......................           16,027            16,143
   Hotel ...................................            1,325             1,243
   Gift shop ...............................              387               353
   Advertising and promotion ...............            3,846             3,482
   General and administrative ..............           15,413            15,824
   Rent expense paid to related party ......              316               310
   Depreciation and amortization ...........            3,082             3,382
                                                 ------------      ------------
        Total operating expenses ...........           51,474            53,598
                                                 ------------      ------------
        Operating income ...................           (1,078)            3,865
                                                 ------------      ------------
Other income(expenses):
   Development costs .......................             (175)           (5,143)
   Interest income .........................              109                59
   Interest expense ........................           (8,342)           (7,968)
   Other, net ..............................              116                46
                                                 ------------      ------------
        Total other income (expense) .......           (8,292)          (13,006)
                                                 ------------      ------------
        Loss before  income taxes ..........           (7,214)           (9,141)
Provision for income taxes .................             --                --
                                                 ------------      ------------
        Net loss ...........................           (7,214)           (9,141)

        Retained earnings (deficit),
        beginning of period ................          (27,103)          (15,876)
                                                 ------------      ------------

        Retained earnings(deficit),
        end of period ......................     $    (34,317)     $    (25,017)
                                                 ============      ============

        Net loss per share of
        common stock .......................     $      (0.72)     $      (0.91)
                                                 ============      ============
        Weighted average common
        shares outstanding .................       10,000,000        10,000,000
                                                 ============      ============


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

                      BECKER GAMING, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                             (Dollars In Thousands)
                                   (Unaudited)

                                                     Nine Months Ended March 31,
                                                             1997          1996
                                                         --------      --------
Cash flows from operating activities:
  Net loss .........................................     $ (7,214)     $ (9,141)
  Adjustments to reconcile net loss to net
     cash (used in) provided by operating
     activities:
     Depreciation and amortization .................        3,082         3,382
     Amortization of original issue discount .......          406           401
     Abandonment loss ..............................           --         4,080
     Provisions for losses on receivables...........           72            --
     Net loss (gain) on sale of assets .............            1            17

(Increase) decrease in operating assets:
    Receivables ....................................         (123)          449
    Receivables from related parties ...............           (4)           --
    Inventories ....................................           25)          103
    Prepaid expenses ...............................          210           193
    Deposits and other assets ......................         (142)           63

Increase (decrease) in operating liabilities:
    Accounts payable ...............................         (363)           69
    Accrued expenses ...............................        4,478         3,253
                                                         --------      --------
            Total adjustments ......................        7,642        12,010
                                                         --------      --------
        Net cash provided by (used in)
        operating activities .......................          428         2,869
                                                         --------      --------

Cash flows from investing activities:
  Capital expenditures .............................         (577)         (613)
  Proceeds from sale of equipment ..................        3,240            35
  Issuance of notes receivable .....................           (4)           --
  Payments of notes receivable .....................           76            29
  Increase in investment in prospective ventures....         (751)           --
                                                         --------      --------
    Net cash provided by (used in)
     investing activities ..........................        1,984          (549)
                                                         --------      --------

Cash flows from financing activities:
  Proceeds from notes payable ......................          349           232
  Payments under notes payable .....................         (467)         (293)
  Payments under capital lease obligations .........       (1,814)         (719)
                                                         --------      --------
    Net cash used in financing activities
                                                           (1,932)         (780)
                                                         --------      --------
    Net increase in cash and cash equivalents ......          480         1,540
Cash and cash equivalents,
 beginning of period ...............................        6,745         6,657
                                                         --------      --------
Cash and cash equivalents,
 end of period .....................................     $  7,225      $  8,197
                                                         ========      ========

Supplemental cash flow disclosures:

   Interest paid, net of amount capitalized ........     $  5,934      $  5,909
                                                         ========      ========
   Income taxes paid ...............................           $-            $-
                                                         ========      ========
   Capitalized lease obligations incurred ..........           $-            $-
                                                         ========      ========

The accompanying notes are an integral part of these 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  and  nine-month  periods  ended  March 31,  1997 are not
necessarily  indicative  of the results  that may be expected for the year ended
June 30, 1997. 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, 1996.

2)   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.

<PAGE>



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


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 (the "CQC  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
repurchase of $20,000,000 principal amount of 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 remain 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 each of November 15,
1995, May 15, 1996,  and November 15, 1996 and will not have funds  available to
make the May 15, 1997 interest payment. Arizona Charlie's,  Inc. ("AC"), another
wholly owned  subsidiary of BGI and a guarantor of the CQC Notes,  does not have
funds  available to advance on behalf of CQC at March 31, 1997. AC is restricted
from selling  assets under the covenants  governing its 12% First Mortgage Notes
due November 15, 2000 (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
to satisfy its guarantee  obligation with respect to the CQC Notes.  However, in
January  1997  Management  has taken steps to increase  profitably  and generate
additional cash flow at AC, including  down-sizing  employee staffing levels and
associated  payroll costs in certain  departments.  Other operating  departments
have been  combined to eliminate  supervisory  and  management  positions.  Such
down-sizing  and  eliminations  which  took  place in  February  and  March  are
partially  reflected  in  the  1997  three-month  period.   Also,  the  existing
restaurants  and food  facilities are being analyzed to determine if the current
pricing  structures  are meeting the overall  goals of  attracting  a sufficient
number of casino  patrons as designed.  As such,  beginning  in April 1997,  new
value  priced  menus  have  been  implemented  in the  Chinese  restaurant.  The
Sportsbook  deli is being  expanded to include a  mini-food  court area which in
addition to the present  deli-style  sandwiches will offer grilled items as well
as Mexican  Style fast food  items.  Entertainment  events  including  headliner
concerts, lounge acts, and professional boxing matches are being re-evaluated to
determine if these events  attract the necessary  casino patrons  desired.  Also
beginning in April 1997, a slot player club and automated slot reporting  system
was purchased and is currently  being  installed to attract new patrons and help
retain existing patrons.  However, no assurance can be made regarding the future
performance of AC. Such  performance may be affected or influenced by prevailing
economic conditions and financial,  business and competitive factors, many which
are beyond AC's control.

<PAGE>

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

As of March 31,  1997,  AC is in  default of certain  debt  covenants  under the
Indenture (the "AC Indenture") governing the AC Notes. These covenant violations
include (i) a failure to meet a minimum fixed charge  coverage ratio, as defined
in the AC  Indenture,  and  (ii)  advances  by AC to BGI in  excess  of  amounts
permitted under the AC Indenture.  Such advances remain outstanding at March 31,
1997. In addition,  beginning with the quarter ending  December 31, 1995, AC has
not  met  the  minimum  tangible  net  worth  requirement  set  forth  in the AC
Indenture.  Under the terms of the AC Indenture,  AC is required to offer to buy
back  $27,500,000  of the  outstanding  AC Notes at  March  31,  1997 due to the
failure to meet this  covenant,  and such amounts  shall  increase by $5,500,000
each fiscal quarter so long as AC is in default of the covenant. AC has not made
such offer and does not intend to do so while  discussions  with the  Bondholder
Committee described below are in process. As a result of these covenant defaults
under covenants,  the AC Notes have been classified as currently  payable in the
accompanying financial statements.

The CQC Notes are not subject to mandatory  redemption,  except upon a change of
control, or other circumstances as defined in the Indenture.  CQC has the option
to redeem the CQC Notes at a premium of 106%  beginning  on November  15,  1997,
declining to par value on November 15, 1999. If prior to November 15, 1997,  BGI
consummates an initial public offering of its common stock,  CQC may also redeem
the CQC Notes, at a premium of 108%.

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  March  31,  1997,  CQC  had  a  net  deficit  of
approximately $17,000,000.

The AC Notes are not subject to  mandatory  redemption,  except upon a change of
control,  decline in tangible net worth, or certain asset sales,  all as defined
in the AC  Indenture.  AC has the  option to redeem the AC Notes at a premium of
106%  beginning  on November  15,  1997,  declining to par value on November 15,
1999.

The AC Indenture contains covenants that, among other things,  limit the ability
of AC and, in certain  cases,  Sunset Coin,  Inc.  ("SC"),  another wholly owned
subsidiary  of BGI  and a  guarantor  of  the AC  Notes,  to  pay  dividends  or
management fees, or incur additional  indebtedness.  At March 31, 1997, AC had a
net deficit of approximately  $14,500,000 and $1,900,000 of SC's net assets were
restricted by such indenture covenants.

<PAGE>


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

CQC  continues  to  market  its  riverboat  assets  to  prospective  buyers  and
management is continuing its discussions with an informal committee representing
the holders of the AC Notes and CQC notes (the "Bondholder Committee") regarding
a proposed  restructuring  plan. 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.   The  proposed
restructuring plan therefore contemplates the issuance of additional AC Notes to
fulfill AC's guarantee  obligation for remaining  principal and accrued interest
of the CQC Notes after applying sale proceeds.  However,  no satisfactory offers
for the  riverboat are  currently  available,  and no agreement has been reached
with  the  Bondholder  Committee  regarding  the  proposed  restructuring  plan.
Accordingly,  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 March 31,  1997  financial  statements  of the  Company do not  include  any
adjustment that might result from the outcome of this uncertainty.

Management of AC has taken several steps to overcome the substantial doubt as to
its  ability to  continue  as a going  concern  including  reducing  expenses as
previously  described,  eliminating  costs  associated  with the maintenance and
operation of the BGI airplane that was sold in July, 1996, the on-going attempts
to sell the CQC riverboat and use the proceeds to retire  indebtedness,  pursuit
of new business  development  activities  to  strengthen  BGI's  position in the
gaming  market,   and  continuing   negotiations  with  an  informal   committee
representing  the  holders  of the AC Notes and CQC  Notes to reach a  favorable
restructure of such Notes.

3)   Assets Held For Sale:

At March 31, 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.

Also, on July 26, 1996, the Company sold its corporate aircraft for net proceeds
of  approximately  $3,200,000 and retired a related capital lease  obligation of
approximately  $1,800,000.  During the quarter ended June 30, 1996,  the Company
recognized a write-down in the carrying  value of the aircraft of  approximately
$440,000 based upon the difference between the carrying value and the contracted
sales price.


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

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



                                     ASSETS


                                                 March 31,    June 30,
                                                     1997        1996
                                                 --------    --------
                                                 (unaudited)
Current assets:

   Cash and cash equivalents .................   $  5,355    $  4,591
   Restricted cash, in escrow account ........         10          10
   Trade and other accounts receivable .......        444         473
   Receivable from related  parties ..........      2,483       1,539
   Inventories ...............................        558         575
   Prepaid expenses ..........................        949       1,118
                                                 --------    --------
     Total current assets ....................      9,799       8,306
                                                 --------    --------

Property and equipment:

   Building and improvements .................     37,488      37,488
   Furniture and equipment ...................     22,859      22,575
   Land improvements .........................      1,628       1,628
                                                 --------    --------
                                                   61,975      61,691
   Less, accumulated  depreciation ...........    (18,371)    (16,218)
                                                 --------    --------
                                                   43,604      45,473
   Land ......................................        208         208
                                                 --------    --------
       Net property and equipment ............     43,812      45,681
                                                 --------    --------

Other assets:

   Receivable from related party, noncurrent..        210         987
   Deposits and other ........................        562         460
   Note receivable from related party.........      4,416       4,416
   Financing costs, less accumulated
   amortization of $1,782 at March 31,
   1997 and $1,366 June 30, 1996 .............      2,091       2,507
                                                 --------    --------
       Total other  assets ...................      7,279       8,370
                                                 --------    --------
       Total assets ..........................   $ 60,890    $ 62,357
                                                 ========    ========
<PAGE>

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)



                                                 March 31,   June 30,
                                                     1997        1996
                                                 --------    --------
                                               (unaudited)


Current liabilities:
   Trade accounts payable ....................   $    990    $  1,452
   Accounts payable to related parties .......          4           4
   Accrued expenses ..........................      5,843       3,323
   Management fees due Becker Gaming, Inc. ...      5,187       4,682
   Notes payable .............................        190         110
   Notes payable to related party ............      3,150       2,250
   Current portion of obligations
     under capital leases ....................         13          15
   Long-term debt classified as current due
     to default under covenants ..............     55,000      55,000
                                                 --------    --------
           Total current liabilities .........     70,377      66,836

Subordinated notes payable to prior
  stockholders ...............................      5,000       5,000
Obligations under capital leases,
  less current portion .......................         14          22
                                                 --------    --------
           Total liabilities .................     75,391      71,858
                                                 --------    --------

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) ................    (14,970)     (9,970)
                                                 --------    --------

           Total stockholders' equity
           (deficit) .........................    (14,501)     (9,501)
                                                 --------    --------

           Total liabilities  and
           stockholders' equity (deficit) ....   $ 60,890    $ 62,357
                                                 ========    ========


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 March 31,
                                                           1997            1996
                                                       --------        --------
Revenues:
  Gaming .......................................       $ 11,837        $ 13,454
  Food and beverage ............................          3,297           3,436
  Hotel ........................................            854             844
  Gift shop ....................................            135             150
  Management fee from affiliates ...............            653             729
  Other ........................................            175             338
                                                       --------        --------
      Gross revenues ...........................         16,951          18,951
Less, promotional allowances ...................         (1,985)         (2,033)
                                                       --------        --------
      Net revenues .............................         14,966          16,918
                                                       --------        --------

Operating expenses:
  Gaming .......................................          3,218           3,445
  Food and beverage ............................          3,922           4,164
  Hotel ........................................            421             428
  Gift shop ....................................            137             119
  Advertising and promotion ....................          1,100           1,097
  General and administrative ...................          3,996           4,423
  Management fee - Becker Gaming, Inc. .........            817             912
  Rent expense paid to related party ...........             55              54
  Depreciation and amortization ................            864             889
                                                       --------        --------
      Total operating expenses .................         14,530          15,531
                                                       --------        --------
      Operating income (loss)...................            436           1,387
                                                       --------        --------

Other income (expenses):
  Gain (loss) on sale of assets .................            (1)             --
  Interest income ..............................             67              74
  Interest expense .............................         (1,814)         (1,808)
  Other, net ...................................             22              16
                                                       --------        --------
      Total other expenses .....................         (1,726)         (1,718)
                                                       --------        --------
      Income (loss) before taxes ...............         (1,290)           (331)
Provision for income tax .......................             --              --
                                                       --------        --------
      Net (loss) income .........................      ($ 1,290)       ($   331)

Retained earnings (deficit),
  beginning of period ..........................        (13,681)         (8,644)
                                                       --------        --------

Retained earnings (deficit),
   end of period ...............................       ($14,971)       ($ 8,975)
                                                       ========        ========
<PAGE>



                                                     Nine Months Ended March 31,
                                                           1997            1996
                                                       --------        --------
Revenues:
  Gaming .......................................       $ 36,362        $ 39,988
  Food and beverage ............................         10,445           9,807
  Hotel ........................................          2,540           2,337
  Gift shop ....................................            404             457
  Management fee from affiliates ...............          2,021           1,454
  Other ........................................            711             852
                                                       --------        --------
       Gross revenues ..........................         52,483          54,895
 Less, promotional allowances ..................         (6,479)         (5,647)
                                                       --------        --------
      Net revenues .............................         46,004          49,248
                                                       --------        --------

Operating expenses:
  Gaming .......................................          9,658          11,092
  Food and beverage ............................         12,505          12,054
  Hotel ........................................          1,325           1,243
  Gift shop ....................................            387             353
  Advertising and promotion ....................          3,708           3,392
  General and administrative ...................         12,975          14,147
  Management fee - Becker Gaming, Inc. .........          2,526           2,674
  Rent expense paid to related party ...........            167             164
  Depreciation and amortization ................          2,583           2,668
                                                       --------        --------
      Total operating expenses .................         45,834          47,787
                                                       --------        --------
      Operating income (loss)...................            170           1,461
                                                       --------        --------

Other income (expenses):
  Gain (loss) on sale of assets ................             (1)            (10)
  Interest income ..............................            204             218
  Interest expense .............................         (5,435)         (5,283)
  Other, net ...................................             61              50
                                                       --------        --------
      Total other expenses .....................         (5,171)         (5,025)
                                                       --------        --------
      Income (loss) before taxes ...............         (5,001)         (3,564)
Provision for income tax .......................           --              --
                                                       --------        --------
      Net (loss) income ........................       ($ 5,001)       ($ 3,564)

Retained earnings (deficit),
  beginning of period ..........................         (9,970)         (5,411)
                                                       --------        --------

Retained earnings (deficit),
  end of period ................................       ($14,971)       ($ 8,975)
                                                       ========        ========


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)


                                                     Nine Months Ended March 31,
                                                               1997        1996
                                                           --------    --------
Cash flows from operating activities:
    Net income (loss) ..................................   ($ 5,001)   ($ 3,564)

    Adjustments to reconcile net income
    (loss) to net cash provided by
    operating activities:
    Depreciation and amortization ......................      2,583       2,668
    Provision for losses on related
     party receivables .................................        175       1,239
    (Gain) loss on sale of equipment ...................          1          11

(Increase) decrease in operating assets:
    Receivables ........................................         29      (2,203)
    Inventories ........................................         17          78
    Prepaid expenses ...................................        169         137
    Deposits and other .................................       (102)         85

Increase (decrease) in operating liabilities:
    Accounts payable ...................................       (462)         63
    Accrued expenses ...................................      2,520       1,342
    Management fees due to Becker Gaming, Inc. .........      2,526       2,674
                                                           --------    --------
       Total adjustments ...............................      7,456       6,094
                                                           --------    --------
        Net cash provided by operating activities ......      2,455       2,530
                                                           --------    --------

Cash flows from investing activities:
    Capital expenditures ...............................       (305)       (271)
    Increase in receivable from related party........... 
    Increase in receivable from Becker Gaming, Inc. ....       (372)         --
    Increase in  management fee receivable from Becker
    Gaming, Inc. .......................................     (2,021)     (1,454)
    Payments from related party receivable..............         30          --
    Proceeds from assets sales .........................          7          12
                                                           --------    --------
       Net cash provided by 
          investing activities .........................     (2,661)     (1,713)
                                                           --------    --------

Cash flows from financing activities:
    Proceeds from borrowing under payables..............        190          75
    Proceeds from related party notes payable...........        900          --
    Principal payments on notes payable ................       (110)         --
    Payments under capital lease obligations ...........        (10)         (4)
                                                           --------    --------
       Net cash provided by 
          financing activities .........................        970         (71)
                                                           --------    --------
       Net increase in cash and cash equivalents .......        764         888
Cash and cash equivalents, beginning of the period .....      4,591       5,404
                                                           --------    --------
Cash and cash equivalents, end of the period ...........   $  5,355    $  6,292
                                                           ========    ========
Supplemental cash flow disclosures:
    Interest paid, net of amount capitalized ...........   $  5,435    $  5,282
                                                           ========    ========
    Income taxes paid ..................................         $-          $-
                                                           ========    ========
    Capital lease obligations incurred .................         $-          $-
                                                           ========    ========


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 and nine-month periods ended March 31,
1997 are not necessarily  indicative of the results that may be expected for the
year ended June 30, 1997. 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, 1996.

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

AC has  guaranteed  the payment of  principal  of and  interest on the 12% First
Mortgage  Notes due November 15, 2000 (the "CQC" Notes") issued by Capitol Queen
& Casino,  Inc.  ("CQC").  An aggregate of $20,000,000  in principal  amount and
$3,600,000  in past due interest are  outstanding  on the CQC Notes at March 31,
1997. 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  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.

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.

<PAGE>


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

CQC financed the Capitol Queen project  through the issuance of  $40,000,000  in
principal  amount of CQC Notes.  As of January 1, 1995,  the Indenture (the "CQC
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  repurchase of $20,000,000  principal  amount of 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 remain 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 each of November 15,
1995,  May 15, 1996 and November  15, 1996 and will not have funds  available to
make the May 15, 1997  interest  payment.  AC does not have funds  available  to
advance on behalf of CQC at March 31, 1997. AC is restricted from selling assets
under the covenants governing its 12% First Mortgage Notes due November 15, 2000
(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 to satisfy its guarantee obligation
with respect to the CQC Notes.  However,  in January 1997  Management  has taken
steps to increase  profitably and generate additional cash flow at AC, including
down-sizing  employee  staffing  levels and associated  payroll costs in certain
departments.  Other  operating  departments  have  been  combined  to  eliminate
supervisory and management  positions.  Such down-sizing and eliminations  which
took place in February and March are partially reflected in the 1997 three-month
period. Also, the existing restaurants and food facilities are being analyzed to
determine if the current  pricing  structures  are meeting the overall  goals of
attracting a sufficient number of casino patrons as designed. As such, beginning
in April  1997,  new value  priced  menus have been  implemented  in the Chinese
restaurant.  The Sportsbook  deli is being expanded to include a mini-food court
area which in addition to the present  deli-style  sandwiches will offer grilled
items as well as Mexican Style fast food items.  Entertainment  events including
headliner  concerts,  lounge acts,  and  professional  boxing  matches are being
re-evaluated  to determine if these events attract the necessary  casino patrons
desired.  Also  beginning in April 1997, a slot player club and  automated  slot
reporting  system was purchased and is currently  being installed to attract new
patrons and help retain existing patrons. However, no assurance can be made
regarding  the future  performance  of AC. Such  performance  may be affected or
influenced  by  prevailing  economic  conditions  and  financial,  business  and
competitive factors, many which are beyond AC's control.

<PAGE>


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


As of March 31,  1997,  AC is in  default of certain  debt  covenants  under the
Indenture (the "AC Indenture") governing the AC Notes. These covenant violations
include (i) a failure to meet a minimum fixed charge  coverage ratio, as defined
in the AC  Indenture,  and  (ii)  advances  by AC to BGI in  excess  of  amounts
permitted under the AC Indenture.  Such advances remain outstanding at March 31,
1997. In addition,  beginning with the quarter ending  December 31, 1995, AC has
not  met the  minimum  tangible  net  worth  requirement,  set  forth  in the AC
Indenture.  Under the terms of the AC Indenture,  AC is required to offer to buy
back  $27,500,000  of the  outstanding  AC Notes at  March  31,  1997 due to the
failure to meet this covenant, and such amount shall increase by $5,500,000 each
fiscal quarter so long as AC is in default of the covenant. AC has not made such
offer and does not  intend to do so while the  discussions  with the  Bondholder
Committee  described  below  are in  process.  As a result  of  these  covenants
defaults,  the AC  Notes  have  been  classified  as  currently  payable  in the
accompanying financial statements.

The AC Notes are not subject to  mandatory  redemption,  except upon a change of
control,  decline in tangible net worth, or certain assets sales, all as defined
in the Indenture. The Company has the option to redeem the AC Notes at a premium
of 106%  beginning on November 15, 1997,  declining to par value on November 15,
1999.

In  connection  with its guarantee of the CQC Notes,  the CQC Indenture  imposes
certain  restrictive  covenants on the Company,  including minimum cash flow and
net  worth   requirements   and   restrictions  on  additional   borrowings  and
distributions of earnings.

CQC  continues  to  market  its  riverboat  assets  to  prospective  buyers  and
management is continuing its discussions with an informal committee representing
the holders of the AC Notes and CQC notes (the "Bondholder Committee") regarding
a proposed  restructuring  plan. 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.   The  proposed
restructuring plan therefore contemplates the issuance of additional AC Notes to
fulfill AC's guarantee  obligation for remaining  principal and accrued interest
of the CQC Notes after applying sale proceeds.  However,  no satisfactory offers
for the  riverboat are  currently  available,  and no agreement has been reached
with  the  Bondholder  Committee  regarding  the  proposed  restructuring  plan.
Accordingly,  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 March 31, 1997  financial  statements of AC do not include
any adjustment that might result from the outcome of this uncertainty.

Management of AC has taken several steps to overcome the substantial doubt as to
its  ability to  continue  as a going  concern  including  reducing  expenses as
previously  described,  eliminating  costs  associated  with the maintenance and
operation of the BGI airplane that was sold in July, 1996, the on-going attempts
to sell the CQC riverboat and use the proceeds to retire  indebtedness,  pursuit
of new business  development  activities  to  strengthen  BGI's  position in the
gaming  market,   and  continuing   negotiations  with  an  informal   committee
representing  the  holders  of the AC Notes and CQC  Notes to reach a  favorable
restructure of such Notes.

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

<PAGE>

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

                                 BALANCE SHEETS
                             (Dollars In Thousands)


                                     ASSETS


                                                           March 31,   June 30,
                                                                1997      1996
                                                             -------    -------
                                                         (Unaudited)
Current assets:
  Cash ...................................................   $   648    $ 1,122
  Current portion of notes receivable ....................        99        117
  Note receivable from related party .....................     3,150      2,250
  Other receivables ......................................       303        274
  Prepaid expenses .......................................        21         46
                                                             -------    -------
      Total current assets ...............................     4,221      3,809
                                                             -------    -------


Property and equipment:
  Building and leasehold improvements ....................       174        174
  Furniture, fixtures and equipment ......................     3,012      2,885
                                                             -------    -------
                                                               3,186      3,059
  Less, accumulated depreciation .........................    (1,548)    (1,370)
                                                             -------    -------
      Net property and equipment .........................     1,638      1,689
                                                             -------    -------

Other assets:
  Notes receivable, less current
    portion ..............................................       161        194

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

  Other assets, less accumulated
    amortization of $34 at March 31, 1997,
    and $24 at June 30, 1996 ............................         78         88
                                                             -------    -------

      Total assets .......................................   $ 6,334    $ 5,891
                                                             =======    =======
<PAGE>


                      LIABILITIES AND STOCKHOLDERS' EQUITY


                                                          March 31,  June 30,
                                                               1997     1996
                                                             ------   ------
                                                        (Unaudited)
Current liabilities:
  Trade accounts payable .................................   $    2   $   44
  Accrued expenses .......................................      770      608
  Current portion of long term debt ......................      325      279
                                                             ------   ------
       Total current liabilities .........................    1,097      931


Long-term liabilities:
   Long-term debt, less current portion ..................      333      502
   Subordinated notes payable to
     former stockholders .................................    3,000    3,000
                                                             ------   ------
      Total liabilities ..................................    4,430    4,433
                                                             ------   ------

Commitments and contingencies

Stockholders' equity:
  Common stock, no par value, 2,500
  shares authorized, 400 shares
  issued and outstanding .................................       27       27
Retained earnings ........................................    1,877    1,431
                                                             ------   ------
      Total stockholders' equity .........................    1,904    1,458
                                                             ------   ------

      Total liabilities and stockholders'
      equity .............................................   $6,334   $5,891
                                                             ======   ======

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 March 31,
                                              1997       1996
                                           -------    -------
Revenues:
    Slot route:
       From locations controlled
          by related parties ...........   $   614    $   607
       Other ...........................        30         38

    Slot service fees:
       From related parties ............        21         24
       Other ...........................         8          8
                                           -------    -------
         Total revenues ................       673        677

Operating expenses:
    Slot route and service .............       313        324
    General and administrative .........         8          4
    Management fee - Becker Gaming, Inc.        34         34
    Depreciation and amortization ......        73         75
                                           -------    -------
       Total operating expenses ........       428        437
                                           -------    -------
Operating income .......................       245        240
                                           -------    -------
Other income (expense):
    Interest income ....................        48         44
    Interest expense ...................       (89)       (96)
    Other income .......................        81         24
                                           -------    -------
       Total other income (expense) ....        40        (28)
                                           -------    -------
Net income before income tax ...........       285        212
Provision for income tax ...............       (73)       (72)
                                           -------    -------
Net income .............................       212        140
Retained earnings,
beginning of period ....................     1,665      1,273
                                           -------    -------
Retained earnings, end of
period .................................   $ 1,877    $ 1,413
                                           =======    =======
<PAGE>


                                       Nine Months Ended March 31,
                                              1997       1996
                                           -------    -------
Revenues:
    Slot route:
       From locations controlled
          by related parties ...........   $ 1,789    $ 1,750
       Other ...........................        97        112

    Slot service fees:
       From related parties ............        63         72
       Other ...........................        25         25
                                           -------    -------
         Total revenues ................     1,974      1,959

Operating expenses:
    Slot route and service .............     1,000        939
    General and administrative .........        38         31
    Management fee - Becker Gaming, Inc.       104        102
    Depreciation and amortization ......       215        224
                                           -------    -------
       Total operating expenses ........     1,357      1,296
                                           -------    -------
Operating income .......................       617        663
                                           -------    -------
Other income (expense):
    Interest income ....................       143        126
    Interest expense ...................      (274)      (298)
    Other income .......................       129         59
                                           -------    -------
       Total other income (expense) ....        (2)      (113)
                                           -------    -------

 Net income before income tax ..........       615        550
Provision for income tax ...............      (169)      (187)
                                           -------    -------
Net income .............................       446        363
Retained earnings,
beginning of period ....................     1,431      1,050
                                           -------    -------
Retained earnings,
end of period ..........................   $ 1,877    $ 1,413
                                           =======    =======


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)


                                        Nine Months Ended March 31,
                                             1997       1996
                                          -------    -------
Cash flows from operating activities:
    Net income ........................   $   446    $   363

    Adjustments  to  reconcile  net  
     income to net cash  provided 
     by operating activities:
     Depreciation and amortization ....       215        224
     Gain on sales of equipment .......        --         13

(Increase) decrease in operating assets:
    Other receivables .................       (30)       (11)
    Prepaid expenses ..................        23         23

Increase (decrease) in operating liabilities:
     Accounts payable .................       (43)       (69)
     Accrued expenses .................       161        310
                                          -------    -------
         Total adjustments ............       326        490
                                          -------    -------

         Net cash provided by
          operating activities ........       772        853
                                          -------    -------

Cash flows from investing activities:
   Capital expenditures ...............      (150)      (324)
   Proceeds from sales of equipment ...        --         12
   Increase in related
     party notes receivable ...........      (900)        --
   Increase in advances
     to related parties ...............      (125)       (32)
   Increase in notes receivable .......       (25)        --
   Repayments of notes receivable .....        76         63
                                          -------    -------
        Net cash used in
          investing activities ........     (1,124)     (281)
                                          -------    -------
Cash flows from financing activities:

    Proceeds from notes payable .......       159        157
    Principal payments on notes payable      (281)      (222)
                                          -------    -------
        Net cash (used in) provided by
          financing activities ........      (122)       (65)
                                          -------    -------

        Net increase in cash ..........      (474)       507

Cash, beginning of period .............     1,122        506
                                          -------    -------
Cash, end of period ...................   $   648    $ 1,013
                                          =======    =======

Supplemental cash flow disclosures:
    Interest paid .....................   $   274    $   298
                                          =======    =======
    Income taxes paid .................        $-         $-
                                          =======    =======

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 and
nine-month  periods ended March 31, 1997 are not  necessarily  indicative of the
results that may be expected for the year ended June 30, 1997. 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, 1996.


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

SC has  guaranteed  the  payment  of the  $55,000,000  principal  amount  of and
interest on the 12% First  Mortgage Notes due November 15, 2000 (the "AC Notes")
issued by Arizona  Charlie's,  Inc.  ("AC"),  another wholly owned subsidiary of
BGI.  AC is in  default  of  certain  covenants  under  the  Indenture  (the "AC
Indenture")  governing  the AC Notes as of March 31, 1997.  In addition,  AC has
guaranteed  the payment of  principal  and  interest on certain  mortgage  notes
issued by CQC (the "CQC Notes").  An aggregate  $20,000,000 in principal  amount
and  $3,600,000 in past due interest are  outstanding  on the CQC Notes at March
31, 1997.  Capitol Queen & 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. A proposed  restructuring plan therefore contemplates (i)
the  modification  of  covenants  under  the AC  Indenture  to cure the  current
defaults and (ii) the issuance of additional AC Notes to fulfill AC's  guarantee
obligation  for  remaining  principal  of and accrued  interest on the CQC Notes
after applying sale proceeds.  However, no satisfactory offers for the riverboat
are currently  available,  and no agreement has been reached with the holders of
the AC Notes and CQC Notes regarding the proposed restructuring plan.


<PAGE>


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

Should AC be unable to complete  its  restructuring  plan,  it will not have the
financial  resources  to repay the AC Notes and honor its  guarantee  obligation
under the CQC Notes.  The  Company  would thus  likely be  required to honor its
guarantee obligation of the AC Notes, which the Company does not have sufficient
resources to satisfy.  Accordingly,  these matters raise substantial doubt about
the ability of the Company to continue as a going concern.  The final outcome of
these matters is not  presently  determinable  and the March 31, 1997  financial
statements of the Company do not include any  adjustment  that might result from
the outcome of this uncertainty.

Management of AC has taken several steps to overcome the substantial doubt as to
its  ability to  continue  as a going  concern  including  reducing  expenses as
previously  described,  eliminating  costs  associated  with the maintenance and
operation of the BGI airplane that was sold in July, 1996, the on-going attempts
to sell the CQC riverboat and use the proceeds to retire  indebtedness,  pursuit
of new business  development  activities  to  strengthen  BGI's  position in the
gaming  market,   and  continuing   negotiations  with  an  informal   committee
representing  the  holders  of the AC Notes and CQC  Notes to reach a  favorable
restructure of such Notes.




================================================================================
<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


                                                           March 31,   June 30,
                                                                1997      1996
                                                             -------   -------
                                                         (Unaudited)
Current assets:


  Restricted cash, in escrow account ....................      $  30    $   30
                                                             -------   -------

      Total current assets ...............................        30        30
                                                             -------   -------

Other assets:


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

  Financing costs, net of accumulated
    amortization of $411 at March 31,
    1997 and $312 at June 30, 1996 .......................       506       605
  Deposits and other assets ..............................        60        60
                                                             -------   -------

      Total other assets .................................     8,320     8,419
                                                             -------   -------

      Total assets .......................................   $ 8,350   $ 8,449
                                                             =======   =======


                  LIABILITIES & STOCKHOLDERS' EQUITY(DEFICIT)

                                                         March 31,    June 30,
                                                              1997        1996
                                                          --------    --------
                                                       (Unaudited)

Current liabilities:

  Advances from related parties .......................   $  1,180     $ 1,006
  Accrued interest ....................................      4,889       2,775
  Notes payable to related parties ....................      1,200       1,200
  Long-term debt classified as current,
    net of unamortized original issue discount
    of $2,068 and $2,474, respectively ................     17,932      17,526
                                                          --------    --------
         Total liabilities ............................     25,201      22,507
                                                          --------    --------

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 ........    (29,583)    (26,790)
                                                          --------    --------
      Total stockholders' equity (deficit) ............    (16,851)    (14,058)
                                                          --------    --------

      Total liabilities and stockholders'
         equity(deficit) ..............................   $  8,350    $  8,449
                                                          ========    ========


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 March 31,
                                        1997       1996
                                     -------    -------
Revenues .........................        $-         $-

Operating expenses:
  Amortization of financing and
    other costs ..................        33         33
  Abandonment loss ...............        --      4,080
  Development costs ..............        41        195
                                     -------    -------

      Total operating expenses ...        74      4,308
                                     -------    -------

Operating loss ...................       (74)    (4,308)

Other income (expenses):
  Interest income ................        --         --
  Interest expense ...............    (1,016)      (750)
  Interest capitalized ...........        --         --
                                     -------    -------

Total other income (expense) .....    (1,016)      (750)
                                     -------    -------

Net loss before extraordinary item
                                      (1,090)    (5,058)
                                     -------    -------

Extraordinary item:
  Loss on early retirement of
    debt (no income tax benefit
    available) ...................      --         --
                                     -------    -------
   Net loss ......................   $(1,090)   $(5,058)
                                     =======    =======

<PAGE>


                                                                  For The Period
                                                                January 20, 1993
                                                                    (The Date Of
                                                                      Inception)
                                           Nine Months              Through
                                         Ended March 31,           March 31,
                                         1997        1996            1997
                                     --------    --------    ------------------
Revenues ...........................       $-          $-                    $-


Operating expenses:
  Amortization of financing and
    other costs ....................       99          98                 1,440
  Abandonment loss .................       --       4,392                10,426
  Development costs ................      175         751                 1,886
                                     --------    --------    ------------------

      Total operating expenses .....      274       5,241                13,752
                                     --------    --------    ------------------
Operating loss                           (274)     (5,241)              (13,752)

Other income (expenses):
  Interest income ..................       --         --                  1,265
  Interest expense .................   (2,519)     (2,165)              (13,690)
  Interest capitalized .............     --          --                     683
                                     --------    --------    ------------------

Total other income (expense) .......   (2,519)     (2,165)              (11,742)
                                     --------    --------    ------------------

Net loss before extraordinary item .   (2,793)     (7,406)              (25,494)
                                     --------    --------    ------------------
Extraordinary item:
  Loss on early retirement of
     debt (no income tax benefit ...
     available) ....................     --          --                  (4,089)
                                     --------    --------    ------------------

   Net loss ........................ $ (2,793)   $ (7,406)   $          (29,583)
                                     ========    ========    ==================


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)





                                                   Nine Months Ended
                                                        March 31,
                                                    1997       1996
                                                 -------    -------

Cash flows from development stage activities:
 Net loss ....................................   $(2,793)   $(7,406)
 Adjustments to reconcile net loss
    to net cash provided by (used in)
    development stage activities:
 Amortization of financing and other costs ...        99         98
 Amortization of original issue discount .....       406        401
 Abandonment losses ..........................        --      4,392
 Extraordinary loss on retirement of debt ....        --         --
 Increase in accounts payable
  and accruals, net of amounts
  for capital expenditures ...................     2,114      1,622
 Increase in advances from related parties ...       174        848
                                                 -------    -------
       Total adjustments .....................     2,793      7,361
                                                 -------    -------
       Net cash used in development
         stage activities ....................        --        (45)
                                                 -------    -------

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

     Net (decrease) increase in
         cash and cash  equivalents ..........       --        (45)

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

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
                                                           March 31,
                                                             1997
                                                           --------

Cash flows from development stage activities:
 Net loss ...................................              $(29,583)
 Adjustments to reconcile net loss
    to net cash provided by (used in)
    development stage activities:
 Amortization of financing and other costs ..                 1,440
 Amortization of original issue discount ....                 2,313
 Abandonment losses and write-downs of assets
     held for salee..........................                10,426
 Extraordinary loss on retirement of debt ...                 4,089
 Increase in accounts payable
  and accruals, net of amounts
  for capital expenditures ..................                 4,901
 Increase in advances from related parties ..                 1,168
                                                           --------
       Total adjustments ....................                24,337
                                                           --------
       Net cash used in development
         stage activities ...................                (5,246)
                                                           --------

Cash flows from investing activities:
 Capital expenditures, net of
  construction accounts payable .............               (12,936)
 Decrease in deposits and other assets ......                   (31)
 Capitalization of preopening costs .........                   (60)
 Development costs ..........................                  (340)
 Net (additions to) reductions
    in restricted cash equivalents ..........                  (553)
                                                           --------
     Net cash provided by
       (used in) investing activities .......               (13,920)
                                                           --------

Cash flows from financing activities:
 Principal payments on First
    Mortgage Notes ..........................               (20,200)
 Proceeds from issuance of First
    Mortgage Notes, net of financing costs ..                30,666
 Proceeds from borrowings under
    notes payable to  related parties .......                 1,200
 Equity contribution from Becker Gaming, Inc.
      relating to sale of warrants ..........                 7,500
                                                           --------
     Net cash provided by financing activities               19,166
                                                           --------

     Net (decrease) increase in
         cash and cash  equivalents .........                    --

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

Cash and cash equivalents,
    end of period ...........................                   $-
                                                           ========
Supplemental cash flow disclosures:
 Interest paid, net of amounts capitalized ..              $  5,807
                                                           ========

 Original issue discount that
    did not affect cash .....................              $  7,500
                                                           ========

 Equity contribution by Becker Gaming
    that did not affect cash ................              $  5,232
                                                           ========



The accompanying notes are an 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 instruction to Form
10-Q and Article 10 of Regulation S-X.  Accordingly,  they do not include all of
the  information  and  footnotes  required  by  generally  accepted   accounting
principles for complete financial statements. In the opinion of management,  all
adjustments  and  normal  recurring  accruals  considered  necessary  for a fair
presentation have been included.  Operating results for the three and nine-month
periods ended March 31, 1997 are not necessarily  indicative of the results that
may be  expected  for the year  ended June 30,  1997.  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, 1996.


2)   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 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.

<PAGE>


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

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 (the "CQC  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
repurchase of $20,000,000 principal amount of 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 remain 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 each of November 15,
1995,  May 15, 1996 and November  15, 1996 and will not have funds  available to
make the May 15, 1997 interest payment. Arizona Charlie's,  Inc. ("AC"), another
wholly owned  subsidiary of BGI and a guarantor of the CQC Notes,  does not have
funds available to advance on behalf of CQC at March 31, 1997.  Further, AC does
not have sufficient financial resources to satisfy its guarantee obligation with
respect to the CQC  Notes,  particularly  because AC is in default of  covenants
under the Indenture governing its 12% First Mortgage Notes due November 15, 2000
(the "AC Notes").

As mentioned  previously,  CQC's obligations under the CQC Indenture was amended
with the  requisite  consent of the  holders of the CQC  Notes.  CQC's  previous
obligations to complete and open the Capitol Queen have been  eliminated and CQC
has agreed to a two-step plan to repay the CQC Notes.  The first step, which was
consummated  on  January  17,  1995,  involved  the  repurchase  of  $20,000,000
principal  amount of the CQC Notes at 101% of such principal amount plus accrued
and unpaid  interest with funds held in the restricted  project escrow  account.
The Company 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.

<PAGE>


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

The CQC Notes are not subject to mandatory  redemption,  except upon a change of
control, or other circumstances as defined in the CQC Indenture. The Company has
the option to redeem the CQC Notes at a premium of 106%  beginning  on  November
15, 1997,  declining to par value on November 15, 1999. If prior to November 15,
1997,  BGI  consummates  an initial  public  offering of its common  stock,  the
Company may also redeem the CQC Notes at a premium of 108%.

The CQC Indenture contains covenants that, among other things, limit the ability
of the Company and, in certain cases,  AC, to pay dividends or management  fees,
or incur additional indebtedness.

CQC  continues  to  market  its  riverboat  assets  to  prospective  buyers  and
management is continuing its discussions with an informal committee representing
the holders of the AC Notes and CQC Notes (the "Bondholder Committee") regarding
a proposed  restructuring  plan. 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.   The  proposed
restructuring plan therefore contemplates the issuance of additional AC Notes to
fulfill AC's guarantee  obligation for remaining  principal and accrued interest
of the CQC Notes after applying sale proceeds.  However,  no satisfactory offers
for the  riverboat are  currently  available,  and no agreement has been reached
with  the  Bondholder  Committee  regarding  the  proposed  restructuring  plan.
Accordingly,  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 March 31, 1997 financial  statements of the Company do not
include any adjustment that might result from the outcome of this uncertainty.

Management of AC has taken several steps to overcome the substantial doubt as to
its  ability to  continue  as a going  concern  including  reducing  expenses as
previously  described,  eliminating  costs  associated  with the maintenance and
operation of the BGI airplane that was sold in July, 1996, the on-going attempts
to sell the CQC riverboat and use the proceeds to retire  indebtedness,  pursuit
of new business  development  activities  to  strengthen  BGI's  position in the
gaming  market,   and  continuing   negotiations  with  an  informal   committee
representing  the  holders  of the AC Notes and CQC  Notes to reach a  favorable
restructure of such Notes.

3)   Assets Held For Sale:

At March 31, 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 guarantees of the CQC Notes and the AC Notes, respectively.  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.


Arizona Charlie's, Inc.
-----------------------

General

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


           Results of Operations for the three and nine-months ended
                            March 31, 1997 and 1996

      Results from  operations at AC decreased for both the three and nine-month
periods ended March 31, 1997 compared to the same periods in 1996 primarily as a
result of  decreased  gaming  revenues  in the more  recent  periods.  Operating
expenses also decreased for both the  three-month  and nine-month  periods ended
March  31,  1997,  primarily  as a result of  reduced  payroll  expenses  in the
operating departments and reduced General and Administrative expenses associated
with the maintenance and operation of the corporate airplane sold in July, 1996.

      Net revenues at AC decreased by $1,952,000,  or 11.5%, from $16,918,000 to
$14,966,000  for the  three-month  period  ended March 31, 1997  compared to the
three-month   period  ended  March  31,  1996.  In  the  same   period-to-period
comparison,   operating  expenses,   including  depreciation  and  amortization,
decreased by 6.4% to $14,530,000 from  $15,531,000.  This resulted in a $951,000
decrease in  operating  income from  $1,387,000  to $436,000 for the more recent
period.

      Net revenues at AC decreased by $3,244,000,  or 6.6%, from  $49,248,000 to
$46,004,000  for the  nine-month  period  ended March 31,  1997  compared to the
nine-month period ended March 31, 1996. In the same period-to-period comparison,
operating expenses,  including depreciation and amortization,  decreased by 4.1%
to  $45,834,000  from  $47,787,000.  This  resulted in a $1,291,000  decrease in
operating income from $1,461,000 to $170,000 for the more recent period.

      The largest  portion of the revenue  decrease for the  three-month  period
ended March 31, 1997 is attributable to gaming  revenues,  specifically,  gaming
machine  revenues,  which  decreased  10.4%  from  $11,464,000  to  $10,269,000,
reflecting  lower  levels  of play  from  patrons.  Revenues  from  table  games
increased 4.4% from $1,071,000 to $1,120,000 during the 1997 three-month  period
and race and sports book revenues  decreased $244,917 or 34.0% reflecting lesser
pari-mutuel  horse race play from patrons  because of the on-going  dispute over
increased  fees that began in  November  1996,  between  the Nevada  Pari-Mutuel
Association  and both the  Thoroughbred  Owners of California and the California
Horse Racing Board who provide and authorize televised  disseminator services to
Race & Sports  books in Nevada.  Until the  increased  fee issues are  resolved,
these televised  disseminator  services which are popular with existing  patrons
will not be  available.  Bingo  revenues  also  decreased  by  $201,000  for the
three-month  period ended March 31, 1997 when compared to the same period of the
prior year.  The largest  portion of the decrease in revenues for the nine-month
period  ended  March 31,  1997 is also  attributable  to gaming  revenues  which
decreased 9.1% from  $39,988,000 to  $36,362,000.  Specifically,  gaming machine
revenues decreased $2,711,000 or 8.0% from $33,760,000 to $31,049,000 reflecting
lesser play from patrons.  Revenues from table games increased  $19,000 or 0.5%,
from  $3,506,000  to  $3,525,000,  and  revenues  from the  race &  sports  book
decreased $398,000,  or 17.1%, from $2,332,000 to $1,934,000 also reflecting the
aforementioned  on-going dispute between the Nevada Pari-Mutuel  Association and
both the  Thoroughbred  Owners of  California  and the  California  Horse Racing
Board.  Bingo revenues also decreased by $479,000  during the nine-month  period
ended March 31, 1997 compared to the same period of the prior year.  Lesser play
from patrons for both the 1997 three-month and nine-month periods are the result
of increased  competition from surrounding  hotel/casinos that appeal to Arizona
Charlie's "local" patron base.
<PAGE>

      Food and Beverage revenues  decreased  $139,000 or 4.0% from $3,436,000 to
$3,297,000  during the  three-month  period ended March 31, 1997 compared to the
same period in the prior year.  The  decrease  in revenues is  primarily  due to
decreased  complimentary  sales in the food and beverage  department  reflecting
management's  recent  efforts  to  better  control  the  costs  associated  with
complimentary sales through stronger player evaluation  methods.  Such sales are
included  in  revenues at retail  value and are then  deducted as a  promotional
allowance.  For the  nine-month  period  ended March 31,  1997,  food & beverage
revenues increased $638,000 or 6.1% from $9,807,000 to $10,445,000 when compared
to the nine-month period of the prior year,  reflecting increased  complimentary
sales in the food and beverage departments. Increased complimentary sales in the
food and beverage  department  are the result of casino  promotion and marketing
efforts to attract, reward and retain qualified patrons.

      Hotel revenues  increased $10,000 or 1.2% from $844,000 to $854,000 during
the three months ended March 31, 1997 compared to the same three-month period in
1996.  The increase is primarily  due to a slight  decrease in occupancy  and an
increase  in average  room rates of 86.7% and $43.7,  respectively,  compared to
92.3% and $39.3 in the 1996 period. During the nine-month period ended March 31,
1997, hotel revenues increased by $203,000 or 8.0% from $2,337,000 to $2,540,000
compared to the same nine-month period of 1996. The increased revenue is largely
due to an increase  in  occupancy  and  average  room rates of 87.3% and $43.22,
respectively, compared to 86.9% and $38.77 in the 1996 nine-month period.

      Gift shop  revenues  decreased  $15,000 or 10.0% from $150,000 to $135,000
during the  three-month  period ended March 31, 1997 compared to the same period
in 1996.  During the nine-month  period ended March 31, 1997, gift shop revenues
decreased  $53,000,  or 11.6%,  from  $457,000 to $404,000  compared to the same
period  in 1996.  The  decreases  are  primarily  due to  reducing  the hours of
operation in the 1997 periods.

     Other revenues,  which principally include entertainment cover charges, ATM
commissions,  and revenues from PBX and banquets,  decreased 48.2% from $338,000
to $175,000 for the three-month period ended March 31, 1997 compared to the same
period in 1996.  During  the nine  month  period  ended  March 31,  1997,  other
revenues  decreased by $141,000 or 16.6% from  $852,000 to $711,000  compared to
the same nine-month  period of 1996. The decreases  reflect lower  entertainment
cover  charge,  banquet  revenues  and  boxing  revenues  resulting  from  fewer
concerts, banquets and boxing events that occurred in the 1997 periods.
<PAGE>

      Gaming expenses  decreased by $227,000 and $1,434,000,  or 6.6% and 12.9%,
from $3,445,000 and $11,092,000 to $3,218,000 and $9,658,000,  respectively, for
the three-month  and nine-month  periods ended March 31, 1997 as compared to the
same  periods in 1996.  The lower  levels of expense  for both  periods  reflect
reductions  in  staffing  levels in the slot and  table  games  departments  and
decreased slot promotion expenses.

      Food  and  Beverage  expenses  decreased  by  $242,000  and  increased  by
$451,000,  or 5.8% and 3.6%,  from  $4,164,000 and $12,054,000 to $3,922,000 and
$12,505,000,  respectively,  for the  three-month  and nine-month  periods ended
March 31, 1997 when  compared to the same periods in 1996,  as a result of lower
food costs  associated  with  decreased  Food & Beverage  revenues  for the 1997
three-month  period,  and increased  food and beverage  costs and an increase in
salary and wages,  all associated with the increase in food & beverage  revenues
during the 1997  nine-month  period.  As a result,  food and  beverage  expenses
represented  118.9% and 119.7% of food and beverage revenues for the three-month
and nine-month periods ended March 31, 1997 compared to 121.2% and 122.9% of the
food and beverage revenues for the same periods in 1996.

      Hotel expenses  decreased by $7,000 and increased by $82,000,  or 1.6% and
6.2%, from $428,000 and $1,243,000 to $421,000 and $1,325,000, respectively, for
the three-month  and nine-month  periods ended March 31, 1997 as compared to the
same periods in 1996,  reflecting  staffing  reductions in the 1997  three-month
period, and additional repair and maintenance costs associated with the original
100 rooms built in 1988,  the additional  costs of room linens,  and normal wage
and salary  increases in the 1997  nine-month  period.  Net  contribution by the
hotel department (hotel revenues less hotel operating expenses) was $433,000 and
$1,215,000 for the  three-month  and nine-month  periods ended March 31, 1997 as
compared to $416,000 and $1,094,000 for the same periods in 1996.

       General and Administrative expenses decreased by $427,000 and $1,172,000,
or 9.7% and 8.3%,  from $4,423,000 and $14,147,000 to $3,996,000 and $12,975,000
respectively, for the three-month and nine-month periods ended March 31, 1997 as
compared to the same periods in 1996. The decreases resulted from a reduction in
entertainment  department  costs that are  associated  with fewer  entertainment
events and lower entertainer fees and equipment rental expense.  Other decreases
include  reductions of staffing levels in the security,  entertainment,  porters
and  aviation  departments  and a  reduction  in  expenses  associated  with the
operation of a jet  airplane  which was sold in July 1996.  The Company  accrued
management fees payable to BGI of $817,000 and $2,526,000 during the three-month
and nine-month periods ended March 31, 1997.

      Advertising and Promotional expenses increased by $3,000 and $316,000,  or
0.3% and 8.5%,  from  $1,097,000  and  $3,392,000 to $1,100,000  and  $3,708,000
during the three-month  and nine-month  periods ended March 31, 1997 as compared
to the same  period  in 1996.  Management  believes  that  these  levels of slot
promotional  expenditures  in both of the 1996 periods are  necessary to attract
and  maintain  the desired  customer  levels,  and  support  the other  existing
facilities throughout the property. Management believes that frequent promotions
are necessary to compete with the newer  hotel/casinos that are located close in
proximity  to AC.  These  newer  hotel/casinos  appeal and market to the Arizona
Charlie's "local" patron base.
<PAGE>

      Depreciation  and Amortization  decreased by $25,000 and $85,000,  or 2.8%
and 3.2%,  from $889,000 and  $2,668,000 to $864,000 and  $2,583,000  during the
three-month  and  nine-month  periods  ended March 31, 1997 when compared to the
same periods in 1996, as a result of decreased  depreciation expenses associated
with older assets.

      AC had other expenses of $1,726,000 and $5,171,000 for the three-month and
nine-month  periods ended March 31, 1997 compared with $1,718,000 and $5,025,000
for the same  periods  in 1996.  The  increase  in the  1997  nine-month  period
reflects an adjustment to correct the  calculation of interest  associated  with
the AC Notes.

     In January,  1997  Management  has taken steps to increase  profitably  and
generate  additional cash flow at AC, including  down-sizing  employee  staffing
levels and  associated  payroll costs in certain  departments.  Other  operating
departments   have  been  combined  to  eliminate   supervisory  and  management
positions.  Such down-sizing and  eliminations  which took place in February and
March are partially reflected in the 1997 three-month period. Also, the existing
restaurants  and food facilities have being analyzed to determine if the current
pricing  structures  are meeting the overall  goals of  attracting  a sufficient
number of casino  patrons as designed.  As such,  beginning  in April 1997,  new
value  priced  menus  have  been  implemented  in the  Chinese  restaurant.  The
Sportsbook  deli is being  expanded to include a  mini-food  court area which in
addition to the present  deli-style  sandwiches will offer grilled items as well
as Mexican  Style fast food  items.  Entertainment  events  including  headliner
concerts, lounge acts, and professional boxing matches are being re-evaluated to
determine if these events  attract the necessary  casino patrons  desired.  Also
beginning in April 1997, a slot player club and automated slot reporting  system
was purchased and is currently  being  installed to attract new patrons and help
retain existing patrons.  However, no assurance can be made regarding the future
performance of AC. Such  performance may be affected or influenced by prevailing
economic conditions and financial,  business and competitive factors, many which
are beyond AC's control.

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 $13,750,000.  Management anticipates that AC will generate taxable
income  and that its  effective  federal  income tax rate will  approximate  the
statutory  rate of 34%,  prior  to  consideration  of the  benefit  from the net
operating losses, which may be utilized to offset taxable income.
<PAGE>

Liquidity and Capital Resources
-------------------------------

      At March  31,  1997,  AC had a  working  capital  deficit  of  $60,578,000
compared to a working  capital  deficit of  $58,530,000  at June 30,  1996.  The
decrease in working capital in the amount of $2,046,000 was caused  primarily by
increased  accrued interest on the AC Notes and accrued  management fees payable
to BGI.

      For the nine-month period ended March 31, 1997, cash provided by operating
activities decreased  approximately  $75,000 to $2,455,000,  from $2,530,000 for
the  same  period  in  1996.  The  decrease  in the  1997  period  is  primarily
attributable to the increased net loss for the current period,  partially offset
by the increased accrued interest on the AC Notes.

      For the nine-month period ended March 31, 1997, net cash used in investing
activities  increased to $2,661,000  for the  nine-month  period ended March 31,
1997  compared  with  $1,713,000  for the same period in 1996.  The  increase of
$948,000  was  caused  primarily  by  a  $372,000   increase  in  related  party
receivable, an increase in management fee receivable of $567,000 and an increase
in capital expenditures of $34,000. .

      Cash flows  provided by financing  activities  for the  nine-month  period
ended March 31,  1997 was  $970,000  compared  with  $71,000 for the  nine-month
period ended March 31, 1996 reflecting proceeds from a related party payable.

     AC's  long-term  obligations,  approximately  $5,014,000 at March 31, 1997,
consist of the stockholder notes and capitalized equipment leases. 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.  Further, AC is expected to have annual capital expenditure  requirements
of approximately $600,000.

      On November 15, 1996,  AC made an interest  payment due on the AC Notes in
the amount of  $1,100,000,  an amount equal to one-third of the required due. On
December  16,  1996  another  one-third  of the  interest  due in the  amount of
$1,100,000 was paid. The remainder of the interest was paid on January 15, 1997.

       AC is currently in technical default under the Indenture governing the AC
Notes  because  it  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.
As a result of such defaults,  the holders of 25% or more in principal amount of
the Notes may cause the AC Notes to be  accelerated,  in which  event they would
become immediately due and payable in full. AC does not have and is not expected
to have the resources to pay the AC Notes if they are accelerated.
<PAGE>

     In addition, AC has a substantial  contingent obligation resulting from its
guarantee of the CQC Notes,  an aggregate of $20,000,000 in principal  amount of
which  remain  outstanding.  CQC was not  able to make  its  scheduled  interest
payments  of  $1,200,000  due on each of  November  15,  1995,  May 15, 1996 and
November  15, 1996,  and will not have funds  available to make the May 15, 1997
interest  payment and AC does not have funds  available  to advance on behalf of
CQC at  March  31,  1997.  Management  of AC and  CQC are  currently  undergoing
discussions with an informal committee  representing the holders of the AC Notes
and CQC Notes regarding a proposed restructuring plan, however, an agreement has
not yet been  reached.  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 past due interest  thereon.  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 past due 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 past
due interest thereon,  AC will be obligated under its guarantee of the CQC Notes
to fund the shortfall.

      Moreover,  because it has not yet effected the sale of its assets,  CQC is
in default of the Indenture governing the CQC Notes. As a result, the holders of
25% or more in  principal  amount of the CQC Notes may cause the CQC Notes to be
accelerated,  in which event they would  become  immediately  due and payable in
full. If the CQC Notes were to be accelerated,  CQC would not be able to pay the
outstanding  CQC Notes without an infusion of capital,  which is not expected to
be  available.  AC would then be  obligated  under its  guarantee to pay the CQC
Notes but is not  expected  to have the  resources  to satisfy  such  obligation
should it  materialize.  A default by AC under its guarantee would also give the
holders  of 25% or more in  principal  amount  of the AC Notes  the  ability  to
accelerate  the AC  Notes.  If the AC Notes or the CQC  Notes  are  accelerated,
substantial doubt exists about AC's ability to continue as a going concern.

      AC's management believes that, assuming the AC Notes and CQC Notes are not
accelerated,  it has sufficient  funds to meet its projected needs for financing
of  existing  operations  and to service  its debt  obligations.  However,  AC's
ability to obtain capital,  should it be required,  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.

      Management of AC has taken several steps to overcome the substantial doubt
as to its ability  continue as a going concern  including  reducing  expenses as
previously  described,  eliminating  costs  associated  with the maintenance and
operation of the BGI airplane that was sold in July, 1996, the on-going attempts
to sell the CQC riverboat, and use the proceeds to retire indebtedness,  pursuit
of new business  development  activities  to  strengthen  BGI's  position in the
gaming  market,   and  continuing   negotiations  with  an  informal   committee
representing  the  holders  of the AC Notes and CQC  Notes to reach a  favorable
restructure of such Notes.
<PAGE>

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  shareholders  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 nine Becker  Gaming Group  ("BGG")
locations and one  additional  location owned by an unrelated  party,  which are
expected to be renewed in general course except for Charlie's Saloon (a BGG bar)
which discontinued its operations on April 21, 1996.


           Results of operations for the three and nine months ended
                            March 31, 1997 and 1996

     SC's  results of  operations  increased  for both the three and  nine-month
periods  ended  March 31, 1997 when  compared  to the same  periods in the prior
year.  Net income  before  income  taxes  increased by 25.6% to $285,000 for the
three-month  period  and  10.6%  to  $615,000  for the  nine-month  period.  The
increases are mainly  attributable  to recoveries of bad debts of $57,000 in the
latest quarter which were previously written-off in past fiscal periods.

      SC's total revenues  declined for the  three-month  period ended March 31,
1997 when  compared to the same period last year by 0.6% to $673,000  due to the
conversion of one space lease location to a  participating  location in the more
recent period.  Whereas the nine-month period ended March 31, 1997 when compared
to same period in 1996 showed a net  increase in revenues by 0.8% to  $1,974,000
as a result of one  participating  location  added in the current period and the
proceeds for one location  which was only open for a partial period of the prior
fiscal year.  Another factor  contributing  to increased  revenue in the current
period were the conversion of some machines to bill validator machines.
<PAGE>

      The total  number of gaming  machines  operated  during both the three and
nine-month  periods  ended March 31, 1997 were 395  compared to 396 in the prior
year.  The total  number  of gaming  machines  from the BGG  locations  that are
serviced by SC was 115, as compared to 130 in the same  periods last year due to
the discontinued operation of the aforementioned BGG bar. Slot service fees from
BGG for the three-month and nine-month periods ended March 31, 1997 decreased to
$21,000 and $63,000,  from $24,000 and $72,000 for the same periods in the prior
year.

      Gaming machine route expenses for the  three-month  period ended March 31,
1997 decreased by 3.3% to $313,000 when compared to the same period in the prior
year reflecting decreased salaries and wages and associated payroll taxes due to
reduction in security  personnel during the recent period partially offset by an
increase in repairs and  maintenance  of slot  machines.  During the  nine-month
period ending March 31, 1997 gaming machine route expenses  increased by 6.5% to
$1,000,000  reflecting  salaries  and  wages  and  associated  payroll  taxes of
security  personnel  and  repairs and  maintenance  of slot  machines  offset by
decreases in loss and damages, and automotive expenses.

     General and administrative expenses for the three-month period increased by
100.0% to $8,000 from $4,000,  and for the nine-month  period increased by 22.6%
to $38,000 from $31,000,  reflecting decreases in supplies and professional fees
for the  three-month  period and increased  office  expenses for the  nine-month
period.

      Management fees due to Becker Gaming,  Inc.  remained  relatively the same
for the three-month and nine-month periods ended March 31, 1997 when compared to
the same periods in the prior year.

      Depreciation  and  amortization  decreased by 2.7% and 4.0% to $73,000 and
$215,000  for the  three-month  and  nine-month  periods  ended March 31,  1997,
reflecting  decreased  depreciation and  amortization  costs associated with the
April 1996 closing of a BGG bar. SC abandoned furniture,  fixtures and equipment
contained in this bar.

      During the  three-month  period ended March 31, 1997,  SC had other income
(net of other expenses) of approximately $40,000 compared to other expense, (net
of other income) of $28,000 and for the nine-month period other expenses (net of
other  income)  were $2,000  compared to $113,000  for the same periods in 1996.
These decreases are  attributable to reduced  interest  expense relating to four
notes  payable paid- off in various  months for the previous  fiscal year ended,
and the  previously  mentioned  bad debt  recovery of $57,000 in the more recent
period.

Income Taxes
------------

      As a  result  of  the  termination  of its  election  to be  treated  as S
corporation,  SC became  liable for income taxes on income earned from and after
January 1, 1995. Prior to such termination, SC did not incur or pay their income
tax liability in respect to income of SC.  Estimated  income tax payable for the
three-month and nine-month  periods ended March 31, 1997 amounted to $73,000 and
$169,000  from $72,000 and $187,000 in the same period in the prior year.  These
were based on an anticipated effective federal income tax rate approximating the
statutory rate of 34%.

<PAGE>

Liquidity and Capital Resources
-------------------------------

      Cash  provided by operating  activities  for the  nine-month  period ended
March 31, 1997  decreased to $772,000  from $853,000 for the  nine-month  period
ended March 31, 1996,  mostly due to a net decrease in operating  liabilities of
$123,000 and  depreciation  and  amortization of $9,000  partially  offset by an
increase in net income of $83,000.

      Cash flows used in investing  activities for the  nine-month  period ended
March 31, 1997 increased to $1,124,000 from $281,000 reflecting an addition of a
note  receivable  from a related  party of  $900,000,  increases  in advances to
related  parties and locations of $150,000  offset by purchases of slot machines
for new locations of $174,000.

      Cash flows used in financing  activities for the  nine-months  ended March
31,1997  increased  by $57,000  compared to same period in the prior year due to
principal payments on notes.

      Apart from its anticipated  obligation with respect to the AC Notes,  SC's
indebtedness  includes the  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 term note at July 1, 1994,  with monthly  payments
through June 1998. SC was able to request  advances  through October 20, 1996 at
which time the  Company's  right to receive  advances  under the  agreement  was
terminated.  In  addition,  SC has term notes of $563,000  due at various  dates
through April 2001, having interest at prime plus 1.5%.

      SC's management believes that its cash generated by operations to meet its
projected needs for existing operations will be sufficient and limited expansion
of its gaming machine route business. Should SC determine to expand on more than
a limited  basis,  it is likely that further  capital would be  necessary.  SC's
access to  additional  capital  will be  significantly  restricted  under the AC
Indenture so long as SC is a guarantor of the AC Notes.  SC has  guaranteed  the
payment of the AC Notes,  which  guarantee is subject to release upon attainment
by AC of a fixed  charge  coverage  ratio of 2.25 to 1. In  connection  with its
guarantee, the Indenture imposes restrictions on the distribution of earnings.

      AC may have  liability  under its  guarantee  of the CQC Notes beyond that
which it could immediately support, AC may be in default of the AC Notes and SC,
as guarantor of the AC Notes,  would have liability  under its  guarantee.  Such
liability would likely exceed the amount which SC could immediately support.
<PAGE>

Capitol Queen & Casino, Inc.
----------------------------

    Analysis of Development Stage Activities for the period January 20, 1993
                 (the date of inception) through March 31, 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 March 31,  1997,  approximately  $30,000  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,  and November 15, 1996 and will not have funds
available to pay the May 15, 1997 interest  payment.  Further,  AC does not have
available  funds to advance on behalf of CQC. The  management  of AC and CQC are
currently in discussions with an informal committee  representing the holders of
the AC Notes and CQC Notes regarding a proposed  restructuring plan. However, an
agreement has not yet been reached.

      During the period from  inception  through  March 31, 1997,  CQC had total
operating expenses of $13,752,000 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 June 30, 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  $1,440,000  associated  with  debt  issue  costs  and
$1,886,000  of project  development  costs.  For the same  period,  CQC incurred
$13,690,000  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  $1,265,000  for the period  from
inception to March 31, 1997.

<PAGE>

Liquidity and Capital Resources
-------------------------------

      For the period from  inception  through  March 31, 1997,  net cash used in
development  stage  activities  was  $5,246,000.  Cash flows  used in  investing
activities for the period was $13,920,000 which included  $12,936,000 of capital
expenditures related to the construction of the riverboat and acquisition of the
Jefferson  City  land  site.  At April 30,  1997,  CQC had  expended  a total of
approximately  $21,650,000 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 $3,600,000 at March 31,
1997.  There can be no assurance  that CQC will be  successful in its efforts to
sell its assets or, that if a sale is effected,  the proceeds will be sufficient
to fully or  substantially  repay the CQC Notes and  accrued  interest  thereon.
Moreover,  CQC because it has not yet  effected  the sale of its  assets,  is in
default  of the  CQC  Indenture.  As a  result,  the  holders  of 25% or more in
principal amount of the CQC Notes may cause the CQC Notes to be accelerated,  in
which event they would become  immediately  due and payable in full.  If the CQC
Notes were to be  accelerated,  CQC would not be able to pay the outstanding CQC
Notes without an infusion of capital, which is not expected to be available. CQC
is not  expected  to engage  in any  activities  after  the sale of its  assets,
although it may  continue  to pursue  legal  relief  with  respect to the injury
caused by the ruling of Missouri  Gaming  Commission.  The cost of pursuing such
relief is expected to be borne by Becker Gaming, Inc.


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  or financial  condition of BGI, CQC, or the
Nevada Operating Companies.

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

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

     On June 26, 1995, the Circuit Court issued a peremptory (permanent) writ of
mandamus similar to the preliminary writ,  declaring the Commission's order void
and  ordering  the  Commission  to  proceed  with  an   investigation  of  CQC's
application  "with all  deliberate  speed."  On July 21,  1995,  the  Commission
appealed the Circuit  Court's  decision to the Missouri Court of Appeals for the
Western District, and on April 30, 1996, a three-judge panel of that Court ruled
that  mandamus  was not the proper  vehicle  for  challenging  the  Commission's
decision.  The Court of Appeals ruled that CQC may obtain  judicial  review only
after an  administrative  proceeding.  The Court of Appeals  also ruled that the
Missouri statutes did not prohibit the Commission from denying a license without
conducting an  investigation,  and that the claim that the Commission  broke its
promise not to deny a license without first investigating  should be raised in a
breach of contract action, not a mandamus petition. The Court of Appeals did not
address the merits;  that is, it did not decide  whether  the  Commission  acted
arbitrarily  or whether its decision was  justified or a breach of its promises.
The Missouri Supreme Court declined to review the decision.  However,  the Court
of Appeals'  ruling had no  immediate  consequences  for two reasons.  First,  a
Missouri  Circuit  Court in a  separate  action  (discussed  below)  voided  the
Commission's  decision for the independent  reason that it was made in violation
of Missouri's open meeting law.  Second,  after the decision in the open meeting
law case, CQC notified the Commission that it was withdrawing its application.

      On March 24, 1995,  CQC filed an action against the Commission in the Cole
County,  Missouri,  Circuit  Court,  alleging that the  Commission  had violated
Missouri's  open meeting law by  deliberating in a closed session before issuing
its decision denying CQC's license.  The petition requested an order voiding the
Commission's  decision.  On March 27,  1995,  as a  protective  measure  against
possible  arguments  that  Cole  County  is not the  proper  venue,  CQC filed a
substantively  identical action in the St. Louis County Circuit Court. In April,
the Commission filed answers to both complaints denying that it had violated the
open  meeting law. On June 1, 1995,  CQC moved for summary  judgment in the Cole
County  case.  In  its  response,   the  Commission  stated  that  it  "did  not
deliberately  intend to circumvent"  the open meeting law but had deliberated in
closed session based on erroneous advice of counsel.  The Commission argued that
the closed session could  nevertheless be justified  under statutory  exceptions
allowing  agencies to meet privately with their lawyers to discuss  confidential
information  and  litigation.  The  Circuit  Court  heard the motion for summary
judgment on December 19, 1995. In an order issued on April 23, 1996, the Circuit
Court rejected the Commission's  arguments and granted CQC's motion, ruling that
the Commission had violated the open meeting law and declaring the  Commission's
order to be void. The  Commission did not appeal the decision,  and the time for
doing so has expired.  Therefore,  the decision declaring the Commission's order
to be void is final.  As a result,  notwithstanding  the other  related  actions
discussed  above,  there  no  longer  exists  any  denial  of  licenses  by  the
Commission.
<PAGE>

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

      On March 23, 1995, the Missouri Attorney General filed misdemeanor charges
against CQC and Bruce Becker  alleging they knowingly  made false  statements on
CQC's gaming  license  application.  CQC and Mr.  Becker  vehemently  denied the
charges and launched a vigorous defense. On July 25, 1995, the Circuit Court for
St. Louis  County,  Missouri,  dismissed  the charges,  ruling that they did not
state an offense,  that the Attorney General lacked authority to bring them, and
that they were filed after the statute of limitations  had expired.  On July 28,
1995, the Attorney  General filed an appeal in the Missouri Court of Appeals for
the Eastern District. CQC's and Bruce Becker's motions to dismiss the appeals as
untimely filed were summarily denied on August 14, 1995. On April 16, 1996, in a
2-1  decision,  a panel of the  Missouri  Court of Appeals  reversed the Circuit
Court's  dismissal.  The Missouri Supreme Court then exercised its discretion to
review the case,  and on January 27, 1997 the Missouri  Supreme Court issued its
ruling in favor of CQC and Bruce Becker, holding that the prosecutions sought by
the  Attorney  General  were barred by the  applicable  statute of  limitations.
Accordingly,  the  Attorney  General,  or  any  other  Missouri  prosecutor,  is
precluded from any further pursuit of the misdemeanor charges levied against CQC
and Bruce Becker in this matter.

Item 6.  Exhibits and Reports on Form 8-K

     No exhibits are included herein:

     The  Company  did not file any  reports on form 8-K during the  nine-months
ended March 31, 1997.

<PAGE>

================================================================================
                                   SIGNATURES

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



                                                             Becker Gaming, Inc.
                                                             -------------------
                                                                    (Registrant)





Date:    May 15, 1997                       /S/ Bruce F. Becker
         ---------------------              -------------------
                                            Bruce F. Becker
                                            President, Chief Executive
                                            Officer(Principal Executive Officer)






Date:    May 15, 1997                       /S/ Jerry Griffis
         ----------------                   -----------------
                                            Jerry Griffis
                                            Chief Financial Officer
                                            (Principal Financial and
                                            Accounting Officer)
================================================================================
<PAGE>