<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

    X    Annual report pursuant to Section 13 or 15(d) of the Securities
  -----  Exchange Act of 1934 for the fiscal year ended September 30, 1999 or

         Transition report pursuant to Section 13 or 15(d) of the Securities
  -----  Exchange Act of 1934

                          COMMISSION FILE NUMBER: 1-9481

                           SANTA FE GAMING CORPORATION

             (Exact name of registrant as specified in its Charter)

                  NEVADA                              88-0304348
------------------------------------------------------------------------------
       (State or other jurisdiction                (I.R.S. Employer
     of incorporation or organization)            Identification No.)

4949 N. RANCHO DR., LAS VEGAS, NEVADA                         89130
------------------------------------------------------------------------------
(Address of principal Executive Office)                       (Zip Code)

Registrant's telephone number, including area code:  (702) 658-4300

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                      NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

TITLE OF EACH CLASS:
COMMON STOCK, PAR VALUE $.01 PER SHARE        OVER THE COUNTER BULLETIN BOARD
EXCHANGEABLE REDEEMABLE PREFERRED STOCK       OVER THE COUNTER BULLETIN BOARD

               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 (or for such shorter
period that the Registrant was required to file such reports), and (2) has
been subject to filing requirements for the past 90 days. YES  X   No
                                                              ---     ---

               Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K, or any amendment to this Form 10-K.  X
                                          ---

               The number of shares of common stock outstanding as of
December 20, 1999, was 6,195,356. The market value of the common stock held
by nonaffiliates of the Registrant as of December 20, 1999, was approximately
$1,266,431. The market value was computed by reference to the closing sales
price of $.6875 per share of common stock on the Over the Counter Bulletin
Board as of December 20, 1999.

                      DOCUMENTS INCORPORATED BY REFERENCE:
PART III HEREOF INCORPORATES BY REFERENCE PORTIONS OF THE PROXY STATEMENT FOR
THE 2000 ANNUAL MEETING OF STOCKHOLDERS (TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION WITHIN 120 DAYS AFTER SEPTEMBER 30, 1999).

<PAGE>

                  SANTA FE GAMING CORPORATION AND SUBSIDIARIES
                    ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
                          YEAR ENDED SEPTEMBER 30, 1999

                                TABLE OF CONTENTS

                                     PART I

<TABLE>
<CAPTION>

                                                                                                            PAGE
<S>            <C>                                                                                          <C>
Item 1.        Business........................................................................................3
                      General..................................................................................3
                      Hotel and Casino Operations..............................................................4
                      Land Held for Development................................................................7
                      Nevada Regulations and Licensing.........................................................8
Item 2.        Properties.....................................................................................11
Item 3.        Legal Proceedings..............................................................................12
Item 4.        Submission of Matters to a Vote of Security Holders............................................19

                                     PART II

Item 5.        Market for the Registrant's Common Stock and Related
                      Security Holders Matters...............................................................19
Item 6.        Selected Financial Data........................................................................20
Item 7.        Management's Discussion and Analysis of Financial Condition and
                      Results of Operations...................................................................21
Item 8.        Financial Statements and Supplementary Data....................................................38
Item 9.        Changes in and Disagreements with Accountants on Accounting and
                      Financial Disclosure....................................................................72

                                    PART III

Item 10.       Directors and Executive Officers of the Registrant.............................................72
Item 11.       Executive Compensation.........................................................................72
Item 12.       Security Ownership of Certain Beneficial Owners and Management.................................73
Item 13.       Certain Relationships and Related Transactions.................................................73

                                     PART IV

Item 14.       Exhibits, Financial Statement Schedules and Reports on Form 8-K................................73
</TABLE>

                                       2

<PAGE>

                                     PART I

ITEM 1.  BUSINESS

                                     GENERAL

         Santa Fe Gaming Corporation, (the "Company" or "Santa Fe Gaming"), a
publicly traded Nevada corporation, is the successor corporation of two
affiliates, Sahara Resorts ("SR") and Sahara Casino Partners, L.P., which
combined in a business combination in September 1993. The Company's primary
business operations are conducted through two wholly-owned subsidiary
corporations, Santa Fe Hotel Inc. ("SFHI") and Pioneer Hotel Inc. ("PHI")
(together the "Operating Companies"). SFHI owns and operates the Santa Fe
Hotel and Casino (the "Santa Fe"), located in Las Vegas, Nevada, and PHI owns
and operates the Pioneer Hotel & Gambling Hall (the "Pioneer") in Laughlin,
Nevada. The Company, owns real estate through SFHI, adjacent to the Santa Fe,
and through an indirect wholly-owned subsidiary of the Company, Sahara Las
Vegas Corp. ("SLVC"), on Las Vegas Boulevard South (the "Strip").

         In November 1999, SLVC sold real property located in Henderson,
Nevada to Station Casinos, Inc. In connection with the sale, the Company,
SLVC, SFHI and members of the family of Paul W. Lowden, majority stockholder
of the Company, entered into non-compete agreements, in which they agreed not
to compete through November 15, 2014 within a five-mile radius of two of the
buyer's casinos located in the Henderson area. Additionally, the Company and
SFHI entered into a Right of First Refusal Agreement with the buyer, pursuant
to which SFHI granted the buyer a 15-year right of first refusal, subject to
certain exceptions, to purchase either capital stock or debt or other
securities convertible into capital stock of SFHI or SFHI assets in the event
SFHI sells a substantial portion of its assets. The Company granted the buyer
a 15-year right of first refusal to buy any outstanding SFHI capital stock
that the Company or its affiliates propose to sell.

         The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown in the
financial statements, liabilities subject to compromise at September 30,1999
are $63.8 million. This amount reflects the principal and accrued interest on
the 13 1/2% First Mortgage Bonds issued by Pioneer Finance Corp ("PFC"),
which matured December 1, 1998 ( the "13 1/2% Notes") but were not paid. PFC
and PHI filed for relief under Chapter 11 of the United States Bankruptcy
Code (the "Bankruptcy Code") in February and April 1999, respectively. The 13
1/2% Notes are guaranteed by the Company and the Company is party to legal
proceedings in which holders of the 13 1/2% Notes are suing to enforce
payment on the guarantees. (See Item 3. "Legal Proceedings"). Additionally,
SFHI is in default under its 9 1/2% Notes issued by SFHI due December 2000
(the "9 1/2% Notes") as a result of the failure to pay the 13 1/2% Notes at
maturity and the related PFC and PHI bankruptcies. The Company has also
guaranteed substantially all of the other debt of its other subsidiaries,
SLVC and SFHI. Furthermore, at September 30, 1999, current liabilities exceed
current assets by approximately $5.5 million and there is a stockholders'
deficiency of $59.2 million. The Company's inability to repay the 13 1/2%
Notes, its net losses and its stockholders' deficiency raise substantial
doubt about its ability to continue as a going concern.

         Management's plans regarding these matters include seeking
confirmation of a joint plan of reorganization for PFC and PHI under the
Bankruptcy Code and exploring refinancing alternatives for substantially
all of its debt. The

                                       3

<PAGE>

financial statements do not include any adjustments that might result from
the consequences of the proceedings under Chapter 11 or pending litigation
nor all adjustments that might be necessary should the Company be unable to
continue as a going concern.

         The principal executive office of the Company is located at 4949 N.
Rancho Dr., Las Vegas, Nevada 89130 and the telephone number is (702)
658-4300.

                           HOTEL AND CASINO OPERATIONS

         The Company's primary business operations are in the gaming industry
and are conducted at the Santa Fe in Las Vegas, Nevada and the Pioneer in
Laughlin, Nevada.

                        DESCRIPTION OF THE HOTEL-CASINOS

         The Santa Fe is located in Las Vegas, approximately nine miles
northwest of downtown Las Vegas, adjacent to US-95 at the off-ramp for Rancho
Road. The Santa Fe was built in 1991 on a 38-acre site and includes a 440,000
square foot facility, features a traditional southwestern decor, 200 hotel
rooms, an 85,000 square foot casino with 1,665 slot and video poker machines
and a wide range of table games, a 550-seat bingo room, a 180-seat race and
sports book with 38 large screen televisions, an arcade and a variety of
dining options, including three specialty restaurants, a 575-seat buffet and
a 24-hour restaurant. The hotel features 200 rooms in a five-story tower.
Each room features a mountain-view, is approximately 310 square feet, has a
sitting area and a choice of king or two double beds. The hotel offers its
guests a pool, spa and patio area. Additionally, the Santa Fe includes a
Hockey League regulation size ice skating arena and a 60-lane
state-of-the-art bowling center. Among the Santa Fe's five full-service bars
is a lounge which features live entertainment nightly and overlooks the ice
skating arena. The Santa Fe also includes convention and banquet seating for
500 people. During fiscal 1999, Santa Fe completed renovation of its 200
hotel rooms.

          The Pioneer, built in 1982, featuring a classical western
architecture style, is located in Laughlin, Nevada, an unincorporated town on
the Colorado River bordering Arizona. The Pioneer is located on approximately
12 acres of land, with Colorado River frontage of approximately 770 feet, and
is situated near the center of Laughlin's Casino Drive. Approximately 6 1/2
acres of the 12 acres are subject to a 99-year ground lease (the "Pioneer
Ground Lease") which, by its terms, is scheduled to terminate in December
2078. The leased land lies between and separates the remaining two parcels of
land that are held in fee. The Pioneer is comprised of four buildings. One of
the three motel buildings together with a portion of both the Pioneer's
casino building and a second motel building are located on land subject to
the Pioneer Ground Lease. The casino is located in the main building,
totaling approximately 50,000 square feet of which approximately 21,500
square feet house the casino. The Pioneer features 920 slot machines and
provides a range of table games, including blackjack ("21"), craps, a
roulette wheel and a keno game. The first floor includes the casino, two
bars, snack bar and gift shop, as well as a twenty-four hour restaurant,
kitchen, smoke shop, special events area, restrooms and storage areas. A
partial second floor houses a gourmet restaurant, administrative offices and
banquet rooms. The three motel buildings were built in 1984 of frame
construction and comprise approximately 66,000, 54,000 and 30,000 square
feet, respectively. A total of 417 motel rooms are housed in the three
buildings and improvements include a swimming pool and spa.


                                       4

<PAGE>

REVENUES

         The primary source of revenues to the Company's hotel-casinos is
gaming, which represented 78.7%, 81.0% and 79.3% in 1999, 1998, and 1997,
respectively, of total revenues in the respective fiscal years. The following
table sets forth information regarding the approximate number of licensed
games and gaming devices of the Santa Fe and the Pioneer as of September 30,
1999:

<TABLE>
<CAPTION>

                                 SANTA FE      PIONEER       TOTAL
                                 --------      -------       -----
       <S>                       <C>           <C>           <C>
       Slot Machines               1,665         920         2,585

       Blackjack ("21")               19          11            30

       Craps                           2           2             4

       Roulette                        3           1             4

       Poker and Pan                   5           -             5

       Race/Sports Book                1           -             1

       Keno                            1           1             2

       Bingo                           1           -             1

       Other                           2           3             5
</TABLE>

         The Santa Fe targets primarily (i) mature local Las Vegas gamers who
desire a comfortable off-Strip gaming venue with favorable slot and video
poker machine payouts, (ii) local Las Vegas families that seek a variety of
recreational amenities that are separate from adult gaming activities, (iii)
out-of-town hockey and bowling leagues that seek a southwest venue to conduct
tournaments and (iv) out-of-town business and vacation travelers who desire
off-Strip accommodations as well as friends and relatives of local residents
who require accommodations. The occupancy rate at the Santa Fe for the last
three fiscal years was 86.1% in fiscal 1999, 83.1% in fiscal 1998, and 84.6%
in fiscal 1997.

          The Santa Fe attempts to attract and retain customers by offering
slot and video poker machine payouts that compare favorably to the
competition. A highly visible means used by the Santa Fe to accomplish this
marketing program is to offer what management believes to be the largest
number of quarter video poker machines with a theoretical payout of 100% or
better. The Santa Fe periodically sponsors detailed product research of its
competitors to categorize the number and type of video poker games by payouts
and monitors changes in game products to assist it in maintaining a
sustainable competitive advantage over competing properties.

          The Santa Fe uses an electronic players' club, the Desert Fortune
Club (the "Club"), to capture player information, better identify customers
and build customer retention and loyalty. The Santa Fe uses this information
for database marketing and rewards. Club members receive targeted periodic
mailings, including newsletters detailing activities and specials at the
Santa Fe, invitations to special events and tournaments, coupons for
complimentary or discounted dining and cheques redeemable for cash at the
Santa Fe.


                                       5

<PAGE>

         The Pioneer targets primarily (i) mature, out-of-town customers
residing in Central Arizona and Southern California, (ii) retirees who reside
in the Northeast and Midwest United States and Canada, and travel to the
Southwest United States during the winter months and (iii) local residents
who reside in Laughlin, Nevada, in Bullhead City, Kingman and Lake Havasu,
Arizona. The occupancy rate at the Pioneer in each of the last three fiscal
years was 69.2%, 76.9%, and 79.6% respectively, in fiscal years 1999, 1998,
and 1997.

         The Pioneer attempts to attract and retain customers by offering
slot and video poker machine payouts that compare favorably to the
competition. A visible means used by the Pioneer to accomplish this marketing
program is to offer what management believes to be the largest number of
quarter video poker machines with pay tables that have a theoretical pay out
percentage of 99.97% or better. The Pioneer periodically sponsors detailed
product research of its competitors to categorize the number and type of
video poker games by payouts and monitors changes in game products to assist
it in maintaining a sustainable competitive advantage over competing
properties.

         The Pioneer has organized a program it calls the "Round-Up Club"
established to encourage repeat business from frequent and active slot
customers. A member of the Round-Up Club accumulate points in the member's
account for play on a slot machine that can be redeemed for free gifts, food
and beverages and cheques redeemable for cash. Pioneer management also uses
the Round-Up Club membership list for direct mail marketing.

MANAGEMENT AND PERSONNEL

         At September 30, 1999, the Company employed 17 administrative
personnel, and the Santa Fe and the Pioneer employed 1,200 and 730 persons,
respectively.

         SFHI is negotiating with the Teamsters, Operating Engineers,
Culinary and Bartenders Unions ("Unions") with respect to a collective
bargaining agreement covering certain employees at the Santa Fe. If
negotiations result in an agreement between SFHI and the Unions, operating
expenses may increase. In the event negotiations fail to result in an
agreement, the Unions may call a strike, which would result in operating
revenues being adversely affected. In either event, there could be a material
adverse effect on the results of operations and financial condition of SFHI
and the Company.

         The Santa Fe continues to be the target of a union boycott in which
the Unions ask the public not to patronize the properties. Management is
unable to determine the impact, if any, of the union boycott on the Santa Fe.

COMPETITION

         In Las Vegas, hotels and gambling casinos compete primarily in three
areas: on or near the Strip, within downtown Las Vegas and in the locals
market. The Strip and downtown properties predominantly target out
of-town-visitors, while local properties generally target residents of the
Las Vegas Valley (the "Locals Market"). The Santa Fe targets the Locals
Market and primarily the communities north and northwest of downtown Las
Vegas. The Locals Market is highly competitive. The number of casinos
catering to the Locals Market has increased in the last several years and
some of these competitors have recently completed expansions or new projects.
In addition, a hotel and casino is currently being built approximately eight
miles west of the Santa Fe which is expected to open in 2000 and target the
Locals Market. To a lesser extent the Santa Fe competes with all other
casinos and hotels in the Las Vegas area, as well


                                       6

<PAGE>

as other legalized forms of gaming and gaming operations in other parts of
the state of Nevada and elsewhere. Certain states have legalized, and several
other states are considering legalizing, casino gaming in designated areas.

         In addition to competing with the hotel-casinos in Laughlin, the
Pioneer also competes with the hotel-casinos in Las Vegas and those situated
on I-15 (the principal highway between Las Vegas and southern California)
near the California-Nevada state line, as well as a growing number of Native
American casinos in Laughlin's regional market. The Company believes the
significant expansion of hotel and casino capacity in Las Vegas in recent
years and the growth of Native American casinos in Laughlin's central Arizona
and southern California feeder markets have had a negative impact on Laughlin
hotel-casinos, including the Pioneer, by drawing visitors away from the
Laughlin market. This has, in turn, resulted in increased competition among
Laughlin hotel-casinos, including the Pioneer.

         On August 28, 1998 the California General Assembly, Senate and
Governor approved legislation authorizing gaming operations on tribal lands
pursuant to a form of compact. Prior to this date, such gaming operations
were illegal in California. In addition, on November 3, 1998 California
voters approved Proposition 5, which would have permitted Native American
tribes that enter into agreements with the State of California pursuant to
form of compact to conduct gaming activities including horse race wagering,
gaming devices (including slot machines), banked card games and lotteries. On
August 23, 1999 the California Supreme Court overturned Proposition 5. In
response to this ruling, the California state legislature has placed a
constitutional amendment, Proposition 1-A, on the March 2000 ballot that
would exempt California tribes from the constitutional prohibitions against
casino gaming and would allow the California Governor to compact with the
tribes to conduct limited Las Vegas style gaming activities. The Governor,
with the approval of the legislature, has entered into compacts with 59
California tribes that would allow the tribes to operate casino slot
machines, banked card games, and lotteries, with an option to enter into a
separate off-track betting compact. The compacts are contingent on the
passage of the constitutional amendment, but would allow the tribes to
operate as many as 115,000 slot machines in addition to banked card games and
lotteries. Management believes that the development by Native Americans and
others of casino properties similar to those in Las Vegas in areas close to
Nevada, particularly California and Arizona, would have a material adverse
effect on the Company's business and results of operation.

                            LAND HELD FOR DEVELOPMENT

LAS VEGAS, NEVADA

         The Company owns, through SLVC, an approximately 27-acre parcel of
real property on the Strip, which it may use for possible future development.
In connection with the acquisition of the property, the Company assumed an
operating lease under which a water theme park operates. The lease may be
terminated at any time by the Company; however, if it is terminated prior to
2004, the Company has agreed to pay a loan owed by the tenant to the prior
owner which amortizes over the remaining life of the lease.

         The Company owns, through SFHI, an approximately 21-acre parcel of
real property located next to the Santa Fe which it may use for possible
future development.

         Any future development of these properties is subject to, among
other things, the Company's ability to obtain necessary financing. No
assurance can be given that the Company will obtain development financing or
develop successfully the properties.

See Item 2. "Properties" for further discussion of properties.


                                       7

<PAGE>

                      NEVADA REGULATIONS AND LICENSING

         The Company, PHI and SFHI (collectively, the "Santa Fe Group") are
subject to extensive state and local regulation by the Nevada Gaming
Commission (the "Commission"), Nevada Gaming Control Board (the "Board") and
in the case of PHI and SFHI, the Clark County Liquor and Gaming Licensing
Board and the City of Las Vegas, respectively (collectively the "Nevada
Gaming Authorities").

         The laws, regulations and supervisory procedures of the Nevada
Gaming Authorities seek (i) to prevent unsavory or unsuitable persons from
having any direct or indirect involvement with gaming at any time or in any
capacity, (ii) to establish and maintain responsible accounting practices and
procedures, (iii) to maintain effective control over the financial practices
of licensees, including establishing minimum procedures for internal fiscal
affairs and the safeguarding of assets and revenues, providing reliable
record-keeping and making periodic reports to the Nevada Gaming Authorities,
(iv) to prevent cheating and fraudulent practices and (v) to provide a source
of state and local revenues through taxation and licensing fees. Changes in
such laws, regulations and procedures could have an adverse effect on any or
all of the members of the Santa Fe Group. Management believes the Santa Fe
Group is in compliance with regulations promulgated by the Nevada Gaming
Authorities.

         LICENSING AND REGISTRATION. PHI and SFHI hold Nevada State gaming
licenses to operate the Pioneer and the Santa Fe. The Company has been
approved by the Nevada Gaming Authorities to own, directly or indirectly, a
beneficial interest in the Operating Companies.

         The licenses held by members of the Santa Fe Group are not
transferable. Each issuing agency may at any time revoke, suspend, condition,
limit or restrict licenses or approvals to own a beneficial interest in an
Operating Company for any cause deemed reasonable by such agency. Any failure
to retain a valid license or approval would have a material adverse effect on
all members of the Santa Fe Group.

         If it is determined that the Operating Companies or, when
applicable, new members of the Santa Fe Group, have violated the Nevada laws
or regulations relating to gaming, the Operating Companies or, when
applicable, new members of the Santa Fe Group, could, under certain
circumstances, be fined and the licenses of the Operating Companies or, when
applicable, new members of the Santa Fe Group, could also be limited,
conditioned, revoked or suspended. A violation under any of the licenses held
by the Company, or any of the Operating Companies or, when applicable, new
members of the Santa Fe Group, may be deemed a violation of all the other
licenses held by the Company and each of the Operating Companies or, when
applicable, new members of the Santa Fe Group. If the Commission does
petition for a supervisor to manage the affected casino and hotel facilities,
the suspended or former licensees shall not receive any earnings of the
gaming establishment until approved by the court, and after deductions for
the costs of the supervisor's operation and expenses and amounts necessary to
establish a reserve fund to facilitate continued operation in light of any
pending litigation, disputed claims, taxes, fees and other contingencies
known to the supervisor which may require payment. The supervisor is
authorized to offer the gaming establishment for sale if requested by the
suspended or former licensee, or without such a request after six months
after the date the license was suspended, revoked or not renewed.


                                       8

<PAGE>


         INDIVIDUAL LICENSING. Stockholders, directors, officers and certain
key employees of corporate gaming licensees must be licensed by the Nevada
Gaming Authorities. An application for licensing of an individual may be
denied for any cause deemed reasonable by the issuing agency. Changes in
licensed positions must be reported to Nevada Gaming Authorities. In addition
to its authority to deny an application for an individual license, the Nevada
Gaming Authorities have jurisdiction to disapprove a change in corporate
position. If the Nevada Gaming Authorities were to find any such person
unsuitable for licensing or unsuitable to continue to have a relationship
with a corporate licensee, such licensee would have to suspend, dismiss and
sever all relationships with such person. Such corporate licensee would have
similar obligations with regard to any person who refuses to file appropriate
applications, who is denied licensing following the filing of an application
or whose license is revoked. Each gaming employee must obtain a work permit
which may be revoked upon the occurrence of certain specified events.

         Any individual who is found to have a material relationship or a
material involvement with a gaming licensee may be investigated to be found
suitable or to be licensed. The finding of suitability is comparable to
licensing and requires submission of detailed financial information and a
full investigation. Key employees, controlling persons or others who exercise
significant influence upon the management or affairs of a gaming licensee may
be deemed to have such a relationship or involvement.

         Beneficial owners of more than 10% of the voting securities of a
corporation or partner interests of a partnership registered with the Nevada
Gaming Authorities that is "publicly traded" (a "Registered Entity") must be
found suitable by the Nevada Gaming Authorities, and any person who acquires
more than 5% of the voting securities or partner interests, as the case may
be, of a Registered Entity must report the acquisition to the Nevada Gaming
Authorities in a filing similar to the beneficial ownership filings required
by the Federal securities laws. Under certain circumstances an institutional
investor, as such term is defined in the Gaming Control Act and the
regulations of the Commission and Board (collectively, the "Nevada Gaming
Regulations"), that acquires more than 10% of the Company's voting securities
may apply to the Commission for a waiver of such finding of suitability
requirement. If the stockholder who must be found suitable is a corporation,
partnership or trust, it must submit detailed business and financial
information including a list of beneficial owners. Any beneficial owner of
equity or debt securities of a Registered Entity (whether or not a
controlling stockholder) may be required to be found suitable if the relevant
Nevada Gaming Authorities have reason to believe that such ownership would be
inconsistent with the declared policy of the State of Nevada. If the
beneficial owner who must be found suitable is a corporation, partnership or
trust, it must submit detailed business and financial information, including
a list of its securities.

         In addition, the Clark County Liquor and Gaming Licensing Board has
taken the position that it has the authority to approve all persons owning or
controlling more than 2% of the stock or partner interests of a Registered
Entity, including a gaming licensee or otherwise, or of any corporation,
partnership or person controlling such an entity. The applicant is required
to pay all costs of investigation.

         Any stockholder found unsuitable and who beneficially owns, directly
or indirectly, any securities or partner interests of a Registered Entity
beyond such period of time as may be prescribed by the Nevada Gaming
Authorities may be guilty of a gross misdemeanor. Any person who fails or
refuses to apply for a finding of suitability or a license within 30 days
after being ordered to do so may be found unsuitable. A Registered Entity is
subject to disciplinary action if, after it receives notice that a person is
unsuitable to be a security holder or partner, as


                                       9

<PAGE>

the case may be, or to have any other relationship with it, such Registered
Entity (a) pays the unsuitable person any dividends or property upon any
voting securities or partner interests or makes any payments or distributions
of any kind whatsoever to such person, (b) recognizes the exercise, directly
or indirectly, of any voting rights in its securities or partner interests by
the unsuitable person, (c) pays the unsuitable person any remuneration in any
form for services rendered or otherwise, except in certain and specific
circumstances or (d) fails to pursue all lawful efforts to require the
unsuitable person to divest himself of his voting securities, including, if
necessary, the immediate purchase of the voting securities for cash at fair
market value.

         Registered Entities must maintain current stock ledgers in the State
of Nevada that may be examined by the Nevada Gaming Authorities at any time.
If any securities or partner interests are held in trust by an agent or by a
nominee, the record holder may be required to disclose the identity of the
beneficial owner to the Nevada Gaming Authorities. A failure to make such
disclosure may be grounds for finding the record owner unsuitable. Record
owners are required to conform to all applicable rules and regulations of the
Nevada Gaming Authorities. Licensees also are required to render maximum
assistance in determining the identity of a beneficial owner.

         The Nevada Gaming Authorities have the power to require that
certificates representing voting securities of a corporate licensee bear a
legend to the effect that such voting securities or partner interests are
subject to the Nevada Gaming Regulations. The Nevada Gaming Authorities,
through the power to regulate licensees, have the power to impose additional
restrictions on the holders of such voting securities at any time.

         FINANCIAL RESPONSIBILITY. The Company and the Operating Companies
are required to submit detailed financial and operating reports to the Nevada
Gaming Authorities. Substantially all loans, leases, sales of securities and
other financial transactions entered into by the Company or the Operating
Companies must be reported to and, in some cases, approved by the Nevada
Gaming Authorities.

         CERTAIN TRANSACTIONS. None of the Santa Fe Group may make a public
offering of its securities without the approval of the Commission if the
proceeds therefrom are intended to be used to construct, acquire or finance
gaming facilities in Nevada, or retire or extend obligations incurred for
such purposes. Such approval, if given, will not constitute a recommendation
or approval of the investment merits of the securities offered. Any public
offering requires the approval of the Commission.

         Changes in control of the Company through merger, consolidation,
acquisition of assets, management or consulting agreements or any form of
takeover cannot occur without the prior investigation of the Board and
approval of the Commission. The Commission may require controlling
stockholders, partners, officers, directors and other persons who have a
material relationship or involvement in the transaction to be licensed.

         The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and other corporate
defense tactics that affect corporate gaming licensees in Nevada, and
corporations whose securities are publicly traded that are affiliated with
those operations, may be injurious to stable and productive corporate gaming.
The Commission has established a regulatory scheme to ameliorate the
potentially adverse effects of these business practices upon Nevada's gaming
industry and to further Nevada's policy to (i) assure the financial stability
of corporate or partnership gaming operators and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate


                                      10

<PAGE>

form; and (iii) promote a neutral environment for the orderly governance of
corporate or partnership affairs. Approvals are, in certain circumstances,
required from the Commission before the Company can make exceptional
repurchases of voting securities above the current market price thereof
(commonly referred to as "greenmail") and before an acquisition opposed by
management can be consummated. Nevada's gaming regulations also require prior
approval by the Commission if the Company were to adopt a plan of
recapitalization proposed by the Company's Board of Directors in opposition
to a tender offer made directly to the stockholders for the purpose of
acquiring control of the Company.

         MISCELLANEOUS. Pursuant to recent changes in Nevada law, the Company
and its Nevada-based affiliates, including subsidiaries, may engage in gaming
activities outside the State of Nevada without seeking the approval of the
Authorities provided that such activities are lawful in the jurisdiction
where they are to be conducted and that certain information regarding the
foreign operation is provided to the Board on a periodic basis. The Company
and its Nevada-based affiliates may be disciplined by the Commission if any
of them violates any laws of the foreign jurisdiction pertaining to the
foreign gaming operation, fails to conduct the foreign gaming operation in
accordance with the standards of honesty and integrity required of Nevada
gaming operations, engages in activities that are harmful to the State of
Nevada or its ability to collect gaming taxes and fees, or employs a person
in the foreign operation who had been denied a license or finding of
suitability in Nevada on the ground of personal unsuitability.

         License fees and taxes, computed in various ways depending on the
type of gaming involved, are payable to the State of Nevada and to the
counties and cities in which the Company and the Operating Companies' conduct
their respective operations. Depending upon the particular fee or tax
involved, these fees and taxes are payable either monthly, quarterly or
annually and are based upon: (i) a percentage of the gross gaming revenues
received by the casino operation; (ii) the number of slot machines operated
by the casino; or (iii) the number of table games operated by the casino. A
casino entertainment tax is also paid by the licensee where entertainment is
furnished in connection with the selling of food or refreshments.

         Finally, the Nevada Gaming Authorities may require that lenders to
licensees be investigated to determine if they are suitable and, if found
unsuitable, may require that they dispose of their loans.

ITEM 2.  PROPERTIES

         The Santa Fe is located on a 38-acre site in the northwest section
of Las Vegas, approximately nine miles from the north end of the Strip. The
Santa Fe property is subject to a first priority deed of trust securing the
$14.0 million principal amount of 9 1/2% Notes and a second priority deed of
trust securing 11% First Mortgage Notes due December 15, 2000 ("11% Notes").
As of September 30, 1999, $99.4 million principal amount of the 11% Notes
remain outstanding, and is reported in the consolidated Balance Sheet net of
unamortized debt discount of $1.6 million and $33.1 million principal amount
held by SLVC. SFHI is in default under the 9 1/2% Notes as a result of the
failure to pay the 13 1/2% Notes at maturity and the related PFC and PHI
bankruptcies. The holders of the 9 1/2% Notes have not accelerated the debt
to date, but have the right to do so at any time. See Item 1. "Business
Description of the Hotel-Casinos" for more detailed information regarding the
Santa Fe.

                                      11

<PAGE>

         In January 1999, SFHI acquired for $3.6 million the approximate
21-acre parcel of undeveloped real property adjacent to the Santa Fe from
Santa Fe Gaming. Management believes the cash consideration paid represents
that which could have been negotiated between third parties in an arms length
transaction.

         The Pioneer is located on approximately 12 acres of land, with
Colorado River frontage of approximately 770 feet, and is situated near the
center of Laughlin's Casino Drive. Approximately 6 1/2 acres of the 12-acre
Pioneer site is leased from an unaffiliated third party. The Pioneer property
is subject to a first priority deed of trust securing the 13 1/2% Notes. As
of September 30, 1999, $55.0 million principal amount of the 13 1/2% Notes
was outstanding. See Item 1 "Business Description of the Hotel-Casinos" for
more detailed information regarding the Pioneer.

         The Company owns 27 acres of real property located on the Strip. The
property is subject to a ground lease, which the Company may terminate at any
time. The Company has guaranteed payments by the tenant of a loan owed to the
prior owner of the property ("tenant loan") and has agreed to pay the tenant
loan in full in certain situations, including in the event the lease is
terminated for any reason prior to its scheduled termination date of 2004.
The tenant loan, which is amortized through monthly principal and interest
payments through December 2004, had an outstanding balance of $4.2 million as
of September 30, 1999. This property is subject to a first priority deed of
trust securing the $43.0 million principal amount of 12% First Mortgage Notes
due December 2000 (the "SLVC Notes").

ITEM 3.  LEGAL PROCEEDINGS

PETITION FOR RELIEF UNDER CHAPTER 11

         On February 23, 1999, PFC voluntarily commenced a Chapter 11
proceeding. On April 12, 1999, PHI voluntarily commenced its Chapter 11
proceeding to facilitate the reorganization of the 13 1/2% Notes in
accordance with PFC's 1998 Consent Solicitation, described below.
Contemporaneously with the filing of PHI's voluntary petition, PFC and PHI
(collectively, the "Debtors") filed with the Bankruptcy Court a proposed
Disclosure Statement and joint plan of reorganization as amended (the "Joint
Plan"). The Joint Plan was filed in accordance with consents obtained from
holders of approximately 75% of the outstanding principal amount of 13 1/2%
Notes, pursuant to which PFC agreed to file for relief under Chapter 11 and
the consenting holders agreed to vote to accept a plan of reorganization
substantially similar to the treatment proposed in PFC's Consent Solicitation
Statement, dated October 23, 1998, as amended, ("Consent Solicitation"). On
August 30, 1999 the Bankruptcy Court approved the Disclosure Statement to
accompany the Joint Plan. On October 25, 1999, the Debtors' proposed
modifications to the Joint Plan to satisfy balloting thresholds without
resoliciting the Joint Plan. (See below Joint Plan) The Bankruptcy Court
ruled against the Debtors' proposed modification to the Joint Plan and
ordered the Debtors' proposed modifications would require re-solicitation.
The Court terminated the Debtors' exclusivity, expressly subject to
reinstatement, thereby granting other parties in interest the right to file a
plan to reorganize the Debtors'. On November 8, 1999 the Bankruptcy Court
refused to permit a Disclosure Statement to accompany the Plan of
Reorganization filed on behalf of Hudson Bay Partners LLC ("HBP"). On
December 14, 1999, the Bankruptcy Court refused to approve a Joint Disclosure
Statement to accompany the Plan of Reorganization filed by HBP and High River
Partnership ("High River"). In addition, the Bankruptcy Court reinstated
exclusivity for the Debtors and continued a hearing on the Debtors Disclosure
Statement to accompany their Fourth

                                      12

<PAGE>

Amended Plan of Reorganization (See below "Modified Joint Plan" for more
detailed discussion). No assurance can be given that the Modified Joint Plan
will be confirmed.

         PFC and PHI have received approval from the Bankruptcy court to,
among other items, (i) pay or otherwise honor certain of its pre-petition
obligations, including employee wages, (ii) assume the management agreement
between PHI and the Company, and (iii) assume the land lease for
approximately 6 1/2 acres on which a portion of the Pioneer is located.

         PFC has continued accruing interest on the 13 1/2% Notes subsequent
to the date the bankruptcy petition was filed in accordance with the terms of
the Consent Solicitation. The principal and accrued interest due on the
13 1/2% Notes is $63.8 million as of September 30, 1999 and are reflected as
Liabilities subject to compromise reported in the Consolidated Balance Sheet
included elsewhere in this Annual Report on Form 10K.

CONSENT SOLICITATION

         In November 1998, the Company received and accepted consents from
holders of approximately 75%, or $45.8 million, of principal amount of the
outstanding 13 1/2% Notes pursuant to which (i) PFC agreed to file for relief
under Chapter 11 of the Bankruptcy Code and to submit for confirmation of a
plan of reorganization that provides for issuance of Amended Notes in
satisfaction of the 13 1/2% Notes pursuant to the terms set forth in the
Consent Solicitation, and (ii) the consenting holders agreed (a) to forbear
until December 15, 2000 from exercising rights or remedies arising as a
result of PFC's failure to pay principal and interest on the 13 1/2% Notes at
the December 1, 1998 maturity date, or the failure by PHI to pay principal
and interest on the intercompany note from PHI to PFC at the December 1, 1998
maturity date and (b) to vote to accept a plan of reorganization in a Chapter
11 bankruptcy case that provides for treatment of the 13 1/2% Notes
substantially as set forth in the Consent Solicitation. In addition, the
Company provided collateral for its previously unsecured guarantee of the
13 1/2% Notes, through the pledge of stock of certain of its subsidiaries
including SFHI and SR, the majority owner of the stock of SLVC, and by the
grant of liens on certain of its other assets. In addition, consenting
holders agreed to be bound by restrictions on the transfer or sale of 13 1/2%
Notes. 13 1/2% Notes subject to Consents may be transferred only if the
transferee agrees to be bound by the terms of the Consent Solicitation.

         Pursuant to the terms of the Consent Solicitation, because certain
events will not occurred by December 31, 1999, holders of at least 75% of the
aggregate 13 1/2 Notes subject to consent may terminate the consents.

         Pursuant to the Consent Solicitation, in December 1998 PFC purchased
on a pro-rata basis 10.83% principal amount from all consenting holders,
representing an aggregate of $5.0 million principal amount of 13 1/2% Notes,
plus accrued interest. In July 1999 PFC paid in cash $1.4 million for 50% of
the interest payment due June 1, 1999 to consenting holders. In December
1999, the Court approved payment in cash $1.4 million for 50% of the interest
due December 1, 1999 to consenting holders. In a separate motion, the court
approved payment in cash of approximately $800,000 representing 50% of the
interest due on June 1, 1999 and December 1, 1999 payable to non-consenting
holders and approximately $1.4 million representing the 10.83% pro-rata
principal redemption plus accrued interest, to non-consenting holders, which
pro-rata amount was previously paid to consenting holders in December 1998
for their pro-rata portion upon confirmation of the plan.

                                      13

<PAGE>

          In May, 1999, the Company was advised that a Consenting Holder
attempted to transfer or did transfer an interest in approximately $3.0
million principal amount of 13 1/2% Notes without complying with the
restriction on transfer. In July 1999, PFC commenced an adversary action
seeking injunctive relief preventing the transfer without strict compliance
with the terms of the restrictive legend.

         On November 10, 1999, Hudson Bay Partners LP, ("HBP"), commenced an
adversary proceeding against the Debtors and the Company seeking declaratory
and injunctive relief contesting, among other matters, the validity of the
consents obtained in the Consent Solicitation. On December 13, 1999 the
Bankruptcy Court refused to enter a final judgment regarding the
enforceability of the consents obtained pre-petition in the Consent
Solicitation, but preliminarily (1) determined the consents to be invalid and
(2) enjoined the Debtors and the Company from stating that they will seek to
enforce the Consents.  If the consents are ultimately held to be unenforceable,
the Company intends to seek recission of the grants of security interests,
securing its guaranty of the 13 1/2% notes. The Bankruptcy Court has
tentatively scheduled the matter for trial and established deadlines for
discovery which may not occur prior to balloting on the Debtors' joint plan.

JOINT PLAN

         On October 21, 1999, the Company's subsidiaries, PFC and PHI filed
a ballot report with respect to PFC's and PHI's Second Amended Plan of
Reorganization ("Joint Plan"), indicating that ballots were received as
outlined in the table below from holders of PFC's 13 1/2% Notes.

              Number of Votes From Holders of Class 3 Claims

<TABLE>

         <S>                          <C>                <C>
         Total number of votes:               656        100.00%
         Number of acceptances:               557         84.91%
         Number of rejections:                 99         15.09%


                      Amount of Class 3 Claims Voted

         Total Amount Voted:          $48,388,592        100.00%
         Amount of Acceptances:        34,788,333         71.87%
         Amount of Rejections:         13,610,259         28.13%
</TABLE>

         On October 25, 1999, PFC and PHI commenced confirmation hearings on
the Joint Plan. Pursuant to the Joint Plan, the Debtors were required to meet
certain additional thresholds to confirm the Joint Plan, including receiving
ballots in favor of the plan equal to sixty-seven (67%) of the total
principal amount of 13 1/2% Notes ($54,972,389). The percentage of
acceptances received represented approximately 63.27% of the total
outstanding principal amount of 13 1/2% Notes.

         The Debtors received ballots aggregating approximately $8.1 million
principal amount of 13 1/2% Notes against the Joint Plan from holders of 13
1/2% Notes who had agreed to support the Joint Plan in connection with a
Consent Solicitation, including, one holder who acquired approximately $6.2
million of consented 13 1/2% Notes subsequent to the Consent Solicitation
pursuant to the terms of the restricted legend on the consented bonds, in
which the holder agreed to vote to accept a plan of reorganization
substantially similar to the treatment proposed in the Consent Solicitation.
The Debtors have commenced legal proceedings to seek specific performance
from certain of the Consenting Holders of the 13 1/2% Notes who voted against
the Joint Plan. The Debtors proposed certain modifications to the Joint Plan
to eliminate the additional threshold without resoliciting the Joint Plan, as
modified, which were not permitted at the hearing with the Court ruling that
proposed modifications would require future solicitation.

                                      14

<PAGE>

MODIFIED JOINT PLAN

         On December 17, 1999 the Debtors filed a Disclosure Statement to
accompany the Fourth Amended Joint Plan of Reorganization (the "Modified
Joint Plan"). On December 22, 1999, the Bankruptcy Court continued a hearing
on the Disclosure Statement attached to the Modified Joint Plan to December
29, 1999 and set confirmation hearings for the Modified Joint Plan for
February 2, 2000.

         If the Modified Joint Plan is confirmed, PFC will issue a principal
amount of 13 1/2% First Mortgage Notes (together with the pay-in-kind notes,
as described below, the "Amended Notes") equal to the principal amount of all
outstanding 13 1/2% Notes plus accrued and unpaid interest from June 1, 1998
through December 1, 1999. The Company and its affiliates, other than the
Debtors, have committed at least $20.0 million to the Debtors on the
Effective Date of the Modified Joint Plan ("SFGC Contribution"). The SFGC
Contribution can be satisfied through a contribution of a combination of 13
1/2% Notes, valued at principal amount plus accrued interest, and cash. In
addition, on or about the Effective Date of the Modified Joint Plan, the
Debtors will make an offer to repurchase up to $2.0 million of principal and
accrued interest on the 13 1/2% Notes ("Dutch Auction"). Upon completion of
the SFGC Contribution, the pledge of the SFHI Common Stock granted in
connection with the Consent Solicitation will be released. The Amended Notes
will bear interest at a rate equal to 13 1/2% per annum. Interest on the
Amended Notes will be payable semiannually. The Amended Notes will mature on
December 1, 2006, though the Debtors reserve the right to shorten the
maturity date prior to or at the Confirmation hearing. PFC will have the
right to pay in kind up to 50% of the interest payable on June 1, 2000 and
December 1, 2000 through the issuance of additional Amended Notes with a
principal amount equal to 50% of the interest payable on such Interest
Payment Date (the "PIK Notes"). The terms of the PIK Notes will be identical
to those of the Amended Notes. The Amended Notes will be redeemable at 100%
of the principal amount plus accrued and unpaid interest thereon, at any
time. Upon the occurrence of certain events, PFC will be required to redeem
all outstanding Amended Notes or make an offer to repurchase all or a portion
of the outstanding Amended Notes, in each case at 100% of the aggregate
principal amount thereof, plus accrued and unpaid interest thereon, if any,
to the date of purchase. The Company will guarantee the payment of and
interest on, the Amended Notes, and the guaranty will be secured by a pledge
of the common stock of certain subsidiaries, including SR, and by liens on
certain of its other assets.

         The Modified Joint Plan is subject to the approval of the Bankruptcy
Court. No assurance can be given that the Joint Plan will be confirmed.

INVOLUNTARY PROCEEDINGS

         In January 1999, a purported holder of approximately $4.7 million of
the 13 1/2% Notes (the "Holder") who did not deliver consents pursuant to the
Consent Solicitation delivered to the Company a proposal for treatment of its
13 1/2% Notes in a manner that was inconsistent with the terms agreed to by
the Consenting Holders. The Company advised the Holder that it was reviewing
its alternatives and would not take action with respect to the Holder's
proposal at that time. Thereafter, the Holder and two other holders who
purportedly held in the aggregate $3.1 million in principal amount of 13 1/2%
Notes and who did not provide consents pursuant to the Consent Solicitation
delivered demand notices for payment from the Company under its guarantee of
the 13 1/2% Notes. On January 14, 1999, the three holders of 13 1/2% Notes
filed

                                15

<PAGE>

involuntary bankruptcy petitions against PFC and the Company with the United
States Bankruptcy Court for the District of Nevada. The Company did not
believe that the three holders of 13 1/2% Notes complied with the
requirements of the Bankruptcy Code for the commencement of the involuntary
cases. On February 4, 1999, the Company and PFC filed motions to dismiss the
involuntary petitions and sought such damages as provided by the Bankruptcy
Code. These included costs and reasonable attorney's fees and, in the event
the petitions were filed in bad faith, for all damages caused by such filings
or punitive damages.

         On February 23, 1999, in accordance with the Consent Solicitation,
PFC voluntarily commenced its Chapter 11 proceedings. PFC has reserved its
right to seek damages against the three non-consenting holders for improperly
commencing the involuntary case against it. On March 19, 1999, the bankruptcy
court suspended the involuntary case against the Company pursuant to
Bankruptcy Code Section 305 and further ordered that the involuntary
proceedings would be dismissed upon the Company's obtaining certain waivers
of statutes of limitations regarding alleged avoidance actions. On August 20,
1999, the Bankruptcy Court dismissed the involuntary petition based on the
waivers filed by the Company and subject to the Company filing a supplemental
agreement and declaration by an insider with respect to certain transactions.

         If the Company were to file for relief under Chapter 11 of the
Bankruptcy Code or if an order for relief is entered in the Company's
involuntary bankruptcy case, an event of default would occur under which
SFHI's outstanding indebtedness was issued, which would result in automatic
acceleration of the 11% Notes.

GUARANTEE LITIGATION -  HUDSON BAY

     The Company is the plaintiff in an action titled THE SANTA FE GAMING
CORP. V. HUDSON BAY PARTNERS, ET AL., CV-S-99-00298-JBR (LRL). This action
was instituted on March 11, 1999 in the United States District Court for the
District of Nevada. The defendants are Hudson Bay Partners, LP, ("HBP"), and
David H. Lesser. The complaint includes causes of action for violation of
Section 13(d) of the Securities and Exchange Act of 1934, breach of contract,
fraud, violation of Nevada's Uniform Trade Secrets Act, and intentional
interference with prospective economic advantage. The Company alleges that
the defendants failed to comply with the requirements of Section 13(d) in
connection with their purchases of the Company's preferred stock, and that
defendants wrongfully obtained and used confidential and proprietary
information. Based on its Schedule 13D filings, HBP owns approximately 3.0
million shares or 33.19% of the Company's outstanding Preferred Stock.

        The Company seeks all appropriate injunctive relief in connection
with its Section 13(d) claim, specific performance and consequential and
compensatory damages in connection with its breach of contract claim, and
compensatory and punitive damages in connection with its fraud and
intentional interference with prospective economic advantage claims, and
injunctive relief and punitive damages in connection with its claim under
Nevada's Uniform Trade Secrets Act, as well as any other appropriate relief.
On April 30, 1999, the court denied the Company's motion for preliminary
injunction with respect to 13(d) claim.

         On or about June 18, 1999, defendant HBP, who alleges it holds
approximately $4.7 million of the 13 1/2% Notes, filed a counterclaim against
the Company in which it alleges that the Company is in default on its
guarantee of the 13 1/2% Notes and seeks to recover the amounts it claims are
past due on the 13 1/2% Notes. The Company has denied the allegations made by
HBP in all material respects. On or about July 19, 1999, HBP filed a motion
for summary


                                      16

<PAGE>

judgment on its counterclaim and a request to have that judgment entered,
which the Company has opposed. No hearing date has been set on the motion, and
no trial date has been scheduled in the action. Discovery is on going.

         The Company is defending this lawsuit vigorously. Even if the
Modified Joint Plan is confirmed, any holders who vote to reject the Modified
Joint Plan or who do not vote to accept the Modified Joint Plan would retain
their rights with respect to the Company's guarantee of the 13 1/2% Notes.
If, despite the Company's defense, HBP or another 13 1/2% holder prevails in
litigation against the Company to enforce payment on the guarantees of the
13 1/2% Notes a money judgment could be entered against the Company in an
amount equal to the outstanding principal amount plus accrued interest of the
13 1/2% Notes held by the prevailing party, plus fees and expenses. The Company
does not have sufficient liquid assets to satisfy a judgment in favor of all
holders of 13 1/2% Notes and there is no assurance that the Company would be
able to obtain any financing to enable the Company to do so. If a final
judgment were to be rendered against the Company, it is likely that the
Company would file for relief under Chapter 11 of the Bankruptcy Code.

 GUARANTEE LITIGATION - GMS

         The Company is the defendant in a pending action titled GMS GROUP,
LLC V. THE SANTA FE GAMING CORP., No. 99/602231. This action initially was
instituted on or about April 9, 1999 by means of a motion for summary
judgement in lieu of a complaint filed in the Supreme Court for the State of
New York, County of New York and this action was later reinstituted on or
about May 5, 1999. GMS Group, LLC ("GMS") alleges that the Company is in
default on its guarantee of the 13 1/2% Notes and seeks to recover the
amounts it claims are past due on the 13 1/2% Notes. GMS alleges that it
holds approximately $6.8 million of the 13 1/2% Notes. The Company filed a
motion to dismiss the action for lack of personal jurisdiction over the
Company, or, in the alternative, to have the action transferred to a Nevada
court.

         On September 8, 1999 the Company and GMS entered into a Forbearance
Agreement. Generally, the terms of the Forbearance Agreement require (i)
suspension of the New York litigation until May 31, 2000 (subject to early
termination as of December 31, 1999 because the Joint Plan will not have been
confirmed by December 31, 1999,) (ii) an affirmative vote by GMS in favor of
the Modified Joint Plan, (iii) reimbursement to GMS for its incurred legal
fees and expenses, and (iv) a waiver by the Company of any defenses and right
to oppose the motion for summary judgment brought by GMS in the New York
litigation. Because the Modified Joint Plan will not be confirmed by December
31, 1999, the continued forbearance after that date will at the discretion of
GMS.  Additionally, GMS will be free to vote on a competing plan of
reorganization. If GMS were to terminate the Forbearance Agreement, it would
be entitled to obtain a judgement against the Company for non-payment on the
quarantee of the $6.8 million principal amount of 13 1/2% Notes it holds. If
the Company were unable to satisfy the judgement, it is likely the Company
would file for relief under Chapter 11 of the Bankruptcy Code.

TREASURE BAY - SECURITIES LITIGATION

         On December 12, 1994, the Company and SFHI filed a lawsuit in the
Court, naming Treasure Bay officers A. Clay Rankin III, Joe N. Hendrix and
Bernie Burkholder, and former officer Francis L. Miller as defendants in
matters involving violations of Section 10(b) and Rule 10b-5 of the
Securities Exchange Act of 1934, violation of Nevada state securities laws,
fraud and negligent misrepresentation in connection with the Company's
investment of $10 million in exchange for a 20% interest in Treasure Bay, and
the Company's guarantee of $4.5 million of Treasure Bay's indebtedness. The
defendants have filed answers to the complaint and discovery is continuing.


                                      17

<PAGE>

         On December 15, 1994, Francis L. Miller filed a lawsuit in the
Mississippi Circuit Court, Second Judicial District, against the Company and
SFHI, as well as Paul W. Lowden and Suzanne Lowden, alleging, among other
things, that the Company made certain misrepresentations which induced
Francis Miller to entrust the management of his investments in Treasure Bay's
two Mississippi casinos to the Company and SFHI and to sell the Company and
SFHI a 20% ownership interest in Treasure Bay. The lawsuit was subsequently
amended to remove Suzanne Lowden as a defendant. The Company and SFHI filed a
successful motion to transfer this case to the Court.

         The Court dismissed the Francis L. Miller lawsuit as originally
filed in Mississippi Circuit Court. The Court permitted Mr. Miller to file
the claims that he asserted in the dismissed action as counterclaims to the
lawsuit filed by the Company against Messrs. Miller, Rankin, Hendrix and
Burkholder on December 12, 1994 in the Court. Thus, the two lawsuits were
combined. The parties to the combined litigation have concluded most of the
formal discovery involved in this case. Each party has filed summary judgment
motions in the case asking that the other party's claims be dismissed and for
related relief. A hearing was conducted on October 18, 1999 on the summary
judgement motion.

         On December 7, 1999, the Court issued its Orders on the summary
judgment motions filed by the parties. The Court partially granted the
Company's motion for summary judgment to some of the claims disputed by
Miller in his cross-complain, but left some issues to be decided for trial.
The Court also denied Miller, et al's motion for summary judgment dismission
the Company's remaining claims, thereby ensuring that the matter will
eventually proceed to trial against the defendants, very likely sometime the
late Spring 2000. However, the Court granted one of the Miller defendants'
motions for summary judgment, in effect, precluding one of the claims made by
the Company from the raised at trial. The Company has filed a Motion for
Reconsideration of the ruling with the Court on the grounds that the Court
misinterpreted the law in granting the motion. It is anticipated the the
Court will issue a ruling on the Company's Motion for Reconsideration within
the next 2-3 months. A trial date will then be set to decide the remaining
claims asserted against the Defendants.

POULOS V. CAESAR'S WORLD, INC., ET AL. AND AHERN V. CAESAR'S WORLD, INC.,
ET AL.

         The Company is a defendant in a class action lawsuit originally
filed in the United States District Court of Florida, Orlando Division,
entitled POULOS V. CAESAR'S WORLD, INC., ET AL., AHERN V. CAESAR'S WORLD,
INC., ET AL. and SCHRIER V. CAESAR'S WORLD, INC., ET AL., along with a fourth
action against cruise ship gaming operators and which have been consolidated
in a single action now pending in the United States District Court, District
of Nevada (the "Court"). Also named as defendants in these actions are many
of the largest gaming companies in the United States and certain gaming
equipment manufacturers. Each complaint is identical in its material
allegations. The actions allege that the defendants have engaged in
fraudulent and misleading conduct by inducing people to play video poker
machines and electronic slot machines based on false beliefs concerning how
the machines operate and the extent to which there is actually an opportunity
to win on a given play. The complaints allege that the defendants' acts
constitute violations of the Racketeer Influenced and Corrupt Organizations
Act and also give rise to claims for common law fraud and unjust enrichment,
and seek compensatory, special consequential, incidental and punitive damages
of several billion dollars.

         In response to the complaints, all of the defendants, including the
Company, filed motions attacking the pleadings for failure to state a claim,
seeking to dismiss the complaints for lack of personal jurisdiction and
venue. As a result of those motions, the Court has required the Plaintiffs in
the four consolidated cases to file a single consolidated amended complaint.
Subsequent to Plaintiffs' filing of their consolidated amended complaint, the
defendants refiled numerous motions attacking the amended complaint upon many
of the bases as the prior motions. The Court heard the arguments on those
motions and ultimately denied the motions. Plaintiffs then filed their motion
to certify a class. Defendants have vigorously opposed the motion and the
Court has not yet ruled on the motion to certify the class. If the Court
denies the


                                      18

<PAGE>

status certification then the case cannot go forward as a class action. If
the Court certifies a class then the parties will proceed to meet discovery.

See Item 1. "Business Hotel-Casino Operations - Management and Personnel" for
a discussion of certain labor matters.

         In addition, the Company is subject to various lawsuits relating to
routine matters incidental to its business. The Company does not believe that
the outcome of such litigation, in the aggregate, will have a material
adverse effect on the Company.

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

         There were no matters submitted to a vote of the Company's security
holders during the fourth quarter of fiscal 1999.

                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDERS MATTERS

         The Company's Common Stock is traded on the Over the Counter
Bulletin Board (the "OTCBB") under the symbol "SGMG". Prior to April 1999,
the Company's Common Stock was listed on the American Stock Exchange (the
"AMEX").

         The closing sales price of the Common Stock on December 20, 1999, as
reported by the OTCBB was $0.6875 per share. The tables below set forth the
high and low closing sales prices by quarter for the fiscal years ended
September 30, 1999 and 1998 for the Common Stock, as reported by the OTCBB
for the third and fourth quarter of 1999 and by the AMEX for the first and
second quarter of 1999 and all of 1998.

<TABLE>
<CAPTION>


           FISCAL 1999    FIRST    SECOND      THIRD     FOURTH
       ------------------------------------------------------------
           <S>            <C>      <C>         <C>       <C>
           High           $0.94     $1.00      $1.23      $0.94
           Low            $0.31     $0.31      $0.25      $0.63


           FISCAL 1999    FIRST    SECOND      THIRD     FOURTH
       ------------------------------------------------------------
           High           $1.00     $2.75      $1.69      $1.31
           Low            $0.69     $0.69      $1.25      $0.56
</TABLE>

         The Company has never paid cash dividends on its Common Stock, nor
does it anticipate paying such dividends in the foreseeable future. There
were approximately 887 common stockholders of record as of December 20, 1999.

                                      19

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

         The table below sets forth a summary of selected financial data of
the Company for the years ended September 30 (dollars in thousands, except
per share amounts):

<TABLE>
<CAPTION>

                                        1999        1998        1997         1996        1995
                                      --------    --------    --------     --------    --------
<S>                                   <C>         <C>         <C>          <C>         <C>
Total Revenues, net(1)                $125,607    $112,849    $104,989     $148,432    $251,109

Net Income (Loss)
     Before Extraordinary Items,        $(17,775)   $(62,343)   $(13,713)    $  9,739    $(23,183)
     net of Taxes(2)
 Per Common Share                     $  (2.87)   $ (10.06)   $  (2.21)    $   1.57    $  (3.74)

Net Income (Loss)(2)                  $(19,908)   $(63,859)   $(13,133)    $ 16,160    $(23,363)
 Per Common Share                     $  (3.21)   $ (10.31)   $  (2.12)    $   2.61    $  (3.77)

Total Assets                          $178,025    $192,166    $216,296     $228,656    $366,638

Long-Term Debt
 less current portion(3)              $177,047    $213,147    $170,538     $167,687    $198,655

Redeemable
 Preferred Stock(4)                   $ 24,118    $ 21,986    $ 20,469     $ 18,953    $ 17,521
</TABLE>
--------------------------------------------------------------------------

(1)  Operating results for fiscal 1996 includes one month of operations of the
     Sahara Hotel and Casino; fiscal 1995 includes operations of both the Sahara
     Hotel and Casino and Hacienda Resort Hotel and Casino. Fiscal 1996
     includes a $40.8 million gain relating to the sale of substantially all of
     the assets of the Sahara Hotel and Casino in October 1995. Fiscal 1995
     includes an $8.9 million gain relating to the sale of substantially all the
     assets of Hacienda Hotel Inc. in August 1995.

(2)  Results for fiscal 1998 include a $44.0 million impairment loss to adjust
     to fair market value the carrying value of the Pioneer fixed and intangible
     assets. See Item 7. Management's Discussion and Analysis of Financial
     Condition and Results of Operations.

(3)  Long term debt for fiscal 1999 and 1998 includes $55.0 and $60.0 million,
     respectively, due with respect to the 13 1/2% Notes due on December 1, 1998
     and not paid. See Item 7. Management's Discussion and Analysis of Financial
     Condition and Results of Operations

(4)  The Company declared and issued paid in kind dividends on its Exchangeable,
     Redeemable 8% Preferred Stock during fiscal years 1996 and 1995. The
     Company did not declare dividends on its preferred stock in fiscal 1999,
     1998 and 1997. The accrued dividends of approximately $2.1 million for
     fiscal 1999 and $1.5 million for each of fiscal 1998 and 1997 have been
     recorded as an increase to the preferred stock account.


                                      20

<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

RESULTS OF OPERATIONS - FISCAL 1999 COMPARED TO FISCAL 1998

CONSOLIDATED

         NET OPERATING REVENUES. Consolidated net operating revenues for the
year ended September 30, 1999 were $125.6 million, a $12.8 million, or 11.3%,
increase from $112.8 million for the same period in fiscal 1998. Revenues
increased by $8.6 million at the Santa Fe and $4.1 million at the Pioneer.

         In fiscal 1999, 78.7% of the Company's net revenues was derived from
casino operations, 16.9% from food and beverage operations, 4.5% from hotel
operations and 10.2% from other operations such as bowling, ice skating and
retail outlets ("other revenues"), less promotional allowances of 10.3%. The
Company's business strategy emphasizes slot and video poker machine play. For
fiscal 1999, approximately 87.9% of gaming revenues was derived from slot and
video poker machines, while 8.0% of such revenues was from table games and 4.1%
was from other gaming activities such as the race and sports book, poker, bingo
and keno.

         OPERATING EXPENSES. Total operating expenses increased $9.0 million,
or 8.5%, to $114.0 million for the year ended September 30, 1999 from $105.0
million in the year ended September 30, 1998, excluding the reorganization
expenses of $2.4 million in fiscal 1999 and the impairment loss of $44.0
million in fiscal 1998 (see Pioneer discussion below). Total operating
expenses, excluding PHI and PFC reorganization expenses, as a percentage of
revenue decreased to 90.8% in the year ended September 30, 1999 from 93.1% in
the year ended September 30, 1998. Operating expenses increased by $9.5
million or 16.1% at the Santa Fe and, excluding reorganization expenses,
decreased by $1.1 million or 2.6% at the Pioneer. Operating expenses of SLVC
increased by $300,000, primarily due to the amortization of debt issue costs
associated with the issuance of an additional $22.5 million in principal
amount of SLVC Notes in November 1997.

         In September 1998, in accordance with Statement of Financial Accounting
Standards No. 121 Impairment of Long-Lived Assets ("SFAS 121"), the Company
determined that an impairment had occurred to the carrying value of its assets
at the Pioneer. In the quarter ended September 30, 1998, the Company recorded a
$44.0 million impairment loss to adjust to fair market value the carrying value
of the Pioneer fixed and intangible assets (see more detailed discussion below -
Pioneer).

         OPERATING INCOME. Consolidated operating income for the year ended
September 30, 1999 was $11.6 million, a $3.8 million, or 48.6%, increase from
$7.8 million for the same period in fiscal 1998, excluding the reorganization
expenses of $2.4 million in fiscal 1999 and the impairment loss of $44.0 million
in fiscal 1998 discussed above. Operating income decreased by $900,000 at the
Santa Fe and $300,000 at SLVC and increased by $5.2 million at the Pioneer.


                                      21

<PAGE>

         OTHER EXPENSE. Consolidated interest expense for the year ended
September 30, 1999 was $25.9 million, a $500,000 increase compared to $25.4
million for the same period in fiscal 1998. Interest expense of SLVC increased
by $300,000 in the 1999 period due to the issuance of the additional SLVC Notes
in November 1997. Interest expense increased by $700,000 at the Santa Fe due to
the issuance the 9 1/2% Notes and decreased by $300,000 at the Pioneer due to
the retirement of $5.0 million of 13 1/2% Notes in December 1998.

        During the quarters ended December 31, 1998 and September 30, 1999,
the Company reported charges to earnings of approximately $530,000 and
$510,000 associated with costs and expenses in connection with the exchange
offer portion of the Consent Solicitation and a proposed offering of debt
securities, neither of which was consummated. Additionally, in fiscal 1998,
the Company reported a charge to earnings of approximately $760,000
associated with costs and expenses of a proposed offering of debt securities
which was not consummated.

         NET LOSS. Consolidated net loss before income tax for the year ended
September 30, 1999 was $17.8 million, a $44.8 million improvement compared to a
net loss of $62.3 million in the prior year. The current year reflects the $2.4
million charge for reorganization expenses. The prior year period includes the
$44.0 million charge to recognize the impairment loss discussed above. Loss
before income tax increased by $1.3 million in the 1999 period at the Santa Fe
and $600,000 at SLVC. Excluding the $2.4 million and $44.0 million charges, net
loss improved by $4.4 million at the Pioneer.

         The Company did not record an income tax benefit in the current fiscal
year due to the uncertainty of the Company's ability to recognize the benefit of
the net operating loss. The preferred stock accrued dividend rate increased to
12.0% effective October 1, 1999 from 11.0% beginning on October 1, 1998 and
compared to an 8% dividend rate in the prior year. Consolidated net loss
applicable to common shares was $19.9 million, or $3.21 per common share, in the
1999 period compared to $63.9 million, or $10.31 per common share, in the prior
year period.

SANTA FE

         NET OPERATING REVENUES. Revenues at the Santa Fe increased $8.6
million, or 12.0%, to $80.1 million in fiscal 1999 from $71.5 million in fiscal
1998. Management believes that fiscal 1999 results were positively impacted by
the (i) completion of construction of two new pylon signs in September 1998,
(ii) installation of new gaming equipment in fiscal 1999 and 1998 and (iii) the
growth in the number of residents in northwest Las Vegas.

         Casino revenues increased $6.3 million, or 11.0%, to $63.4 million
in fiscal 1999 from $57.1 million in fiscal 1998. The increase in casino
revenues was due to growth in slot and video poker machine revenues of $5.1
million, or 10.2%, to $55.6 million in fiscal 1999 from $50.5 million in
fiscal 1998 due to an increase in coin-in volume of 12.1%. Other gaming
revenues, including table game revenues, increased $1.1 million, or 16.9%, to
$7.8 million in fiscal 1999 from $6.7 million in fiscal 1998 primarily due to
increased table game, sportsbook and bingo business. Casino promotional
allowances increased $600,000, or 9.4%, to $6.8 million in fiscal 1999 from
$6.2 million in fiscal 1998 due to the increase in customer volume.

                                     22

<PAGE>

         Hotel revenues decreased $100,000, or 4.7% to $3.2 million in fiscal
1999 from $3.3 million in fiscal 1998 due to a 2.5% decrease in average daily
room rate and a decrease in available room nights in fiscal 1999 due to room
renovations completed in September which caused a decrease in occupancy in
fiscal 1999. Food and beverage revenues increased $500,000, or 4.1%, to $12.8
million in fiscal 1999 from $12.3 million in fiscal 1998 due to an increase
in the number of customers. Other revenues increased $2.5 million, or 51.4%,
to $7.5 million in fiscal 1999 from $5.0 million in fiscal 1998 primarily due
to the opening in February 1999 of an additional retail outlet.

         OPERATING EXPENSES. Total operating expenses increased $9.5 million, or
16.1%, to $68.8 million in fiscal 1999 from $59.3 million in fiscal 1998. Total
operating expenses as a percentage of revenue increased to 85.9% in fiscal 1999
from 82.9% in fiscal 1998.

         Casino expenses increased $1.7 million, or 6.9%, to $27.7 million in
fiscal 1999 from $26.0 million in fiscal 1998 due to the increase in casino
revenues. However, casino expenses as a percentage of casino revenues decreased
to 43.8% in fiscal 1999 from 45.4% in fiscal 1998 due to the spreading of fixed
costs over a larger revenue base. Hotel expenses increased $100,000, or 9.3%, to
$1.2 million in fiscal 1999 from $1.1 million in fiscal 1998. Food and beverage
expenses increased $1.0 million, or 11.3%, to $9.7 million in fiscal 1999 from
$8.7 million in fiscal 1998. Food and beverage expenses as a percentage of food
and beverage revenues increased to 76.2% in fiscal 1999 from 71.3% in fiscal
1998, due to an increase in the cost of food sales for fiscal 1999 compared to
fiscal 1998, partially offset by a decrease in the cost of beverage sales. Other
expenses increased $3.0 million, or 139.4%, to $5.2 million in fiscal 1999 from
$2.2 million in fiscal 1998 primarily due to the costs associated with an
additional retail outlet which opened February 1999.

         Selling, general and administrative expenses increased $2.0 million,
or 22.8%, to $10.8 million in fiscal 1999 from $8.8 million in fiscal 1998
due to non-operating legal expenses of $900,000 incurred in connection with
proceedings involving the Company's investment in a minority owned business
and $600,000 increase in management fees under a management agreement
effective July 1999. Selling, general and administrative expenses as a
percentage of revenues increased to 13.5% in fiscal 1999 from 12.3% in fiscal
1998. Utilities and property expenses decreased $100,000, or 1.1%, to $6.4
million in fiscal 1999 from $6.5 million in fiscal 1998 due to decreased rent
expense for gaming equipment resulting from the purchase of equipment in
March 1998 previously under lease, offset by an increase in property
maintenance and utility expense. Utilities and property expenses as a
percentage of revenues decreased to 8.0% in fiscal 1999 from 9.1% in fiscal
1998. Depreciation and amortization expenses increased $1.7 million, or
28.3%, to $7.7 million in fiscal 1999 from $6.0 million in fiscal 1998 due to
the purchase of gaming and other equipment in March 1998 previously under
lease.

         OTHER EXPENSE. Interest expense increased $600,000, or 4.6%, to
$14.7 million in fiscal 1999 from $14.1 million in fiscal 1998 due to the
additional $14 million principal amount of 9 1/2% Notes issued, the proceeds
of which were used in March 1998 to purchase gaming and other equipment
previously under lease and for other capital improvements.

         During fiscal 1999 and 1998, the Company incurred charges to
earnings of approximately $510,000 and $760,000, respectively, associated
with proposed offerings of debt securities which were not consummated.

                                       23

<PAGE>

PIONEER

         In February 1999, PFC, a special purpose subsidiary of the Company
which issued the 13 1/2% Notes to finance the acquisition of the Pioneer in
November, 1988, filed for relief under Chapter 11 of the United States
Bankruptcy Code and has submitted for confirmation a plan of reorganization
that would permit the issuance of amended notes in satisfaction of the 13
1/2% Notes. See Item 3. Legal Proceedings above.

         NET OPERATING REVENUES. Revenues at the Pioneer increased $4.1 million,
or 10.1%, to $44.8 million in fiscal 1999 from $40.7 million in fiscal 1998.
Management believes that 1999 results were positively impacted by an improvement
in the current year in total gaming market revenues reported in Laughlin
compared to prior years.

         Casino revenues increased $1.2 million, or 3.5%, to $35.4 million in
fiscal 1999 from $34.2 million in fiscal 1998. The increase in casino revenues
was due to an increase of $1.3 million, or 4.3%, in slot and video poker
revenues to $31.2 million in fiscal 1999 from $29.9 million in fiscal 1998.
Other gaming revenue, including table games, decreased $100,000, or 2.2%, due to
decreased play in keno. Casino promotional allowances decreased $200,000, or
4.1%, to $6.2 million in fiscal 1999 from $6.4 million in fiscal 1998.

         Hotel revenues increased $100,000, or 3.2%, to $2.5 million in fiscal
1999 from $2.4 million in fiscal 1998 as a drop in occupancy rate to 69.3% from
76.9% was offset by a 12.6% increase in average daily room rate. The Pioneer has
sought to obtain a higher room rate rather than increased occupancy. Food and
beverage revenues decreased $300,000, or 4.2%, to $8.5 million in fiscal 1999
from $8.8 million in fiscal 1998 primarily due to a decrease in the amount of
complimentary food and beverage provided to customers. Other revenues increased
$2.9 million, or 176.7%, to $4.6 million in fiscal 1999 from $1.7 million in
fiscal 1998 due to the opening in August 1998 of an additional retail outlet.

         OPERATING EXPENSES. Excluding reorganization expenses of $2.4
million in fiscal 1999 and a charge of $44.0 million for loss on asset
impairment discussed below, operating expenses decreased $1.1 million, or
2.6% to $40.6 million in fiscal 1999 from $41.7 million in fiscal 1998, and
operating expenses as a percentage of revenue decreased to 90.6% in fiscal
1999 from 102.4% in fiscal 1998.

         Casino expenses decreased $700,000, or 3.5%, to $18.0 million, in
fiscal 1999 from $18.7 million in fiscal 1998 due to a decrease in complimentary
and marketing expenses. Casino expenses as a percentage of casino revenues
decreased to 50.8% in fiscal 1999 from 54.6% in fiscal 1998. Hotel expenses
increased $100,000, or 10.8%, to $900,000 in fiscal 1999, compared to $800,000
in fiscal 1998. Food and beverage expenses decreased $500,000, or 9.0%, to $4.8
million in fiscal 1999 from $5.3 million in fiscal 1998 due to the decrease in
food and beverage revenues and decreases in cost of sales. Food and beverage
expenses as a percentage of food and beverage revenues decreased to 56.6% in
fiscal 1999 from 59.5% in fiscal 1998. Other expenses increased $3.2 million, or
325.9% to $4.2 million for fiscal 1999 compared to $1.0 million for fiscal 1998
due to the cost associated with an additional retail outlet which opened in
August 1998. Other expenses as a percentage of other revenues increased to 92.5%
in the 1999 period from 60.1% in the 1998 period.


                                      24


<PAGE>

         Selling, general and administrative expenses decreased $100,000, or
1.5%, to $5.8 million in fiscal 1999 from $5.9 million in fiscal 1998.
Selling, general and administrative expenses as a percentage of revenues
decreased to 13.0% in fiscal 1999 from 14.5% in fiscal 1998. Utilities and
property expenses decreased $300,000, or 5.8%, to $4.1 million in fiscal 1999
compared to $4.4 million in fiscal 1998. Utilities and property expenses as a
percentage of revenues increased to 9.2% in fiscal 1999 from 10.8% in fiscal
1998. Depreciation and amortization expenses decreased $2.9 million or 52.4%
to $2.7 million in fiscal 1999 from $5.6 million in fiscal 1998 due to the
write-down of the carrying value of the Pioneer's fixed and intangible assets
in the fourth quarter of fiscal 1998, which was previously being depreciated
or amortized. During fiscal 1999, PHI incurred costs and expenses in
connection with the bankruptcy proceedings, resulting in a $2.4 million
charge for reorganization expenses.

         INTEREST EXPENSE. Interest expense decreased $200,000, or 3.1%, to $7.9
million in fiscal 1999 from $8.1 million in fiscal 1998 due to the payment of
approximately $5.0 million principal amount of 13 1/2% Notes in December 1998.

         OTHER EXPENSE. During the quarter ended December 31, 1998, PHI
incurred costs and expenses in connection with the Consent Solicitation,
which included an exchange offer, relating to the 13 1/2% Notes. The exchange
offer was not consummated, resulting in an approximate $530,000 charge to
earnings in fiscal 1999.

RESULTS OF OPERATIONS - FISCAL 1998 COMPARED TO FISCAL 1997

CONSOLIDATED

         NET OPERATING REVENUES. Consolidated net operating revenues for the
year ended September 30, 1998 were $112.8 million, a $7.8 million, or 7.5%,
increase from $105.0 million for the same period in fiscal 1997. Revenues
increased by $8.8 million at the Santa Fe and decreased by $100,000 at the
Pioneer. The prior period's revenues included a $700,000 gain on the sale of
real property.

         OPERATING EXPENSES. Total operating expenses, excluding the
impairment loss of $44.0 million (see below Pioneer discussion), increased
$5.1 million, or 5.1%, to $105.0 million for the year ended September 30,
1998 from $99.3 million in the year ended September 30, 1997. Total operating
expenses as a percentage of revenue decreased to 93.1% in the year ended
September 30, 1998 from 95.2% in the year ended September 30, 1997. Operating
expenses increased by $2.3 million or 4.0% at the Santa Fe and $900,000 or
2.2% at the Pioneer. Operating expenses of SLVC increased by $2.4 million,
primarily due to the amortization of debt issue costs associated with the
issuance of an additional $37.5 million in principal amount of SLVC Notes in
August and November 1997.

                                    25

<PAGE>

         In September 1998, in accordance with SFAS 121, the Company determined
that an impairment had occurred to the carrying value of its assets at the
Pioneer. In the quarter ended September 30, 1998, the Company recorded a $44.0
million impairment loss to adjust to fair market value the carrying value of the
Pioneer fixed and intangible assets (see more detailed discussion below -
Pioneer).

         OPERATING INCOME. Consolidated operating income, excluding the
impairment loss of $44.0 million discussed above, for the year ended September
30, 1998 was $7.8 million, a $2.7 million, or 54.3%, increase from $5.1 million
for the same period in fiscal 1997. Operating income increased by $6.6 million
at the Santa Fe and decreased by $1.0 million at the Pioneer and $2.2 million at
SLVC. The prior period included a $700,000 gain on sale of real property by the
Company.

         INTEREST EXPENSE. Consolidated interest expense for the year ended
September 30, 1998 was $25.4 million, a $2.8 million increase compared to $22.6
million for the same period in fiscal 1997. Interest expense of SLVC increased
by $2.1 million in the 1998 period due to the issuance of the additional SLVC
Notes in August and November 1997.

         OTHER EXPENSES. During fiscal 1998, the Company incurred costs and
expenses in connection with a proposed offering of debt securities. In
September 1998, the Company postponed proceeding with the proposed offering
and recorded a $760,000 charge to earnings for expenses of the proposed
offering.

         NET LOSS. Consolidated loss before income tax for the year ended
September 30, 1998 was $62.3 million, a $44.8 million increase compared to a net
loss of $17.5 million in the same period in the prior year. The current year
reflects the $44.0 million charge to recognize the impairment loss discussed
above. Loss before income tax decreased by $5.0 million in the 1998 period at
the Santa Fe and increased by $500,000 at the Pioneer (excluding the $44.0
million charge) and $4.3 million at SLVC. The prior period included a $700,000
gain on sale of real property by the Company.

         The Company did not record an income tax benefit in the current fiscal
year due to the uncertainty of the Company's ability to recognize the benefit of
the net operating loss. Consolidated net loss applicable to common shares was
$63.9 million, or $10.31 per common share, in the 1998 period compared to $13.1
million, or $2.12 per common share, in the prior year period.

SANTA FE

         NET OPERATING REVENUES. Revenues at the Santa Fe increased $8.8
million, or 14.1%, to $71.5 million in fiscal 1998 from $62.7 million in fiscal
1997. Management believes that fiscal 1998 results were positively impacted by
the (i) completion of construction, beginning in September 1997, on the highway
adjacent to the Santa Fe, (ii) installation of new gaming equipment in fiscal
1998 and 1997 and (iii) the growth in the number of residents in northwest Las
Vegas, which offset the competitive pressures resulting from expansions at
competing facilities during fiscal 1996.


                                      26

<PAGE>

         Casino revenues increased $8.7 million, or 18.1%, to $57.1 million
in fiscal 1998 from $48.4 million in fiscal 1997. The increase in casino
revenues was due to growth in slot and video poker machine revenues of $8.6
million, or 20.5%, to $50.5 million in fiscal 1998 from $41.9 million in
fiscal 1997 due to an increase in coin-in volume of 11.4%. Other gaming
revenues, including table game revenues, increased $200,000, or 2.5%, to $6.7
million in fiscal 1998 from $6.5 million in fiscal 1997 primarily due to
increased racebook and bingo business. Casino promotional allowances
increased $700,000, or 12.4%, to $6.2 million in fiscal 1998 from $5.5
million in fiscal 1997 due to the increase in customer volume.

         Hotel revenues were substantially unchanged at $3.3 million in fiscal
1998 and 1997 due to a 2.0% increase in average daily room rate in fiscal 1998,
offset by a decrease in occupancy rate to 83.1% from 84.6% in fiscal 1997.
Management believes that the decrease in occupancy rate was associated with the
room rate increase. Food and beverage revenues increased $500,000, or 4.3%, to
$12.3 million in fiscal 1998 from $11.8 million in fiscal 1997 due to an
increase in customer volume. Other revenues increased $200,000, or 3.9%, to $5.0
million in fiscal 1998 from $4.8 million in fiscal 1997 primarily due to an
increase in bowling revenue and interest income.

         OPERATING EXPENSES. Total operating expenses increased $2.3 million, or
4.0%, to $59.3 million in fiscal 1998 from $57.0 million in fiscal 1997. Total
operating expenses as a percentage of revenue decreased to 82.9% in fiscal 1998
from 90.9% in fiscal 1997.

         Casino expenses increased $2.5 million, or 10.3%, to $26.0 million in
fiscal 1998 from $23.5 million in fiscal 1997 due to the increase in casino
revenues. Casino expenses as a percentage of casino revenues decreased to 45.4%
in fiscal 1998 from 48.6% in fiscal 1997 due to the spreading of fixed costs
over a larger revenue base. Hotel expenses remained unchanged at $1.1 million
for fiscal 1998 and fiscal 1997. Food and beverage expenses decreased $400,000,
or 3.7%, to $8.7 million in fiscal 1998 from $9.1 million in fiscal 1997 despite
the increase in food and beverage revenues due to cost-of-sales control
measures. As a result, food and beverage expenses as a percentage of food and
beverage revenues decreased to 71.3% in fiscal 1998 from 77.2% in fiscal 1997.
Other expenses were substantially unchanged at $2.2 million in fiscal 1998
compared to $2.1 million in fiscal 1997. Other expenses as a percentage of other
revenues decreased to 43.4% in fiscal 1998 from 43.8% in fiscal 1997 due to a
decline in other revenues as discussed above.

         Selling, general and administrative expenses increased $700,000, or
8.6%, to $8.8 million in fiscal 1998 from $8.1 million in fiscal 1997 due to an
increase in advertising costs and data processing and security expenses.
Selling, general and administrative expenses as a percentage of revenues
decreased to 12.3% in fiscal 1998 from 12.9% in fiscal 1997. Utilities and
property expenses decreased $1.4 million, or 17.4%, to $6.5 million in fiscal
1998 from $7.9 million in fiscal 1997 due to decreased rent expense for gaming
equipment resulting from the purchase of equipment previously under lease.
Utilities and property expenses as a percentage of revenues decreased to 9.1% in
fiscal 1998 from 12.6% in fiscal 1997. Depreciation and amortization expenses
increased $800,000, or 14.5%, to $6.0 million in fiscal 1998 from $5.2 million
in fiscal 1997 due to the purchase of gaming and other equipment previously
under lease.


                                      27

<PAGE>

         INTEREST EXPENSE. Interest expense increased $800,000, or 6.0%, to
$14.1 million in fiscal 1998 from $13.3 million in fiscal 1997 due to the
additional $14 million principal amount of debt incurred to purchase gaming and
other equipment previously under lease and for other capital improvements.

PIONEER

         NET OPERATING REVENUES. Revenues at the Pioneer decreased $100,000, or
0.4%, to $40.7 million in fiscal 1998 from $40.8 million in fiscal 1997. The
decrease in revenues at the Pioneer in current years is believed to be primarily
due to the competitive gaming market environment in and around Laughlin,
including Indian gaming facilities opened in Arizona and Southern California,
and new casinos opened in Las Vegas.

         Casino revenues decreased $600,000, or 1.7%, to $34.2 million in
fiscal 1998 from $34.8 million in fiscal 1997. The decrease in casino
revenues was primarily due to a decline in other gaming revenues, including
table game revenues, which decreased $500,000, or 10.5%, to $4.3 million in
fiscal 1998 from $4.8 million in fiscal 1997. Slot revenues decreased
$100,000, or 0.3%, to $29.9 million in fiscal 1998 from $30.0 million in
fiscal 1997 due to a decrease in coin-in volume of 6.0%. Casino promotional
allowances decreased $500,000, or 6.9%, to $6.4 million in fiscal 1998 from
$6.9 million in fiscal 1997 due to the decrease in customer volume.

         Hotel revenues decreased $200,000, or 6.7%, to $2.4 million in
fiscal 1998 due to a 2.7% decrease in occupancy rate to 76.9% from 79.6% due
to the decline in visitor volume to Laughlin. The average daily room rate was
substantially unchanged. Food and beverage revenues decreased $200,000, or
2.1%, to $8.8 million in fiscal 1998 from $9.0 million in fiscal 1997 due to
the decrease in customer volume and an increase in incentive programs and
giveaways. Other revenues increased $300,000, or 20.9%, to $1.7 million in
fiscal 1998 from $1.4 million in fiscal 1997 due to the opening in August
1998 of a an additional retail outlet.

         OPERATING EXPENSES. Total operating expenses increased $44.9 million to
$85.7 million in fiscal 1998 from $40.7 million in fiscal 1997, primarily due to
a charge of $44.0 million for loss on asset impairment discussed below.
Operating expenses increased $900,000, or 2.2%, and operating expenses as a
percentage of revenue increased to 102.4% in fiscal 1998 from 99.8% in fiscal
1997.

         Casino expenses were substantially unchanged at $18.7 million in fiscal
1998 and 1997. Casino expenses as a percentage of casino revenues increased to
54.6% in fiscal 1998 from 53.6% in fiscal 1997. Hotel expenses increased
$100,000, or 19.4%, to $800,000 in fiscal 1998 from $700,000 in fiscal 1997,
primarily due to increases in labor wage rates and costs to upgrade the hotel
rooms. Hotel expenses as a percentage of hotel revenue increased to 33.5% in
fiscal 1998 from 26.2% in fiscal 1997. Food and beverage expenses increased
$100,000, or 1.7%, to $5.3 million in fiscal 1998 from $5.2 million in fiscal
1997, despite the decrease in food and beverage revenues, due to increases in
labor wage rates. As a result, food and beverage expenses as a percentage of
food and beverage revenues increased to 59.5% in fiscal 1998


                                      28

<PAGE>

from 57.3% in fiscal 1997. Other expenses increased $200,000, or 18.5%, to $1.0
million in fiscal 1998 from $800,000 in fiscal 1997 due to the cost of sales
associated with the retail shop discussed above. Other expenses as a percentage
of other revenues decreased to 60.1% in fiscal 1998 from 61.3% in fiscal 1997.

         Selling, general and administrative expenses increased $300,000, or
6.4%, to $5.9 million in fiscal 1998 from $5.6 million in fiscal 1997 due to
increased advertising costs and allocated corporate expenses. The Pioneer
altered its marketing strategy during fiscal 1998 to include television
advertising as part of its communication mix in order to reach the regional
market to encourage new visits. Selling, general and administrative expenses as
a percentage of revenues increased to 14.5% in fiscal 1998 from 13.6% in fiscal
1997. Utilities and property expenses were substantially unchanged at $4.4
million in fiscal 1998 compared to $4.3 million in fiscal 1997. Utilities and
property expenses as a percentage of revenues increased to 10.8% in fiscal 1998
from 10.5% in fiscal 1997. Depreciation and amortization expenses were
substantially unchanged at $5.6 million in fiscal 1998 and 1997.

         In September 1998, in accordance with SFAS 121, the Company
determined an impairment loss had occurred to the carrying value of the
assets of the Pioneer in Laughlin, Nevada. On August 28, 1998, the California
General Assembly, Senate and Governor approved legislation authorizing gaming
operations pursuant to a form of compact. Prior to this date, California
authorities considered gaming devices operated on Indian reservations to be
illegal. On November 3, 1998, California voters approved Proposition 5, which
expanded the definition of gaming operations considered legal by the form of
compact. Management's view of the Laughlin market indicated that the cash
flows associated with Pioneer operations would not be sufficient to recover
the carrying value of the Company's investment. Under the requirements of
SFAS 121, an impairment charge of $44.0 million was recognized in the fourth
quarter of fiscal 1998 to adjust to fair market value the carrying value of
the Pioneer's fixed and intangible assets. An adverse effect on the Company's
business and results of operation.

         INTEREST EXPENSE. Interest expense decreased $600,000, or 6.5%, to $8.1
million in fiscal 1998 from $8.7 million in fiscal 1997 due to the payment in
November 1997 of a $5.0 million note of a wholly-owned subsidiary of PHI.

LIQUIDITY AND CAPITAL RESOURCES; TRENDS AND FACTORS RELEVANT TO FUTURE
OPERATIONS

         LIQUIDITY. As of September 30, 1999, the Company held cash and cash
equivalents of $13.7 million compared to $22.7 million at September 30, 1998.
On November 16, 1999, SLVC sold real property in Henderson, Nevada resulting
in a gain of approximately $12.9 million which will be reported in the
quarter ending December 31, 1999. In connection with the sale, SLVC, the
Company, SFHI and members of the family of Paul W. Lowden, majority
stockholder of the Company, entered into non-compete agreements with
the Company and SFHI granted rights of first refusal with respect to the
Santa Fe Hotel assets and securities. The Company received total consideration
of $37.2 million.  Approximately $20.6 million in cash proceeds were used to
repay $14.5 million in SLVC Notes, together with $6.1 million of accrued
interest and fees. An additional $1.9 million in cash consideration was used
to pay outstanding

                                       29

<PAGE>

construction costs at the Henderson property and for working capital. The
balance of the consideration was a $14.75 million Promissory Note, payable
upon 60 days notice, which has been pledged to secure the SLUC Notes. On
December 27, 1999, the Company was reimbursed by the City of Henderson
approximately $1.5 million of permit fees paid in connection with the
development of the Henderson property.

         Earnings before interest, taxes, depreciation and amortization,
rents, corporate expenses, reorganization expenses and other non-recurring
charges ("EBITDA") increased $3.8 million, or 14.2%, to $30.9 million in the
year ended September 30, 1999 from $27.1 million in the year ended September
30, 1998. The Company incurred rent expense of $700,000 and $2.1 million in
the years ended September 30, 1999 and 1998, respectively. Other
non-recurring charges were $1.4 million and $0 for 1999 and 1998,
respectively and are comprised primarily of legal expenses incurred in
connection with proceedings involving the Company's former investment in a
minority owned business. The Company will incur less interest expense as a
result of the sale of real property and related agreements in November 1999
and the application of $14.5 million of the proceeds to reduce the
outstanding principal amount of SLVC Notes.

         EBITDA should not be construed as a substitute for operating income
or a better indicator of liquidity than cash flow from operating, investing
and financing activities, which are determined in accordance with generally
accepted accounting principles ("GAAP"), and it is included herein to provide
additional information with respect to the ability of the Company to meet its
future debt service, capital expenditure and working capital requirements.
Although EBITDA is not necessarily a measure of the Company's ability to fund
its cash needs, management believes that EBITDA is a useful tool for
measuring the ability of the Company to service its debt. The Company's
definition of EBITDA may not be the same as that of similarly captioned
measures used by other companies.

          Management believes that, based on operations for the year ended
September 30, 1999, the Company will have sufficient resources from
operations and the real property owned by SLVC on Las Vegas Boulevard South
to meet its operating and debt service requirements (excluding the 13 1/2%
Notes which are the subject of the PFC and PHI Bankruptcy proceedings)
through the twelve month period ending September 30, 2000, although no
assurance can be given to that effect.

         Excluding the 13 1/2% Notes, at September 30, 1999 and giving effect
to the subsequent extension of maturity of the SLVC Notes, the Company had
approximately $17.5 million in current maturities of long-term debt,
comprised primarily of $14.0 million of 9 1/2% Notes due December 2000 which
are in default. The Company had $122.1 million in long-term debt, net of
current maturities, debt discount and debt obligations owned but not retired
by the Company, as of September 30, 1999. Approximately $104.2 million
matures in December 2000, comprised of $99.4 million principal amount of 11%
Notes due December 2000, of which $33.1 million is held by SLVC, and a $4.8
million note due December 2000 (the "Sierra Note").  In December 1999, the
Company and SLVC amended the SLVC Notes, to among other things, extend the
maturity date to December 14, 2000.

         Although management has in the past and is currently exploring
refinancing or debt modification alternatives, as well as a possible
disposition of the Las Vegas Boulevard South property, in order to satisfy
the maturities of debt obligations in 2000, no assurance can be given that
the Company will be able to refinance or modify some or all of its
indebtedness or dispose of, or obtain financing with respect to the Las Vegas
Boulevard South property. Any such refinancing or modification would be
subject to the Company's future operations and the prevailing market
conditions at the time of such proposed transaction and may require the
approval of the Nevada Gaming Authorities for such financings or asset sales.
If the Company is ultimately unable to refinance or modify any such debt
prior to maturity, and/or obtain sufficient proceeds from disposition of the
Las Vegas Boulevard South property to repay such debt, events of default
would occur which would lead to cross-defaults in other material

                                    30
<PAGE>

agreements of the Company including, without limitation, agreements relating
to substantially all of the outstanding long-term debt of the Company and its
subsidiaries. In such event, it is likely the Company would file for relief
under Chapter 11 of the Bankruptcy Code.

         Debt agreements restrict the distribution of cash from certain of the
Company's subsidiaries to the Company. Cash flow from SFHI, PHI and SLVC is
not currently, and are not expected in the foreseeable future to be, available
for distribution to the Company. In addition, debt agreements limit additional
indebtedness of such subsidiaries. Therefore, the Company and its subsidiaries
other than SLVC, PHI and SFHI (collectively "Corporate") must rely on existing
cash and available resources, or cause subsidiaries to dispose of or refinance
assets, to provide liquidity to fund Corporate cash requirements, including
without limitations obligations that may arise as a result of the Company's
guarantee of subsidiary debt.

         CASH FLOW FROM OPERATING ACTIVITIES. The Company's cash provided by
operations was $5.4 million for the year ended September 30, 1999 as compared to
$300,000 for the prior year. The increase in cash provided by operations
was primarily due to improved cash flow from the Santa Fe and Pioneer, offset by
increased interest expense, PFC reorganization expenses and legal
expenses incurred in connection with proceedings involving the Company's
investment in a minority owned business.

         CASH USED IN INVESTING ACTIVITIES. Cash used in investing activities
was $5.7 million during the year ended September 1999, compared to $12.7
million during the year ended September 1998. In fiscal 1999, the Company
incurred $4.3 million of capital expenditures, comprised primarily of
improvements at the Santa Fe and the Pioneer and $1.4 million of development and
other costs related to the Henderson property. In fiscal 1998, the use of cash
represents the acquisition of gaming equipment previously under lease at the
Santa Fe and Pioneer, the acquisition of new pylon signs at the Santa Fe, and
development and other costs related to the Henderson property.

         CASH FLOW FROM FINANCING ACTIVITIES. Cash used in financing
activities was $8.6 million in the 1999 twelve month period compared to cash
provided by financing activities of $19.9 million during the same period in
1998. Cash used in financing activities in the current year period represents
primarily a principal payment to repurchase and retire $5.0 million principal
amount of the 13 1/2% Notes and repayment of a $1.6 million first mortgage
note secured by the approximate 21-acre parcel of undeveloped real property
adjacent to the Santa Fe. In fiscal 1998, the cash provided by financing
activities represented primarily the net proceeds resulting from the issuance
by SLVC of the additional $22.5 million principal amount of SLVC Notes and
the issuance by SFHI of $14 million principal amount of 9 1/2% Notes.
Additionally, in April 1998 the Company sold to a third party promissory
notes issued by SFHI with an aggregate principal amount of approximately $10
million for approximately $9 million in cash.

SFHI - At September 30, 1999, approximately $10.9 million of the Company's
current assets, including approximately $7.2 million of cash and short term
investments, was held by SFHI.


                                     31

<PAGE>

         Results of operations at the Santa Fe for the year ended September
30, 1999 generated EBITDA, as defined, of $22.1 million, compared to $20.6
million of EBITDA in 1998. SFHI's principal uses of cash from operations are
interest payments on indebtedness, capital expenditures to maintain the
facility, and charges for management services from Corporate. In the fiscal
1999 period, the Santa Fe incurred no rent expense compared to $1.2 million
in the fiscal 1998 period. In the fiscal 1999 period, the Santa Fe reported
approximately $1.7 million in charges for management services provided by
Corporate compared to $1.1 million in the fiscal 1998 period. In July 1999,
Santa Fe and the Company entered into a management agreement which provides
for an annual base management fee of $1.4 million and an incentive fee not to
exceed $1.5 million based on the Santa Fe achieving specified levels of
operating results. In fiscal 1999, SFHI incurred non-operating charges of
$1.4 million primarily in connection with legal proceedings involving SFHI's
former investment in a minority owned business. Interest expense in fiscal
2000 is expected to be approximately the same as in fiscal 1999. Capital
expenditures to maintain the facility in fiscal 2000 are expected to be
approximately the same as fiscal 1999.

         Management believes that, based on operations for the twelve month
period ended September 30, 1999, SFHI will have sufficient cash resources to
meet its operating and debt service requirements through the twelve month
period ending September 30, 2000 although no assurance can be given to that
effect.  However, SFHI's 9 1/2% Notes are in default, and the holders may
accelerate the debt at any time.  In addition to the 9 1/2% Notes. Assuming
no debt accidents, SFHI has $99.4 million in principal amount of 11% Notes
and $14.0 million principal amount of 9 1/2% Notes which mature in December
2000. SFHI is exploring alternatives for refinancing or modifying the 9 1/2%
Notes and 11% Notes. The Company has no arrangements for any refinancings or
modifications.

SLVC - At September 30, 1999, a minimal amount of cash and cash equivalents
was held by SLVC. In November 1999, SLVC sold real property in Henderson,
Nevada, and the Company, SLVC, SFHI and members of the family of Paul W.
Lowden, majority stockholder of the Company, entered into non-compete
agreements and the Company and SFHI granted rights of first refusal with
respect to the Santa Fe Hotel assets and securities. The total consideration
of $37.2 million was comprised of $22.5 million in cash and a promissory
note, payable on 60-days notice, in the principal amount of $14.75 million
(the "Promissory Note").  The Promissory Note has been pledged to secure the
SLVC Notes. Of the cash proceeds, SLVC used $20.6 million to pay $6.1 million
in accrued interest and fees on the SLVC Notes and to repay $14.5 million
principal amount of the SLVC Notes, reducing the outstanding principal amount
of SLVC Notes to $43 million. Additionally, SLVC used approximately $500,000
to pay development and construction obligations associated with the property.
The balance of the cash, approximately $1.4 million was retained for working
capital. SLVC has received payment of approximately $7.5 million of the
amount payable under the Promissory Note. Pursuant to the terms of the SLVC
Notes, as amended, (see below) SLVC has committed to use those proceeds to
purchase 13 1/2% Notes and expects to use the remaining cash to be received
under the Promissory Note to purchase affiliate debt and for working capital
purposes.

         In December 1999, SLVC and the Company amended the terms of the SLVC
Notes. As amended, the SLVC Notes bear interest at 12% per annum, payable on
June 20, 2000, and mature on December 14, 2000. SLVC has a mandatory $3
million redemption obligation on June 20, 2000. Under certain conditions,
SLVC is permitted to use the proceeds of the Promissory Note and to borrow an
additional $7.5 million, the proceeds of which may be used by SLVC to
purchase 13-1/2% Notes or to pay principal or interest on the SLVC Notes.

         SLVC's primary source of cash is interest income on $33.1 million
principal amount of 11% Notes and the $14.75 million Promissory Note. SLVC's
principal use of cash is to satisfy principal and interest obligations on the
SLVC Notes. SLVC

                                      32

<PAGE>

owns a 27-acre parcel of real estate on Las Vegas Boulevard South which is
subject to a lease with a water theme park operator. SLVC generates minimal
cash from the lease agreement after payment of property costs.

         Management believes that SLVC has available resources, consisting
primarily of interest payments or the 11% Notes and cash received on payment
of the Promissory Note, as well as the real property on Las Vegas Boulevard
South to meet the principal and interest obligations on the SLVC Notes and
other operating requirements through September 30, 2000, although no
assurance can be given to that effect. The SLVC Notes mature in December
2000. SLVC is exploring alternatives for repayment of the SLVC Notes at
maturity, including but not limited to the sale of the 27-acre parcel on Las
Vegas Boulevard South and refinancing or modification of the SLVC Notes. The
Company has no arrangements for any refinancings, modifications, dispositions
or other financings, the purpose of which would be to satisfy the principal
and interest obligations on the SLVC Notes, and no assurance can be given
that SLVC will successfully make such arrangements.

PHI - At September 30, 1999 approximately $7.8 million of the Company's
current assets, including approximately $6.2 million of cash and cash
equivalents, was held by PHI.

         Results of operations at the Pioneer for the year ended September
30, 1999 generated EBITDA, as defined, of $8.6 million, compared to $6.6
million of EBITDA in 1998. EBITDA margin increased to 19.3% in fiscal 1999
from 16.2% in fiscal 1998. PHI's principal uses of cash are for operating
lease payments, corporate expenses, interest payments on indebtedness,
reorganization expenses and capital expenditures to maintain the facility.
Pioneer incurred charges for management services from Corporate of $1.1
million in the years ended September 30, 1999 and 1998, respectively. In
December 1998, the Pioneer and the Company entered into a management
agreement which provides for a base fee through December 31, 1999 and
thereafter a base and and an incentive fee not to exceed $1.0 million per
year based on the Pioneer achieving specified levels of operating results.
Pioneer reported rent expense of approximately $700,000 in fiscal 1999
compared to $800,000 in fiscal 1998. Capital expenditures to maintain the
facility in fiscal 2000 are expected to be approximately the same as in
fiscal 1999.  See "Item 1 - Competition."

         Although results of operations of the Pioneer have not been
noticeably adversely impacted since PFC's February 1999 filing for relief
under Chapter 11 of the Bankruptcy Code, no assurance can be given that the
filing for relief under Chapter 11 by PFC, and by PHI, and potentially by the
Company and other subsidiaries of the Company, will not have a material
adverse affect on the operations and financial condition of the Pioneer.  See
"Item 3 - Legal Proceedings."

         Management believes that, based on operations for the period ended
September 30, 1999, PHI will have sufficient cash and available resources to
meet its operating requirements through the twelve months ending September 30,
2000, although no assurance can be given to that effect.


                                       33

<PAGE>

         PFC and PHI have filed for relief under Chapter 11 of the United
States Bankruptcy Code. See "Item 3. Legal Proceedings - Pioneer Bankruptcy"
for information regarding the bankruptcy cases.

         CORPORATE - Approximately $1.2 million of the Company's current
assets at September 30, 1999, including approximately $200,000 of cash and
cash equivalents, was held by Corporate. In November 1999, SLVC distributed
approximately $1.4 million to Corporate in connection with the sale of the
Henderson property. On December 27, 1999, the Company was reimbursed by the
City of Henderson approximately $1.5 million of permit fees paid in
connection with the development of the Henderson property.

         Corporate consists primarily of non-operating entities which do not
generate cash flow from operations. Corporate's principal uses of cash are
for debt service, administrative and professional expenses and costs
associated with the evaluation and development of proposed projects.
Additional potential uses of cash by Corporate include obligations that may
arise as a result of the Company's guarantee of subsidiary debt, and the
guarantee of the tenant loan if the Company terminates the lease subject to
the parcel on Las Vegas Boulevard South owned by SLVC. The guaranteed debt of
the Company's subsidiaries, PHI, SLVC and SFHI, include the 13 1/2% Notes
which are the subject of PFC's and PHI's bankruptcy proceedings and the
9 1/2% Notes, which are in default.

         Management believes that Corporate has sufficient working capital
and available resources to meet its operating requirements through the twelve
month period ending September 30, 2000, although no assurance can be given to
that effect.  Although management is exploring refinancing or debt
modification alternatives, as well as possible disposition of the Las Vegas
Boulevard South property, in order to satisfy the maturities of debt
obligations in 2000, no assurance can be given that the Company will be able
to refinance or modify some or all of its indebtedness, or dispose of the Las
Vegas Boulevard South property.

         The Company's preferred stock provides that dividends accrue on a
semi-annual basis, to the extent not declared. The Company is a party to
financing arrangements that restrict the Company's ability to exchange the
preferred stock to subordinated notes commencing in September 1998 and to
declare and pay dividends or make distributions with respect to the Company's
capital stock, which currently prohibit the payment of cash dividends on the
preferred stock. The Company has accrued the semi-annual preferred stock
dividends due in fiscal years 1999, 1998 and 1997. Because dividends in an
amount equal to dividend payments for one dividend period have accrued and
remain unpaid for two years, the preferred stockholders, voting as a separate
class, elected two directors at the annual meeting held in May 1999. In
October 1999, the dividend rate will increase to 12.0% and will increase by
50 basis points each semi-annual period thereafter, up to a maximum of 16%.
On December 23, 1999, John M. Bradham, one of two preferred stock directors
elected at the 1999 Annual Meeting, resigned as a director.

RELATED PARTIES

         In fiscal years 1993 and 1992, Hacienda Hotel Inc's., predecessor made
loans to LICO, a Nevada corporation wholly owned by Paul W. Lowden, which
provided entertainment services to the Hacienda Resort Hotel and Casino and the
Sahara Hotel and Casino, in the aggregate amount of $476,000. In January 1998,
the loans to LICO were satisfied through an offset against Mr. Lowden's bonus
for fiscal year 1998 in the amount of $800,000 (Fiscal Year 1998 Bonus") and a
fee in the amount of $100,000 due to Mr. Lowden for personal guarantees he
issued for certain Company financing arrangements (the "Personal Guarantee
Fee"). In December 1998, at the request of Mr. Lowden, the Company's payment of
$350,000 of the


                                     34

<PAGE>

Fiscal Year 1998 Bonus and the Personal Guarantee Fee which satisfied, in
part, the loan to LICO, was rescinded, and LICO's obligation to pay the
Company $350,000, together with interest thereon from January 1998, was
reinstated. The Company remained obligated to pay Mr. Lowden the additional
$350,000 of the fiscal year 1998 bonus. In February 1999, the Company offset
the $350,000 of the remaining payment to Mr. Lowden, payable in connection
with the 1998 Fiscal Year Bonus, against the remaining outstanding obligation
of LICO to the Company.

COMPUTERIZED OPERATIONS AND THE YEAR 2000

         INTRODUCTION. In an effort to adequately address and prepare for the
impact and to prevent potential disruption of business operations at the
Company's properties, the Company's Management Information Systems ("MIS")
department has been working to identify areas of risk related to the Company's
current technology's potential inability to process properly the change from the
year 1999 to 2000.

         STATE OF READINESS. Since 1997, the MIS department, which oversees
and has responsibility for the operation of the Company's technology systems,
has been charged with assessing, evaluating and monitoring the actions the
Company will need to take to become year 2000 compliant. The MIS department
has made an assessment of most of the information technology ("IT") and
non-IT systems of both the Santa Fe and the Pioneer. Examples of IT systems
include the hotel-reservation system, billing system, inventory and
purchasing system, property management system and point of sale system (cash
registers). Examples of non-IT systems include slot machines, video poker
machines, elevators to guest rooms and executive offices, the telephone
system, the in-room movie program and the bingo system. Generally, the
Company's non-IT systems appear to be Year 2000 compliant, i.e., they have
the ability to process properly the change from the year 1999 to 2000. Most
of the Company's IT systems required upgrading and/or replacing to become
Year 2000 compliant. The Company has upgraded and/or replaced such IT systems
by. The Company does not expect that the year 2000 issue will pose
significant operational problems for either the IT or non-IT assets.

         The Company from time to time exchanges electronic information with
suppliers and other third parties. As of the date of this report, the Company
does not have any information concerning the Year 2000 compliance of its
suppliers or other third parties, although the Company has distributed written
questionnaires to its significant suppliers to determine the extent to which the
Company's interface systems are vulnerable to such persons' failure to remediate
their own year 2000 issues. There can be no assurance that such suppliers or
third parties will not suffer a year 2000 business disruption. Such failures
could have a material adverse effect on the Company's financial condition and
results of operation.

         COSTS TO ADDRESS THE YEAR 2000 ISSUE. The Company estimates that it
will spend approximately $650,000 on system upgrades and/or replacements and has
incurred approximately $395,000 as of September 30, 1999. The Company believes
that such amount, as well as remaining costs to address the Year 2000 issue,
will not have a material effect on the


                                     35

<PAGE>

liquidity or financial condition of the Company. The Company intends to fund
from operations the costs of becoming year 2000 compliant.

         RISKS PRESENTED BY THE YEAR 2000 ISSUE. To date, the Company has not
identified any IT systems that present a material risk of not being year 2000
ready or for which a suitable alternative cannot be implemented. However, if
any suppliers or third parties who provide goods or services that are
critical to the Company's activities fail to address their year 2000 issues
appropriately, there could be a material adverse effect on the Company's
financial condition and results of operations.  The failure to be year 2000
compliant in a timely manner could have a material adverse effect on the
Company's financial condition and results of operations.

         CONTINGENCY PLANS. The Company has completed its assessment of the
risks from year 2000 failures and the Company has developed year 2000
specific contingency plans.

EFFECTS OF INFLATION

         The Company has been generally successful in recovering costs
associated with inflation through price adjustments in its hotels. Any such
increases in costs associated with casino operations and maintenance of
properties may not be completely recovered by the Company.

PRIVATE SECURITIES LITIGATION REFORM ACT

         Certain statements in this Annual Report on Form 10-K which are not
historical facts are forward looking statements, such as statements relating
to future operating results, existing and expected competition, financing and
refinancing sources and availability and plans for future development or
expansion activities and capital expenditures. Such forward looking
statements involve a number of risks and uncertainties that may significantly
affect the Company's liquidity and results in the future and, accordingly,
actual results may differ materially from those expressed in any forward
looking statements. Such risks and uncertainties include, but are not limited
to, those related to effects of bankruptcy, competition, leverage and debt
service, financing and refinancing efforts, general economic conditions,
changes in gaming laws or regulations (including the legalization of gaming
in various jurisdictions) and risks related to development and construction
activities.

RECENTLY ISSUED ACCOUNTING STANDARDS

         The Financial Accounting Standards Board ("FASB") issued SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information" ("SFAS
131"), which is effective for fiscal years beginning after December 15, 1997.
This statement redefines how operating segments are determined and requires
qualitative disclosure of certain financial and descriptive information about a
company's operating segments. The Company adopted SFAS No. 131 in the year
ending September 30, 1999.

         The FASB recently issued SFAS No. 133 ("SFAS 133"), Accounting for
Derivative Instruments and Hedging Activities, which is effective for financial
statements for all fiscal quarters of all fiscal years beginning after June 15,
2000. SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments


                                    36

<PAGE>

embedded in other contracts and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
Management has determined that the effect, if any, of the adoption of SFAS
133 on the Company's future operations or financial condition will be
immaterial.

         The American Institute of Certified Public Accountants' Accounting
Standards Executive Committee issued Statement of Position ("SOP") 98-5
"Reporting on the Costs of Start-up Activities." This standard provides guidance
on the financial reporting for start-up costs and organization costs. This
standard requires costs of start-up activities and organization costs to be
expensed as incurred. This standard is effective for fiscal years beginning
after December 15, 1998. Management has determined that the effect, if any, of
the adoption of this SOP on the Company's future operations or financial
condition will be immaterial.

ITEM 7A.  MARKET RISK DISCLOSURE

         The Company has debt instruments with interest rates which fluctuate
based on certain indexes. The Company believes that the market risk arising
from these financial instruments is not material.

                                       37
<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                      INDEX
                      TO CONSOLIDATED FINANCIAL STATEMENTS
                        AND FINANCIAL STATEMENT SCHEDULES

              FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                                             PAGE
<S>                                                                           <C>
Independent Auditors' Report................................................  39

   Consolidated Balance Sheets as of
      September 30, 1999 and 1998...........................................  40

   Consolidated Statements of Operations for the Years Ended
      September 30, 1999, 1998 and 1997.....................................  41

   Consolidated Statements of Stockholders' Equity (Deficiency) for the
      Years Ended September 30, 1999, 1998 and 1997.........................  42

   Consolidated Statements of Cash Flows for the Years
      Ended September 30, 1999, 1998 and 1997...............................  43

Notes to Consolidated Financial Statements..................................  44
</TABLE>

Financial Statement Schedules are omitted because of the absence of conditions
under which they are required or because the information is included in the
financial statements or the notes thereto.


                                      38

<PAGE>


INDEPENDENT AUDITORS' REPORT

To the Stockholders of Santa Fe Gaming Corporation:

         We have audited the accompanying consolidated balance sheets of Santa
Fe Gaming Corporation and subsidiaries (the "Company") as of September 30, 1999
and 1998, and the related consolidated statements of operations, stockholders'
equity (deficiency), and cash flows for each of the three years in the period
ended September 30, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

         We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

         In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Santa Fe Gaming Corporation
and subsidiaries as of September 30, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1999 in conformity with generally accepted accounting principles.

         The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Notes 11
and 21 to the financial statements, the Company did not pay the $60 million
principal amount of 13 1/2% First Mortgage Notes ("13 1/2% Notes") of Pioneer
Finance Corp., ("PFC") which were due December 1, 1998 which debt is secured
by Pioneer Hotel Inc. ("PHI") and guaranteed by Santa Fe Gaming. The
Company's inability to meet the repayment terms of the 13 1/2% Notes, its net
losses and its stockholders' deficiency raise substantial doubt about its
ability to continue as a going concern. Management's plans regarding these
matters include seeking confirmation of a plan of reorganization under
Chapter 11 of the United States Bankruptcy Code and exploring refinancing
alternatives for substantially all of the debt. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.

DELOITTE & TOUCHE LLP
Las Vegas, Nevada
December 3, 1999

                                      39

<PAGE>

                  SANTA FE GAMING CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           SEPTEMBER 30, 1999 AND 1998

<TABLE>
<CAPTION>

ASSETS                                                                           1999                1998
------                                                                      -------------       -------------
<S>                                                                         <C>                  <C>
Current assets:
 Cash and cash equivalents                                                  $  13,710,226        $ 22,650,882
 Accounts receivable, net                                                       1,097,626           1,617,762
 Inventories                                                                    1,185,514           1,339,796
 Prepaid expenses & other                                                       4,049,669           3,243,415
                                                                            --------------      --------------
                                                                               20,043,035          28,851,855
 Assets held for sale                                                          25,856,829                   0
                                                                            --------------      --------------
Total current assets                                                           45,899,864          28,851,855

Property and equipment:
 Land held for development                                                     23,109,400          38,194,065
 Land used in operations                                                       29,343,886          29,343,886
 Buildings and improvements                                                    88,696,845          90,665,531
 Machinery and equipment                                                       45,237,874          39,219,898
 Accumulated depreciation                                                     (57,305,636)        (48,574,230)
                                                                            --------------      --------------
Property and equipment, net                                                   129,082,369         148,849,150

Other assets                                                                    3,042,463          14,465,409
                                                                            --------------      --------------
Total assets                                                                $ 178,024,696       $ 192,166,414
                                                                            ==============      ==============

LIABILITIES and STOCKHOLDERS' DEFICIENCY
----------------------------------------

Current liabilities:
 Accounts payable                                                            $  4,815,886        $  3,864,000
 Interest payable                                                               2,613,709           4,497,420
 Accrued and other liabilities                                                  7,020,748           7,656,644
                                                                            --------------      --------------
                                                                               14,450,343          16,018,064
Debt due upon sale of assets                                                   19,482,336                   0
Current portion of long-term debt                                              17,466,041           1,785,716
                                                                            --------------      --------------
Total current liabilities                                                      51,398,720          17,803,780

Long-term debt - less current portion                                         122,074,897         153,146,836

Liabilities subject to compromise                                              63,810,662          62,700,000

Stockholders' deficiency
 Common stock, $.01 par value: authorized-100,000,000
  shares; issued and outstanding-6,195,356 shares                                  61,954              61,954
 Preferred stock, exchangeable, redeemable 11% cumulative
  stated at $2.14 liquidation value, authorized-10,000,000
  shares; issued and outstanding-8,856,651 shares                              24,117,989          21,985,750
 Additional paid-in capital                                                    51,513,504          51,513,504
 Accumulated deficit                                                         (134,865,256)       (114,957,636)
                                                                            --------------      --------------
    Total                                                                     (59,171,809)        (41,396,428)

 Less treasury stock - 4,875 shares, at cost                                      (87,774)            (87,774)
                                                                            --------------      --------------
Total stockholders' deficiency                                                (59,259,583)        (41,484,202)
                                                                            --------------      --------------
Total liabilities and stockholders' deficiency                              $ 178,024,696       $ 192,166,414
                                                                            ==============      ==============
</TABLE>


See the accompanying Notes to Consolidated Financial Statements.

                                    40

<PAGE>

                  SANTA FE GAMING CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997


<TABLE>
<CAPTION>
                                                                 1999            1998            1997
                                                             -------------  --------------  --------------
<S>                                                          <C>            <C>             <C>
Revenues:
  Casino                                                     $ 98,848,676    $ 91,383,488    $ 83,217,092
  Hotel                                                         5,617,979       5,699,479       5,817,273
  Food and beverage                                            21,231,687      21,102,213      20,785,262
  Other                                                        12,849,675       7,286,665       6,864,737
  Gain on sale of assets                                                0               0         725,179
                                                             ------------   -------------   -------------

Gross revenues                                                138,548,017     125,471,845     117,409,543

  Less casino promotional allowances                          (12,940,850)    (12,622,591)    (12,420,872)
                                                             ------------   -------------   -------------

Net operating revenues                                        125,607,167     112,849,254     104,988,671
                                                             ------------   -------------   -------------

Operating expenses:
  Casino                                                       45,771,280      44,635,725      42,196,846
  Hotel                                                         2,079,342       1,890,842       1,756,065
  Food and beverage                                            14,519,502      14,002,750      14,250,879
  Other                                                         9,407,823       3,161,547       2,938,658
  Selling, general and administrative                          13,977,087      12,561,344      11,820,409
  Corporate expenses                                            3,530,244       3,443,950       2,935,848
  Utilities and property expenses                              11,041,359      11,616,199      12,868,831
  Depreciation and amortization                                13,672,321      13,723,996      11,157,480
  Reorganization expenses                                       2,431,807               0               0
  Loss on asset impairment                                              0      44,025,709               0
                                                             ------------   -------------   -------------

Total operating expenses                                      116,430,765     149,062,062      99,925,016
                                                             ------------   -------------   -------------

Operating income (loss)                                         9,176,402     (36,212,808)      5,063,655

Interest expense                                               25,907,514      25,371,590      22,607,548
Other expenses                                                  1,044,269         758,241               0
                                                             ------------   -------------   -------------
Loss before tax benefit and extraordinary item                (17,775,381)    (62,342,639)    (17,543,893)

Federal income tax benefit                                              0               0      (3,830,601)
                                                             ------------   -------------   -------------

Loss before extraordinary item                                (17,775,381)    (62,342,639)    (13,713,292)

Extraordinary item-gain on early extinguishment
 of debt, net of tax provision of $1,129,000 in 1997                    0               0       2,096,238
                                                             ------------   -------------   -------------

Net loss                                                      (17,775,381)    (62,342,639)    (11,617,054)

Dividends accrued on preferred shares                           2,132,239       1,516,258       1,516,259
                                                             ------------   -------------   -------------

Net loss applicable to common shares                         $(19,907,620)  $ (63,858,897)  $ (13,133,313)
                                                             ============   =============   =============

Average common shares outstanding                               6,195,356       6,195,356       6,195,356
                                                             ============   =============   =============
Extraordinary item, net of tax
 provision per common share                                  $          0   $           0   $        0.34
                                                             ============   =============   =============

Loss per common share                                         $     (3.21)  $      (10.31)  $       (2.12)
                                                             ============   =============   =============
</TABLE>

See the accompanying Notes to Consolidated Financial Statements.


                                       41

<PAGE>

                  SANTA FE GAMING CORPORATION AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
              FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                        Common     Preferred         Additional       Accumulated       Treasury
                                        Stock        Stock        Paid-in Capital       Deficit          Stock         Total
                                      ---------   ------------    ---------------    --------------    ----------  ------------
<S>                                   <C>         <C>             <C>                <C>               <C>         <C>
Balances, October 1, 1996             $  61,954   $ 18,953,233     $ 51,513,504      $ (37,965,426)    $ (87,774)  $ 32,475,491

Net loss                                                                               (11,617,054)                 (11,617,054)
Preferred stock dividends accrued                    1,516,259                          (1,516,259)                           0
                                      ---------   ------------     ------------      -------------     ---------   ------------

Balances, September 30, 1997             61,954     20,469,492       51,513,504        (51,098,739)      (87,774)    20,858,437

Net loss                                                                               (62,342,639)                 (62,342,639)
Preferred stock dividends accrued                    1,516,258                          (1,516,258)                           0
                                      ---------   ------------     ------------      -------------     ---------   ------------

Balances, September 30, 1998             61,954     21,985,750       51,513,504       (114,957,636)      (87,774)   (41,484,202)

Net loss                                                                               (17,775,381)                 (17,775,381)
Preferred stock dividends accrued                    2,132,239                          (2,132,239)                           0
                                      ---------   ------------     ------------      -------------     ---------   ------------

Balances, September 30, 1999          $  61,954   $ 24,117,989     $ 51,513,504      $(134,865,256)    $ (87,774)  $(59,259,583)
                                      =========   ============     ============      =============     =========   ============
</TABLE>


See the accompanying Notes to Consolidated Financial Statements.


                                       42

<PAGE>

                 SANTA FE GAMING CORPORATION AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
             FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                                            1999               1998               1997
                                                                       --------------      -------------     --------------
<S>                                                                    <C>                 <C>               <C>
Cash flows from operating activities:
Net loss                                                               $ (17,775,381)      $(62,342,639)     $ (11,617,054)
Adjustments to reconcile net loss to
 net cash provided by (used in) operating activities
   Depreciation and amortization                                          13,672,321         13,723,996         11,157,480
   Gain on sale of assets                                                          0                  0           (725,179)
   Gain on early extinguishment of debt, net                                       0                  0         (2,096,238)
   Loss on impairment of assets                                                    0         44,025,709                  0
   Debt discount amortization                                              1,291,008          1,532,759          1,703,368
   Reorganization expenses incurred in connection with
     Chapter 11 and related legal proceedings                              2,431,807                  0                  0
Change in assets and liabilities
   Accounts receivable, net                                                  520,136           (706,895)           618,856
   Accounts receivable, officer                                                    0                  0            636,113
   Inventories                                                               154,282            (91,597)           (30,079)
   Prepaid expenses & other                                                 (806,252)           303,397            231,702
   Deferred income taxes                                                           0                  0         (3,830,601)
   Other assets                                                           (1,546,096)         2,778,522         (1,105,769)
   Accounts payable                                                        1,262,684           (888,041)          (640,102)
   Interest payable                                                        7,351,167            584,670           (529,475)
   Accrued and other liabilities                                           1,249,833          1,372,066         (2,115,775)
                                                                       -------------       ------------      -------------
Net cash provided by (used in) operating activities
   before reorganization items                                             7,805,509            291,947         (8,342,753)
Reorganization expenses incurred in connection with
   Chapter 11 and related legal proceedings                               (2,431,807)                 0                  0
                                                                       -------------       ------------      -------------

Net cash provided by (used in) operating activities                        5,373,702            291,947         (8,342,753)
                                                                       -------------       ------------      -------------

Cash flows from investing activities:
   Proceeds of sale of land held for development                                   0                  0          3,150,000
   Capital expenditures                                                   (4,303,088)        (5,700,499)        (1,566,035)
   Development costs                                                      (1,438,677)        (6,958,828)          (202,919)
                                                                       -------------       ------------      -------------

Net cash provided by (used in) investing activities                       (5,741,765)       (12,659,327)         1,381,046
                                                                       -------------       ------------      -------------

Cash flows from financing activities:
   Cash proceeds of long-term debt                                                 0         81,439,996         21,675,658
   Cash paid on long-term debt                                            (8,217,252)       (58,065,611)       (15,709,115)
   Debt issue cost                                                          (355,341)        (3,502,340)        (1,356,443)
                                                                       -------------       ------------      -------------

Net cash provided by (used in) financing activities                       (8,572,593)        19,872,045          4,610,100
                                                                       -------------       ------------      -------------

Increase (decrease) in cash and cash equivalents                          (8,940,656)         7,504,665         (2,351,607)

Cash and cash equivalents, beginning of year                              22,650,882         15,146,217         17,497,824
                                                                       -------------       ------------      -------------

Cash and cash equivalents, end of year                                 $  13,710,226       $ 22,650,882      $  15,146,217
                                                                       =============       ============      =============
</TABLE>

See the accompanying Notes to Consolidated Financial Statements.


                                      43

<PAGE>

                  SANTA FE GAMING CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997

1.  BASIS OF PRESENTATION AND GENERAL INFORMATION

         Santa Fe Gaming Corporation, formerly known as Sahara Gaming
Corporation, (the "Company" or "Santa Fe Gaming"), a publicly traded Nevada
corporation, is the successor corporation of two affiliates, Sahara Resorts
("SR") and Sahara Casino Partners, L.P., which combined in a business
combination in September, 1993. The Company's primary business operations are
conducted through two wholly owned subsidiary corporations, Santa Fe Hotel Inc.
("SFHI") and Pioneer Hotel Inc. ("PHI") (the "Operating Companies"). SFHI owns
and operates the Santa Fe Hotel and Casino (the "Santa Fe"), located in Las
Vegas, Nevada, and PHI owns and operates the Pioneer Hotel & Gambling Hall (the
"Pioneer") in Laughlin, Nevada. The Company owns, through SFHI, real estate
adjacent to the Santa Fe, and through an indirect wholly-owned subsidiary of the
Company, Sahara Las Vegas Corp. ("SLVC"), on Las Vegas Boulevard South (the
"Strip").

         In November 1999, SLVC sold real property located in Henderson,
Nevada to Station Casinos, Inc. In connection with the sale, the Company,
SLVC, SFHI and members of the family of Paul W. Lowden, majority stockholder
of the Company entered into non-compete agreements, in which they agreed not
to compete through November 15, 2014 within a five-mile radius of two of the
buyer's casinos located in the Henderson area. Additionally, the Company and
SFHI entered into a Right of First Refusal Agreement with the buyer, pursuant
to which SFHI granted the buyer a 15-year right of first refusal, subject to
certain exceptions, to purchase either capital stock or debt or other
securities convertible into capital stock of SFHI or SFHI assets in the event
SFHI sells a substantial portion of its assets. The Company granted the buyer
a 15-year right of first refusal to buy any outstanding SFHI capital stock
that the Company or its affiliates propose to sell.

         The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown in the
financial statements, Liabilities subject to compromise are $63.8 million,
which is attributable to principal and accrued interest on the 13 1/2% Notes
which matured December 1, 1998 and were not paid. PFC and PHI filed for
relief under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy
Code") in February and April 1999, respectively. (See Notes 11 and 21) In
addition, SFHI is in default under the 9 1/2% Notes issued by SFHI and
guaranteed by the Company (the "9 1/2% Notes") which mature in December 2000
due as a result of the failure to pay the 13 1/2% Notes. (See Note 10). The
Company has also guaranteed substantially all the other debt of its
subsidiaries SLVC and SFHI. Furthermore, at September 30, 1999, current
liabilities exceed current assets by approximately $5.5 million and there is
a stockholders' deficiency of $59.2 million. The Company's inability to meet
the repayment terms of the 13 1/2% Notes, its net losses and its
stockholders' deficiency raise substantial doubt about its ability to
continue as a going concern.

         Management's plans regarding these matters are also described in
Notes 10 and 21, including seeking confirmation of a joint plan of
Reorganization under the Bankruptcy Code and exploring refinancing
alternatives for substantially all of its debt. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.

                                      44

<PAGE>

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

         The accompanying consolidated financial statements include the accounts
of Santa Fe Gaming and its wholly owned subsidiaries. Amounts representing the
Company's investment in less than majority-owned companies in which a
significant equity ownership interest is held are accounted for on the equity
method. All material inter-company accounts and transactions have been
eliminated in consolidation.

Cash and Cash Equivalents

         Investments which mature within 90 days from the date of purchase are
treated as cash equivalents. These investments are stated at cost which
approximates their market value.

Inventories

         Food, beverage, gift shop and other inventories are stated at first-in,
first-out cost, not in excess of market.

Property and Equipment

         Property and equipment are stated at cost less accumulated
depreciation. Costs of maintenance and repairs of property and equipment are
expensed as incurred. Costs of major improvements are capitalized and
depreciated pursuant to the standard described below. Gains or losses on the
disposal of property and equipment are recognized in the year of sale. In
sale/leaseback transactions of property and equipment, gains are deferred and
recognized over the lease term and losses are recognized in the year of sale.

         The Company periodically assesses the recoverability of property, plant
and equipment and evaluates such assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Asset impairment is determined to exist if estimated future cash
flows, undiscounted and without interest charges, are less than the carrying
amount in accordance with Statement of Financial Accounting Standards ("SFAS")
No. 121, Impairment of Long-Lived Assets ("SFAS 121").

         Depreciation and amortization are computed by the straight-line method
over the shorter of the estimated useful lives or lease terms. The length of
depreciation and amortization periods are for buildings and improvements 7 to 40
years and for machinery and equipment 3 to 15 years.

Goodwill

         The excess cost over the net assets of an acquired company is amortized
using the straight line method over a 40 year period. Management periodically
evaluates the realizability of goodwill and evaluates such asset for impairment
whenever events or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable. Asset impairment is determined to exist if
estimated future cash flows, undiscounted and without interest charges, are less
than the carrying amount in accordance with SFAS 121.


                                      45

<PAGE>

         In September 1998, in accordance with SFAS 121, the Company
determined that an impairment had occurred to the carrying value of its
assets at the Pioneer. In the quarter ended September 30, 1998, the Company
recorded a $44.0 million impairment loss to adjust to fair market value the
carrying value of the Pioneer fixed and intangible assets.

Pre-Opening Expenses and Capitalized Interest

         All pre-opening expenses directly related to development of gaming
operations are capitalized as incurred and included in other assets and
expensed within the first year of operations. Interest costs are capitalized
on funds disbursed during the development phase of projects and expensed
pursuant to depreciation and amortization methods over the asset's estimated
useful life. Beginning in fiscal 2000, the Company will be required to
expense development costs as incurred.

Federal Income Taxes

         Deferred income taxes are provided on temporary differences between
pretax financial statement income and taxable income resulting primarily from
different methods of depreciation and amortization. The Company accounts for
Income Taxes in accordance with SFAS No. 109, Accounting for income taxes
("SFAS 109").

Revenue Recognition

         Casino revenue is recorded as gaming wins less losses. Revenues
include the retail amount of room, food, beverage and other services provided
gratuitously to customers. Such amounts are then deducted as promotional
allowances. The estimated cost of providing these promotional services has
been reported in the accompanying consolidated financial statements as an
expense of each department granting complimentary services. The table below
summarizes the departments' costs of such services (dollars in thousands):

<TABLE>
<CAPTION>
                            1999                1998                1997
                        ------------        ------------        ------------
<S>                     <C>                 <C>                 <C>
Food and Beverage       $    11,691         $    11,357         $    11,051
Hotel                           885                 931                 972
Other                           498                 162                 181
                        ------------        ------------        ------------
   Total                $    13,074         $    12,450         $    12,204
                        ============        ============        ============
</TABLE>

Indirect Expenses

         Certain indirect expenses of operating departments such as utilities
and property expense and depreciation and amortization are shown separately
in the accompanying consolidated statements of operations.

Earnings Per Share

         The Company presents its per share results in accordance with SFAS
No. 128 "Earnings per Share" ("SFAS 128"). SFAS 128 requires the presentation
of basic net income (loss) per share and diluted net income (loss) per share.
Basic per share amounts are computed by dividing net income (loss) by average
shares outstanding during the period. Diluted per share amounts are computed
by dividing net income (loss) by average shares outstanding plus the dilutive
net income (loss) by average shares outstanding plus the dilutive effect of
common


                                     46

<PAGE>

share equivalents. The effect of options outstanding was not included in
diluted calculations during the years ended September 30, 1999, 1998 and 1997
since the Company incurred a net loss.

Estimates and Assumptions

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Significant estimates used by the Company include estimated
useful lives for depreciable and amortizable assets, certain other estimated
liabilities and valuation reserves and estimated cash flows in assessing the
recoverability of long-lived assets. Actual results may differ from estimates.

Bankruptcy - Related Accounting

         The Company has accounted for all transactions related to the PFC and
PHI Chapter 11 case in accordance with Statement of Position 90-7 ("SOP 90-7"),
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code,"
which was issued by the American Institute of Certified Public Accountants in
November 1990. Accordingly, Liabilities subject to compromise under the Chapter
11 case have been segregated on the Consolidated Balance Sheet and are recorded
for the amounts that are expected to be allowed under the Amended Plan. (see
Note 21(c) ) In addition, the Consolidated Statements of Operations and
Consolidated Statements of Cash Flows for the period ended September 30, 1999
disclose expenses related to the Chapter 11 case and litigation relating to
enforcement of the Company's guarantees of the 13 1/2% Notes under
"Reorganization Expenses".

Reclassification

         Certain reclassifications have been made in the 1998 consolidated
financial statements in order to conform to the presentation used in 1999.

Recently Issued Accounting Standards

         The Financial Accounting Standards Board ("FASB") issued SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information" ("SFAS
131"), which is effective for fiscal years beginning after December 15, 1997.
This statement redefines how operating segments are determined and requires
qualitative disclosure of certain financial and descriptive information about a
company's operating segments. The Company adopted SFAS No. 131 in the year
ending September 30, 1999. See Note 25

         The FASB recently issued SFAS No. 133 ("SFAS 133"), Accounting for
Derivative Instruments and Hedging Activities, which is effective for financial
statements for all fiscal quarters of all fiscal years beginning after June 15,
2000. SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Management has determined
that the effect, if any, of the adoption of SFAS 133 on the Company's
future operations or financial condition will be immaterial.


                                      47
<PAGE>

         The American Institute of Certified Public Accountants' Accounting
Standards Executive Committee issued Statement of Position ("SOP") 98-5
"Reporting on the Costs of Start-up Activities." This standard provides
guidance on the financial reporting for start-up costs and organization
costs. This standard requires costs of start-up activities and organization
costs to be expensed as incurred. This standard is effective for fiscal years
beginning after December 15, 1998. Management has determined that the effect,
if any, of the adoption of this SOP on the Company's future operations or
financial condition will be immaterial.

Fair Value of Financial Instruments

         The Company estimates the fair value of its long term debt and
preferred stock to be $195.6 million and $4.6 million, respectively, at
September 30, 1999 based upon available market prices. The Company estimates
that all other financial instruments have a fair value which approximates
their recorded value.

3.  CASH AND CASH EQUIVALENTS

         At September 30, 1999, the Company held cash and cash equivalents of
$13.7 million compared to $22.7 million at September 30,1998. Substantially
all of the cash and cash equivalents were held by SFHI and PHI and were
subject to restrictions which prohibit distribution of this cash to the
Company.

         At September 30, 1999, approximately $7.2 million of the Company's
consolidated cash and cash equivalents was held by SFHI and was subject to
certain restrictions and limitations on its use, including restrictions on
its availability for distribution to the Company, by the terms of an
indenture pursuant to which $115 million principal amount of 11% First
Mortgage Notes due December 2000 ("11% Notes") of SFHI was issued. As of
September 30, 1999, SFHI did not meet the conditions precedent to making a
distribution to the Company. See Notes 9 and 10

         At September 30, 1999, approximately $6.2 million of the Company's
consolidated cash and cash equivalents was held by PHI and was subject to
certain restrictions, including restrictions on its availability for
distribution to the Company, by the terms the 13 1/2% Notes of PFC were
issued, the proceeds of which were loaned to PHI. As of September 30, 1999,
PHI did not meet the conditions precedent to making a distribution to the
Company. Approximately $2.0 million of PHI's cash is reserved for payments to
be made to certain holders of 13 1/2% Notes upon confirmation of the Amended
plan. See Notes 9, 10, 11 and 21

         At September 30, 1999, a minimal amount of the Company's
consolidated cash and cash equivalents was held by SLVC and was subject to
certain restrictions and limitations on its use by the terms of a note
purchase agreement pursuant to which $57.5 million principal amount of notes
due December 1999 (the "SLVC Notes"), were issued by SLVC. As of September
30, 1999, SLVC did not meet the conditions precedent to making a distribution
to the Company. See Notes 9, 10 and 21

                                      48

<PAGE>

4.  ACCOUNTS RECEIVABLE, NET

         Accounts receivable at September 30, 1999 and 1998 consisted of the
following:

<TABLE>
<CAPTION>
                                                    1999            1998
                                              ---------------  ---------------
<S>                                           <C>              <C>
Casino and hotel                              $    2,423,061   $    2,891,652
Other                                                565,059          563,957
                                              --------------   --------------
                                                   2,988,120        3,455,609
Less allowance for doubtful accounts               1,890,494        1,837,847
                                              --------------   --------------
Total                                         $    1,097,626   $    1,617,762
                                              ==============   ==============
</TABLE>

Changes in the allowance for doubtful accounts for the years ended September
30, 1999, 1998 and 1997 were as follows:

<TABLE>
<CAPTION>
                                      1999             1998           1997
                                ---------------  ---------------  --------------
<S>                             <C>              <C>              <C>
Balance, beginning of year      $    1,837,847   $    2,006,768   $   2,196,847
Provision                              178,624           40,673          94,738
Accounts written-off                  (125,977)        (209,594)       (284,817)
                                ---------------  ---------------  --------------
Balance, end of year            $    1,890,494   $    1,837,847   $   2,006,768
                                ===============  ===============  ==============
</TABLE>

5.  ASSETS HELD FOR SALE

         In March 1994, the Company purchased for approximately $15.1 million
a 39-acre parcel of land located in Henderson, Nevada, for future development
of a proposed casino hotel complex. At September 30, 1999 the cost to acquire
the property is included in Assets held for sale in the Consolidated Balance
Sheet. In addition to costs to acquire the property, the Company has recorded
approximately $10.8 million in preliminary architectural, engineering,
permitting, and other development costs, which are also included in Assets
held for sale in the accompanying Consolidated Balance Sheet. The Company
sold the land in November 1999. See Note 24

     At September 30, 1998, the cost to acquire the 39-acre parcel of real
property in Henderson, Nevada is included in Land held for development and
approximately $9.3 million in preliminary engineering and design fees,
construction related permits and development costs are included in Other
assets in the accompanying Consolidated Balance Sheet.

6.  LAND HELD FOR DEVELOPMENT

         In October 1995, the Company acquired a 27-acre parcel on Las Vegas
Boulevard South which was valued at approximately $21.5 million. The Company
assumed an operating lease under which a water theme park operates on the
27-acre parcel. The lease may be terminated by the Company at any time after
December 1996. The Company has guaranteed payments by the tenant of a loan to
the prior owner of the property ("tenant loan") and has agreed to pay the
loan in full in certain situations, including in the event the lease is
terminated for any reason prior to 2004. The tenant loan, which is amortized
through monthly principal and interest payments through December 2004, had an
outstanding balance of $4.2 million as of September 30, 1999. Under the terms
of the lease, as amended, the water-theme park remits a base rent of
approximately $16,000 monthly plus an annual rent payment based on gross
receipts.

                                     49

<PAGE>

         In January 1999, SFHI acquired for $3.6 million the approximate
21-acre parcel of undeveloped real property adjacent to the Santa Fe from
Santa Fe Gaming. In connection with the closing of the transaction in January
1999, $1.6 million of indebtedness secured by the property was repaid.
Management believes the cash consideration paid represents that which could
have been negotiated between third parties in an arms length transaction.

7.  PROPERTY AND EQUIPMENT, NET

         In fiscal 1999, the Santa Fe renovated its 200 hotel rooms in a
five-story tower at a cost of approximately $800,000.

         In March 1998, the Company acquired, for approximately $10.7
million, gaming equipment and furniture and fixtures previously under lease
at the Santa Fe. In June 1998, the Santa Fe acquired additional gaming
equipment for $1.2 million. In September 1998, Santa Fe completed
construction of two new pylon signs at a total cost of approximately $1.8
million. The Company funded the acquisitions and construction with proceeds
from a $14 million note placement in April 1998. See Note 10

         In December 1997, the Company acquired, for approximately $1.2
million, gaming equipment previously under lease at the Pioneer. In January
1998, the Pioneer acquired, for approximately $500,000, additional gaming
machines with available working capital. See Note 10

8.  OTHER ASSETS

         In February 1996, the Company, through a wholly-owned subsidiary,
acquired a 50% equity interest for $175,000 in a restaurant/tavern operation
in northwest Las Vegas, Santa Fe Mining Company, L.L.C. ("Santa Fe Mining").
The restaurant/tavern opened on July 1, 1996. The Company and its partner
each contributed $175,000 and have guaranteed a $950,000 loan incurred to
finance construction and equipment. In addition, Santa Fe Mining entered into
a three year fully amortizing note at 11 1/2% per annum for approximately
$100,000 to finance the acquisition of slot equipment.

9.  CURRENT PORTION OF LONG TERM DEBT

         As of September 30, 1999, the Company reported approximately $17.5
million in current maturities of long term debt during the twelve-month
period ending September 30, 2000, comprised primarily of $14.0 million
principal amount of the 9 1/2% Notes which are in default. See Notes 10 and 24

10.  LONG TERM DEBT, NET

      Long-term debt is presented net of unamortized debt discounts and debt
obligations owned, but not retired, by the Company. The Company is subject to
various financing agreements containing covenants and restrictions, of which,
management believes it is in compliance with the exception of the 13 1/2%
Notes and the 9 1/2% Notes. See Note 11

                                     50

<PAGE>

         As of September 30, 1999, the Company had $122.1 million in
long-term debt, net of (i) current maturities of $17.5 million, (ii) debt
discount of $1.6 million, (iii) debt obligations owned but not retired of
$33.1 million of 11% Notes, (iv) $17.7 million debt due upon sale of assets
and (v) $55.6 million liabilities subject to compromise. The majority of such
amounts mature in December 2000, comprised primarily of $99.4 million
principal amount of 11% Notes, of which $33.1 million is held by SLVC, and
$43.0 million principal amount of SLVC Notes.

Long-term debt at September 30, 1999 and 1998 consisted of the following:

<TABLE>
<CAPTION>
                                                      1999                1998
                                                ---------------      --------------
<S>                                             <C>                  <C>
11% First Mortgage Notes, Net
("11% Notes") due 2000                           $   64,674,213      $   63,383,205

9 1/2% Senior Secured Notes,
("9 1/2% Notes") due 2000                            14,000,000          14,000,000

11% Equipment Notes,
("Equipment Notes") due 2001                          8,796,139           9,939,996

Note Purchase Agreement
("SLVC Notes") due December 15, 1999                 60,725,742          57,500,000
 (See Note 24)

Note payable to Sierra Construction
 Corp. ("Sierra Note"), due 2000;
 interest at prime plus 2%                            4,787,022           4,879,875

12% First Mortgage Note ("Land
 Note") due 1999                                              0           1,559,000

13 1/2% First Mortgage Notes,
 ("13 1/2% Notes") due 1998                          54,972,389          60,000,000

Other notes payable, collateralized
 primarily by equipment                               4,171,129           3,418,696


Obligations under capital leases                        112,435             251,780
                                                ----------------    ----------------
     Sub-total                                      212,239,069         214,932,552
Less current portion (See Note 9)                    17,466,041           1,785,716
Less debt due upon sale of assets (See Note 24)      17,725,742                   0
Less Liabilities Subject to
  Compromise (See Note 11)                           54,972,389          60,000,000
                                                ----------------    ----------------
     Total long-term debt                       $   122,074,897     $   153,146,836
                                                ================    ================
</TABLE>

                                      51

<PAGE>

Excluding the $55 million principal amount of 13 1/2% Notes that matured on
December 1, 1998, the scheduled maturities of long-term debt (excluding
capital leases) for the year ending September 30 are as follows:

<TABLE>
                   <S>                      <C>
                   2000                     $   17,359,894
                   2001                        121,518,734
                   2002                             92,582
                   2003                            103,599
                   2004                            115,983

                   Thereafter                      237,711
                                            --------------
                      Total                 $  139,428,503
                                            ==============
</TABLE>

11% NOTES:

         On December 29, 1993, SFHI consummated a public offering (the
"Offering") of 11,500 units, with each unit consisting of $10,000 principal
of the 11% Notes and one warrant to acquire, for no additional consideration,
an additional $1,000 principal amount of the 11% Notes upon exercise no later
than December 15, 1996. The 11% Notes are secured by, among other things, a
second priority deed of trust on the Santa Fe and are guaranteed by the
Company. Interest is payable semi-annually on June 15 and December 15, at the
rate of 11% per annum. The 11% Notes mature on December 15, 2000. Assuming
all warrants were exercised on December 15, 1996, the total principal amount
of 11% Notes to be paid at maturity would have been $126.5 million and the
effective rate of interest per annum would have been 12.46%. SFHI is subject
to certain covenants under the indenture in which the 11% Notes were issued
including, among other things, restrictions on the incurrence of additional
debt and making any loan or any distribution or dividends to any affiliate of
the Company. See Note 3

          In August 1995, in connection with an offer to repurchase pursuant
to the terms of the Indenture, warrants to acquire $11.5 million principal
amount 11% Notes were exercised, resulting in $126.5 million principal amount
of 11% Notes outstanding. Upon completion of the repurchase offer, $105
million principal amount of 11% Notes was outstanding.

         In January 1996 and August 1997, the Company completed the
repurchase of an aggregate of $38.7 million principal amount of 11% Notes.
The Company financed the repurchases with the net proceeds of private
placements of an aggregate of $35 million principal amount of SLVC Notes
issued by SLVC. The Company retired $5.6 million principal amount of the 11%
Notes purchased and pledged the balance of $33.1 million principal amount
held by the Company as collateral for the SLVC Notes. The Company recorded
extraordinary gains of approximately $4.9 million after tax related to the
debt repurchase in the quarter ended March 31, 1996 and of approximately $1.7
million after tax related to the debt repurchase in the quarter ended
September 30, 1997.

         In March 1998, holders of a majority of the 11% Notes consented to
amendments to the indenture under which the 11% Notes were issued. Pursuant
to the amendments, SFHI (a) incurred $14 million of senior secured
indebtedness; (b) granted a security interest in certain gaming equipment to
secure two promissory notes in the aggregate principal amount of
approximately $10 million to obtain an extension of the maturity of the two
promissory notes

                                     52

<PAGE>

from May 1998 until April 2001 and a reduction in the interest rate to 11%,
and (c) is permitted to lease to a third party three acres for development of
a non-gaming hotel.

         As of September 30, 1999, $99.4 million principal amount of the 11%
Notes was outstanding. The 11% Notes are reported in the consolidated Balance
Sheet net of unamortized debt discount of $1.6 million and of the $33.1
million principal amount held by SLVC and pledged as collateral for the SLVC
Notes. The 11% Notes are callable at par until maturity.

9 1/2% NOTES:

         In April 1998, SFHI issued $14 million principal amount of 9 1/2%
Notes, secured by a first priority deed of trust on the Santa Fe. The 9 1/2%
Notes require quarterly interest only payments, and mature on December 15,
2000. SFHI used approximately $10.7 million of proceeds to purchase gaming
and other equipment under lease and approximately $1.2 million of the
proceeds to fund in part the purchase of additional gaming equipment.

         Certain events related to the non-payment by PFC of the 13 1/2%
Notes at maturity created events of default under the 9 1/2% Notes. The
holders of the 9 1/2% Notes have not accelerated the 9 1/2% Notes, although
no assurance can be given that the 9 1/2% Notes will not be accelerated. If
the holders of the 9 1/2% Notes accelerate the payment of the 9 1/2% Notes, a
default would occur under the 11% Notes, permitting the holders to accelerate
that indebtedness. If the 9 1/2% Notes or the 11% Notes were to be
accelerated and the Company is unable to refinance the indebtedness or sell
all or a portion of its assets and realize sufficient proceeds to satisfy the
debt, it is likely that SFHI and the Company will file for relief under
Chapter 11 of the Bankruptcy Code. The Company is exploring refinancing
alternatives for the 11% Notes and the 9 1/2% Notes. See Note 21

EQUIPMENT NOTES:

         In April 1998, SFHI modified the terms of two $5 million promissory
notes due an affiliate, aggregating approximately $10 million ("Equipment
Notes") in connection with a sale by the affiliate of the Equipment Notes to
a third party. The terms were modified to (i) reduce the interest rate to 11%
and to extend the maturity date from May 1998 to April 2001 and (ii) grant a
security interest in certain gaming and other equipment. In April 1998, the
Company consummated the sale of the Equipment Notes for cash proceeds of
approximately $9 million. In December 1998, SFHI amended the terms of one of
the Equipment Notes to reduce the principal amount to $4.5 million and to
provide for amortization payments of principal and interest until maturity.

                                     53

<PAGE>

SLVC NOTES:

         The SLVC Notes were initially issued in January 1996 in an aggregate
principal amount of $20 million due December 15, 1999. In August 1997, SLVC
and the holders of the SLVC Notes amended the terms of the SLVC Notes to,
among other things, (i) provide for the issuance of an additional $15 million
of SLVC Notes to increase the outstanding principal amount to $35.0 million.
In November 1997, the Company entered into an amended and restated agreement
with respect to the SLVC Notes pursuant to which an additional $22.5 million
principal amount of SLVC Notes were issued to increase the outstanding
principal balance to $57.5 million. SLVC issued two tranches of promissory
notes, $37 million principal amount with an interest rate of 9.75% and $20.5
million with an interest rate of 13.25%. Certain other provisions of the loan
agreement were amended, including the elimination of any sinking fund
principal payments prior to maturity in December 1999. The SLVC Notes are
secured by, among other things, the 27-acre parcel of real property on the
Las Vegas Strip, 39-acre parcel of real property in Henderson, Nevada and
$33.1 million principal amount of 11% Notes, and are guaranteed by the
Company. Upon the earlier of the repayment of the SLVC Notes or maturity,
SLVC is required to pay $2.1 million in fees associated with the SLVC Notes.
See Note 24

         The proceeds from the SLVC Notes were used as follows: (i) In
January 1996, approximately $17.5 million was used to repurchase $25.6
million principal amount of 11% Notes, of which $5.6 million was retired and
$20.0 million is held as collateral for the SLVC Notes (ii) in August 1997,
approximately $10.5 million was used to repurchase $13.1 million principal
amount of 11% Notes, which is held as collateral for the SLVC Notes, $2.5
million was deposited in a cash collateral account for use for future
principal and interest payments on the SLVC Notes and the remaining balance
was used to pay for certain expenses and to make distributions to the
Company, and (iii) in November 1997, $20 million was used by SLVC to acquire
the 39-acre parcel of land in Henderson, Nevada from an affiliate for cash.

         Pursuant to the terms of the SLVC Notes, the nonpayment of the
13 1/2% Notes at maturity created an event of default, and the filing for
relief under Chapter 11 by PFC and PHI created events of default under the
SLVC Notes that caused the SLVC Notes to automatically become due and
payable. In June 1999, the holders of the SLVC Notes rescinded the
acceleration and agreed to defer payment of $1.3 million of interest until
maturity, but did not waive other defaults related to the non-payment by PFC
of the 13 1/2% Notes. If the holders of the SLVC Notes accelerate the SLVC
Notes and demand payment under the SLVC Notes and the Company guarantee and
the Company is unable to refinance the SLVC Notes or sell or a portion of its
assets and realize proceeds sufficient to satisfy the debt, it is likely that
SLVC and the Company will file for relief under Chapter 11 of the Bankruptcy
Code. The Company amended the SLVC Notes in December 1999 and is exploring
refinancing alternatives for the SLVC Notes. See Notes 21 and 24

         At September 30, 1999, the balance of the SLVC Notes was $60.7
million, comprised of $57.5 million principal, $1.3 million of accrued
interest originally due on June 15, 1999 and $1.9 million of fees payable at
repayment or maturity. In the accompanying consolidated Balance Sheet, $17.7
million of the balance due on the SLVC Notes as of September 30, 1999 is
classified as Debt due upon sale of assets, and the balance is classified as
Long-term debt, as a result of the sale of real property in Henderson,
Nevada. See Note 24

                                    54

<PAGE>

SIERRA NOTE:

         The Sierra Note, issued in December 1993 for $6.6 million, bears
interest at 2% above the prime rate (10 1/4% at September 30, 1999) and
originally was payable in monthly installments of principal and interest of
$80,099 commencing December 1993 until maturity in December 1998. In October
1998, the Company amended the terms of the Sierra Note to extend the maturity
date to December 2000, provide for certain mandatory prepayment requirements
and to require interest only payments until the maturity date.

LAND NOTE:

         In December 1996, the Company borrowed approximately $1.6 million
pursuant to a first mortgage note secured by the 21-acre parcel. In January
1999, SFHI acquired for $3.6 million the approximate 21-acre parcel of
undeveloped real property adjacent to the Santa Fe from the Company. In
connection with the closing of the transaction, the $1.6 million note was
repaid. Management believes the cash consideration paid represents that which
could have been negotiated between third parties in an arms length
transaction.

11.  LIABILITIES SUBJECT TO COMPROMISE

         Liabilities subject to compromise consist of $55 million of
principal and approximately $8.8 million of accrued interest due on the 13
1/2% Notes as of September 30, 1999. The 13 1/2% Notes were issued by PFC.
The 13 1/2% Notes are secured by a first priority deed of trust on the
Pioneer and are guaranteed by the Company. The 13 1/2% Notes matured on
December 1, 1998, but were not paid at maturity. See Note 21

12.  LEASES

         All non-cancelable leases have been classified as capital or
operating leases. At September 30, 1999, the Company had leases for personal
and real property which expire in various years to 2078. Under most leasing
arrangements, the Company pays the taxes, insurance and the operating
expenses related to the leased property.

         At September 30, 1999 and 1998, equipment leased under capital
leases are recorded in the consolidated Balance Sheets as follows:

<TABLE>
<CAPTION>
                                          SEPTEMBER 30
                                ---------------------------------
                                  1999                  1998
                                --------------     --------------
<S>                             <C>                <C>
Equipment                       $      934,991     $    1,011,422
Less accumulated amortization          742,051            424,946
                                --------------     --------------
   Total                        $      192,940     $      586,476
                                ===============    ==============
</TABLE>

                                       55


<PAGE>



        Amortization of assets leased under capital leases is included in
depreciation and amortization expense in the consolidated Statements of
Operations.

         Future minimum lease payments as of September 30, 1999 are as
follows:

<TABLE>
<CAPTION>
                                                  CAPITAL           OPERATING
                                              ---------------    ----------------
<S>                                           <C>                <C>
2000                                          $      110,832      $      725,856
2001                                                   5,554             725,856
2002                                                   1,389             725,856
2003                                                       0             725,856
2004                                                       0             725,856
Thereafter                                                 0          53,894,808
                                              --------------     ---------------
                                                     117,775     $    57,524,088
                                                                 ===============
    Less amount representing interest                  5,340
    Present value of minimum
      lease payments
                                              --------------
                                              $      112,435
                                              ==============
</TABLE>

Included in future minimum operating lease payments are rental costs
associated with the real property under the lease at the Pioneer.
Approximately 6 1/2 acres of the Pioneer property are subject to a 99 year
ground lease, expiring in December 2078. Under the ground lease the Company
is subject to an annual rental obligation of $720,000 per year, adjusted
annually based on the Consumer Price Index. Additionally, beginning January
1, 2004 and every ten years thereafter, the annual rent will be adjusted to
an amount equal to 10% of the fair market value of the land subject to the
ground lease, on an unimproved basis.

         In December 1997, the Pioneer purchased the gaming equipment
previously subject to lease for approximately $1.2 million, as a result of
which monthly rental expense for gaming equipment decreased by approximately
$44,000.

         In March 1998, Santa Fe purchased gaming and other equipment
previously subject to lease for approximately $10.7 million, as a result of
which monthly rental expenses decreased approximately $300,000.

13.  STOCKHOLDERS' DEFICIENCY

         The Company has outstanding redeemable exchangeable cumulative
preferred stock. Prior to fiscal 1997, the Company satisfied the semi-annual
dividend payments on its preferred stock through the issuance of paid in kind
dividends. Commencing in fiscal 1997, dividends paid on the preferred stock,
to the extent declared, must be paid in cash. No dividends were declared on
the preferred stock in fiscal 1997, 1998 and 1999. Pursuant to the terms of
the Certificate of Designation with respect to the preferred stock, dividends
that are not declared are cumulative and accrue. The dividend rate per annum
was equal to 8% of $2.14 for each share of preferred stock until September
30, 1998, at which date the dividend rate increased to 11%. Beginning October
1, 1999, the dividend rate increased to 12.0% and the dividend will continue
to increase by an additional 50 basis points on each succeeding semi-annual
dividend payment date up to a maximum of 16% per annum. The accrued stock
dividends have been recorded as an increase to the preferred stock account.
The Company is a party to financing arrangements that restrict

                                      56

<PAGE>

the Company's ability to declare and pay dividends or make distributions with
respect to the Company's capital stock, which currently prohibit the payment
of cash dividends on the preferred stock. As of September 30, 1999, the
aggregate liquidation preference of the Preferred Stock was $24.1 million or
$2.72 per share.

         At the election of the Company, the Preferred Stock is redeemable,
in whole or in part, at any time and from time to time at a redemption price
equal to the per share liquidation preference of $2.14 plus (i) an amount
equal to all accrued but unpaid dividends, whether or not declared, plus (ii)
under certain circumstances relating to asset dispositions and mergers, an
additional amount determined in accordance with the Certificate of
Designation of the Preferred Stock (the "Liquidation Preference").
Additionally, at the election of the Company, if any shares of Preferred
Stock have not been redeemed on or prior to the tenth dividend payment date
from the issuance of the Preferred Stock, September 30, 1998, such shares may
be exchanged from time to time for Junior Subordinated Notes of the Company.
The principal amount of the Junior Subordinated Notes, if issued, will be
equal to the Liquidation Preference of the Preferred Stock for which such
notes are exchanged. The Junior Subordinated Notes would mature on September
30, 2008, and would bear interest at an annual rate of 11%, payable
semi-annually. The Company is a party to financing agreements that prohibit
the Company from exercising an option to exchange the Preferred Stock into
Junior Subordinated Notes.

         The Company has accrued, but not paid, dividends payable on the
Preferred Stock since September 30, 1996. Pursuant to the Certificate of
Designation, because at least one full dividend payment has been accrued but
not paid for two years, the holders of the Preferred Stock, as a separate
class, elected two directors to the Company's board of directors at the
annual meeting of stockholders held in May 1999. The two directors elected by
Preferred Stockholders are in addition to the five directors elected by the
holders of the Company's Common Stock. The Preferred Stockholders' right to
elect two directors will continue until all dividend arrearages have been
paid.  On December 23, 1999, John M. Bradham, one of the two preferred stock
directors elected at the 1999 Annual Meeting, resigned as a director.

14.  STOCK OPTION PLAN

         The Company has a Key Employee Stock Option Plan (the "Stock Option
Plan") providing for the grant of up to 619,535 shares of its common stock to
key employees. The Stock Option Plan provides for both incentive stock
options and non-qualified stock options. In October 1995, the Company
canceled all outstanding options and issued 153,000 options at an exercise
price of $3.00 per share. In 1996, options to acquire 6,250 were canceled. In
February 1997, the Company canceled all outstanding options and issued
146,750 options at an exercise price of $1.50. In 1997, options to acquire
10,000 were canceled. During fiscal year ended September 30, 1998, 447,785
options were granted. As of September 30, 1999, there were 584,535 options
outstanding under the Stock Option Plan. No options were exercised during
fiscal years 1999, 1998 and 1997. The outstanding options have an expiration
date of February 2007.

         In December 1995, the Company adopted the 1995 Non-Employee Director
Stock Option Plan (the "Non-Employee Director Plan") which provides for the
grant of up to 100,000 shares of its common stock to the directors. Directors
are automatically granted an option to purchase 12,500 shares of the common
stock at an exercise price equal to the market value of such shares on the
date of such election to the board. As of September 30, 1999, there were
25,000 options outstanding under this plan. The outstanding options have an
expiration date of February 2007.

                                       57
<PAGE>

         SFHI, SLVC and PHI (collectively, the "Subsidiaries"), have adopted
subsidiary stock option plans (the "Subsidiary Plans"). The Subsidiary Plans
provide for the grant of options by each of the Subsidiaries with respect to
an aggregate of up to 10% of the outstanding shares of such Subsidiary's
Common Stock to employees, non-employee directors, consultants or affiliates
of the Company or the Subsidiaries. The purpose of the Subsidiary Plans is to
enable the Subsidiaries, the Company and any subsidiaries of the Company or
Subsidiaries to attract, retain and motivate their employees, non-employee
directors, consultants and affiliates by providing for or increasing the
proprietary interest of such persons in the Subsidiaries. Certain of the
agreements under which the Company's long-term debt is issued provide that if
the Company ceases to own, directly or indirectly, 100% of the outstanding
capital stock of specified Subsidiaries, an event of default will occur or an
offer to repurchase the debt must be made. As a result, the Subsidiary Plans
may not be exercised if the exercise would result in a default, or require an
offer to repurchase the outstanding debt, under any agreement with respect to
long-term debt of the Company or any of its Subsidiaries. As of September 30,
1999, no options had been granted under any Subsidiary Plans.

Accounting for stock-based compensation:

         In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), which is effective for fiscal years
beginning after December 15, 1995. Although SFAS 123 encourages an entity to
measure compensation by applying the fair value method of accounting for
employee stock-based compensation arrangements, it permits an entity to
continue to account for employee stock-based compensation arrangements under
the provisions of Accounting Principles Board Opinion 25 ("APB 25").

         The Company has elected to continue to account for stock-based
compensation in accordance with APB 25. Under APB 25, generally only stock
options that have intrinsic value at the date of grant are considered
compensatory. Intrinsic value represents the excess, if any, of the market
price of the stock at the grant date over the exercise price of the option.
Under SFAS 123, all stock option grants are considered compensatory.
Compensation cost is measured at the date of grant based on the estimated
fair value of the options determined using an option pricing model. The model
takes into account the stock price at the grant date, the exercise price, the
expected life of the option, the volatility of the stock, expected dividends
on the stock and the risk-free interest rate over the expected life of the
option.

         The following table discloses the Company's pro forma net income and
net income per share for 1998 and 1997 assuming compensation cost for
employee stock options had been determined using the fair value-based method
prescribed by SFAS 123. The table also discloses the weighted average
assumptions used in estimating the fair value of each option grant on the
date of grant using the Black-Scholes option pricing model, and the estimated
weighted average fair value of the options granted. No stock options were
granted or exercised in 1999, therefore, no information has been included for
1999.


                                      58

<PAGE>

         The model assumes no expected future dividend payments on Santa Fe
Gaming's Common Stock for the options granted in both 1998 and 1997 (dollars in
thousands, except per share data).


<TABLE>
<CAPTION>

                                                       1998                     1997
                                                   -------------           -------------
<S>                                                <C>                     <C>
Net income (loss):
   As reported                                     $     (63,859)          $     (13,133)
   Pro forma                                       $     (64,067)          $     (13,169)

Net income (loss) per share:
   As reported                                     $      (10.31)          $       (2.12)
   Pro forma                                       $      (10.34)          $       (2.13)

Weighted average assumptions:
   Expected stock price volatility                         100.0%                   85.0%
   Risk-free interest rate                                   5.4%                    6.0%
   Expected option lives (in years)                          4.0                     4.0
   Estimated fair value of options                  $       0.72            $       0.98
</TABLE>


15.  FEDERAL INCOME TAXES

         The Company accounts for income taxes under SFAS 109. In accordance
with SFAS 109, deferred income taxes reflect the net effects of (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes,
and (b) operating loss and tax credit carry forwards. Deferred income taxes
of $11.0 million were recorded as of October 1, 1993 as a result of the
purchase accounting associated with the Company's investment in a publicly
traded partnership. The Company has recognized approximately $29.3 million in
federal income tax benefit for financial reporting purposes based on book
losses.

         The expense (benefit) for income taxes attributable to pre-tax
income consisted of:

<TABLE>
<CAPTION>

YEAR ENDED SEPTEMBER 30              1999        1998         1997
--------------------------------------------- ----------  ------------
(DOLLARS IN THOUSANDS)
<S>                               <C>         <C>         <C>
Current                           $        0  $        0  $          0
Deferred                                   0           0        (2,702)
                                  ----------  ----------  ------------
Total expense (benefit)           $        0  $        0  $     (2,702)
                                  ==========  ==========  ============
</TABLE>


                                      59

<PAGE>

         The expense (benefit) for income taxes attributable to pre-tax
income differs from the amount computed at the federal income tax statutory
rate as a result of the following:

<TABLE>
<CAPTION>

YEAR ENDED SEPTEMBER 30              1999        1998         1997
--------------------------------------------- ----------  ------------
(DOLLARS IN THOUSANDS)
<S>                               <C>         <C>         <C>
Amount at Statutory rate          $   (6,222) $  (21,820) $     (3,946)
Goodwill                                   0      14,732           487
Valuation Allowance                    6,035       6,418             0
Lobbying costs/Political
  contributions                           11          82             0
Deferred tax credits                       0           0             0
Other                                    176         588           757
                                  ----------  ----------  ------------
                                  $        0  $        0  $     (2,702)
                                  ==========  ==========  ============
</TABLE>

         The components of the deferred tax asset (liability) consisted of the
following:

<TABLE>

YEAR ENDED SEPTEMBER 30              1999        1998         1997
--------------------------------------------- ----------  ------------
(DOLLARS IN THOUSANDS)
<S>                               <C>         <C>         <C>
DEFERRED TAX LIABILITIES

Prepaid expenses                     $ 1,013  $      972           961
Fixed asset cost, depreciation
 and amortization, net                11,569      11,587        11,672
Capitalized interest                       0           0           953
Original issue discount                   34          34            34
Other                                  2,142       2,142         2,142
                                  ----------  ----------  ------------
Gross deferred tax liabilities    $   14,758  $   14,735  $     15,762
                                  ==========  ==========  ============

DEFERRED TAX ASSETS

Net operating loss carryforward   $   25,343  $   19,371  $     13,675
Reserves for accounts and
contracts receivable                     539         517           575
Other                                     60          41           325
Deferred payroll                         488         443           407
Tax credits                              780         780           780
                                  ----------  ----------  ------------
Gross deferred tax assets         $   27,210  $   21,152  $     15,762
                                  ----------  ----------  ------------
Net deferred tax asset
  (liability) before valuation
  allowance                           12,452  $    6,417             0
Valuation Allowance                  (12,452)     (6,417)            0
                                  ----------  ----------  ------------
Net deferred tax asset
  (liability)                     $        0  $        0  $          0
                                  ==========  ==========  ============
</TABLE>

         At September 30, 1999, the Company has a net operating loss
carryforward for regular income tax purposes of approximately $74.5 million,
which will fully expire by the year 2019. The Company recorded a valuation
allowance to reduce the carrying value of the net deferred tax assets due to
the uncertainty surrounding the utilization of the net operating losses.

                                      60

<PAGE>

16.  BENEFIT PLANS

         The Company has a savings plan (the "Plan") qualified under Section
401(k) of the Internal Revenue Code of 1986, as amended. The Plan covers
substantially all of the Company's employees. The Company's matching
contributions paid in 1999, 1998 and 1997 were $114,000, 105,000, and
$96,000, respectively.

17.  RELATED PARTIES

         In November 1993, Mr. Lowden, Chairman of the Board, Chief Executive
Officer and 70% stockholder of the Company, and Bank of America entered into
a personal loan agreement, secured by a pledge of substantially all the
common shares of the Company owned by Mr. Lowden. Mr. Lowden advised the
Company he repaid the entire loan balance in July 1998.

         In fiscal years 1993 and 1992, Hacienda Hotel Inc's., predecessor
made loans to LICO, a Nevada corporation wholly owned by Paul W. Lowden,
President and Chairman of the Company, in the aggregate amount of $476,000.
LICO provided entertainment services to the Hacienda Resort Hotel and Casino
and the Sahara Hotel and Casino. In January 1998, the loans to LICO were
satisfied through an offset against Mr. Lowden's bonus for fiscal year 1998
in the amount of $800,000 (the "Fiscal Year 1998 Bonus") and a fee in the
amount of $100,000 due Mr. Lowden for personal guarantees he issued for
certain Company financing arrangements (the "Personal Guarantee Fee"). In
December 1998, at the request of Mr. Lowden, The Company's payment of
$350,000 of the Fiscal Year 1998 Bonus and the Personal Guarantee Fee which
satisfied, in part, the loan to LICO, was rescinded, and LICO's obligation to
pay the Company $350,000, together with interest thereon from January 1998,
was reinstated. In February 1999, the Company offset the $350,000 of the
remaining payment to Mr. Lowden, payable in connection with the 1998 Fiscal
Year Bonus, against the remaining outstanding obligation of LICO to the
Company.

18.  LOSS ON ASSET IMPAIRMENT

         In September 1998, in accordance with SFAS 121, the Company
determined an impairment loss had occurred to the carrying value of the
assets of the Pioneer in Laughlin, Nevada. On August 28, 1998, the California
General Assembly, Senate and Governor approved legislation authorizing gaming
operations pursuant to a form of compact. Prior to this date, California
authorities considered gaming devices operated on Indian reservations to be
illegal. On November 3, 1998, California voters approved Proposition 5, which
expanded the definition of gaming operations considered legal by the form of
compact. Management's view of the Laughlin market indicated that the cash
flows associated with Pioneer operations would not be sufficient to recover
the carrying value of the Company's investment. Under the requirements of
SFAS 121, an impairment charge of $46.0 million was recognized in the fourth
quarter of fiscal 1998 to adjust to fair market value the carrying value of
the Planner's fixed and intangible assets.

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<PAGE>

19.  OTHER EXPENSE

         During the quarters ended December 31, 1998 and September 30, 1999,
the Company reported charges to earnings of approximately $530,000 and
$510,000 associated with costs and expenses in connection with the exchange
of a portion of the Consent Solicitation and a proposed offering of debt
securities, neither of which was consummated. Additionally, in fiscal 1998,
the Company reported a charge to earnings of approximately $760,000
associated with costs and expenses of a proposed offering of debt securities
which was not consummated.

         During fiscal 1999 and 1998, the Company incurred charges to
earnings of approximately $510,000 and $760,000, respectively, associated with
proposed offerings of debt securities which were not consummated.

20.  EXTRAORDINARY ITEMS

         In January 1996 and August 1997, the Company completed the
repurchase of an aggregate of $38.7 million principal amount of 11% Notes.
The Company financed the repurchases with the net proceeds of private
placements of an aggregate of $35 million principal amount of SLVC Notes
issued by SLVC. The Company retired $5.6 million principal amount of the 11%
Notes purchased and pledged the balance of $33.1 million principal amount
held by the Company as collateral for the SLVC Notes. The Company recorded an
extraordinary gain of approximately $1.7 million after tax related to the
debt repurchase in the quarter ended September 30, 1997.

         In April 1997, the Company acquired $3.5 million principal amount of
10 1/4% Subordinated Debentures due June 1998 issued by the Company
("Subdebentures"). The Company submitted $2.3 million in Subdebentures to the
trustee for cancellation in satisfaction of the sinking fund payment due in
June 1997. In addition, the Company submitted $1.2 million for cancellation
in reduction of the balance due at maturity in June 1998. The Company
recorded a $400,000 extraordinary gain net of amortization of debt discount
and original issue cost and federal income tax of $300,000 on the purchase
which is reported in the quarter ended June 30, 1997.

21.  PETITION FOR RELIEF UNDER CHAPTER 11 OF THE UNITED STATES BANKRUPTCY
CODE AND LIABILITIES SUBJECT TO COMPROMISE; RELATED LITIGATION

a.  Petition for Relief Under Chapter 11

         On February 23, 1999, PFC voluntarily commenced a Chapter 11
proceeding. On April 12, 1999, PHI voluntarily commenced its Chapter 11
proceeding to facilitate the reorganization of the 13 1/2% Notes in
accordance with the PFC's 1998 Consent Solicitation, described below.
Contemporaneously with the filing of PHI's voluntary petition, PFC and PHI
(collectively, the "Debtors") filed with the Bankruptcy Court a proposed
Disclosure Statement and joint plan of reorganization as amended (the "Joint
Plan"). The Joint Plan was filed in accordance with consents obtained from
holders of approximately 75% of the outstanding principal amount of 13 1/2
Notes, pursuant to which PFC agreed to file for relief under Chapter 11 and
the consenting holders agreed to vote to accept a plan of reorganization
substantially similar to the treatment proposed in PFC's Consent Solicitation
Statement, dated October 23, 1998, as amended, ("Consent Solicitation"). On
August 30, 1999 the Bankruptcy Court approved the Disclosure Statement to
accompany the Joint Plan. On October 25, 1999, the Debtors proposed
modifications to the Joint Plan to satisfy

                                      62

<PAGE>

balloting thresholds without resoliciting the Joint Plan. (See below Joint
Plan) The Bankruptcy Court ruled against the Debtors' proposed modification
to the Joint Plan and ordered the Debtors' proposed modifications would
require re-solicitation. The Court terminated the Debtors' exclusivity,
expressly subject to reinstatement, thereby granting other parties in
interest the right to file a plan to reorganize the Debtors. On November 8,
1999 the Bankruptcy Court refused to permit a Disclosure Statement to
accompany the Plan of Reorganization filed on behalf of Hudson Bay Partners
LLC ("HBP"). On December 14, 1999, the Bankruptcy Court refused to approve a
Joint Disclosure Statement to accompany the Plan of Reorganization filed by
HBP and High River Partnership ("High River"). In addition, the Bankruptcy
Court reinstated exclusivity for the Debtors and continued a hearing on the
Debtors Disclosure Statement to accompany the Fourth Amended Plan of
Reorganization (See below "Modified Joint Plan" for more detailed
discussion). No assurance can be given that the Modified Joint Plan will be
confirmed.

         PFC and PHI have received approval from the Bankruptcy court to,
among other items, (i) pay or otherwise honor certain of its pre-petition
obligations, including employee wages, (ii) assume the management agreement
between PHI and the Company, and (iii) assume the land lease for
approximately 6 1/2 acres on which a portion of the Pioneer is located.

         PFC has continued accruing interest on the 13% Notes subsequent to
the date the bankruptcy petition was filed in accordance with the terms of
the Consent Solicitation. The principal and accrued interest due on the 13
1/2% Notes is $63.8 million as of September 30, 1999 and reflected as
Liabilities subject to compromise reported in the Consolidated Balance Sheet.

b.  Consent Solicitation

         In November 1998, the Company received and accepted consents from
holders of approximately 75%, or $45.8 million, of principal amount of the
outstanding 13 1/2% Notes pursuant to which (i) PFC agreed to file for relief
under Chapter 11 of the Bankruptcy Code and to submit for confirmation of a
plan of reorganization that provides for issuance of Amended Notes in
satisfaction of the 13 1/2% Notes pursuant to the terms set forth in the
Consent Solicitation, and (ii) the Consenting Holders agreed (a) to forbear
until December 15, 2000 from exercising rights or remedies arising as a
result of PFC's failure to pay principal and interest on the 13 1/2% Notes at
the December 1, 1998 maturity date, or the failure by PHI to pay principal
and interest on the intercompany note from PHI to PFC at the December 1, 1998
maturity date and (b) to vote to accept a plan of reorganization in a Chapter
11 bankruptcy case that provides for treatment of the 13 1/2% Notes
substantially as set forth in the Consent Solicitation. In addition, the
Company provided collateral for its previously unsecured guarantee of the 13
1/2% Notes, through the pledge of stock of certain of its subsidiaries
including SFHI, SR, the majority owner of the stock of SLVC, and by the grant
of liens on certain of its other assets. In addition, consenting holders
agreed to be bound by restrictions on the transfer or sale of 13 1/2% Notes.
13 1/2% Notes subject to Consents may be transferred only if the transferee
agrees to be bound by the terms of the Consent Solicitation.

         Pursuant to the terms of the Consent Solicitation, because certain
events have not occurred by December 31, 1999, such events will not occur. As
a result holders of at least 75% of the aggregate 13 1/2% Notes subject to
consents may terminate the consents.

         Pursuant to the Consent Solicitation, in December 1998 PFC purchased
on a pro-rata basis 10.83% principal amount from all consenting holders an
aggregate of $5.0 million principal amount of 13 1/2% Notes, plus accrued
interest. In July 1999 PFC paid in cash $1.4 million for 50% of the interest

                                      63

<PAGE>

payment due June 1, 1999 to consenting holders. In December 1999, the Court
approved payment in cash $1.4 million for 50% of the interest due December 1,
1999 to consenting holders. In a separate motion, the court approved payment
in cash of approximately $800,000 representing 50% of the interest due on
June 1, 1999 and December 1, 1999 payable to non-consenting holders and
approximately $1.4 million representing the 10.83% pro-rata principal
redemption plus accrued interest, to non-consenting holders, which pro-rata
amount was previously paid to consenting holders in December 1998 for their
pro-rata portion upon confirmation of the plan.

          In May 1999, the Company was advised that a Consenting Holder
attempted to transfer or did transfer an interest in approximately $3.0
million principal amount of 13 1/2% Notes without complying with the
restriction on transfer. In July 1999, PFC commenced an adversary action
seeking injunctive relief preventing the transfer without strict compliance
with the terms of the restrictive legend.

         On November 10, 1999, Hudson Bay Partners LP, ("HBP"), commenced an
adversary proceeding against the Debtors and the Company seeking declaratory
and injunctive relief contesting, among other matters, the validity of the
consents obtained in the Consent Solicitation. On December 13, 1999 the
Bankruptcy Court refused to enter a final judgment regarding ruling on the
enforceability of the consents obtained pre-petition in the Consent
Solicitation, but preliminarily (1) determined the consents to be invalid and
(2) enjoined the Debtors and the Company from stating that they will seek to
enforce the Consents. If the consents are ultimately held to be unenforceable
the Company intends to seek recission of the grant of security interests
securing its guaranty of the 13 1/2% Notes. The Bankruptcy Court has
tentatively scheduled the matter for trial and established deadlines for
discovery which may not occur prior to balloting on the Debtors' joint plan.

c.  Joint Plan

         On October 21, 1999, the Company's subsidiaries, PFC and PHI, filed
a ballot report with respect to PFC's and PHI's Second Amended Plan of
Reorganization ("Joint Plan"), indicating that ballots were received as
outlined in the table below from holders of PFC's 13 1/2% Notes.

               Number of Votes From Holders of Class 3 Claims

<TABLE>
<S>                                   <C>                      <C>
Total number of votes:                          656            100.00%
Number of acceptances:                          557             84.91%
Number of rejections:                            99             15.09%

                       Amount of Class 3 Claims Voted

Total Amount Voted:                   $  48,388,592            100.00%
Amount of Acceptances:                   34,778,333             71.87%
Amount of Rejections:                    13,610,259             28.13%
</TABLE>

         On October 25, 1999, PFC and PHI commenced confirmation hearings on
the Joint Plan. Pursuant to the Joint Plan, the Debtors were required to meet
certain additional thresholds to confirm the Joint Plan, including receiving
ballots in favor of the plan equal to sixty-seven (67%) of the total
principal amount of 13 1/2% Notes ($54,972,389). The percentage of
acceptances received represented approximately 63.27% of the total
outstanding principal amount of 13 1/2% Notes.

                                      64

<PAGE>

         The Debtors received ballots aggregating approximately $8.1 million
principal amount of 13 1/2% Notes against the Joint Plan from holders of 13
1/2% Notes who had agreed to support the Joint Plan in connection with a
Consent Solicitation, including, one holder who acquired approximately $6.2
million of consented 13 1/2% Notes subsequent to the Consent Solicitation
pursuant to the terms of the restricted legend on the consented bonds, in
which the holder agreed to vote to accept a plan of reorganization
substantially similar to the treatment proposed in the Consent Solicitation.
The Debtors have commenced legal proceedings to seek specific performance
from certain of the Consenting Holders of the 13 1/2% Notes who voted against
the Joint Plan. The Debtors proposed certain modifications to the Joint Plan
to eliminate the additional threshold without resoliciting the Joint Plan, as
modified, which were not permitted at the hearing with the Court ruling
proposed modifications would require future solicitation.

d.  Modified Joint Plan

         On December 17, 1999 the Debtors filed a Disclosure Statement to
accompany the Fourth Amended Joint Plan of Reorganization (the "Modified
Joint Plan"). On December 22, 1999, the Bankruptcy Court continued a hearing
on the Disclosure Statement attached to the Modified Joint Plan to December
29, 1999 and set confirmation hearings for the Modified Joint Plan for
February 2, 2006.

         If the Modified Joint Plan is confirmed, PFC will issue a principal
amount of 13 1/2% First Mortgage Notes (together with the pay-in-kind notes,
as defined below, the "Amended Notes") equal to the principal amount of all
outstanding 13 1/2% Notes plus accrued and unpaid interest from June 1, 1998
through December 1, 1999. The Company and its affiliates, other than the
Debtors have committed at least $20.0 million to the Debtors on the Effective
Date of the Modified Joint Plan ("SFGC Contribution"). The SFGC Contribution
can be satisfied through a contribution of a combination of 13 1/2% Notes,
valued at principal amount plus accrued interest, and cash. In addition, on
or about the Effective Date of the Modified Joint Plan, the Debtors will make
an offer to repurchase up to $2.0 million of principal and accrued interest
on the 13 1/2% Notes ("Dutch Auction"). Upon completion of the SFGC
Contribution, the pledge of the SFHI Common Stock granted in connection with
the Consent Solicitation will be released. The Amended Notes will bear
interest at a rate equal to 13 1/2% per annum. Interest on the Amended Notes
will be payable semiannually. The Amended Notes will mature on December 1,
2006, though the Debtors reserve the right to shorten the maturity date prior
to or at the Confirmation hearing. PFC will have the right to pay in kind up
to 50% of the interest payable on June 1, 2000 and December 1, 2000 through
the issuance of additional Amended Notes with a principal amount equal to 50%
of the interest payable on such Interest Payment Date (the "PIK Notes"). The
terms of the PIK Notes will be identical to those of the Amended Notes. The
Amended Notes will be redeemable at 100% of the principal amount plus accrued
and unpaid interest thereon, at any time. Upon the occurrence of certain
events, PFC will be required to redeem all outstanding Amended Notes or make
an offer to repurchase all or a portion of the outstanding Amended Notes, in
each case at 100% of the aggregate principal amount thereof, plus accrued and
unpaid interest thereon, if any, to the date of purchase. The Company will
guarantee the payment of and interest on, the Amended Notes, and the guaranty
will be secured by a pledge of the common stock of certain subsidiaries,
including SR, and by liens on certain of its other assets.

         The Modified Joint Plan is subject to the approval of the Bankruptcy
Court. No assurance can be given that the Joint Plan will be confirmed.

                                      65

<PAGE>

e.  Involuntary Proceedings

         In January 1999, a purported holder of approximately $4.7 million of
the 13 1/2% Notes (the "Holder") who did not deliver consents pursuant to the
Consent Solicitation delivered to the Company a proposal for treatment of its
13 1/2% Notes in a manner that was inconsistent with the terms agreed to by
the Consenting Holders. The Company advised the Holder that it was reviewing
its alternatives and would not take action with respect to the Holder's
proposal at that time. Thereafter, the Holder and two other holders who
purportedly held in the aggregate $3.1 million in principal amount of 13 1/2%
Notes and who did not provide consents pursuant to the Consent Solicitation
delivered demand notices for payment from the Company under its guarantee of
the 13 1/2% Notes. On January 14, 1999, the three holders of 13 1/2% Notes
filed involuntary bankruptcy petitions against PFC and the Company with the
United States Bankruptcy Court for the District of Nevada. The Company did
not believe that the three holders of 13 1/2% Notes complied with the
requirements of the Bankruptcy Code for the commencement of the involuntary
cases. On February 4, 1999, the Company and PFC filed motions to dismiss the
involuntary petitions and sought such damages as provided by the Bankruptcy
Code. These included costs and reasonable attorney's fees and, in the event
the petitions were filed in bad faith, for all damages caused by such filings
or punitive damages.

         On February 23, 1999, in accordance with the Consent Solicitation,
PFC voluntarily commenced its Chapter 11 proceedings. PFC has reserved its
right to seek damages against the three non-consenting holders for improperly
commencing the involuntary case against it. On March 19, 1999, the bankruptcy
court suspended the involuntary case against the Company pursuant to
Bankruptcy Code Section 305 and further ordered that the involuntary
proceedings would be dismissed upon the Company's obtaining certain waivers
of statutes of limitations regarding alleged avoidance actions. On August 20,
1999, the Bankruptcy Court dismissed the involuntary petition based on the
waivers filed by the Company and subject to the Company filing a supplemental
agreement and declaration by an insider with respect to certain transactions.

         If the Company were to file for relief under Chapter 11 of the
Bankruptcy Code or if an order for relief is entered in the Company's
involuntary bankruptcy case, an event of default would occur under which
SFHI's outstanding indebtedness was issued, which would result in automatic
acceleration of the 11% Notes.

f.  Guarantee Litigation -  Hudson Bay

         The Company is the plaintiff in an action titled THE SANTA FE GAMING
CORP. V. HUDSON BAY PARTNERS, ET AL., CV-S-99-00298-JBR (LRL). This action
was instituted on March 11, 1999 in the United States District Court for the
District of Nevada. The defendants are Hudson Bay Partners, LP, ("HBP"), and
David H. Lesser. The complaint includes causes of action for violation of
Section 13(d) of the Securities and Exchange Act of 1934, breach of contract,
fraud, violation of Nevada's Uniform Trade Secrets Act, and intentional
interference with prospective economic advantage. The Company alleges that
the defendants failed to comply with the requirements of Section 13(d) in
connection with their purchases of the Company's preferred stock, and that
defendants wrongfully obtained and used confidential and proprietary
information. Based on its Schedule 13D filings, HBP owns approximately 3.0
million shares or 33.19% of the Company's outstanding Preferred Stock.


                                      66

<PAGE>


         The Company seeks all appropriate injunctive relief in connection
with its Section 13(d) claim, specific performance and consequential and
compensatory damages in connection with its breach of contract claim, and
compensatory and punitive damages in connection with its fraud and
intentional interference with prospective economic advantage claims, and
injunctive relief and punitive damages in connection with its claim under
Nevada's Uniform Trade Secrets Act, as well as any other appropriate relief.
On April 30, 1999, the court denied the Company's motion for preliminary
injunction with respect to 13(d) claim.

         On or about June 18, 1999, defendant HBP, who alleges it holds
approximately $4.7 million of the 13 1/2% Notes, filed a counterclaim against
the Company in which it alleges that the Company is in default on its
guarantee of the 13 1/2% Notes and seeks to recover the amounts it claims are
past due on the 13 1/2% Notes. The Company has denied the allegations made by
HBP in all material respects. On or about July 19, 1999, HBP filed a motion
for summary judgment on its counterclaim and a request to have that judgment
entered, which the Company has opposed. No hearing date has been set on the
motion, and no trial date has been scheduled in the action. Discovery is
on going.

         The Company is defending this lawsuit vigorously. Even if the
Modified Joint Plan is confirmed, any holders who vote to reject the Modified
Joint Plan or who do not vote to accept the Modified Joint Plan would retain
their rights with respect to the Company's guarantee of the 13 1/2% Notes.
If, despite the Company's defense, HBP or another 13 1/2% holder prevails in
litigation against the Company to enforce payment on the guarantees of the 13
1/2% Notes a money judgment could be entered against the Company in an amount
equal to the outstanding principal amount plus accrued interest of the 13
1/2% Notes held by the prevailing party, plus fees and expenses. The Company
does not have sufficient liquid assets to satisfy a judgment in favor of all
holders of 13 1/2% Notes and there is no assurance that the Company would be
able to obtain any financing to enable the Company to do so. If a final
judgment were to be rendered against the Company, it is likely that the
Company would file for relief under Chapter 11 of the Bankruptcy Code.

g.  Guarantee Litigation - GMS

         The Company is the defendant in a pending action titled GMS GROUP,
LLC V. THE SANTA FE GAMING CORP., No. 99/602231. This action initially was
instituted on or about April 9, 1999 by means of a motion for summary
judgement in lieu of a complaint filed in the Supreme Court for the State of
New York, County of New York and this action was later reinstituted on or
about May 5, 1999. GMS Group, LLC ("GMS") alleges that the Company is in
default on its guarantee of the 13 1/2% Notes and seeks to recover the
amounts it claims are past due on the 13 1/2% Notes. GMS alleges that it
holds approximately $6.8 million of the 13 1/2% Notes. The Company filed a
motion to dismiss the action for lack of personal jurisdiction over the
Company, or, in the alternative, to have the action transferred to a Nevada
court.

         On September 8, 1999 the Company and GMS entered into a Forbearance
Agreement. Generally, the terms of the Forbearance Agreement require (i)
suspension of the New York litigation until May 31, 2000 (subject to early
termination as of December 31, 1999 because the Joint Plan will not have been
confirmed by December 31, 1999,) (ii) an affirmative vote by GMS in favor of
the Modified Joint Plan, (iii) reimbursement to GMS for its incurred legal
fees and expenses, and (iv) a waiver by the Company of any defenses and right
to oppose the motion for summary judgment brought by GMS in the New York
litigation. Because the Modified Joint Plan will not be confirmed by December
31, 1999, the continued forbearance after that date will at the discretion of
GMS.  Additionally, GMS will be free to vote on a competing plan of
reorganization. If GMS were to terminate the Forbearance Agreement, it would
be entitled to obtain a judgement against the Company for non-payment on the
quarantee of the $6.8 million principal amount of 13 1/2% Notes it holds. If
the Company were unable to satisfy the judgement, it is likely the Company
would file for relief under Chapter 11 of the Bankruptcy Code.

                                      67

<PAGE>

h.  Reorganization Expenses

         In fiscal year 1999, PHI has incurred approximately $2.4 million in
reorganization expenses pursuant to PHI's petition for relief under Chapter
11 of the United States Bankruptcy Code. See Note 11

22.  CONTINGENCIES

Litigation:

         The Company is subject to various lawsuits relating to routine
matters incidental to its business. The Company does not believe that the
outcome of such litigation, in the aggregate, will have a material adverse
effect on the Company. For a discussion of litigation in connection with
PFC's failure to pay the 13 1/2% Notes at maturity, see Note 21.

Poulos v. Caesar's World, Inc., et al. and Ahern v. Caesar's World, Inc., et
al.

         The Company is a defendant in a class action lawsuit originally
filed in the United States District Court of Florida, Orlando Division,
entitled POULOS V. CAESAR'S WORLD, INC., ET AL., AHERN V. CAESAR'S WORLD,
INC., ET AL. and SCHRIER V. CAESAR'S WORLD, INC., ET AL, along with a fourth
action against cruise ship gaming operators and which have been consolidated
in a single action now pending in the United States District Court, District
of Nevada (the "Court"). Also named as defendants in these actions are many,
of the largest gaming companies in the United States and certain gaming
equipment manufacturers. Each complaint is identical in its material
allegations. The actions allege that the defendants have engaged in
fraudulent and misleading conduct by inducing people to play video poker
machines and electronic slot machines based on false beliefs concerning how
the machines operate and the extent to which there is actually an opportunity
to win on a given play. The complaints allege that the defendants' acts
constitute violations of the Racketeer Influenced and Corrupt Organizations
Act and also give rise to claims for common law fraud and unjust enrichment,
and seek compensatory, special consequential, incidental and punitive damages
of several billion dollars.

         In response to the complaints, all of the defendants, including the
Company, filed motions attacking the pleadings for failure to state a claim,
seeking to dismiss the complaints for lack of personal jurisdiction and
venue. As a result of those motions, the Court has required the Plaintiffs in
the four consolidated cases to file a single consolidated amended complaint.
Subsequent to Plaintiffs' filing of their consolidated amended complaint, the
defendants refiled numerous motions attacking the amended complaint upon many
of the bases as the prior motions. The Court heard the arguments on those
motions and ultimately denied the motions. Plaintiffs then filed their motion
to certify a class. Defendants have vigorously opposed the motion and the
Court has not yet ruled on the motion to certify the class. If the Court
denies the certification then the case cannot go forward as a class action.
If the Court certifies a class then the parties will proceed to meet
discovery.


                                      68

<PAGE>

Treasure Bay

         On December 12, 1994, the Company and SFHI filed a lawsuit in the
Court, naming Treasure Bay officers A. Clay Rankin III, Joe N. Hendrix and
Bernie Burkholder, and former officer Francis L. Miller as defendants in
matters involving violations of Section 10(b) and Rule 10b-5 of the
Securities Exchange Act, violation of Nevada state securities laws, fraud and
negligent misrepresentation in connection with the Company's investment of
$10 million in exchange for a 20% interest in Treasure Bay, and the Company's
guarantee of $4.5 million of Treasure Bay's indebtedness. The defendants have
filed answers to the complaint and discovery is continuing.

         On December 15, 1994, Francis L. Miller filed a lawsuit in the
Mississippi Circuit Court, Second Judicial District, against the Company and
SFHI, as well as Paul W. Lowden and Suzanne Lowden, alleging, among other
things, that the Company made certain misrepresentations which induced
Francis Miller to entrust the management of his investments in Treasure Bay's
two Mississippi casinos to the Company and SFHI and to sell the Company and
SFHI a 20% ownership interest in Treasure Bay. The lawsuit was subsequently
amended to remove Suzanne Lowden as a defendant. The Company and SFHI filed a
successful motion to transfer this case to the Court.

         On December 7, 1999, the Court issued its Orders on the summary
judgment motions filed by the parties.  The Court partially granted the
Company's motion for summary judgment to some of the claims asserted by
Miller in his cross-complaint, but left some issues to be decided for trial.
The Court also denied Miller, et al's motion for summary judgment dismissing
the Company's remaining claims, thereby ensuring that the matter will
eventually proceed to trial against the defendants, very likely sometime in
late Spring 2000.  However, the Court granted one of the Miller defendants'
motions for summary judgment, in effect, precluding one of the claims made by
the Company from being raised at trial.  The Company has filed a Motion for
Reconsideration of this ruling with the Court on the grounds that the Court
misinterpreted the law in granting the motion.  It is anticipated that the
Court will issue a ruling on the Company's Motion for Reconsideration within
the next 2-3 months.  A trial date will then be set to decide the remaining
claims asserted against the Defendants.

Tax Matters

         On September 30, 1997, the United States Tax Court issued an adverse
ruling applicable to hotels and casinos which provide meals to employees. The
IRS has interpreted the Tax Court ruling to mean that nonqualifying employees
are required to recognize income based on the fair value of meals in excess
of the amount paid by the employee. Accordingly, employers may be liable for
withholding and payroll taxes associated with the fair value of the meals
provided to employees in excess of the amount paid by the employee. In May
1999 the Ninth Circuit reversed the Tax Court ruling. Effective for all tax
years beginning before, on, or after July 22, 1998 (the effective date of
Internal Revenue Code Section 119(b)(4)) employees are not required to
recognize income based on the fair value of the meal furnished as long as
more than one half of the employees to whom such meals are provided are
furnished the meals for the convenience of the employer.

Other

         In February 1998, the Company amended its agreement with the owner
of a recreational vehicle park, which purchased the rights and obligations
under contracts with members of Camperland, a recreational vehicle park
previously owned and operated by the Company. In accordance with the
amendment, the Company (i) reconveyed a first deed of trust on 14 acres of
vacant land owned by the existing park, which secured performance by the
existing park's operators in connection with the assumption of the Camperland
contracts, and (ii) was relieved of its obligation, in certain situations, to
make payment of $750,000 under certain circumstances and of all performance
obligations with regard to the Camperland contract.


                                      69

<PAGE>


23.  SUPPLEMENTAL STATEMENTS OF CASH FLOWS INFORMATION


         Supplemental statement of cash flows information for the years ended
September 30, 1999, 1998 and 1997 is presented below:

<TABLE>
<CAPTION>

                                                              1999             1998              1997
                                                           ----------       ----------        ----------
                                                                    (AMOUNTS IN THOUSANDS)
<S>                                                        <C>              <C>               <C>
Operating activities:
Cash paid during the year for interest, net of
  amounts capitalized of $0, $108 and $204
  for 1999, 1998 and 1997, respectively                    $   17,265       $   23,355        $   22,587
                                                           ==========       ==========        ==========
Cash paid during the year for income taxes:                $        -       $        -        $      100
                                                           ==========       ==========        ==========
Investing and financing activities:
  Capital lease obligations incurred in
  connection with the acquisition of
  machinery and equipment                                  $        -       $       22        $      208
                                                           ==========       ==========        ==========
Long-term debt incurred in connection with
  the acquisition of machinery and equipment               $      696       $   11,160        $    1,071
                                                           ==========       ==========        ==========
Preferred stock dividends at liquidation value:
Accrued                                                    $    2,132       $    1,516        $    1,516
                                                           ==========       ==========        ==========
</TABLE>

24. SUBSEQUENT EVENTS

         In November 1999, SLVC sold real property in Henderson, Nevada and
the Company and certain affiliates entered into certain agreements for $37.2
million. In connection with the sale, SLVC, the Company, SFHI and members of
the family of Paul W. Lowden, majority stockholder of the Company, entered
into non-compete agreements and the Company and SFHI granted rights of first
refusal with respect to the Santa Fe Hotel assets and securities. The total
consideration of $37.2 million was comprised of $22.5 million in cash and a
Promissory Note, payable on 60-days notice, in the principal amount of $14.75
million. The promissory note has been pledged to secure the SLVC Notes. Of
the cash proceeds, SLVC used $20.6 million to pay $6.1 million in accrued
interest and fees on the SLVC Notes, of which $5.0 million is included in
debt due upon sale of assets in the Consolidated Balance Sheet at September
30, 1999, and to repay $14.5 million principal amount of the SLVC Notes,
reducing the outstanding principal amount of SLVC Notes to $43 million.
Additionally, SLVC used approximately $500,000 to pay development and
construction obligations associated with the property. The balance of the
cash, approximately $1.4 million was retained for working capital. As of
September 30, 1999, the Company has classified $25.8 million in costs
incurred to acquire the Henderson property and related to development to
"Assets held for sale" and $19.5 million in obligations to "Debt due upon
sale of assets" in the Consolidated Balance Sheet. Accordingly, the Company
expects to report a pre-tax gain on sale of assets in the quarter ending
December 31, 1999 of approximately $12.9 million or $2.08 per common share,
subject to reimbursement of certain costs and net of costs incurred since
October 1, 1999.

         In December 1999, SLVC and the Company amended the terms of the SLVC
Notes. As amended, the SLVC Notes bear interest at 12% per annum, payable on
June 20, 2000 and mature on December 14, 2000. SLVC has a mandatory $3
million redemption obligation on June 20, 2000. Under certain conditions,
SLVC is permitted to use the proceed of the Promissory Note and to borrow an
additional $7.5 million, the proceeds of which may be used by SLVC to
purchase 13-1/2% Notes and pay principal or interest on the SLVC Notes. Under
certain circumstances, SLVC may distribute up to $7.5 million to the Company
in the form of cash or principal amount of 13 1/2% Notes.


                                      70

<PAGE>

25. SUPPLEMENTAL STATEMENT --- SEGMENT INFORMATION

     THE COMPANY'S PRIMARY OPERATIONS ARE IN THE HOTEL/CASINO INDUSTRY AND IN
FISCAL YEARS 1999, 1998 AND 1997 WERE CONDUCTED THROUGH PHI AND SFHI. "OTHER"
BELOW INCLUDES FINANCIAL INFORMATION FOR THE COMPANY'S OTHER OPERATIONS.

<TABLE>
<CAPTION>
                                                     TWELVE MONTHS ENDED SEPTEMBER 30
                                               --------------------------------------------------
                                                  1999                1998                 1997
                                               ---------           ---------            ---------
PIONEER HOTEL                                             (DOLLARS IN THOUSANDS)
----------------------------------
<S>                                            <C>                 <C>                  <C>
Operating revenues                             $  44,760           $  40,663            $  40,839
                                               =========           =========            =========
Operating income (loss)                        $   1,776           $ (44,998)           $      90
                                               =========           =========            =========
Interest expense                               $   7,882           $   8,139            $   8,700
                                               =========           =========            =========
Depreciation and amortization                  $   2,666           $   5,604            $   5,583
                                               =========           =========            =========
Rents                                          $     724           $     840            $   1,024
                                               =========           =========            =========
EBITDA (1)                                     $   8,648           $   6,597            $   7,626
                                               =========           =========            =========
Capital expenditures                           $   1,094           $   2,662            $     949
                                               =========           =========            =========
Identifiable assets (2)                        $  42,740           $  47,561            $ 107,629
                                               =========           =========            =========
SANTA FE HOTEL
----------------------------------
Operating revenues                             $  80,091           $  71,520            $  62,706
                                               =========           =========            =========
Operating income                               $  11,299           $  12,241            $   5,678
                                               =========           =========            =========
Interest expense                               $  14,723           $  14,072            $  13,280
                                               =========           =========            =========
Depreciation and amortization                  $   7,701           $   6,002            $   5,240
                                               =========           =========            =========
Rents                                          $       0           $   1,250            $   3,022
                                               =========           =========            =========
EBITDA (1)                                     $  22,116           $  20,619            $  14,871
                                               =========           =========            =========
Capital expenditures                           $   4,171           $  14,137            $   1,422
                                               =========           =========            =========
Identifiable assets (2)                        $  85,719           $  88,967            $  76,635
                                               =========           =========            =========
OTHER & ELIMINATIONS
----------------------------------
Operating revenues                             $     756           $     666            $   1,444
                                               =========           =========            =========
Operating loss                                 $  (3,899)          $  (3,456)           $     704
                                               =========           =========            =========
Interest expense                               $   3,303           $   3,161            $     628
                                               =========           =========            =========
Depreciation and amortization                  $   3,305           $   2,118            $     334
                                               =========           =========            =========
Rents                                          $       0           $       0            $       0
                                               =========           =========            =========
EBITDA (1)                                     $     137           $    (146)           $     705
                                               =========           =========            =========
Capital expenditures                           $    (266)          $      83            $     475
                                               =========           =========            =========
Identifiable assets (2)                        $  49,566           $  55,638            $  32,032
                                               =========           =========            =========
TOTAL
----------------------------------
Operating revenues                             $ 125,607          $  112,849            $ 104,989
                                               =========           =========            =========
Operating income (loss)                        $   9,176          $  (36,213)           $   5,064
                                               =========           =========            =========
Interest expense                               $  25,908          $   25,372            $  23,202
                                               =========           =========            =========
Depreciation and amortization                  $  13,672          $   13,724            $  11,157
                                               =========           =========            =========
Rents                                          $     724          $    2,090            $   4,046
                                               =========           =========            =========
EBITDA (1)                                     $  30,901          $   27,070            $  22,477
                                               =========           =========            =========
Capital expenditures                           $   4,999          $   16,882            $   2,846
                                               =========           =========            =========
Identifiable assets (2)                        $ 178,025          $  192,166            $ 216,296
                                               =========           =========            =========
</TABLE>

(1) EBITDA represents earnings before interest, taxes, depreciation and
amortization, rents, corporate expenses, reorganization expenses and other
nonrecurring charges.

(2) Identifiable assets represents total assets less elimination for
intercompany items.


                                      71

<PAGE>

26.      QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)           1999            1998
----------------------------------------        ----------     ----------
<S>                                             <C>            <C>

Revenues
   First Quarter                                $   30,154     $   27,359
   Second Quarter                                   32,251         28,671
   Third Quarter                                    32,251         28,839
   Fourth Quarter                                   30,951         27,980
                                                ----------     ----------
                                                $  125,607     $  112,849
                                                ==========     ==========
Operating Income (loss)
   First Quarter                                $    3,717     $    1,607
   Second Quarter                                    3,887          2,108
   Third Quarter                                       784          2,691
   Fourth Quarter                                      788        (42,619)
                                                ----------     ----------
                                                $    9,176     $  (36,213)
                                                ==========     ==========
Net Loss
   First Quarter                                $   (3,339)    $   (4,470)
   Second Quarter                                   (2,424)        (3,885)
   Third Quarter                                    (5,560)        (4,030)
   Fourth Quarter                                   (6,452)       (49,958)
                                                ----------     ----------
                                                $  (17,775)    $  (62,343)
                                                ==========     ==========
Net loss per
Common Share
   First Quarter                                $    (0.62)    $    (0.78)
   Second Quarter                                    (0.48)         (0.69)
   Third Quarter                                     (0.99)         (0.71)
   Fourth Quarter                                    (1.12)         (8.13)
                                                ----------     ----------
                                                $    (3.21)        (10.31)
                                                ----------     ----------
</TABLE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

         Not applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT EXECUTIVE
COMPENSATION AND OTHER INFORMATION

         The information regarding the directors and executive officers of
the Company to be included in the Company's Proxy Statement for the 2000
Annual Meeting of Stockholders (the "Proxy Statement") is incorporated herein
by reference.

ITEM 11. EXECUTIVE COMPENSATION

         The information regarding Executive Compensation to be included in
the Proxy Statement is incorporated herein by reference.

                                      72

<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information regarding Security Ownership to be included in the
Proxy Statement is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information regarding Certain Relationships And Related
Transactions to be included in the Proxy Statement is incorporated herein by
reference.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

   (a)   1. and 2.  Financial Statements and Schedules

         The financial statements and schedules filed as part of this report are
         listed in the Index to Consolidated Financial Statements under Item 8.

   (b)   Reports on Form 8-K filed during the last quarter of 1999.

         The Registrant filed a Current Report on Form 8-K dated November 15,
         1999 under Item 5. Other Events, reporting certain information relating
         to the sale of the Henderson property and an update with respect to the
         Pioneer Hotel, Inc. and Pioneer Finance Corp. bankruptcy proceedings.

   (c)  Exhibits

EXHIBIT
  NO.                           DESCRIPTION OF EXHIBIT

3.1      Articles of Incorporation and Bylaws of the Company (Previously filed
         with the Securities and Exchange Commission as an exhibit to the
         Company's S-4 (No. 33-67864) Registration Statement on Form 10-K dated
         June 15, 1982 and incorporated herein by reference.)

3.2      Certificate of Designation for Exchangeable Redeemable Preferred Stock.
         (Previously filed with the Securities and Exchange Commission as an
         exhibit to the Company's Registration Statement on Form S-4 (No.
         33-67864) and incorporated herein by reference.)

3.3      Amended and Restated Bylaws of Santa Fe Gaming Corporation. (14)

10.1     Form of Indenture (the "Pioneer Indenture") between Pioneer Finance,
         the Partnership and Security Pacific National Bank, as Trustee,
         relating to the 13-1/2% First Mortgage Bonds Due 1998 of Pioneer
         Finance (the "Bonds").(1)

10.2     Form of Bonds (included as an exhibit to the Pioneer Indenture). (1)


                                      73

<PAGE>

EXHIBIT
  NO.                           DESCRIPTION OF EXHIBIT

10.3     Form of Purchase Money Note relating to the acquisition of the Pioneer
         Hotel and Gambling Hall (the "Pioneer Acquisition") (included as an
         exhibit to the Pioneer Indenture).(1)

10.4     Form of Purchase Money Deed of Trust relating to the Bonds (included as
         an exhibit to the Pioneer Indenture).(1)

10.5     Form of Guaranty of the Partnership relating to the Bonds (included in
         the Pioneer Indenture).(1)

10.6     Form of Assignment Agreement from Pioneer Finance Corp. to the Trustee
         relating to the Bonds (included as an exhibit to the Pioneer
         Indenture).(1)

10.7     Form of Subordination Provision relating to the Bonds (included as an
         Exhibit to the Pioneer Indenture).(1)

10.8     Form of PARI PASSU Certificate relating to the Bonds (included as an
         exhibit to the Pioneer Indenture).(1)

10.9     Acquisition Agreement relating to the Pioneer Acquisition.(1)

10.10    Pioneer Ground Lease, as amended.(1)

10.11    Conformed Lessor's Agreement dated as of November 16, 1988 among
         Lessor, Lessee and Pioneer Operating Partnership relating to the
         Pioneer Acquisition.(1)

10.12    Notes secured by liens on office building in Las Vegas, Nevada in the
         original principal amounts of $301,598.05, $23,337.96 and $649,063.99
         bearing interest at 10%, 11% and 13.5% per annum, respectively.(2)

10.13    First Supplemental Indenture to Pioneer Indenture dated as of December
         21, 1990 among Pioneer Finance, and Sahara Casino Partners, L.P. and
         Security Pacific National Bank.(3)

10.14    Promissory Note in the amount of $2,760,079 dated October 10, 1990
         executed by Santa Fe Operating Limited Partnership in favor of Deutsche
         Credit Corporation, collateralized by equipment.(4)

10.15    Key Employee Stock Option Plan.(5)

10.16    Lease Modification Letter dated August 24, 1995 by and between Wet N'
         Wild Nevada, Inc. and Sahara Corporation.(6)

10.16    Deed of Trust, Fixture Filing and Financing Statement and Security
         Agreement with Assignment of Rents, dated as of January 16, 1996, by
         and among Sahara Las Vegas Corp., as trustor, Stewart Title of Nevada,
         as trustee, and SunAmerica Life Insurance Company, as beneficiary.(7)


                                      74

<PAGE>

EXHIBIT
  NO.                           DESCRIPTION OF EXHIBIT

10.18    Security Agreement, dated as of January 16, 1996, by and between Sahara
         Las Vegas Corp. and SunAmerica Life Insurance Company. (7)

10.19    Guaranty, dated as of January 16, 1996, made by Sahara Gaming
         Corporation in favor of SunAmerica Life Insurance Company. (7)

10.20    Sahara Las Vegas Corp. Tranche A Note due December 15, 1999, dated July
         31, 1997 (8)

10.21    Casino Properties Guaranty dated July 29, 1997 (8)

10.22    Sahara Resorts Guaranty dated July 29, 1997 (8)

10.23    Hacienda Hawaiian Guaranty dated July 29, 1997 (8)

10.24    First Amendment to Company Security Agreement dated July 29, 1997 (8)

10.25    Sahara Resorts Pledge Agreement dated July 29, 1997 (8)

10.26    Company Pledge Agreement dated July 29, 1997 (8)

10.27    Casino Properties Pledge Agreement dated July 29, 1997 (8)

10.28    Hacienda Hawaiian Pledge Agreement dated July 29, 1997 (8)

10.29    Second Amended and Restated Note Purchase Agreement dated as of
         November 25, 1997 among Registrant, SLVC and the holders named
         therein. (9)

10.30    Form of Tranche A Promissory Note. (9)

10.31    Form of Tranche B Promissory Note. (9)

10.32    Second Amendment to Deed of Trust, Fixture filing and Financing
         Statement and Security Agreement with Assignment of Rents executed and
         delivered on November 25, 1997 by SLVC in favor of SunAmerica Life
         Insurance Company, as Collateral Agent. (9)

10.33    Second Amendment to Security Agreement executed and delivered on
         November 25, 1997 between SLVC and SunAmerica Life Insurance Company,
         as Collateral Agent. (9)

10.34    Deed of Trust, Fixture Filing and Financing Statement and Security
         Agreement with Assignment of Rents executed and delivered on November
         5, 1997 by SLVC in favor of SunAmerica Life Insurance Company, as
         Collateral Agent. (9)


                                      75

<PAGE>

EXHIBIT
  NO.                           DESCRIPTION OF EXHIBIT

10.35    Second Amendment to Subordination, Non-Disturbance and Attornment
         Agreement dated November 25, 1997 among SLVC, Wet `N Wild Nevada, Inc.
         And SunAmerica Life Insurance Company, as Collateral agent. (9)

10.36    Second Amendment to the Environmental Indemnity Agreement executed and
         delivered on November 25, 1997 by Registrant and SLVC in favor of Sun
         America Life Insurance Company, as Collateral Agent. (9)

10.37    Environmental Indemnity Agreement issued by Registrant and SLVC on
         November 25, 1997 in favor of SunAmerica Life Insurance Company, as
         Collateral Agent. (9)

10.38    Consent to Amendment and Restatement delivered on November 25, 1997 by
         Registrant, Sahara Resorts, Casino Properties, Inc. and Hacienda
         Hawaiian Properties, Inc. (9)

10.39    Purchase Agreement by and between Santa Fe Gaming Corporation and Steve
         Allen dated November 21, 1997 (10)

10.40    First Supplemental Indenture with respect to 11% First Mortgage Notes
         due 2000 between Santa Fe Hotel Inc., Santa Fe Gaming Corporation and
         IBJ Schroder Bank & Trust Company dated as of April 14, 1998 (11)

10.41    Amended and Restated Note by and between Santa Fe Hotel Inc., Santa Fe
         Gaming Corporation in favor of PDS Financial Corporation-Nevada, as
         Collateral Agent dated April 14, 1998 (11)

10.42    Security Agreement between Santa Fe Hotel Inc. and PDS Financial
         Corporation-Nevada, as Collateral Agent dated April 14, 1998 (11)

10.43    Amended and Restated Promissory Note by and between Santa Fe Hotel
         Inc., Santa Fe Gaming Corporation in favor of PDS Financial
         Corporation-Nevada, as Collateral Agent dated April 14, 1998 (11)

10.44    Security Agreement between Santa Fe Hotel Inc. and PDS Financial
         Corporation-Nevada dated April 14, 1998 (11)

10.45    Form of Promissory Note due December 15, 2000 (11)

10.46    Deed of Trust, Fixture Filing and Financing Statement and Security
         Agreement with assignment of Rents executed and delivered on April 14,
         1998 by Santa Fe Hotel Inc. in favor of SunAmerica Life Insurance
         Company, as Collateral Agent. (11)

10.47    Security Agreement dated as of April 14, 1998 by Santa Fe Hotel Inc. in
         favor of SunAmerica Life Insurance Company, as Collateral Agent. (11)


                                      76

<PAGE>

EXHIBIT
  NO.                           DESCRIPTION OF EXHIBIT

10.48    Environmental Indemnity Agreement dated as of April 14, 1998 by Santa
         Fe Hotel Inc. in favor of SunAmerica Life Insurance Company, as
         Collateral Agent. (11)

10.49    Guaranty dated as of April 14, 1998 by Santa Fe Gaming Corporation in
         favor of SunAmerica Life Insurance Company, as Collateral Agent. (11)

10.50    Subordination and Intercreditor Agreement dated as of April 14, 1998
         among SunAmerica Life Insurance Company, as Collateral Agent, Santa Fe
         Hotel Inc. and IBJ Schroder Bank & Trust Company, as Trustee (11)

10.51    Amended and Restated Promissory Note dated as of October 1, 1998 by
         Santa Fe Gaming Corporation in favor of Sierra Construction Corp. (12)

10.53    Security Agreement by and between Hacienda Hotel Inc. and IBJ Schroder
         Bank & Trust Company dated November 30, 1998. (13)

10.54    Security Agreement by and between Santa Fe Coffee Company and IBJ
         Schroder Bank & Trust Company dated November 30, 1998. (13)

10.55    Security Agreement by and between Sahara Nevada Corp. and IBJ Schroder
         Bank & Trust Company dated November 30, 1998. (13)

10.56    Fourth Supplemental Indenture by and among IBJ Schroder Bank & Trust
         Company, Pioneer Finance Corp, Pioneer Hotel, Inc. and Santa Fe Gaming
         Corporation dated November 30, 1998. (13)

10.57    Security Agreement by and between Santa Fe Gaming Corporation and IBJ
         Schroder Bank & Trust Company dated November 30, 1998. (13)

10.58    Pledge Agreement by and between Santa Fe Gaming Corporation and IBJ
         Schroder Bank & Trust Company dated November 30, 1998. (13)

10.59    Employment Agreement by and among Santa Fe Gaming Corporation and
         Thomas K. Land dated October 1, 1998 (16)

10.60    First amendment to the Employment Agreement, dated October 1, 1998 by
         and among Santa Fe Gaming Corporation and Thomas K. Land. (14)

10.61    Management Agreement by and between Santa Fe Gaming Corporation and
         Santa Fe Hotel Inc. dated as of July 1, 1999. (15)

10.62    Management Agreement by and between Pioneer Hotel and Santa Fe Gaming
         Corporation dated as of December 30, 1998. (15)

10.63    First Amendment to Second Amended and Restated Note Purchase Agreement
         by and among Santa Fe Gaming Corporation, Sahara Las Vegas Corp.,
         SunAmerica Life Insurance Company, and Anchor National Life Insurance
         Company dated June 18, 1999. (15)


                                      77

<PAGE>

EXHIBIT
  NO.                           DESCRIPTION OF EXHIBIT

10.64    Purchase and Sale Agreement dated November 15, 1999 by and between SLVC
         and STN. (16)

10.65    Right of First Refusal dated November 15, 1999 by and among STN, SFGC
         and SFHI. (16)

10.66    Non-Competition Agreement dated November 15, 1999 by and among STN,
         SFHI, SLVC, and SFGC. (16)

10.67    First Amendment to Non-Competition Agreement dated November 16, 1999 by
         and among STN, SFHI, SLVC, and SFGC. (16)

10.68    Unsecured Promissory Note dated November 15, 1999 by STN to SLVC and
         the Rider to Station Casinos, Inc. Note dated November 15, 1999. (16)

10.69    Second Amendment to Second Amended and Restated Note Purchase Agreement
         dated November 15, 1999 by and among SLVC, SFGC, SunAmerica Life
         Insurance Company and Anchor National Life Insurance Company. (16)

10.70    Forbearance Agreement dated September 8, 1999 by and between SFGC and
         GMS Group, LLC.(16)

10.71    Third Amendment to Second Amended and Restated Note Purchase Agreement
         dated December 16, 1999 by and among SLVC, SFGC, SunAmerica Life
         Insurance Company and Anchor National Life Insurance Company.

10.72    Third Amendment to Deed of Trust, Fixture Filing and Financing
         Statement and Security Agreement with assignment of Rents executed and
         delivered on December 16, 1999 by Sahara Las Vegas Corporation in favor
         of SunAmerica Life Insurance Company, as Collateral Agent.

10.73    Third Amendment to Environmental Indemnity Agreement dated as of
         December 16 by Sahara Las Vegas Corporation in favor of SunAmerica Life
         Insurance Company, as Collateral Agent.

10.74    Third Amendment to Security Agreement dated as of April 14, 1998 by
         Sahara Las Vegas Corporation in favor of SunAmerica Life Insurance
         Company, as Collateral Agent.

22.      Subsidiaries of the Company. (5)

23.1     Consent of Deloitte & Touche LLP

27.      Financial Data Schedule


                                      78

<PAGE>

FOOTNOTES TO EXHIBIT INDEX

1)     Previously filed with the Securities and Exchange Commission as an
       exhibit to the Registration Statement on Form S-1 (No. 33-24589) of
       Pioneer Finance Corp., the Partnership and Pioneer Operating Partnership
       and incorporated herein by reference.

2)     Previously filed with the Securities and Exchange Commission as an
       exhibit to the Partnership's Registration Statement on Form S-1 (No.
       33-13214) and incorporated herein by reference.

3)     Previously filed with the Securities and Exchange Commission as an
       exhibit to post effective Amendment No. 5 to the Registration Statement
       on Form S-1 (No. 33-33031) of Sahara Finance Corp., Sahara Casino
       Partners, L.P., Sahara Operating Limited Partnership, Hacienda Operating
       Limited Partnership, Santa Fe Operating Limited Partnership, as filed on
       April 15, 1991 and incorporated herein by reference.

4)     Previously filed with the Securities and Exchange Commission as an
       exhibit to post effective Amendment No. 8 to the Registration Statement
       on Form S-1 (No. 33-33031) of Sahara Finance Corp., Sahara Casino
       Partners, L.P., Sahara Operating Limited Partnership, Hacienda Operating
       Limited Partnership, Santa Fe Operating Limited Partnership, as filed
       December 30, 1991.

5)     Previously filed with the Securities and Exchange Commission as an
       exhibit to Sahara Gaming Corporation's Annual Report on Form 10-K for the
       year ended September 30, 1993.

6)     Previously filed with the Securities and Exchange Commission as an
       exhibit to Sahara Gaming Corporation's Report on Form 10-K for the year
       ended September 30, 1995.

7)     Previously filed with the Securities and Exchange Commission as an
       exhibit to Sahara Gaming Corporation's Report on Form 10-Q for the
       quarter ended December 31, 1995.

8)     Previously filed with the Securities and Exchange Commission as an
       exhibit to Santa Fe Gaming Corporation's Report on Form 10-Q for the
       quarter ended June 30, 1997.

9)     Previously filed with the Securities and Exchange Commission as an
       exhibit to Santa Fe Gaming Corporation's Report on Form 8-K dated
       December 4, 1997.

10)    Previously filed with the Securities and Exchange Commission as an
       exhibit to Santa Fe Gaming Corporation's Report on Form 10-Q for the
       quarter ended December 31, 1997.

11)    Previously filed with the Securities and Exchange Commission as an
       exhibit to Santa Fe Gaming Corporation's Report on Form 10-Q for the
       quarter ended March 30, 1998.


                                      79

<PAGE>

12)    Previously filed with the Securities and Exchange Commission as an
       exhibit to Santa Fe Gaming Corporation's Report on Form 8-K dated October
       23, 1998.

13)    Previously filed with the Securities and Exchange Commission as an
       exhibit to Santa Fe Gaming Corporation's Report on Form 10-K for the year
       ended September 30, 1998.

14)    Previously filed with the Securities and Exchange Commission as an
       exhibit to Santa Fe Gaming Corporation's Report on Form 10-Q for the
       quarter ended March 30, 1999.

15)    Previously filed with the Securities and Exchange Commission as an
       exhibit to Santa Fe Gaming Corporation's Report on Form 10-Q for the
       quarter ended June 30, 1999.

16)    Previously filed with the Securities and Exchange Commission as an
       exhibit to Santa Fe Gaming Corporation's Report on Form 8-K dated
       November 15, 1999.


                                       80

<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) 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.

                                    SANTA FE GAMING CORPORATION

December 28, 1999                   By:  /s/ PAUL W. LOWDEN
                                         ------------------------------------
                                         Paul W. Lowden, President

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.

<TABLE>
<CAPTION>

         SIGNATURE                     TITLE                          DATE
         ---------                     -----                          ----
<S>                             <C>                             <C>

/s/ PAUL W. LOWDEN              Chairman of the Board
---------------------------     and President (Principal         December 28, 1999
Paul W. Lowden                  Executive Officer)


/s/ JAMES W. LEWIS              Director                         December 28, 1999
---------------------------
James W. Lewis


/s/ SUZANNE LOWDEN              Director                         December 28, 1999
---------------------------
Suzanne Lowden


                                Director                         December -, 1999
----------------------------
Peter J. Siris


/s/ JOHN DELANEY                Director                         December 28, 1999
----------------------------
John Delaney


/s/ THOMAS K. LAND              Director and Chief Financial    December 28, 1999
----------------------------    Officer (Principal Financial
Thomas K. Land                  and Accounting Officer)
</TABLE>

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