===============================================================================
                                    FORM 10-Q


                       SECURITIES AND EXCHANGE COMMISSION

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


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

                 For the quarterly period ended: September 30, 1996

                                       OR

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


                         Commission file number 33-76368

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

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

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

                                 (702) 258-5200

              (Registrant's telephone number, including area code)

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

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

     YES [X]                                        NO [ ]


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

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

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

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

ARIZONA CHARLIE'S, INC.

Balance Sheets as of September 30, 1996 and June 30, 1996.................... 8
Statements of Operations and Retained Earnings (Deficit) for the
     Three- Month Periods Ended September 30, 1996
     and 1995.................................................................9
Statements of Cash Flows for the Three-Month Periods
     Ended September 30, 1996 and 1995.......................................10
Notes to Financial Statements................................................11

SUNSET COIN, INC.

Balance Sheets as of September 30, 1996 and June 30, 1996....................14
     Statements of Income and Retained Earnings for the Three-
Month Periods Ended September 30, 1996 and 1995..............................15
     Statements of Cash Flows for the Three-Month Periods Ended
September 30, 1996 and 1995..................................................16
Notes to Financial Statements................................................17

CAPITOL QUEEN & CASINO, INC.

Balance Sheets as of September 30, 1996 and June 30, 1996....................19
Statements of Loss Incurred During the Development Stage
     for the Three-Month Periods Ended September 30, 1996
     and 1995 and for the period from January 20, 1993
     (the date of inception) through September 30, 1996......................20
Statements of Cash Flows for the for Three-Month Periods Ended
     September 30, 1996 and 1995 the period from January 20,
     1993 (the date of inception) through September 30, 1996.................21
Notes to Financial Statements................................................22


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

Becker Gaming, Inc...........................................................25
Arizona Charlie's, Inc.......................................................25
Sunset Coin, Inc.............................................................30
Capitol Queen & Casino, Inc..................................................33

Part II. Other Information
Item 1. Legal Proceedings....................................................35
Item 6. Exhibits and Reports on Form 8-K.....................................38

Signatures ..................................................................39


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

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



                                     ASSETS

                                                        September 30,  June 30,
                                                             1996        1996
                                                          --------     --------
                                                         (Unaudited)
Current assets:

   Cash and cash equivalents ...........................   $  9,088    $  6,745
   Restricted cash, in escrow account ..................         40          40
   Trade and other accounts receivable .................        483         626
   Receivables from related parties ....................         44          33
   Inventories .........................................        740         729
   Prepaid expenses ....................................      1,067       1,244
   Current portion of notes receivable .................        142         153
   Assets held for sale ................................       --         3,233
                                                           --------    --------
         Total current assets ..........................     11,604      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 .............................     27,992      27,773
                                                           --------    --------
                                                              68,885      68,666
   Less, accumulated depreciation ......................    (19,913)    (19,078)
                                                           --------    --------
                                                              48,972      49,588
    Land ...............................................        208         208
                                                           --------    --------
        Net property and equipment .....................     49,180      49,796
                                                           --------    --------


Other assets:

   Assets held for sale ................................      7,754       7,754
   Notes receivable, less
     current portion, net ..............................        453         472
   Receivables from related parties,
     less current portion ..............................        165         165
   Deposits and other ..................................      1,406       1,375
   Financing costs, net ................................      2,940       3,112
                                                           --------    --------
        Total other assets .............................     12,718      12,878
                                                           --------    --------
        Total assets ...................................   $ 73,502    $ 75,477
                                                           ========    ========


                  LIABILITIES AND STOCKHOLDERS'EQUITY(DEFICIT)


                                                   September 30,        June 30,
                                                          1996            1996
                                                       --------         --------
                                                      (Unaudited)

Current liabilities:

  Trade accounts payable ...............................  $  1,886    $  1,761
  Accrued expenses .....................................     9,207       6,409
  Notes payable ........................................        45         110
  Current portion of subordinated
     notes payable to stockholders .....................       800         800
  Current portion of
     long term debt ....................................       407         381
  Long-term debt classified as
     current, net of unamortized
     original  issue discount of
     $2,339 and $2,474, respectively ...................    72,661      72,526
  Current portion of obligations
     under capital leases ..............................       101       1,960
                                                          --------    --------
        Total current liabilities ......................    85,107      83,947




Long-term debt, less current portion ...................     1,240       1,330
Subordinated notes payable to
     stockholders,  less current portion ...............     8,000       8,000
Obligations under capital leases,
     less current portion ..............................       172         197
                                                          --------    --------

        Total liabilities ..............................    94,519      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) ..........................   (30,123)    (27,103)
                                                          --------    --------


        Total stockholders'
        equity (deficit) ...............................   (21,017)    (17,997)
                                                          --------    --------

        Total liabilities
        and stockholders'
        equity(deficit) ................................  $ 73,502    $ 75,477
                                                          ========    ========


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

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

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




                                      Three Months Ended September 30,
                                               1996            1995
                                       ------------    ------------
Revenues:
   Gaming ..........................   $     14,430    $     15,326
   Food and beverage ...............          4,583           4,271
   Hotel ...........................            761             722
   Gift shop .......................            131             155
   Other ...........................            271             318
                                       ------------    ------------
        Gross revenues .............         20,176          20,792
Less, promotional allowances .......         (2,583)         (2,088)

                                       ------------    ------------
        Net revenues ...............         17,593          18,704

Operating expenses:

   Gaming ..........................          3,855           4,146
   Food and beverage ...............          5,491           5,174
   Hotel ...........................            479             398
   Gift shop .......................            124             107

   Advertising and promotion .......          1,330           1,205
   General and administrative ......          5,456           5,347
   Rent expense paid to
     related party .................            104              96
   Depreciation and
   amortization ....................          1,022           1,127
                                       ------------    ------------
        Total operating
        expenses ...................         17,861          17,600
                                       ------------    ------------
        Operating income ...........           (268)          1,104
                                       ------------    ------------
Other income(expenses):
   Development costs ...............            (73)           (165)
   Interest income .................             31               5
   Interest expense ................         (2,740)         (2,581)
   Other,  net .....................             30              42
                                       ------------    ------------
        Total other
          income (expense) .........         (2,752)         (2,699)
                                       ------------    ------------
        Loss before
          income taxes .............         (3,020)         (1,595)
                                       ------------    ------------
        Net loss ...................         (3,020)         (1,595)
        Retained earnings (deficit),
           beginning of period .....        (27,103)        (15,876)
                                       ------------    ------------


        Retained earnings(deficit),
          end of period ............   $    (30,123)   $    (17,471)
                                       ============    ============
        Net loss per share of common
          stock ....................   $      (0.30)   $      (0.16)
                                       ============    ============
        Weighted average common
          shares outstanding .......     10,000,000      10,000,000
                                       ============    ============



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

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

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



                                           Three Months Ended September 30,
                                                    1996       1995
                                                 -------    -------
Cash flows from operating activities:
  Net (loss) income ..........................   ($3,020)   ($1,595)
  Adjustments to reconcile net
  (loss) income to net cash
  (used in) provided by operating activities:
  Depreciation and amortization ..............     1,022      1,127
  Amortization of original issue discount ....       135        134

(Increase) decrease in operating assets:
  Receivables ................................       160       (878)
  Receivables from related parties ...........       (11)      --
  Inventories ................................       (11)        64
  Prepaid expenses ...........................       177        218
  Deposits and other assets ..................       (31)        (1)

Increase (decrease) in operating liabilities:
  Accounts payable net of amounts for
  capital expenditures .......................       125      1,552
  Accrued expenses ...........................     2,698      1,606
                                                 -------    -------
     Total adjustments .......................     4,264      3,822
                                                 -------    -------
     Net cash provided by
          operating activities ...............     1,244      2,227
                                                 -------    -------

Cash flows from investing activities:
  Capital expenditures, net of
     construction accounts payable ...........      (233)      (305)
  Proceeds from sale of equipment ............     3,315          3
  Issuance of notes receivable ...............      --          (31)
  Payments of notes receivable ...............        30         39
                                                 -------    -------

     Net cash provided by (used in)
          investing activities ...............     3,112       (294)
                                                 -------    -------

Cash flows from financing activities:
  Payments under notes payable ...............      (129)      (322)
  Payments under capital lease obligations ...    (1,884)       (27)
                                                 -------    -------
     Net cash used in financing activities ...    (2,013)      (349)
                                                 -------    -------
     Net increase in cash and cash equivalents     2,343      1,584
Cash and cash equivalents, beginning of period     6,745      6,657
                                                 -------    -------
Cash and cash equivalents, end of period .....   $ 9,088    $ 8,241
                                                 =======    =======

Supplemental cash flow disclosures:
  Interest paid, net of amount capitalized ...   $   351    $   281
                                                 =======    =======


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

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

                      BECKER GAMING, INC AND SUBSIDIARIES

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



1)   Basis of Presentation:

The accompanying consolidated financial statements of Becker Gaming, Inc. ("BGI"
or the  "Company")  are  unaudited  and have been  prepared in  accordance  with
generally accepted accounting  principles for interim financial  information and
with  the   instructions  to  Form  10-Q  and  Article  10  of  Regulation  S-X.
Accordingly,  they do not include all of the information and footnotes  required
by generally accepted accounting  principles for complete financial  statements.
In the opinion of management,  all  adjustments  and normal  recurring  accruals
considered  necessary  for a fair  presentation  have been  included.  Operating
results for the three-month  period ended September 30, 1996 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 almost completed.  CQC had also obtained the necessary permits
for the  land-based  development  portion of the project and  performed  certain
dredging and other site preparation work. Immediately following the Commission's
decision,  management  temporarily  suspended further development of the Capitol
Queen project,  pending an appeal of the decision and legal remedies potentially
available to the Company.  Costs  associated with the development of the project
which had been  deferred  during the  development  stage were written off in the
fourth quarter of the fiscal year ended June 30, 1994.

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

CQC financed the Capitol Queen project  through the issuance of  $40,000,000  in
principal  amount of 12% First  Mortgage  Notes due  November 15, 2000 (the "CQC
Notes").  As of January 1, 1995, the Indenture (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 November 15, 1995 and
May 15,  1996,  will not be able to make such  payment  on  November  15,  1996.
Arizona  Charlie's,  Inc.  ("AC"),  another wholly owned subsidiary of BGI and a
guarantor of the CQC Notes,  will not have funds  available to advance on behalf
of CQC on November  15, 1996.  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.

As of September 30, 1996, 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 September
30, 1996. In addition,  beginning with the quarter ending  December 31, 1995, AC
has not met  the  minimum  tangible  net  worth  requirement  set  forth  the AC
Indenture.  Under the terms of the AC Indenture,  AC is required to offer to buy
back  $16,500,000  of the  outstanding AC Notes at September 30, 1996 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  September  30,  1996,  CQC had a net  deficit  of
approximately $15,000,000.

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 September 30, 1996, AC had
a net deficit of  approximately  $12,000,000  and  $1,600,000 of SC's net assets
were restricted by such indenture covenants.

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  September 30, 1996  financial  statements of the Company do not include any
adjustment that might result from the outcome of this uncertainty.


3)   Assets Held For Sale:

At September 30, 1996, 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.
================================================================================

                             ARIZONA CHARLIE'S, INC.

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

                                  BALANCE SHEET
                             (Dollars In Thousands)
                                   ----------


                                     ASSETS

                                                  September 30, June 30,
                                                       1996        1996
                                                   --------    --------
                                                    (Unaudited)
Current assets:

   Cash and cash equivalents .......................   $  5,426    $  4,591
   Restricted cash, in escrow  account .............         10          10
   Trade and other accounts receivable .............        304         473
   Receivable from related  parties ................      2,649       1,539
   Inventories .....................................        581         575
    Prepaid expenses ...............................        950       1,118
                                                       --------    --------
      Total current assets .........................      9,920       8,306
                                                       --------    --------


Property and equipment:

   Building and improvements .......................     37,488      37,488
   Furniture and  equipment ........................     22,679      22,575
   Land improvements ...............................      1,628       1,628
                                                       --------    --------
                                                         61,795      61,691
   Less, accumulated depreciation ..................    (16,937)    (16,218)
                                                       --------    --------

                                                         44,858      45,473
    Land ...........................................        208         208
                                                       --------    --------

        Net property and equipment .................     45,066      45,681
                                                       --------    --------



Other assets:

   Receivable from related
     party, noncurrent .............................        210         987
   Deposits and other ..............................        472         460
   Notes receivable from related party .............      4,416       4,416
   Financing costs, less
     accumulated amortization
     of $1,505 September 30, 1996 and $1,336
     June 30, 1996 .................................      2,368       2,507
                                                       --------    --------

        Total other assets .........................      7,466       8,370
                                                       --------    --------

        Total assets ...............................   $ 62,452    $ 62,357
                                                       ========    ========



                 LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)

                                                     September 30,  June 30,
                                                           1996        1996
                                                       --------    --------
                                                                     (Unaudited)
Current liabilities:

   Trade accounts payable ...........................   $  1,368    $  1,452
   Accounts payable to related parties ..............          1           4
   Accrued expenses .................................      5,649       3,323
   Management fees due Becker Gaming, Inc. ..........      4,851       4,682
   Notes payable ....................................         45         110
   Notes payable to related party ...................      2,250       2,250
   Current portion of obligations
     under capital leases ...........................         11          15
   Long-term debt classified as
     current due to default
     under covenants ................................     55,000      55,000
                                                        --------    --------


         Total current liabilities ..................     69,175      66,836



Subordinated notes payable to
   prior stockholders ...............................      5,000       5,000
Obligations under capital
   leases, less current portion .....................         22          22
                                                        --------    --------

         Total  liabilities .........................     74,197      71,858
                                                        --------    --------

Commitments and contingencies


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

   Retained earnings  (deficit) .....................    (12,214)     (9,970)
                                                        --------    --------

         Total stockholder's equity (deficit) .......    (11,745)     (9,501)
                                                        --------    --------

         Total liabilities and
            stockholder's equity (deficit) ..........   $ 62,452    $ 62,357
                                                        ========    ========

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

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

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


                                    Three Months Ended September 30,
                                             1996        1995
                                         --------    --------
Revenues:
  Gaming .............................   $ 12,229    $ 12,891
  Food and beverage ..................      3,501       3,033
  Hotel ..............................        761         722
  Gift shop ..........................        131         155
  Management fee-affiliates ..........        676        --
  Other ..............................        258         299
                                         --------    --------
      Gross revenues .................     17,556      17,100
Less, promotional allowances .........     (2,195)     (1,668)
                                         --------    --------
      Net revenues ...................     15,361      15,432
                                         --------    --------
Operating expenses:
  Gaming .............................      3,284       3,539
  Food and beverage ..................      4,297       3,835
  Hotel ..............................        479         398
  Gift shop ..........................        124         107
  Advertising and promotion ..........      1,287       1,176
  General and administrative .........      4,663       4,798
  Management fee - Becker Gaming, Inc.        845         857
  Rent expense paid to related party .         55          54
  Depreciation and amortization ......        858         886
                                         --------    --------
      Total operating expenses .......     15,892      15,650
                                         --------    --------
      Operating income (loss) ........       (531)       (218)
                                         --------    --------
Other income (expenses):
  Interest income ....................         68          69
  Interest expense ...................     (1,811)     (1,714)
  Other, net .........................         30          28
                                         --------    --------
      Total other income (expenses) ..     (1,713)     (1,617)
                                         --------    --------
      Loss before income taxes .......     (2,244)     (1,835)
                                         --------    --------
      Net loss .......................     (2,244)     (1,835)
Retained earnings(deficit),
     beginning of period .............     (9,970)     (5,411)
                                         --------    --------

Retained earnings(deficit),
     end of period ...................   $(12,214)   $ (7,246)
                                         ========    ========


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

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

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


                                                Three Months Ended September 30,
                                                           1996       1995
                                                        -------    -------
Cash flows from operating activities:
  Net loss ..........................................   ($2,244)   ($1,835)

Adjustments to  reconcile  net income  
    (loss) to net cash  provided by 
    operating activities:
    Provision for losses on related party receivables        73      1,149
    Depreciation and amortization ...................       858        886

(Increase) decrease in operating assets:
    Receivables .....................................       169     (1,358)
    Inventories .....................................        59         (6)
    Prepaid expenses ................................       168        193
    Deposits and other ..............................       (12)        15

Increase (decrease) in operating liabilities:
    Accounts payable, net of amounts for capital
    expenditures ....................................       (87)       995
    Management fees due to Becker Gaming, Inc. ......       169        857
    Accrued expenses ................................     2,326        320
                                                        -------    -------
      Total adjustments .............................     3,658      3,116
                                                        -------    -------
      Net cash provided by operating activities .....     1,414      1,281
                                                        -------    -------
Cash flows from investing activities:
    Capital expenditures, net of amounts in accounts
      payable .......................................      (104)       (74)
    Increase in related party receivables ...........      (406)      --
    Proceeds from assets sales ......................      --            2
                                                        -------    -------
      Net cash used in investing activities .........      (510)       (72)
                                                        -------    -------
Cash flows from financing activities:
    Principal payments on notes payable .............       (65)       (40)
    Payments under capital lease obligations ........        (4)        (2)
                                                        -------    -------
      Net cash used in financing activities .........       (69)       (42)
                                                        -------    -------

      Net increase (decrease) in cash and cash
          equivalents ...............................       835      1,167
Cash and cash equivalents, beginning of the period ..     4,591      5,404
                                                        -------    -------
Cash and cash equivalents, end of the period ........   $ 5,426    $ 6,571
                                                        =======    =======

Supplemental cash flow disclosures:
     Interest paid, net of amounts capitalized ......   $   129    $   129
                                                        =======    =======


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

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

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

1)   Basis of Presentation:

      Arizona  Charlie's,  Inc.  ("AC"  or  the  "Company")  is a  wholly  owned
subsidiary of Becker Gaming, Inc. ("BGI"). The accompanying financial statements
of AC have been  prepared  in  accordance  with  generally  accepted  accounting
principles for interim  financial  information and with the instructions to Form
10-Q and Article 10 of Regulation S-X.  Accordingly,  they do not include all of
the  information  and  footnotes  required  by  generally  accepted   accounting
principles for complete financial statements. In the opinion of management,  all
adjustments  and  normal  recurring  accruals  considered  necessary  for a fair
presentation have been included.  Operating  results for the three-month  period
ended September 30, 1996 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
$2,400,000  in accrued  interest  are  outstanding  on the CQC Notes at June 30,
1996. CQC was formed to develop,  own and operate the "Capitol Queen"  riverboat
casino and  related  land-based  facilities  in  Jefferson  City,  Missouri.  On
September 28, 1994, CQC was notified that its  application  for a gaming license
was rejected by the Missouri Gaming Commission (the  "Commission").  At the time
CQC was notified of the  Commission's  decision,  construction  of the riverboat
under contract with a shipbuilder  was almost  completed.  CQC had also obtained
the necessary permits for the land-based  development portion of the project and
performed  certain  dredging  and  other  site  preparation  work.   Immediately
following the Commission's  decision,  Management  temporarily suspended further
development of the Capitol Queen project,  pending an appeal of the decision and
legal remedies potentially available to the Company.

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

CQC financed the Capitol Queen project  through the issuance of  $40,000,000  in
principal  amount of 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 November 15, 1995 and
May 15, 1996 and will not be able to make such payment on November 15, 1996.  AC
will not have funds  available to advance on behalf of CQC on November 15, 1996.
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.

As of September 30, 1996, 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 September
30, 1996. 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  $16,500,000  of the  outstanding AC Notes at September 30, 1996 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  September  30,  1996  financial  statements  of AC do not
include any adjustment that might result from the outcome of this uncertainty.


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

                                SUNSET COIN, INC.

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

                                 BALANCE SHEETS
                             (Dollars In Thousands)


                                     ASSETS


                                                        September 30,   une 30,
                                                                1996       1996
                                                             -------    -------
                                                         (Unaudited)
Current assets:
  Cash ...................................................   $ 1,207    $ 1,122
  Current portion of notes receivable ....................       106        117
  Note receivable from related party .....................     2,250      2,250
  Other receivables ......................................       250        274
  Prepaid expenses .......................................        39         46
                                                             -------    -------
      Total current assets ...............................     3,852      3,809
                                                             -------    -------


Property and equipment:
  Building and leasehold improvements ....................       174        174
  Furniture, fixtures and equipment ......................     2,951      2,885
                                                             -------    -------
                                                                3,125      3,059
  Less, accumulated depreciation .........................    (1,434)    (1,370)
                                                             -------    -------
      Net property and equipment .........................     1,691      1,689
                                                             -------    -------

Notes receivable, less current
  portion ................................................       181        194

Advances to related parties ..............................       140        111



Other assets, less accumulated
  amortization of $26 at September 30, 1996
  and $24 at June 30 , 1996 ..............................        84         88
                                                             -------    -------

      Total assets .......................................   $ 5,948    $ 5,891
                                                             =======    =======



                      LIABILITIES AND STOCKHOLDER'S EQUITY

                                                      September 30,   une 30,
                                                               1996     1996
                                                             ------   ------
                                                          (Unaudited)
Current liabilities:
  Trade accounts payable .................................   $   12   $   44
  Accrued expenses .......................................      637      608
  Current portion of long term debt ......................      306      279
                                                             ------   ------
      Total current liabilities ..........................      955      931

 Long-term liabilities:
   Long-term debt, less current portion ..................      437      502
   Subordinated notes payable to
     former stockholders .................................    3,000    3,000
                                                             ------   ------
      Total liabilities ..................................    4,392    4,433
                                                             ------   ------



Commitments and contingencies

Stockholder's equity:
  Common stock, no par value, 2,500
  shares authorized, 400 shares
  issued and outstanding .................................       27       27
Retained earnings ........................................    1,529    1,431
                                                             ------   ------

      Total stockholder's equity .........................    1,556    1,458
                                                             ------   ------

      Total liabilities and stockholder's
      equity .............................................   $5,948   $5,891
                                                             ======   ======

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

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

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

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


                                               Three Months Ended September 30,

                                                         1996       1995
                                                      -------    -------
Revenues:
    Slot route:
       From locations controlled by related parties   $   567    $   563
       Other ......................................        35         45
    Slot service fees:
       From related parties .......................        21         24
       Other ......................................         8          8
                                                      -------    -------
         Total revenues ...........................       631        640

Operating expenses:
    Slot route and service ........................       347        302
    General and administrative.....................        23         24

    Management fee - Becker Gaming, Inc............        33         34
    Depreciation and amortization..................        71         73
                                                      -------    -------
       Total operating expenses....................       474        433
                                                      -------    -------
Operating income ..................................       157        207
                                                      -------    -------
Other income (expense):
    Interest income ...............................        47         41
    Interest expense ..............................       (91)       (99)
    Other income ..................................        24         22
                                                      -------    -------
       Total other income (expense)................       (20)       (36)

                                                      -------    -------
Net income before income tax.......................       137        171
Provision for income tax ..........................       (39)       (58)
                                                      -------    -------
Net income ........................................        98        113
Retained earnings, beginning of period.............     1,431      1,050
                                                      -------    -------
Retained earnings, end of period...................   $ 1,529    $ 1,163
                                                      =======    =======


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

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

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

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



                                    Three Months Ended September 30,

                                           1996       1995
                                        -------    -------
Cash flows from operating activities:
    Net income ......................   $    98    $   113
    Adjustments to reconcile net
     income to net cash provided
     by operating activities:
    Depreciation and amortization ...        71         73

    (Increase) decrease in operating assets:
        Other receivables ...........        24         16
        Prepaid expenses ............         7          5
    Increase (decrease) in operating liabilities:
     Accounts payable ...............       (32)        46
     Notes Payable ..................        44       --

        Accrued expenses ............        29        174
                                        -------    -------

          Total adjustments
                                            143        314
                                        -------    -------

          Net cash provided by
               operating activities .       241        427
                                        -------    -------

Cash flows from investing activities:
   Capital expenditures .............       (70)      (135)

   Increase in advances to related
     parties ........................       (29)       (21)
   Repayments of notes receivable ...        24          6
                                        -------    -------
   Net cash used in investing
     activities .....................       (75)      (150)
                                        -------    -------
Cash flows from financing activities:
    Principal payments on notes
          payable ...................       (81)       (80)
                                        -------    -------
        Net cash used in financing
          activities ................       (81)       (80)
                                        -------    -------

        Net increase in cash
                                             85        197

Cash, beginning of period ...........     1,122        506
                                        -------    -------
Cash, end of period .................   $ 1,207    $   703
                                        =======    =======

Supplemental cash flow disclosures:
    Interest paid ...................   $    91    $   101
                                        =======    =======

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

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

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

1)   Basis of Presentation:

Sunset Coin,  Inc. ("SC" or the "Company") is wholly owned  subsidiary of Becker
Gaming, Inc. ("BGI"). The accompanying  financial statements of SC are unaudited
and  have  been  prepared  in  accordance  with  generally  accepted  accounting
principles for interim  financial  information and with the instructions to Form
10-Q and Article 10 of Regulation S-X.  Accordingly,  they do not include all of
the  information  and  footnotes  required  by  generally  accepted   accounting
principles for complete financial statements. In the opinion of management,  all
adjustments  and  normal  recurring  accruals  considered  necessary  for a fair
presentation  have been included.  Operating  results for the three period ended
September  30, 1996 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 September 30, 1996. 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 $2,400,000 in accrued interest are outstanding on the CQC Notes at September
30, 1996.  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.

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 September 30, 1996 financial
statements of the Company do not include any  adjustment  that might result from
the outcome of this uncertainty.

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

                          CAPITOL QUEEN & CASINO, INC.

           (A Development Stage Company And A Wholly Owned Subsidiary
                             of Becker Gaming, Inc.)

                                 BALANCE SHEETS
                    (Dollars In Thousands, Except Share Data)



                                     ASSETS

                                                       September 30, June 30,
                                                               1996     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 $345 at September 30,
    1996 and $312 at June 30, 1996 .......................      572      605
  Deposits and other assets ..............................       60       60
                                                             ------   ------
      Total other assets .................................    8,386    8,419
                                                             ------   ------

      Total assets .......................................   $8,416   $8,449
                                                             ------   ------
                                                             ------   ------



                   LIABILITIES & STOCKHOLDER'S EQUITY(DEFICIT)


                                                        September 30,  June 30,
                                                              1996        1996
                                                           --------    --------
                                                          (Unaudited)
Current liabilities:
  Advances from related parties .......................  $  1,079    $  1,006
  Accrued interest ....................................     3,392       2,775
   Notes payable to related parties ...................     1,200       1,200

  Long-term debt classified as current,
    net of unamortized original issue discount
    of $2,339 and $2,474, respectively ................    17,661      17,526
                                                         --------    --------
          Total liabilities ...........................    23,332      22,507
                                                         --------    --------

Commitments and contingencies

Stockholder's equity(deficit):
  Common stock, $1.00 par value, 1,000 shares
     authorized, 100 shares issued and outstanding ....      --          --
  Additional paid-in capital ..........................    12,732      12,732
  Deficit accumulated during development stage ........   (27,648)    (26,790)
                                                         --------    --------
      Total stockholder's equity (deficit) ............   (14,916)    (14,058)
                                                         --------    --------


      Total liabilities and stockholder's
          equity(deficit) .............................  $  8,416    $  8,449
                                                         --------    --------
                                                         --------    --------

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

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

                          CAPITOL QUEEN & CASINO, INC.

                 (A Development Stage Company And A Wholly Owned
                       Subsidiary of Becker Gaming, Inc.)

            STATEMENTS OF LOSS INCURRED DURING THE DEVELOPMENT STAGE
                             (Dollars In Thousands)
                                   (Unaudited)



                                                                  For The Period
                                                                January 20, 1993
                                                                    (The Date Of
                                                                      Inception)
                                                Three Months Ended     Through
                                                September 30,      September 30,
                                                 1996        1995        1996
                                             --------    --------    --------


Revenues .................................         $-          $-          $-

Operating expenses:
  Amortization of financing and
    other costs ..........................         33          33       1,374
  Abandonment loss and write-downs
    of assets held for sale ..............       --          --        10,426
  Development costs ......................         73         165       1,784
                                             --------    --------    --------

      Total operating expenses ...........        106         198      13,584
                                             --------    --------    --------

Operating loss ...........................       (106)       (198)    (13,584)

Other income (expenses):
  Interest income ........................       --          --         1,265
  Interest expense .......................       (752)       (686)    (11,923)
  Interest capitalized ...................       --          --           683
                                             --------    --------    --------

Total other income (expense) .............       (752)       (686)     (9,975)
                                             --------    --------    --------

Net loss before extraordinary item
                                                 (858)       (884)    (23,559)

Extraordinary item:
   Loss on early retirement of
     debt(no income tax benefit available)       --          --        (4,089)
                                             --------    --------    --------

Net loss .................................   $   (858)   $   (884)   $(27,648)
                                             ========    ========    ========


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

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

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






                                                    Three Months Ended
                                                       September 30,
                                                     1996        1995
                                                  --------    --------

Cash flows from development stage activities:
  Net loss ....................................   $   (858)   $   (884)
  Adjustments to reconcile net loss
    to net cash provided by
    used in development stage activities:
    Amortization of financing and other costs .         33          33
    Amortization of original issue discount ...        135         134
    Abandonment losses and write-downs of
     assets held for sale .....................       --          --
    Extraordinary loss on retirement of debt ..       --          --
    Increase in accounts payable and accruals,
     net of amounts for capital expenditures ..        617         448

    Increase (decrease)  in advances
     from related  parties ....................         73         227
                                                  --------    --------
        Total adjustments .....................        858         842
                                                  --------    --------
        Net cash used in development stage
           activities .........................       --           (42)
                                                  --------    --------

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

Cash flows from financing activities:
  Principal payments on First Mortgage Note ...       --          --
  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 .........................       --           (42)

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

Cash and cash equivalents, end of period ......         $-    $      3
                                                  --------    --------
                                                  --------    --------

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 .................         $-          $-
                                                  --------    --------
                                                  --------    --------


                                                          For The Period
                                                         January 20, 1993
                                                           (The Date Of
                                                            Inception)
                                                             Through
                                                          September 30,
                                                             1996
                                                           --------

Cash flows from development stage activities:
  Net loss ....................................            $(27,648)
  Adjustments to reconcile net loss
    to net cash provided by
    used in development stage activities:
    Amortization of financing and other costs .               1,374
    Amortization of original issue discount ...               2,042
    Abandonment losses and write-downs of
     assets held for sale .....................              10,426
    Extraordinary loss on retirement of debt ..               4,089
    Increase in accounts payable and accruals,
     net of amounts for capital expenditures ..               3,404

    Increase (decrease)  in advances
     from related  parties ....................               1,067
                                                           --------
        Total adjustments .....................              22,402
                                                           --------
        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 .......                 (60)
  Capitalization of preopening costs ..........                (340)
  Development costs ...........................                (553)
  Net (additions to) reductions in ............                  ..
     restricted cash equivalents ..............                 (31)
                                                           --------
      Net cash provided by (used in)
          investing activities ................             (13,920)
                                                           --------

Cash flows from financing activities:
  Principal payments on First Mortgage Note ...             (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.
================================================================================

                          CAPITOL QUEEN & CASINO, INC.
                        (A development stage company and
                a wholly owned subsidiary of Becker Gaming,Inc.)

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


1)   Basis of Presentation:

Capitol Queen & Casino, Inc. ("CQC" or the "Company") is wholly owned subsidiary
of Becker Gaming,  Inc. ("BGI").  The accompanying  financial  statements of CQC
have been prepared in accordance with generally accepted  accounting  principles
for interim  financial  information  and with the  instruction  to Form 10-Q and
Article  10 of  Regulation  S-X.  Accordingly,  they do not  include  all of the
information and footnotes required by generally accepted  accounting  principles
for complete financial statements. In the opinion of management, all adjustments
and normal recurring accruals considered  necessary for a fair presentation have
been included.  Operating results for the three-month period ended September 30,
1996 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 almost completed.  CQC had also obtained the necessary permits
for the  land-based  development  portion of the project and  performed  certain
dredging and other site preparation work. Immediately following the Commission's
decision,  management  temporarily  suspended further development of the Capitol
Queen project,  pending an appeal of the decision and legal remedies potentially
available to the Company.  Costs  associated with the development of the project
which had been  deferred  during the  development  stage were written off in the
fourth quarter of the fiscal year ended June 30, 1994.

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

CQC financed the Capitol Queen project  through the issuance of  $40,000,000  in
principal  amount of 12% First  Mortgage  Notes due  November 15, 2000 (the "CQC
Notes").  As of January 1, 1995, the Indenture (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 November 15, 1995 and
May 15,  1996,  will not be able to make such  payment  on  November  15,  1996.
Arizona  Charlie's,  Inc.  ("AC"),  another wholly owned subsidiary of BGI and a
guarantor of the CQC Notes,  will not have funds  available to advance on behalf
of CQC on November  15, 1996.  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.

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 September 30, 1996 financial  statements of the Company do
not  include  any  adjustment  that  might  result  from  the  outcome  of  this
uncertainty.


3)   Assets Held For Sale:

At September 30, 1996, 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.

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

                      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  promotional
allowance.


           Results of Operations for the three-months ended September
                               30, 1996 and 1995

     Net revenues at AC  decreased  by $71,000,  or 0.5%,  from  $15,432,000  to
$15,361,000 for the three-month  period ended September 30, 1996 compared to the
three-month  period  ended  September  30,  1995.  In the same  period to period
comparison,   operating  expenses,   including  depreciation  and  amortization,
increased by 1.6% to $15,892,000 from  $15,650,000.  This resulted in a increase
in  operating  losses of $313,000  from a loss of $218,000 to a loss of $531,000
for the more recent period.

      Gaming  revenues  decreased  5.1% from  $12,891,000  to  $12,229,000.  The
largest  portion of the decrease in gaming  revenues is  attributable  to gaming
machine  revenues which  decreased 4.2% from  $10,931,000  to  $10,472,000.  The
decrease  reflects  lesser play from slot patrons during the more recent period.
Revenues from table games  increased  3.9% from  $1,169,000 to  $1,215,000.  The
increase in table games revenues for the three-month  period ended September 30,
1996 is primarily the result of marketing efforts to attract table games patrons
utilizing  select  player  events,  including  professional  boxing and  golfing
tournaments.  Reflecting reduced sports play from patrons,  race and sports book
revenues  decreased by $120,000,  or 16.9%,  to $597,000  from  $718,000 for the
three-month period ended September 30, 1996 compared to the same period in 1995.
Bingo revenues  decreased by $116,000 for the three-month period ended September
30,  1996 when  compared to the same period of the prior year due to higher than
normal payouts combined with a decrease in play by patrons.

       Food and beverage revenues  increased 15.4% to $3,501,000 from $3,033,000
for the three-month  period ended September 30, 1996 compared to the same period
of the prior  year.  The  increase in revenues  is  primarily  due to  increased
complimentary sales in the food and beverage department. Such sales are included
in revenues at retail value and are then  deducted as a  promotional  allowance.
Increased  complimentary  sales  in the food and  beverage  departments  are the
result of casino promotion and marketing  efforts to attract,  reward and retain
qualified patrons.

      Hotel revenues  increased  from $722,000 to $761,000 for the  three-months
ended  September 30, 1996  compared to the same period in 1995.  The increase of
5.4% in the 1996 period is primarily due to an increase in occupancy and average
room rates of 91% and  $40.40,  respectively,  compared to 85% and $36.92 in the
1995 period.

      Gift  shop   revenues   decreased   from  $155,000  to  $131,000  for  the
three-months  ended  September 30, 1996 compared to the same period in 1995. The
decrease of 15.5% is  primarily  due to reducing  the hours of  operation in the
1996 period.

      Management  fees from BGI were $676,000 for the  three-month  period ended
September  30,  1996.  Such fees were  implemented  on  October  1, 1995 and are
designed to recover  expenses  associated with the addition of  approximately 40
employees in the accounting, payroll, personnel (and related departmental costs)
and  technical  services  departments  and the  transfer  of  certain  executive
personnel in March 1995 to AC from BGI. The  management  fee is also designed to
recover other expenses transferred from BGI to AC, including the maintenance and
other operating expenses  associated with an airplane and two boats.  Management
fee revenue to AC from BGI is equal to 80% of the management fee expense to BGI.
The  management fee is not collected from BGI, but serves as a vehicle to offset
the above described additional expenses and costs incurred by AC.

       Other revenues,  which include receipts from entertainment cover charges,
ATM commissions  and revenues from PBX and banquets,  decreased from $299,000 to
$258,000 for the  three-months  ended  September  30, 1996  compared to the same
period in the prior year.  The decrease of 13.7% is the  primarily the result of
decreases in entertainment cover charge revenues.

      Gaming  expenses  decreased by $255,000,  or 7.2%, to  $3,284,000  for the
three-month  period ended September 30, 1996 from $3,539,000 for the same period
of the prior year  reflecting a reduction in staffing levels for the table games
department and lower gaming tax and license fees associated with the decrease in
gaming revenues.

      Food & beverage  expenses  increased by $462,000,  or 12.0%, to $4,297,000
for the three-month period ended September 30, 1996 from $3,835,000 for the same
period of the prior year, due primarily to an increase in food cost of $164,000,
an increase in beverage cost of $41,000 and an increase in salaries and wages in
the Food  Department of $112,000,  all associated  with the increase in food and
beverage revenues during the 1996 quarter.

      Hotel  expenses  increased  by  $81,000,  or 20.4%,  to  $479,000  for the
three-month period ended September 30, 1996 from $398,000 for the same period of
the prior year. The increase is primarily due to the expense of refurbishing the
older hotel rooms and normal wage and salary increases.

       General and administrative  expenses  decreased by $135,000,  or 2.8%, to
$4,663,000 for the  three-month  period ended September 30, 1996 from $4,798,000
for the same period of the prior year. The decrease is primarily the result of a
reduction in staffing in the security,  purchasing,  entertainment,  porters and
aviation  departments.  The  decrease  is also due to a  reduction  in  expenses
associated with the operation of a jet airplane which was sold in July 1996.

       Advertising  and  promotion  expenses  increased by $111,000,  or 9.4% to
$1,287,000 for the  three-month  period ended September 30, 1996 from $1,176,000
for the same period of the prior year.  Management believes that these increased
levels of  promotional  expenditures  are  necessary to attract and maintain the
desired customer levels,  to promote the entertainment  events,  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 to AC.

      Depreciation and amortization  decreased by $28,000,  or 3.2%, to $858,000
for the  three-month  period ended September 30, 1996 from $886,000 for the same
period in prior year, as a result of decreased  depreciation expenses associated
with older assets.

      Gift shop  expenses  increased by $17,000,  or 15.9%,  to $124,000 for the
three-month  period ended  September  30, 1996 compared to $107,000 for the same
period  reflecting  increases in wholesale item costs  associated  with the gift
shop operation.

      Management fees to BGI decreased by $12,000,  or 1.4%, to $845,000 for the
three-month period ended September 30, 1996 from $857,000 for the same period in
the prior year.  Management  fees are determined  based on the gross revenues of
AC. As such,  decreased gross revenues bring about lower  management fees. Since
inception of the management fees agreement,  management fees payable to BGI have
been and  continue to be accrued by AC, and may not be paid under the  Indenture
governing  the AC Notes until such time that AC meets a specified  fixed charged
coverage ratio.

      Other  expense  (net of  other  income)  amounted  to  $1,713,000  for the
three-month  period ended September 30, 1996 compared to $1,617,000 for the same
period in the prior year. The increase in expense of $96,000,  or 5.9%, reflects
an  adjustment to correct the  calculation  of interest  associated  with the AC
notes


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 $11,250,000.  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.


Liquidity and Capital Resources

     At September  30, 1996,  AC had a working  capital  deficit of  $59,255,000
compared to a working  capital  deficit of  $58,530,000  at June 30,  1996.  The
decrease in working  capital in the amount of $725,000  was caused  primarily by
increased accruals on the AC Notes and accrued management fees payable to BGI.

      For the  three-month  period ended  September  30, 1996,  cash provided by
operating activities increased  approximately  $133,000, or 10.4%, to $1,414,000
from  $1,281,000 for the same period in 1995. The increase in the 1996 period is
primarily attributable to a net increase in operating assets of $1,410,000,  and
an increase in operating  liabilities of $236,000 partially offset by a decrease
in net income of  $409,000,  a decrease in the  provision  for losses on related
party  receivables of $1,076,000 and a decrease in depreciation and amortization
of $28,000.

      For the  three-month  period ended  September  30, 1996,  net cash used in
investing  activities  decreased  to $510,000 for the  three-month  period ended
September  30, 1996  compared  with  $72,000  for the same  period in 1995.  The
decrease  of $438,000  was caused  primarily  by a $406,000  decrease in related
party receivable and a decrease in capital expenditures of $30,000.

      Cash flows used in financing  activities for the three-month  period ended
September 30, 1996 was $69,000, reflecting payments on notes payable and capital
leases.  For the three-month period ended September 30, 1995, cash flows used in
financing activities was $42,000.

     AC's long-term obligations, approximately $5,022,000 at September 30, 1996,
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.

       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.

     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. As a result of a September 1994 ruling of the Missouri
Gaming Commission  denying CQC's gaming license  application,  CQC has adopted a
plan to sell its assets for the purpose of repaying, to the extent possible, the
outstanding CQC Notes and accrued  interest  thereon.  There can be no assurance
that CQC will be successful in its efforts to sell its assets or, that if a sale
is effected, the proceeds will be sufficient to fully or substantially repay the
CQC Notes and accrued interest thereon.  To the extent any funds CQC may realize
from the sale of its  assets  are not  sufficient  to repay  the CQC  Notes  and
accrued  interest  thereon,  AC 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  and 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.



Sunset Coin, Inc.

General

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

      In addition to the  operation  of its gaming  machine  route,  SC services
gaming machines owned by other operators for fixed service fees.  Included among
its service  agreements  are  contracts  with five Becker  Gaming Group  ("BGG")
locations and one  additional  location owned by an unrelated  party,  which are
expected to be renewed in general  course.  Results of operations  for the three
months ended September 30, 1996 and 1995

     SC's  results of  operations  declined  for the  three-month  period  ended
September  30, 1996  compared  to the same  period in the prior  year.  Revenues
decreased by 13.3% from $113,000 for the 1995 three-month  period to $98,000 for
the 1996  three-month  period.  The decrease in revenues is  attributable to the
expiration  of contracts  that were not renewed with one  participation  and one
service fee location in the more recent period, the effect of which was slightly
offset by the addition of two  participation  locations  and the  conversion  of
another  location from a participation  contract to a more favorable space lease
contract.  A decrease in service revenues in the more recent  three-month period
was due to the discontinued operation of Charlie's Saloon (a BGG bar).

      The average  number of gaming  machines  operated  during the  three-month
period  ended  September  30,  1996 was 254  compared  to 259 in the prior  year
period.  The average number of gaming  machines at BGG locations  serviced by SC
was 115 for the three-month  period ended September 30, 1996 compared to 130 for
the same period in 1995. Slot service fees from BGG for the  three-month  period
ended September 30, 1996 were $29,000,  down from $32,000 for the same period in
the prior year, due to the  discontinued  operation of Charlie's Saloon on April
21, 1996.

      Gaming machine route expenses for the  three-month  period ended September
30, 1996  increased by 14.9% to $347,000 when compared to the same period in the
prior year reflecting  increased salaries and wages, due to additional  staffing
requirements in slot route service and the transfer of management personnel from
BGI to SC, as well as  additional  security  guard wage  expense  for  increased
protection in response to greater slot route theft. Other increased expenses for
repairs and maintenance,  automotive and  complimentary  expenses were partially
offset by a decrease in loss and damage, advertising, and supplies expenses.

     General and administrative expenses for the three-month period decreased by
4.2% to $23,000  from  $24,000 ,  reflecting  decreases  in  professional  fees,
donations, office and supplies expenses, and bad debts.

      Management fees (based upon gross  revenues)  decreased by 2.9% to $33,000
for the  three-month  period ended  September 30, 1996 when compared to the same
period in the prior year.  This decrease is attributable to lower gross revenues
in the more recent period.

      Depreciation  and  amortization  decreased  by  2.7%  to  $71,000  for the
three-month period ended September 30, 1996,  reflecting decreased  depreciation
and  amortization  costs  associated  with the April 1996  closing of  Charlie's
Saloon (a BGG bar). SC abandoned furniture,  fixtures and equipment contained in
this bar.

     During the  three-month  period  ended  September  30,  1996,  SC had other
expenses (net of other income) of approximately  $20,000 compared to $36,000 for
the same  period in 1995.  The  decrease  is  attributable  to reduced  interest
expense  relating  to notes  payable  paid in the  previous  year  for  existing
locations.


Income Taxes

      As a  result  of  the  termination  of its  election  to be  treated  as S
corporation,  SC became  liable for income taxes on income earned from and after
January 1, 1995. Prior to such termination, SC did not incur or pay their income
tax liability in respect to income of SC.  Estimated  income tax payable for the
three-month  period ended September 30, 1996 was $39,000 compared to $58,000 for
the same period in the prior year. These were based on an anticipated  effective
federal income tax rate approximating the statutory rate of 34%.


Liquidity and Capital Resources

      Cash provided by operating  activities  for the  three-month  period ended
September  30, 1996  decreased to $241,000  from  $427,000  for the  three-month
period  ended  September  30,  1995,  mostly due to a net  decrease in operating
liabilities of $179,000 and depreciation and amortization of $2,000 offset by an
increase in operating assets of $10,000, and decrease in revenues of $15,000.

      Cash  flows  used in  investing  activities  for the  three  months  ended
September 30, 1996 amounted to $75,000,  including repayment of notes receivable
of $24,000, an increase in advances to related parties of $29,000, and purchases
of slot machines of $70,000.

      Cash  flows  used in  financing  activities  for the  three  months  ended
September 30, 1996 amounted to $81,000,  reflecting  principal payments on notes
payable.

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

      In  July  1994,  SC  entered  into  an  agreement  with a  bank  for a new
$1,200,000  non-revolving  line of credit.  Each advance under the line shall be
evidenced by a separate  promissory  note with  maturity  date not  exceeding 66
months from the date of the respective  advance  giving rise to the note.  Under
the agreement,  SC originally  could request  advances  through October 28, 1995
only, at which time its rights to advances under the agreement were  terminated.
In December 1995, the agreement was amended, making available the unused portion
of $1,200,000 until October 20, 1996. Advances under the agreement bear interest
at the bank's prime rate plus 1.5% up to a maximum rate of 2.0%. As of September
30, 1996, the amount outstanding under the non- revolving line of credit totaled
$693,000.

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

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


Capitol Queen & Casino, Inc.

     Analysis of  Development  Stage  Activities for the period January 20, 1993
(the date of inception) through September 30, 1996

      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.  At
September 30, 1996,  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 and May 15, 1996,  and will not be able to make it's scheduled
interest payment on November 15, 1996. 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 September 30, 1996, CQC had total
operating expenses of $13,584,000 consisting primarily of an abandonment loss of
$10,426,000  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. 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 abandonment  loss of $4,392,000 in the 1996
fiscal year.  Also included in operating  expenses are  amortization  expense of
$1,374,000   associated   with  debt  issue  costs  and  $1,784,000  of  project
development  costs.  For the same period,  CQC incurred  $11,923,000 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 September 30,
1996.


Liquidity and Capital Resources

      For the period from inception through September 30, 1996, 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 October  31,  1996,  CQC had  expended a total of
approximately  $21,500,000 on the  development  and  construction of the Capitol
Queen.

       CQC's  obligations  consist of the $20,000,000 in principal amount of the
outstanding  CQC Notes and accrued  interest  thereon of $2,400,000 at September
30, 1996.  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.

     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  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 has exercised its discretion to
review the case and has scheduled  argument for November 19, 1996. These charges
are not expected to have a material adverse effect on BGI or CQC.

      On March 24, 1995,  CQC filed an action against the Commission in the Cole
County,  Missouri,  Circuit  Court,  alleging that the  Commission  had violated
Missouri's  open meeting law by  deliberating in a closed session before issuing
its decision denying CQC's license.  The petition requested an order voiding the
Commission's  decision.  On March 27,  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.




Item 6.  Exhibits and Reports on Form 8-K

     No exhibits are included herein:

     The Company  did not file any  reports on from 8-K during the Three  Months
ended September 30, 1996.


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


                                   SIGNATURES

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



Becker Gaming, Inc.
(Registrant)



Date: November 14, 1996
/S/ Bruce F. Becker
-------------------
Bruce F. Becker
President, Chief Executive
Officer(Principal Executive Officer)



Date: November 14, 1996
/S/ Jerry Griffis
-----------------
Jerry Griffis
Chief Financial Officer
(Principal Financial and Accounting Officer)