NEVADA GOLD & CASINOS INC, 10-K/A, 1997-10-02

NEVADA GOLD & CASINOS INC
10-K/A, 1997-10-02
MINERAL ROYALTY TRADERS

Previous: JONES INTERCABLE INC, SC 13E3, 1997-10-02

Next: NEVADA GOLD & CASINOS INC, DEF 14C, 1997-10-02

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K - AMENDED

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

For the fiscal year Ended
MARCH 31, 1997 0-8927

NEVADA GOLD & CASINOS, INC.
(Exact name of registrant as specified in its charter)

NEVADA 88-0142032
(State or other jurisdiction (IRS Employer
of incorporation) Identification Number)

3040 POST OAK BLVD., SUITE 675, HOUSTON, TEXAS 77056
(Address of principal executive offices) (Zip Code)

Registrant's telephone number: (713) 621-2245

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK, PAR VALUE $.12 PER SHARE
(Title of Class)

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 such filing
requirements for the past 90 days. (1) Yes [X] No [ ] (2) 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 Form 10-K or
any amendment to this Form 10-K. [ ]

The aggregate market value of Common Stock held by non-affiliates of the
Registrant at March 31, 1997, based upon the last reported sales price of the
NASDAQ Bulletin Board, was $14,610,831.

At March 31,1997, 8,349,046 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: NONE
<PAGE>
NEVADA GOLD & CASINOS, INC.
MARCH 31, 1997

PART I
ITEM 1. BUSINESS

GENERAL

Nevada Gold & Casinos, Inc. ("the Company") was formed in 1977 under the
name Pacific Gold & Uranium Corporation for the principal purpose of operating
and managing mining activities, primarily in the western United States. During
1993, in connection with the acquisition of a controlling interest in the
Company by Affiliates of the Company's current management, the Company's primary
focus was redirected toward the development of gaming and real estate properties
in Colorado. The Company's current business activities are described below:

GAMING DEVELOPMENT

In 1990, the State of Colorado amended its constitution to permit "limited
stakes gaming" in the cities of Cripple Creek, Central City and Black Hawk, each
considered an old mining town of historical significance. As a result, property
values in these communities increased substantially, particularly in the limited
areas that were zoned for gaming. During the fall of 1993, the Company commenced
negotiations with Clay County Holdings, one of the previous owners of the
property, to acquire certain properties located in and around the City of Black
Hawk (the "Colorado Properties") in exchange for a 75 percent ownership interest
in the Company. The acquisition of the Colorado Properties was accomplished in
two stages. During 1994 and 1995, the Company acquired all of Clay County
Holding's 60 percent undivided interest in the Colorado Properties. In exchange
for its undivided interest, Clay County Holdings was granted 3,166,667 and
268,101 shares of the authorized, but unissued shares of the Company on December
6, 1993 and August 1, 1994, respectively. This transaction (the "Clay County
Acquisition") gave Clay County Holdings a controlling interest in the Company.
The acquired undivided interest was recorded by the Company based upon the fair
market value of the interest as determined by an independent third party
appraisal. To complete the second stage of this transaction, on August 1, 1994
the Company acquired the remaining 40 percent undivided interest in the Colorado
Properties from an unrelated third party. In exchange for its undivided
interest, the seller was granted 1,936,333 shares of the Company's authorized
but unissued common stock. This remaining undivided interest was recorded by the
Company based upon the fair market value of the interest as determined by an
independent third party appraisal. On January 19, 1996, the Company issued an
additional 50,000 shares of stock associated with the Clay County Acquisition.
This additional issuance was due to an understatement in the original number of
shares outstanding at the time of the acquisition. The Colorado Properties
include four lots that have been zoned by the State of Colorado for gaming
purposes. Options on adjacent gaming lots (the "Weaver Parcel" and the "Woodall
Parcel") were purchased during 1995 for cash. The options on these lots were
assigned, and exercised by an affiliate of Caesars World, Inc. as a part of an
operating agreement.

2
<PAGE>

In June 1997, through wholly owned subsidiaries of each company, Nevada
Gold & Casinos, Inc. and Casino America, Inc. entered into a joint venture to
develop a new Isle of Capri casino in Colorado at Black Hawk, 30 miles west of
Denver. The plans are to develop, own and operate the Isle of Capri Black Hawk
as a premier casino gaming facility. The casino will be one of the first gaming
facilities encountered by customers traveling from Denver to the Black Hawk
market and, upon completion, it will be one of the largest gaming facilities in
Colorado. It will feature 90,000 square feet on one level with 1,100 slot
machines, 24 blackjack and poker games, a fine dining restaurant, a
delicatessen, a full service buffet, and an event center. The facility also will
include 1,000 on-site parking spaces. The Isle of Capri Black Hawk will be
designed and constructed pursuant to a bonded "guaranteed maximum price"
design/build agreement, which also provides for the addition of a hotel at the
option of the venture for an agreed-upon increase to the guaranteed maximum
price.

The Company holds its interest in the Isle of Capri Black Hawk through a
wholly owned subsidiary, Black Hawk Gold, Ltd., a Colorado Corporation ("Black
Hawk Gold"). The Company, through Black Hawk Gold, made a capital contribution
valued under the agreement at $7.5 million. The contribution consisted of land
valued at $7.9 million, subject to a note payable with a balance, including
principal and interest, of approximately $400,000 that was paid by the joint
venture. The property included lots 5, 6, 7 and 8 of Block 51, and adjoining
land comprised of over three acres located in Black Hawk, Colorado. Casino
America, Inc. will manage the casino under a long-term management agreement for
a fee based upon the revenues generated by the project. The development of the
project is subject to a number of conditions, including the receipt of all
required regulatory approvals, particularly approval from the Colorado Gaming
Division.

In March 1996, Nevada Gold & Casinos, Inc. and Caesar's World Gaming
Corporation ("Caesar's"), a subsidiary of ITT Corporation, had announced joint
development plans for this project. Although all the necessary land was
assembled, designs were completed, and operating agreements were signed, no
further action was taken. The Company's ownership interest in this project would
have been between 13% and 22%, depending upon the amount of land and cash
contributed by the Company. In August 1997, Casino America purchased Caesar's
interest in this project.

Under the terms of the original agreement with Casino America, the Company
would have retained about 48% interest in the joint venture and Casino America
would have owned about 52%. In July 1997, the operating agreement with Casino
America was amended. The Company's ownership was decreased to 45% and Casino
America's ownership was increased to 55% to compensate Casino America for
providing a Completion Capital Commitment and the Managers Subordination
Agreement. Pursuant to the amended operating agreement, the Company received
from Casino America a $500,000 loan, $700,000 in cash for sale of part of its
ownership interest in the joint venture, and an additional commitment to fund up
to $800,000 toward the Company's future cash requirements. The Company's
ownership of the joint venture was reduced to approximately 41% upon receipt by
the Company of the initial $1,200,000 and its ownership will be reduced to
approximately 36% if all of the additional $800,000 commitment is used.
Substantially all of the $1,200,000 proceeds were paid directly to creditors of
the

3
<PAGE>
Company in full payment of the Company's outstanding obligations to such
creditors. The Company has the option to repurchase the sold portion of its
ownership interest in the project within 180 days after the date of each
funding. The loan bears interest at the higher of 14.5% or Casino America's
highest cost of funds plus two percentage points and is due on August 20, 2000.

In January 1997, the Company engaged Jefferies and Company, Inc., a
nationally known investment banking concern prominent in the gaming industry, as
its exclusive financial advisor in connection with the structuring and financing
of the casino project. In August 1997, first mortgage notes in the aggregate
amount of $75,000,000 were issued by Isle of Capri Black Hawk, L.L.C. and its
wholly owned subsidiary, Isle of Capri Black Hawk Capital Corp. (collectively
the "Issuers"). These notes mature on August 31, 2004 and bear interest at 13%
per annum. Interest on the notes is payable semi-annually on each February 28
and August 31, commencing February 28, 1998. Contingent interest is payable on
the notes, on each interest payment date, in an aggregate amount equal to 5% of
the Isle of Capri Black Hawk L.L.C.'s consolidated cash flow for the two fiscal
quarters ending during the January or July immediately preceding such interest
payment date. The notes are secured by a first lien on substantially all of the
existing and future assets of the Issuers and are without recourse to the
members of Isle of Capri Black Hawk, L.L.C. or their respective parent or
affiliate entities.

The Company conveyed property to the City of Black Hawk for the
realignment of Miners Mesa Road in exchange for a fifteen foot strip of adjacent
gaming property which would increase the square footage available for gaming and
provide additional land to the joint venture.

REAL ESTATE DEVELOPMENT

On September 9, 1994, Gold Mountain Development, LLC was formed. Per
negotiated agreement with the other three members, Nevada Gold & Casino's
ownership was 40%. The Company had a nominal cost basis in this ownership. On
May 19, 1995, the Company transferred real estate having a cost basis of
$867,283, mortgages payable and certain other assets to Gold Mountain
Development, LLC. The Company received a note receivable from Gold Mountain in
the amount of $919,248 with interest at the rate of 14% per annum and maturing
on March 31, 1997. The Company was required to assume debt totaling $115,384.

On September 26, 1995, the Company acquired the remaining 60% interest in
Gold Mountain Development, LLC, making it a wholly owned subsidiary. The former
members received a portion of the land owned subject to the underlying
mortgages. The Company conveyed real estate having a cost basis of $242,063 and
a note in the amount of $150,000, which had a balance of approximately $9,000 as
of March 31, 1997. In accordance with this transaction, the Company was released
from $115,384 of debt which had been assumed with the original purchase of
equity into Gold Mountain Development, LLC. Approximately $96,000 of debt was
assumed by the former members. In connection with the acquisition of the
remaining interest in Gold Mountain Development, LLC, the value of the assets
owned by Gold Mountain Development, LLC were recorded at management's estimate
of fair value, with a resulting

4
<PAGE>
adjustment to the equity of Gold Mountain Development, LLC. Intercompany
balances have been eliminated in preparing the Company's financial statements as
of March 31, 1997 and 1996.

On July 9, 1996, President Clinton signed legislation authorizing a
public-private land exchange that will make possible the creation of a major new
residential and recreational development near the Black Hawk gaming area west of
Denver, while also preserving 8,700 acres of pristine wilderness area throughout
Colorado. Public law 104-158 authorizes the Bureau of Land Management to swap
133 separate tracts of federal land comprised of over 300 acres. This project is
designed to provide housing, commercial infrastructure, retail and resort
facilities for the fast growing gaming area of Black Hawk and Central City.

As of March 31, 1995, the Company entered into an agreement to purchase
100% of the outstanding common stock of Sunrise Land and Minerals, Inc.
("Sunrise"). The seller financed the entire purchase price of the acquisition
through a non-recourse note. Effective August 23, 1996, the Company retired the
short-term non-recourse note associated with the Sunrise purchase, through the
issuance of 166,667 restricted shares of the Company's common stock.

MINING INTERESTS

The Company had a joint-venture agreement with Cameco U.S., Inc.,
("Cameco") which was terminated effective March 31, 1996. Effective November 1,
1996, the Company entered into a new lease with Sagebrush Exploration, Inc.,
("Sagebrush") to explore, develop, and mine properties in the Goldfield Mining
District. The Company received a cash payment of $32,100 for annual land
maintenance fees, and advance minimum royalty payments of $5,000 per month. The
Company is also to receive a production royalty of five percent (5%) of "net
smelter returns" for all products mined or removed from the property. Sagebrush
may elect at any time during the course of the agreement to purchase up to one
percent (1%) of the royalty for the sum of $2.5 million. The Company will
receive from Sagebrush, upon approval of the Vancouver Stock Exchange, 50,000
shares of the capital stock from its parent company, Coromandel Resources, Ltd.,
("Coromandel"). The Company will receive an additional 50,000 shares of capital
stock of Coromandel one year from the effective date of this lease. This
agreement is for an initial term of 10 years. The lease can be extended at
Sagebrush's option for nine additional terms of 10 years each, so long as
Sagebrush is conducting exploration, development, or mining of the property. For
a period of 66 months from the effective date of this agreement, the Company has
the option to acquire a 49% working interest in the property. Sagebrush agrees
to incur expenditures for exploration and development of the property of not
less than $5 million in the aggregate, over the first five years of this
agreement. Sagebrush will also be responsible for keeping the property current
on any and all taxes and maintenance fees.

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

Financial reporting of the Company's industry segments is disclosed in the
body of the financial statements.

5
<PAGE>
BUSINESS RISK FACTORS

NEED FOR ADDITIONAL CAPITAL

Revenues from the Company have not been sufficient to cover the Company's
operating expenses during the past two years. In addition, there have been no
revenues from the Company's gaming operations to date since these are currently
in the predevelopment stage. Management does not expect significant increases in
revenues from any of its operations over the next year.

Through third parties and Affiliates, the Company increased its short-term
debt by $844,356 during the year ended March 31, 1997 to cover its operating
deficit and to reduce its long-term debt. Some funds were obtained through
private sales of restricted Company Stock to "accredited" investors, as that
term is defined under Securities and Exchange Commission Regulation D.

Effective December 31, 1996, the Board of Directors and common
stockholders having at least a majority of the voting power of the shares of the
Company authorized and approved the Company to authorize 500,000 shares of
Preferred Stock, $10 par value per share. The preferred stock may be issued in
one or more series, which may be determined at the time of issuance by the Board
of Directors without further action by the common stockholders. On December 31,
1996, the Board of Directors approved the issuance of 125,000 shares of
preferred stock and the Company issued 90,100 shares of 12% cumulative preferred
stock, $10 par value, which are callable by the Company. These shares were
issued in exchange for short term notes payable to Clay County Holdings, Inc.,
an affiliate of the Secretary, and accrued management fees due to Aaminex
Capital Corp.("Aaminex"), an affiliate of the President.

The Company will continue to require substantial capital to fund the
continued acquisition and development of the real estate properties and to cover
the anticipated operating deficits and debt maturities during the next several
years.

During the year ended March 31, 1996, the Company offered $8,500,000 in
Convertible Secured Notes. As of August 23, 1996, the Company withdrew this debt
offering. Funds in escrow were returned in compliance with the terms of the
offering.

On July 5, 1996, the Company issued $2,030,000 in discounted commercial
paper with a 31 day term for which it received proceeds of $2,000,000. The
commercial paper was paid in full at maturity.

6
<PAGE>
annum. Interest on the notes is payable semi-annually on each February 28 and
August 31, commencing February 28, 1998. Contingent interest is payable on the
notes, on each interest payment date, in an aggregate amount equal to 5% of the
Isle of Capri Black Hawk, L.L.C.'s consolidated cash flow for the two fiscal
quarters ending during the January or July immediately preceding such interest
payment date. The notes are secured by a first lien on substantially all of the
existing and future assets of the Issuers and are without recourse to the
members of the Isle of Capri Black Hawk, L.L.C. or their respective parent or
affiliate entities.

ENVIRONMENTAL CONSIDERATIONS

The casino hotel complex to be constructed in Black Hawk will be located
in an area that has been designated by the United States Environmental
Protection agency ("EPA") as a superfund site on the National Priorities List as
a result of contamination from historic mining activity in the area. The EPA is
entitled to proceed against owners and operators of properties located within
the superfund site for remediation and response costs associated with their
properties and with the entire site. The Isle of Capri Casino Black Hawk will be
located within the drainage basin of the North Clear Creek and therefore subject
to potentially contaminated surface and ground water from upstream
mining-related sources. Soil and ground water samples on the site indicate that
several contaminants existed in concentrations exceeding drinking water
standards. An affiliate of the Company, in cooperation with the EPA and the
Colorado Department of Health performed environmental analyses and tests and
removed all mined waste located on the gaming site. The Company has funded a
total of $345,584 to an affiliate to complete the remediation which has been
capitalized as cost of the property. No further remedial activity has been
required or is expected with respect to the gaming lots.

GOVERNMENTAL REGULATIONS

The ownership and operation of gaming facilities in Colorado are subject
to extensive state and local regulations. No gaming may be conducted in Colorado
unless licenses are obtained from the Colorado Limited Gaming Control Commission
(the "Colorado Commission"). In addition, the State of Colorado created the
Division of Gaming (the "Colorado Division") within its Department of Revenue to
license, implement, regulate, and supervise the conduct of limited stakes
gaming. The Director ("Colorado Director") of the Colorado Division under the
supervision of the Colorado Commission, has been granted broad powers to ensure
compliance with the law and regulations. The Colorado Commission, Colorado
Division, Colorado Director, and the city authorities in Black Hawk that have
responsibility for regulation of gaming are collectively referred to as the
"Colorado Gaming Authorities."

The laws, regulations and supervisory procedures of the Colorado Gaming
Authorities seek to maintain public confidence and trust that licensed limited
gaming is conducted honestly and competitively, that the rights of the creditors
of licensees are protected and that gaming is free from criminal and corruptive
elements. It is the stated policy of the Colorado Gaming Authorities that public
confidence and trust can be maintained only by strict regulation of all persons,
locations, practices, associations, and activities related to the operation of
the licensed gaming establishments and the manufacture and distribution of
gaming devices and equipment.

7
<PAGE>
The Colorado Commission is empowered to issue five types of gaming and
related licenses. The Isle of Capri Casino Black Hawk requires a retail gaming
license, which must be renewed each year, and the Colorado Division has broad
discretion to revoke, suspend, condition, limit or restrict the licensee at any
time. No person or entity can have an ownership interest in more than three
retail licenses, and the Company's business opportunities will be limited
accordingly. The Isle of Capri Casino Black Hawk has not yet obtained the
required gaming license. There is no assurance that such license will be
obtained.

There can be no assurance that the Company will be able to comply or
conduct business in accordance with applicable regulations. Furthermore, there
can be no assurance that additional state or federal statutes or regulations
will not be enacted at some future date which could have a material adverse
effect on the business operations of the Company.

ACCESS TO BLACK HAWK

The City of Black Hawk is located in a narrow valley in the foothills of
the Colorado Rocky Mountains and is accessible by winding mountain roads which
are generally two lanes and require extremely cautious driving, especially in
bad weather. Congestion on the roads leading into Black Hawk is not uncommon
during the peak summer season, holidays, and other times of the year and may
discourage potential customers from traveling to casinos located in the City of
Black Hawk. Black Hawk attracts most of Denver's customer flow by being the
closest gaming location to that city. Black Hawk has enjoyed an advantage over
Central City because gaming customers have to drive by, and, in part through,
Black Hawk, to reach Central City. The addition of a proposed road directly
connecting Central City with Interstate 70 may result in the elimination of this
particular advantage. There exists doubt, however, as to whether necessary state
funds will be committed to fund the proposed road. If the road were built as
currently proposed, Black Hawk could benefit because the proposed road provides
for a separate exit directly into Black Hawk.

COMPETITION

The gaming and casino industry is subject to intense competition,
particularly in the state of Colorado. As the number of gaming establishments in
Colorado has increased over the past two years, average revenues for some of the
smaller casinos located in Colorado have declined significantly. Future
initiatives could expand limited gaming in Colorado to other locations. In
addition to competing with other casinos in Black Hawk, the Isle of Capri Casino
Black Hawk may compete for customers with casinos in other gaming jurisdictions.
While the Isle of Capri Casino Black Hawk believes its casino will have
competitive advantages over the other gaming establishments in the area as a
primary result of its size and location, the Company believes that national,
regional, state, and local competition for the gaming markets, in general, will
be extremely intense during the foreseeable future. Many of the Company's
competitors have established positions in more locations, have greater financial
resources, and have more experience and expertise than the Company.

8
<PAGE>
EMPLOYEES AND OTHER MATTERS

The Company maintains a staff of seven employees as of March 31, 1997, who
were employed in executive, administrative and accounting functions.

REVERSE STOCK SPLIT

On August 23, 1996, the Company's Board of Directors ("Board") approved
and declared a three for one reverse stock split ("Stock Split") of the
authorized and issued and outstanding shares of common stock, par value $.04 per
share, effective September 23, 1996 (the "Record Date").

The Stock Split resulted in an increase in the par value of the Common
Stock from $.04 per share to $.12 per share. Shareholders holding less than one
share of Common Stock after the Stock Split will receive from the Company, in
lieu of a fraction of a share, payment for the fraction at $6.00 per share. All
other shareholders, (shareholders holding more than one share) owning any
fraction of a share after the Stock Split, were issued, at no cost to the
shareholder, such additional fraction of a share as is necessary to increase the
fractional share to a full share. Payment to each holder of less than one share
will be made upon receipt by the Company of such holder's stock certificate(s)
issued prior to the Record Date. Any fractional shares to be issued to holders
of greater than one share will be issued to each such holder upon receipt by the
Company's transfer agent, Nevada Agency & Trust Company, of such holder's stock
certificates issued prior to the Record Date. Upon completion of the reverse
split, the total number of authorized shares of Common Stock was reduced from
30,000,000 to 10,000,000 and the total number of issued and outstanding shares
of Common Stock was reduced from 24,831,861 shares to up to 8,277,287 shares,
depending upon the number of fractional shares issued to complete the Stock
Split. All shares, including any shares reserved for issuance pursuant to any
options or warrants granted by the Company, will be automatically adjusted to
reflect the Stock Split.

From April 29, 1994 through September 22, 1996, the common stock of the
Company was listed on the "Bulletin Board" of NASDAQ under the symbol "NGCI." As
a result of the reverse stock split, the common stock of the Company was listed
on the "Bulletin Board" of NASDAQ under the symbol "NGCS," beginning on
September 23, 1996.

ITEM 2. PROPERTIES

The Company's principal properties consist of undeveloped land located in
and around Black Hawk, Colorado and Nevada County, California. Certain Colorado
properties are zoned for gaming, while the other properties are intended for
residential, commercial, and recreational real estate development. The Company's
mining properties are located in the Goldfield Mining District, Nye and
Esmeralda Counties, Nevada.

9
<PAGE>
The Company leases approximately 3,500 square feet of office space in
Houston, Texas, and a 1,300 square foot apartment/office in Denver Colorado. The
monthly rental for both facilities is currently $3,800. The Company believes
that its existing facilities are adequate to meet its current needs and to
accommodate anticipated growth.

ITEM 3. LEGAL PROCEEDINGS

None.

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

On December 31, 1996, the Board of Directors and common stockholders
having at least a majority of the voting power of the shares of the Company
authorized and approved the Company to authorize 500,000 shares of preferred
stock, $10 par value per share. The preferred stock may be issued in one or more
series, which may be determined at the time of issuance by the Board of
Directors without further action by the common stockholders. This was done by a
consent to action without a meeting of the majority shareholders and the Board
of Directors of the Company and votes representing 5,338,489 shares were cast
for this matter.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

The Company's Common Stock is traded on the NASDAQ "Bulletin Board", under
the symbol NGCS. There were approximately 3200 shareholders of record, as of
March 31, 1997. The following table sets forth the high and low sales prices
relating to the Company's common stock for the last two fiscal years:

FISCAL YEARS ENDED
-------------------------------------
MARCH 31, 1997 MARCH 31, 1996
----------------- -----------------
HIGH BID LOW BID HIGH BID LOW BID
-------- ------- -------- -------
First Quarter $6.188 $4.125 $10.125 $4.125
Second Quarter 6.563 3.375 9.750 7.500
Third Quarter 5.375 2.875 8.250 3.375
Fourth Quarter 3.000 1.500 7.125 3.750

DIVIDENDS

There have never been any dividends declared by the Registrant. The
Registrant's losses do not currently indicate the ability to pay cash dividends,
and Registrant does not indicate the intention of paying cash dividends in the
foreseeable future.

10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA

The Selected Financial Data set forth below should be read in conjunction
with the accompanying financial statements and notes, thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- --------

Revenues ............. $ 94,004 $ 468,113 $ 77,900 $ 60,152 $ 48,000

Net loss ............. 1,613,078 598,752 434,364 113,203 32,465

Net loss per
share * .............. .20 .07 .06 .05 .02

Total assets ......... 4,956,023 5,057,691 4,213,808 2,265,932 490,175

Long term debt ....... 208,900 395,798 579,480 369,446 26,537
- ------------
* Adjusted retroactively for the three-for-one reverse stock split effective
August 23, 1996.

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

The following discussions of the Company's results of operations and
financial position should be read in conjunction with the financial statements
and notes pertaining thereto, appearing elsewhere in this Form 10-K. Management
is of the opinion that inflation and changing prices will have little, if any,
effect on the Company's financial position or results of operations.

RESULTS OF OPERATIONS

COMPARISON OF FISCAL YEARS ENDED MARCH 31, 1997 AND 1996

Revenues decreased $374,109 for the year ended March 31, 1997 compared to
the prior year. Royalty Income decreased $30,000. The current year included
$25,000 from the Sagebrush Exploration rental agreement which was effective
beginning November 1, 1996 and $5,000 under the terms of a rental agreement with
Cameco that was terminated effective March 31, 1996. The prior year included
$60,000 from Cameco. Included in Other Income for the year ended March 31, 1996
was $350,000 recognized as a gain on the disposal of assets in which the Company
had a nominal cost basis and $50,000 as part of a rental agreement. The current
year includes a $57,644 increase in interest income including interest earned on
the proceeds of the $2,000,000 commercial paper and $33,385 interest income
received from BSH, Inc., an affiliate of the President and Treasurer.

11
<PAGE>
General and Administrative expenses increased $69,669, including increases
of $22,441 for travel, $16,500 for commission expense, $12,241 for depreciation
and $9,713 for telephone expense.

Interest Expense increased $208,625, for the year ended March 31, 1997 as
compared to last year. The current year included $30,000 interest on the
$2,000,000 commercial paper and an increase of $178,625 in other interest
expense, primarily for other short-term notes payable and interest on the
accrued expenses related to the management agreement with Aaminex.

Salaries increased $86,132 for the year ended March 31, 1997 as compared
to last year, because employees have been added to handle accounting and other
functions previously outsourced by the Company.

Legal and Professional fees increased $255,745. Consulting expenses
increased $346,321, generally due to expense recorded on stock options awarded.
Accounting expense decreased $67,337 because employees were added to handle
functions previously outsourced by the Company. Legal fees decreased $23,240.
The prior year included legal fees attributable to the Caesars Black Hawk
project and the $8.5 million debt offering.

Other Expenses increased $20,046, including an increase in printing
expenses, generally related to printing of the Form 10K and shareholders'
meeting materials.

COMPARISON OF FISCAL YEARS ENDED MARCH 31, 1996 AND 1995

Revenues increased $390,213 for the year ended March 31, 1996 compared to
the prior year. Included in Other Income for the year ended March 31, 1996 was
$350,000 recognized as a gain on the disposal of assets in which the Company had
a nominal cost basis and $50,000 as part of a rental agreement.

General and Administrative expenses increased $126,746 including increases
of $44,104 for contract labor, $32,350 for office rent, $10,000 for management
fees to Aaminex, an affiliate of the President, and $16,459 for property tax.

Interest Expense increased $122,769 for the year ended March 31, 1996 as
compared to the prior year, including interest on short-term notes payable and
interest on the debt related to the acquisition of properties. Additionally, the
Company entered into capital lease agreements for furniture and computer
equipment that has been recorded as a lease obligation, thus resulting in
interest expense being incurred in connection with the lease payments.

Salaries increased $24,379 for the year ended March 31, 1996 as compared
to the prior year, because employees were added, generally to perform accounting
functions that had previously been outsourced by the Company.

12
<PAGE>
Legal and Professional fees increased $259,540. Accounting expense
increased $135,594, resulting from a change in auditors, as well as the
continued development of the system of internal controls and financial
reporting. The Company also incurred costs pertaining to assistance in the
preparation of various regulatory filings. Legal fees increased $134,825,
including legal fees attributable to the Caesars Black Hawk project and the $8.5
million debt offering.

Other Expenses increased $21,168, including increases in promotional
expenses, partially a result of sponsorship of a reception and a presentation at
the Regional Investment Bankers Conference.

LIQUIDITY AND CAPITAL RESOURCES

Through third parties and Affiliates, the Company increased its short-term
debt by $844,356 to cover its operating deficit and to reduce its long-term
debt. Some funds were obtained through private sales of restricted Company Stock
to "accredited" investors, as that term is defined under Securities and Exchange
Commission Regulation D.

During the year ended March 31, 1996, the Company offered $8,500,000 in
Convertible Secured Notes. As of August 23, 1996, the company withdrew this debt
offering. Funds in escrow were returned in compliance with the terms of the
offering.

On July 5, 1996, the Company issued $2,030,000 in discounted commercial
paper with a 31-day term for which it received proceeds of $2,000,000. The
commercial paper was paid in full at maturity.

13
<PAGE>
consolidated cash flow for the two fiscal quarters ending during the January or
July immediately preceding such interest payment date. The notes are secured by
a first lien on substantially all of the existing and future assets of the
Issuers and are without recourse to the members of the Isle of Capri Black Hawk,
L.L.C. or their respective parent or affiliate entities.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required thereunder is included in this report as set forth in
the "Index to Financial Statements".

Index to Financial Statements

Report of independent public accountants 15
Report of independent public accountants
from prior years 16
Balance sheets 17
Statements of operations 18
Statements of stockholders' equity 19-20
Statements of cash flows 21
Notes to financial statements 22-39

14
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
Nevada Gold & Casinos, Inc.:

We have audited the accompanying consolidated balance sheets of Nevada Gold &
Casinos, Inc. and subsidiaries (a Nevada corporation in the development stage)
as of March 31, 1997 and the related statements of operations, stockholders'
equity and cash flows for the year then ended and the 1997 amounts included in
the cumulative amounts during the development stage (Inception -December 27,
1993). 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 audit. We did not audit the financial statements of
Nevada Gold & Casinos, Inc. for the periods prior to April 1, 1996. Those
statements were audited by other auditors whose reports have been furnished to
us and our opinion, insofar as it relates to amounts for the periods prior to
April 1, 1996, included in the cumulative totals, is based solely upon the
report of the other auditors.

We conducted our audit 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 audit and the reports of other auditors provide a reasonable
basis for our opinion.

In our opinion, based on our audit and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Nevada Gold & Casinos, Inc. and
subsidiaries as of March 31, 1997, and the results of their operations and their
cash flows for the year then ended and for the 1997 amounts included in the
cumulative amounts for the period from Inception to March 31, 1997, in
conformity with generally accepted accounting principles.

/s/ PANNELL KERR FORSTER OF TEXAS, P. C.
Pannell Kerr Forster of Texas, P. C.
Houston, Texas
July 11, 1997 (except with respect to the matters discussed in Notes 1 and 13,
as to which the date is September 24, 1997)

15
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Nevada Gold & Casinos, Inc.:

We have audited the accompanying balance sheets of Nevada Gold & Casinos, Inc.
(a Nevada corporation in the development stage) as of March 31, 1996, and 1995
and the related statements of operations, stockholders' equity and cash flows
for the years then ended and the related statements of operations and cash flows
for the period from the inception of the development stage (Inception -December
27, 1993) to March 31, 1996. 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 did not audit the financial
statements of Nevada Gold & Casinos, Inc. for the period from Inception through
March 31, 1994. Such statements are included in the cumulative inception to
March 31, 1996 totals of the statements of operations and cash flows and reflect
total revenues and net loss of 10 percent and 10 percent, respectively, of the
related cumulative totals. Those statements were audited by other auditors whose
reports have been furnished to us and our opinion, insofar as it relates to
amounts for the period from Inception to March 31, 1994, included in the
cumulative totals. is based solely upon the report of the other auditors.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 and the report of other auditors provide a reasonable
basis for our opinion.

In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Nevada Gold & Casinos, Inc. as of March 31, 1996, and
1995 and the results of its operations and its cash flows for the years then
ended and for the period from Inception to March 31, 1996. in conformity with
generally accepted accounting principles.

As discussed in Note 1 to the financial statements , revenues have not been
sufficient to cover the Company's operating expenses during the past several
years. In addition, there have been no revenues from the Company's gaming
operations to date since these activities are currently in the predevelopment
stage. Management does not expect significant increases in revenues from any of
its operations over the next year. The Company will require substantial
additional capital to fund the continued acquisition and development of gaming
and real estate properties and to cover the Company's anticipated operating
deficits and debt maturities over the next several years. The Company intends to
fund such capital requirements through a combination of debt and equity
offerings. However, there is no assurance that these offerings will be
successful or that proceeds from these offerings, if successful, will be
sufficient to meet all of the Company's future cash requirements. The short term
viability of the Company is dependent upon the Company's ability to raise
sufficient capital to meet its cash requirements. In addition, the Company has
signed a Operating Agreement with Caesars World Inc. ("Caesars") concerning the
development of a casino hotel complex. However, there is no assurance that the
development of a successful casino will be completed. The ownership and
operation of gaming facilities are subject to extensive state and local
regulations. There is no assurance that the Company will be able to comply or
conduct business in accordance with applicable regulations. The long term
viability of the Company is dependent upon successful completion and operation
of a casino hotel complex. The factors described above raise substantial doubt
about the Company's ability to continue as a going concern. The accompanying
financial statements have been prepared assuming that the Company will continue
as a going concern. If the Company is unable to continue as a going concern, the
values realized from the Company's assets may be less than the carrying amounts
reported in its financial statements. The accompanying financial statements do
not include any adjustments relating to the recoverability and classification of
asset carrying amounts or the amount and classification of liabilities that
might result should the Company be unable to continue as a going concern.

ARTHUR ANDERSEN LLP
Houston, Texas
May 24, 1996 (except with respect to the matters discussed in Notes 1 and 14, as
to which the date is July 31, 1996).

16
<PAGE>
NEVADA GOLD & CASINOS, INC.
BALANCE SHEETS
AS OF MARCH 31, 1997 AND 1996

1997 1996
----------- -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents .......................... $ 78,245 $ 76,371
Short term investments ............................. 17,408 109,789
Receivable from broker ............................. -- 125,000
Other assets ....................................... 65,000 --
----------- -----------
TOTAL CURRENT ASSETS ............................... 160,653 311,160

Property and assets held for development ........... 4,203,418 4,127,084

Mining properties & claims ......................... 480,812 480,812
Furniture, fixtures and equipment, net ............. 111,140 138,635
----------- -----------

TOTAL ASSETS ....................................... $ 4,956,023 $ 5,057,691
=========== ===========

LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities ........... $ 325,893 $ 538,002
Short term notes payable ........................... 1,504,367 1,606,481
Current portion of long term debt .................. 112,492 106,313
----------- -----------
TOTAL CURRENT LIABILITIES .......................... 1,942,752 2,250,796
----------- -----------
LONG-TERM DEBT
Mortgages payable, net of current portion .......... 176,632 202,661
Notes payable, net of current portion .............. 32,268 193,137
----------- -----------
TOTAL LONG-TERM DEBT ............................... 208,900 395,798
----------- -----------
TOTAL LIABILITIES .................................. 2,151,652 2,646,594
----------- -----------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY

Preferred stock, $10 par value, 500,000 shares
authorized, 90,100 shares outstanding at
March 31, 1997 ................................. 901,000 --

Common stock, $.12 par value, 10,000,000 shares
authorized, 8,349,046 and 8,097,371 shares
outstanding at March 31, 1997 and 1996,
respectively ................................... 1,001,886 971,685
Additional paid in capital ......................... 5,956,959 4,881,808
Accumulated deficit prior to development stage
(12/27/93) ......................................... (2,296,077) (2,296,077)
Accumulated deficit during development stage ....... (2,759,397) (1,146,319)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY ......................... 2,804,371 2,411,097
=========== ===========
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......... $ 4,956,023 $ 5,057,691
=========== ===========

The accompanying notes are an integral part of these financial statements

17
<PAGE>
NEVADA GOLD & CASINOS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1997, 1996 AND 1995
AND CUMULATIVE AMOUNTS DURING DEVELOPMENT STAGE SINCE DECEMBER 27, 1993

CUMULATIVE
AMOUNTS
DURING
DEVELOPMENT
STAGE
(SINCE
1997 1996 1995 12/27/93)
----------- ----------- ----------- -----------
REVENUES
Royalty income ......... $ 30,000 $ 60,000 $ 55,000 $ 204,000
Other income ........... 64,004 408,113 22,900 496,169
----------- ----------- ----------- -----------
TOTAL REVENUES ......... 94,004 468,113 77,900 700,169
----------- ----------- ----------- -----------
EXPENSES
General &
administrative ....... 464,226 394,557 220,954 1,129,155
Interest expense ....... 338,218 129,593 6,826 487,021
Salaries ............... 149,511 63,379 39,000 278,985
Legal & professional
fees ................. 652,876 397,131 159,094 1,267,951
Other .................. 102,251 82,205 86,390 296,454
----------- ----------- ----------- -----------
TOTAL EXPENSES ......... 1,707,082 1,066,865 512,264 3,459,566
----------- ----------- ----------- -----------
NET LOSS ............... $(1,613,078) $ (598,752) $ (434,364) $(2,759,397)
=========== =========== =========== ===========
PER SHARE INFORMATION
Weighted average number
of common shares and
equivalent outstanding .. 8,219,096 8,136,788 7,123,076 6,443,829
=========== =========== =========== ==========
Net loss per common
share ................... $ (.20) $ (.07) $ (.06) $ (.43)
=========== =========== =========== ==========

The accompanying notes are an integral part of these financial statements

18
<PAGE>
NEVADA GOLD & CASINOS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1997, 1996, AND 1995
AND CUMULATIVE AMOUNTS DURING DEVELOPMENT STAGE SINCE DECEMBER 27, 1993
<TABLE>
<CAPTION>
Stock Preferred Stock Common Stock
Subscriptions Shares Amount Shares * Amount
------------- ------ ------ -------- ------
<S> <C> <C> <C> <C>
Balance at 3/31/93 $ $ 1,426,939 $171,233

Stock issued for cash 133,333 16,000
Stock issued for property (Note 5)
12/27/93 3,166,667 380,000
Cash for stock subscriptions 295,500
Contribution of salaries to paid in
capital by officers
Net loss
------- ------- --------- --------- -------
Balance at 3/31/94 295,500 4,726,939 567,233

Stock subscriptions outstanding (295,500)
Stock issued for property
(Note 5) 8/1/94 2,204,434 264,532
Stock issued for cash 3/31/94 390,000 46,800
Stock issued for cash 4/15/94 392,400 47,088
Stock issued for cash

Stock issued for cash 8/15/94 295,371 35,445
Net loss
------- ------- --------- --------- -------
Balance at 3/31/95 8,009,144 961,098

Stock issued for cash 2/7/96 2,784 334
Stock issued associated with debt

offering 3/31/96 9,820 1,178
Stock issued for promotional-
and Employee benefits 2/8/96 4,151 498
Stock issued for accounting
Expenses 2/8/96 7,472 897
</TABLE>
Additional Total
Paid Accumulated Stockholders'
In Capital Deficit Equity
---------- ------------ -------------
Balance at 3/31/93 $2,559,028 $(2,296,077) $ 434,184

Stock issued for cash 84,000 100,000
Stock issued for property (Note 5)
12/27/93 703,000 1,083,000
Cash for stock subscriptions 295,500
Contribution of salaries to paid in
capital by officers 1,000 1,000
Net loss (113,203) (113,203)
--------- ---------- ---------
Balance at 3/31/94 3,347,028 (2,409,280) 1,800,481

Stock subscriptions outstanding (295,500)
Stock issued for property
(Note 5) 8/1/94 182,468 447,000
Stock issued for cash 3/31/94 46,800
Stock issued for cash 4/15/94 541,512 588,600
Stock issued for cash

Stock issued for cash 8/15/94 486,610 522,055
Net loss (434,364) (434,364)
--------- ---------- ---------
Balance at 3/31/95 4,557,618 (2,843,644) 2,675,072

Stock issued for cash 2/7/96 5,930 6,264
Stock issued associated with debt

offering 3/31/96 20,917 22,095
Stock issued for promotional-
and Employee benefits 2/8/96 13,189 13,687
Stock issued for accounting
Expenses 2/8/96 24,834 25,731

19
<PAGE>
NEVADA GOLD & CASINOS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1997, 1996, AND 1995
AND CUMULATIVE AMOUNTS DURING DEVELOPMENT STAGE SINCE DECEMBER 27, 1993
<TABLE>
<CAPTION>
Stock Preferred Stock Common Stock
Subscriptions Shares Amount Shares * Amount
------------- --------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Additional stock issued for property
(Note 5) 1/19/96 50,000 6,000
Investment banker's option expense
Interest paid in stock 3/31/96 14,000 1,680
Net loss
------------- --------- -------- ---------- ---------
Balance at 3/31/96 8,097,371 971,685
Stock issued for cash 4/30/96 1,667 200
Stock issued for services 8/9/96 2,000 240
Stock issued for note 8/23/96 166,667 20,000
Stock issued for services 8/30/96 8,749 1,050
Stock issued for interest 9/4/96 833 100
Stock issued for note 12/23/96 33,007 3,961
Stock issued for cash 12/23/96 5,000 600
Stock issued for services 12/31/96 2,596 312
Stock issued for note and
management fee 12/31/96 90,100 901,000
Stock issued for note 2/27/97 31,917 3,830
Consultant and investment bankers
option expense
Other, including fractional shares (761) (92)
Net loss
------------- --------- -------- ---------- ----------
Balance at March 31, 1997 $ 90,100 $901,000 8,349,046 $1,001,886
============= ========= ======== ========== ==========

Additional Total
Paid Accumulated Stockholders'
In Capital Deficit Equity
---------- ----------- ----------
Additional stock issued for property
(Note 5) 1/19/96 (6,000)
Investment banker's option expense 225,000 225,000
Interest paid in stock 3/31/96 40,320 42,000
Net loss (598,752) (598,752)
---------- ----------- -----------
Balance at 3/31/96 4,881,808 (3,442,396) 2,411,097
Stock issued for cash 4/30/96 3,550 3,750
Stock issued for services 8/9/96 5,760 6,000
Stock issued for note 8/23/96 522,966 542,966
Stock issued for services 8/30/96 27,974 29,024
Stock issued for interest 9/4/96 2,400 2,500
Stock issued for note 12/23/96 95,060 99,021
Stock issued for cash 12/23/96 6,900 7,500
Stock issued for services 12/31/96 312
Stock issued for note and
management fee 12/31/96 901,000
Stock issued for note 2/27/97 47,238 51,068
Consultant and investment bankers
option expense 363,250 363,250
Other, including fractional shares 53 (39)
Net loss (1,613,078) (1,613,078)
---------- ----------- -----------
Balance at March 31, 1997 $5,956,959 $(5,055,474) $ 2,804,371
========== =========== ===========
</TABLE>
* Adjusted for three-for-one reverse stock split.

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

20
<PAGE>
NEVADA GOLD & CASINOS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1997, 1996, AND 1995
AND CUMULATIVE AMOUNTS DURING DEVELOPMENT STAGE SINCE DECEMBER 27, 1993
<TABLE>
<CAPTION>
CUMULATIVE
AMOUNTS
DURING
DEVELOPMENT
STAGE (SINCE
1997 1996 1995 12/27/93)
------------ --------- ---------- -----------
<S> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $ (1,613,078) $(598,752) $ (434,364) $(2,759,397)

Adjustment to reconcile net loss to
net cash
Provided (used) by operating
expenses
Depreciation 26,612 14,370 5,488 46,470
Consultant and investment
banker option expense 320,625 - - 320,625
Changes in operating assets and
liabilities:
Receivables (7,619) 230,644 (15,433) 206,525
Accounts payable and accrued
liabilities 530,908 377,474 125,442 1,067,040
------------ --------- ---------- -----------
NET CASH PROVIDED (USED) IN OPERATING
ACTIVITIES (742,552) 23,736 (318,867) (1,118,737)
------------ --------- ---------- -----------
CASH FLOW FROM INVESTING ACTIVITIES:

Property and assets held for development (53,263) (410,919) (572,841) (1,272,514)
Purchase of furniture, fixtures and
equipment - (23,736) (5,302) (29,038)
------------ --------- ---------- -----------

NET CASH USED IN INVESTING ACTIVITIES (53,263) (434,655) (578,143) (1,301,552)
------------ --------- ---------- -----------
CASH FLOW FROM FINANCING ACTIVITIES

Salaries contributed by officers - - - 1,000
Common stock issued for cash, net of
offering costs 31,250 28,359 861,954 1,021,563
Payment for fractional shares (36) (36)

Proceeds from debt 2,952,751 501,407 132,004 3,586,162

Payments on debt (2,186,276) (131,656) (54,293) (2,411,942)

Prepaid stock subscriptions - - - 295,500
------------ --------- ---------- -----------
NET CASH PROVIDED BY FINANCING
2,492,247
ACTIVITIES 797,689 398,110 939,665
------------ --------- ---------- -----------
NET INCREASE (DECREASE) IN CASH 1,874 (12,809) 42,655 71,958

BEGINNING CASH BALANCE 76,371 89,180 46,525 6,287
------------ --------- ---------- -----------
$ $ $ $
ENDING CASH BALANCE $ 78,245 $ 76,371 $ 89,180 $ 78,245
============ ========= ========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
CASH PAID FOR INTEREST $ 161,084 $ 84,149 $ 6,826 $ 264,443
============ ========= ========== ===========
CASH PAID FOR TAXES - - - -
============ ========= ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.

21
<PAGE>
NEVADA GOLD & CASINOS, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
1. BUSINESS

Nevada Gold & Casinos, Inc.'s (the "Company") principal business
historically was mineral exploration and development of properties indirectly,
principally through investments in partnerships and joint ventures. On December
27, 1993, control of the Company changed, and the Company began to explore the
real estate development and gaming businesses in Colorado. The Company is
considered to be in the development stage since December 27, 1993. In January
1994, the Company changed its name from Pacific Gold Corporation to Nevada Gold
& Casinos, Inc. While the Company is maintaining its mining business, it is
anticipated that its growth will be in the real estate and casino businesses.

22
<PAGE>
Under the terms of the original agreement with Casino America, the Company
would have retained about 48% interest in the joint venture and Casino America
would have owned about 52%. In July 1997, the operating agreement with Casino
America was amended. The Company's ownership was decreased to 45% and Casino
America's ownership was increased to 55% to compensate Casino America for
providing a Completion Capital Commitment and the Managers Subordination
Agreement. Pursuant to the amended operating agreement, the Company received
from Casino America a $500,000 loan, $700,000 in cash for sale of part of its
ownership interest in the joint venture, and an additional commitment to fund up
to $800,000 toward the Company's future cash requirements. The Company's
ownership of the joint venture was reduced to approximately 41% upon receipt by
the Company of the initial $1,200,000 and its ownership will be reduced to
approximately 36% if all of the additional $800,000 commitment is used.
Substantially all of the $1,200,000 proceeds were paid directly to creditors of
the Company in full payment of the Company's outstanding obligations to such
creditors. The Company has the option to repurchase the sold portion of its
ownership interest in the project within 180 days after the date of each
funding. The loan bears interest at the higher of 14.5% or Casino America's
highest cost of funds plus two percentage points and is due on August 20, 2000.

The Company conveyed property to the City of Black Hawk for the
realignment of Miners Mesa Road in exchange for rights and title to a fifteen
foot strip of adjacent gaming property which would increase the square footage
available for gaming and provide additional land to the joint venture.

There have been no revenues from the Company's gaming operations to date
since these are currently in the predevelopment stage. Revenues have not been
sufficient to cover the Company's operating expenses during the past several
years. Management does not expect significant increases in revenues from any of
its operations over the next year. As discussed in Note 13 to the financial
statements, in July 1997, the Company signed an amended Operating Agreement with
Casino America, Inc. concerning the development of a casino. Pursuant to this

23
<PAGE>
agreement, the Company exchanged part of its ownership interest in the casino
venture for cash, a loan, and a commitment of additional funds for future cash
requirements. The long-term viability of the Company is dependent upon the
successful completion and operation of a casino.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND EQUIVALENTS. Interest bearing deposits and other investments,
with original maturities of three months or less, are considered cash and cash
equivalents.

MINING PROPERTIES AND CLAIMS. The Company capitalizes costs of acquiring
and developing mineral claims until such time as the properties are placed into
production. At that time, costs will be amortized on a units-of-production
basis. Such costs include the costs to acquire and improve the claims, including
land related improvements, such as roads. The Company carries these costs on its
books at the lower of its basis in the claims, or the net realizable value of
the mineral reserves contained in the claims. Other mining properties are
recorded at their acquisition price. At March 31, 1997 and 1996, management
believes the net realizable value of the mineral reserves is in excess of the
Company's cost in the claims.

PROPERTY HELD FOR DEVELOPMENT. Property held for development consists of
undeveloped land located in and around Black Hawk, Colorado and Nevada County,
California. Certain Colorado properties are zoned for gaming, while the other
properties are intended for residential, commercial, and recreational real
estate development. The Company has capitalized certain direct costs of
pre-development activities together with capitalized interest. Property held for
development is carried at the lower of cost or net realizable value.

IMPACT OF NEW ACCOUNTING STANDARDS. The Company adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" on April 1, 1996.
The impact of this adoption was not material to the Company's financial
statements. The Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation," on April 1, 1996. SFAS No. 123 encourages, but does not require
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company has chosen to continue to account for
stock-based compensation using the intrinsic value method described in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. Accordingly, compensation for stock
options is measured as the excess, if any, of the market value of the Company's
stock at the date of grant over the amount an employee must pay to acquire the
stock.

SFAS No. 123 requires that for stock options or warrants issued to
non-employees, such as vendors or outside directors, all transactions must be
accounted for based on the fair value of the consideration received or the fair
value of the equity instruments issued, whichever is more reliably measurable.

24
<PAGE>
FURNITURE, FIXTURES AND EQUIPMENT. The Company depreciates furniture,
fixtures, and equipment over their estimated useful lives, ranging from 2 to 7
years, using the straight-line method. Expenditures for furniture, fixtures, and
equipment are capitalized at cost. When items are retired or otherwise disposed
of, income is charged or credited for the difference between net book value and
proceeds realized thereon. Ordinary maintenance and repairs are charged to
expense, and replacements and betterments are capitalized.

COMMON STOCK SPLIT. On August 23, 1996, the Company's Board of Directors
approved and declared a three-for-one reverse stock split of the Company's
authorized, issued and outstanding shares of common stock, par value $.04 per
share. Holders of the Common Stock were not entitled to cumulative voting. The
stock split was accompanied by an increase in the par value of the common stock
from $.04 per share to $.12 per share. All references in the consolidated
financial statements referring to shares, share prices, per share amounts and
stock plans have been adjusted retroactively for the three-for-one reverse stock
split.

LOSS PER SHARE DATA. Loss per share is based on the weighted average
number of common shares and common equivalent shares outstanding during each
year. Options are considered to be common stock equivalents and are a component
of weighted average shares outstanding, to the extent that such options are
dilutive as calculated using the treasury stock method.

RECLASSIFICATIONS. Certain prior-year balances have been reclassified to
conform to current year presentations.

CONSOLIDATION. These financial statements are consolidated for all wholly
owned subsidiaries as of March 31, 1997 and 1996. All significant intercompany
transactions and balances have been eliminated in the financial statements.

USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that effect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

3. SHORT TERM INVESTMENTS

On March 27, 1996, the Company purchased a certificate of deposit, which
bears interest at the rate of 4.60% per annum that matured and was redeemed on
September 28, 1996. The certificate of deposit was pledged as collateral on a
loan of same amount at the same financial institution. See Note 7.

25
<PAGE>
4. RECEIVABLE FROM BROKER

At March 31, 1996, the Company, through its investment bankers, had
recorded a receivable from broker for a debt offering, in the amount of $125,000
for the amount subscribed, together with the related indebtedness. See Note 8.
During the year ended March 31, 1997, this debt offering was withdrawn and the
funds held in escrow were returned in compliance with the terms of the offering.

5. REAL ESTATE AND ASSETS HELD FOR DEVELOPMENT

In 1990, the State of Colorado amended its constitution to permit "limited
stakes gaming" in the cities of Cripple Creek, Central City and Black Hawk, each
of which was considered an old mining town of historical significance. As a
result, property values in these communities have increased substantially,
particularly in the limited areas that have been zoned for gaming. During the
fall of 1993, the Company commenced negotiations with Clay County Holdings, one
of the previous owners of the property, to acquire certain properties located in
and around the City of Black Hawk (the "Colorado Properties") in exchange for a
75 percent ownership interest in the Company. The acquisition of the Colorado
Properties was accomplished in two stages. During 1994 and 1995, the Company
acquired all of Clay County Holding's 60 percent undivided interest in the
Colorado Properties. In exchange for its undivided interest in the real estate,
Clay County Holdings was granted 3,166,667 and 268,101 shares of the authorized,
but unissued shares of the Company on December 6, 1993 and August 1, 1994,
respectively. This transaction (the "Clay County Acquisition") gave Clay County
Holdings a controlling interest in the Company. The acquired undivided interest
was recorded by the Company based upon the fair market value of the interest as
determined by an independent third party appraisal. To complete the second stage
of this transaction, on August 1, 1994 the Company acquired the remaining 40
percent undivided interest in the Colorado Properties from an unrelated third
party. In exchange for its undivided interest, the seller was granted 1,936,333
shares of the Company's authorized but unissued common stock. This remaining
undivided interest was recorded by the Company based upon the fair market value
of the interest as determined by an independent third party appraisal. On
January 19, 1996, the Company issued an additional 50,000 shares of stock
associated with the Clay County Acquisition. This additional issuance was due to
an understatement in the original number of shares outstanding at the time of
the acquisition. The Colorado Properties include four lots which have been zoned
by the State of Colorado for gaming purposes. Options on adjacent gaming lots
were purchased during 1995 for cash. The options on these lots were assigned to,
and exercised by, an affiliate of Caesars World, Inc. as a part of the operating
agreement. In June 1997, the Company entered into a joint venture agreement with
Casino America, Inc. to develop a new Isle of Capri Casino in Black Hawk,
Colorado. As part of this agreement, Casino America, Inc. has entered into a
separate agreement with an affiliate of Caesars World, Inc. to acquire the lots
that were previously acquired by Caesars. The Company's management believes that
the acquired gaming lots which are located at the entrance of the Black
Hawk/Central City gaming area, are uniquely situated to take advantage of the
traffic flow coming into the area.

26
<PAGE>
On September 9, 1994, Gold Mountain Development, LLC ("Gold Mountain") was
formed. Per negotiated agreement with the other three members, the Company's
ownership was 40%. The Company had a nominal cost basis in this ownership. On
May 19, 1995, the Company transferred real estate having a cost basis of
$867,283, mortgages payable and certain other assets to Gold Mountain. The
Company received a note receivable from Gold Mountain in the amount of $919,248
with interest at the rate of 14% per annum and maturing on March 31, 1997.
The Company was required to assume debt totaling $115,384.

On September 26, 1995, the Company acquired the remaining 60% interest in
Gold Mountain, making it a wholly owned subsidiary. The former members received
a portion of the land owned subject to the underlying mortgages. The Company
conveyed real estate having a cost basis of $242,063 and a note in the amount of
$150,000, which had a balance of $24,693 as of March 31, 1997. In accordance
with this transaction, the Company was released from $115,384 of debt which had
been assumed with the original purchase of equity of Gold Mountain.
Approximately $96,239 of debt was assumed by the former members. In connection
with the acquisition of the remaining interest in Gold Mountain, the value of
the assets owned by Gold Mountain were recorded at management's estimate of
their fair value, with a resulting adjustment to the equity of Gold Mountain.
Intercompany balances have been eliminated in preparing the Company's financial
statements as of March 31, 1997 and 1996.

As of March 31, 1995, the Company entered into an agreement to purchase
100% of the outstanding common stock of Sunrise Land and Minerals, Inc.
("Sunrise"). The seller financed the entire purchase price of the acquisition
through a non-recourse note. Effective August 23, 1996, the Company retired the
short-term non-recourse note associated with the Sunrise purchase, through the
issuance 166,667 of restricted shares of the Company's common stock.

The Company has capitalized certain costs associated with the
pre-development activities related to the hotel/casino property in Black Hawk,
Colorado. The amounts included in pre-development costs are costs that are
directly attributable to the pre-development of the project.

6. MINING PROPERTIES AND CLAIMS

The Company had a joint-venture agreement with Cameco U.S., Inc.,
("Cameco") which was terminated effective March 31, 1996. Effective November 1,
1996, the Company entered

27
<PAGE>
into a new lease with Sagebrush Exploration, Inc., ("Sagebrush") to explore,
develop, and mine the properties in the Goldfield Mining District. The Company
received a cash payment of $32,100 for annual land maintenance fees, and advance
minimum royalty payments of $5,000 per month. The Company is also to receive a
production royalty of five percent (5%) of "net smelter returns" for all
products mined or removed from the property. Sagebrush may elect at any time
during the course of the agreement to purchase up to one percent (1%) of the
royalty for the sum of $2.5 million. The Company will receive from Sagebrush,
upon approval of the Vancouver Stock Exchange, 50,000 shares of the capital
stock from Sagebrush's parent company, Coromandel Resources, Ltd.,
("Coromandel"). The Company will receive an additional 50,000 shares of capital
stock of Coromandel one year from the effective date of this lease. This
agreement is for an initial term of 10 years. The lease can be extended at
Sagebrush's option for nine additional terms of 10 years each, so long as
Sagebrush is conducting exploration, development, or mining of the property. For
a period of 66 months from the effective date of this agreement, the Company has
the option to acquire a 49% working interest in the property. Sagebrush agrees
to incur expenditures for exploration and development of the property of not
less than $5 million in the aggregate, over the first five years of this
agreement. Sagebrush will also be responsible for keeping the property current
on any and all taxes and maintenance fees.

7. SHORT TERM NOTES PAYABLE

The following notes will become due and payable on or before March 31, 1998:

1997 1996
---------- ---------
Note payable to a Trust, dated 3/31/95,
calling for interest of 8%, principal &
interest due at maturity 3/31/97,
secured by pledge of 100% of stock in
Sunrise Land & Minerals, Inc.
Principal and interest was converted into
166,667 shares of
stock in August 1996. $ 0 $525,000

Notes payable to individuals, eight in
the amount of $25,000 each and three
notes in the amount of $50,000 each. The
notes bear interest at a rate of 12% per
annum, and mature 10/24/97, secured by
gaming lots that are owned by the Company.
Notes aggregating $150,000 have been
assigned to an affiliate of the Company. (A) 350,000 350,000

Note payable to a bank, dated 3/28/95,
calling for interest of 6.60%, interest
paid through 5/28/96, entire principal
due and paid at maturity of 9/28/96,
secured by certificate of deposit for
$100,000 (Note 3.) 0 100,000

Note payable dated 6/21/96, maturing on
9/30/97, calling for 18% interest on any
portion not paid by the maturity date,
secured by stock owned by an affiliate
of the Company. (A) 179,788 0

28
<PAGE>
Note payable dated 3/31/97, maturing on
9/30/97, calling for 18% interest on any
portion not paid by the maturity date,
secured by stock owned by an affiliate
of the Company. (A) 67,116 0

Note payable to individual, dated
7/9/96, calling for interest of 12%,
principal and interest due at maturity
9/30/97, secured by stock owned by an
affiliate of the Company. (A) 75,000 0

Note payable to a trust, dated 7/28/96,
calling for interest of 12.5%, principal
and interest due at maturity 9/30/97,
secured by stock owned by an affiliate
of the Company. (A) 50,000 0

Note payable to individual, dated
1/11/97, calling for interest of 12%,
principal and interest due at maturity
2/1/98, secured by stock owned by an
affiliate of the Company. (A) 30,000 0

Note payable to individual, dated
1/11/97, calling for interest of 12%,
principal and interest due at maturity
2/1/98, secured by stock owned by an
affiliate of the Company. 30,000 0

Note payable to individual, dated
2/1/97, calling for interest of 12%,
principal and interest due at maturity
2/1/98, secured by stock owned by an
affiliate of the Company. (A) 25,000 0

Note payable to individual, dated
1/31/97 calling for interest of 12%,
principal and interest due at maturity
4/1/97, subsequently extended to
8/30/97, secured by stock owned by an
affiliate of the Company. (A) 20,000 0

Note payable to individuals, dated
5/15/96 calling for interest of 12%,
principal and interest due at maturity
5/15/97, secured by stock owned by an
affiliate of the Company. (A) 12,000 0

Note payable to individual, dated
2/17/97, calling for interest of 12%,
principal and interest due at maturity
2/17/98, secured by stock owned by an
affiliate of the Company. 40,000 0

Note payable to individual, dated
2/17/97, calling for interest of 12%,
principal and interest due at maturity
2/17/98, secured by stock owned by an
affiliate of the Company. 20,000 0

Note payable, dated 1/31/97, calling for
interest of 18%, principal and interest
due at maturity 7/30/97, secured by
stock owned by an affiliate of the
Company. (A) 424,000 0

Note payable, dated 9/26/95 calling for
21% interest on any portion not paid by
11/24/95, principal and interest due on
demand, secured by land. 9,072 38,971

29
<PAGE>
Note payable to individual, dated
3/31/95, calling for interest of 10%,
principal and interest is due on demand.
Note is secured by furniture and
fixtures. (A) 16,165 16,165

Note payable to an individual, dated
12/5/95, calling for interest of 12%,
principal and interest is due 10/3/97,
secured by patented mining claims. (A) 25,000 25,000

Earnest money promissory note, dated
10/20/95, due on 9/30/97. 40,000 0

Earnest money promissory note, dated
10/20/95, due on 5/10/97. 10,000 0

Note payable to corporation, dated
1/21/94, calling for interest of 8%,
principal and interest due on demand,
secured by patented mining claim. 0 24,821

Note payable to employee, dated 12/1/96,
calling for interest of 12%, payable in
monthly payments of $1,879 through
4/1/97. 1,879 0

Notes payable to affiliates consisting
of seven individual notes bearing
interest at 10%, all payable on demand.(A) 79,347 526,524
---------- ----------
Total short-term notes payable $1,504,367 $1,606,481
========== ==========

(A) These notes were paid in full or otherwise satisfied subsequent to March 31,
1997. See Note 13 Subsequent Event.

30
<PAGE>
8. LONG TERM DEBT

MORTGAGES PAYABLE. Mortgages payable are comprised of ten mortgage notes,
all secured by real property, consisting of undeveloped land in the city of
Black Hawk, Colorado, or in an adjacent area in the county of Gilpin. The
mortgage terms as of March 31, 1997 and 1996 are as follows:

1997 1996
-------- --------
Note payable, interest at 8%, payable in
monthly payments of $177, through December,
1998. $ 3,464 $ 5,238

Note payable, interest at 8%, payable in
monthly payments of $177, through December,
1998. 3,464 5,238

Note payable, interest at 8%, payable in
monthly payments of $329, through December,
1998. 20,571 22,968

Note payable, interest at 8%, payable in
monthly payments of $284, through December,
1998. 5,544 8,612

Note payable, interest at 8%, payable in
monthly payments of $1,658, through February,
1999. 35,215 52,907

Note payable, interest at 8%, payable in
monthly payments of $1,262, through December,
2003. 78,752 87,232

Note payable, interest at 8%, payable in
monthly payments of $188, through December, 2003 11,737 13,106

Note payable, interest at 8.5%, payable in
monthly payments of $575, through December,
2003. 35,356 39,395

Note payable, interest at 8%, payable in
semi-annual payments of $822, through February,
2004. 8,868 9,742

Note payable, interest at 8%, payable in
monthly payments of $294, through December 2003. 18,363 0
-------- --------
Total mortgages payable 21,334 244,438

Current portion of mortgages payable (44,702) (41,777)
-------- --------
Long term mortgages payable $176,632 $202,661
======== ========

31
<PAGE>
The aggregate principal maturities on long term mortgages for the years
ending March 31, are as follows:

1998 $ 44,702
1999 60,393
2000 20,762
2001 22,539
2002 24,423
Thereafter 48,515
--------
Total $221,334
========

OTHER LONG-TERM NOTES AND CAPITAL LEASES PAYABLE. Long-term notes and
capital leases payable as of March 31, 1997 and 1996 are as follows:

1997 1996
--------- ---------
Capital leases for acquisition of computers and
furniture, principal and interest payments in
the combined amount of $4,483 monthly,
maturity 1998 and 2001 respectively. $ 69,755 $ 102,370

Note payable to individual dated 7/15/94,
calling for interest of 8%, principal and
interest payments in monthly amounts of $2,000,
maturity 9/30/97. (A) 30,303 30,303

Note payable associated with the Company's
$8.5 million secured convertible debt
offering, calling for interest of 10%, for the
first two years, expiring 6/30/01, interest
to be paid semi-annually. Offering was
withdrawn 8/23/96 (Note 4). 0 125,000
--------- ---------
Total other long term notes payable 100,058 257,673

Current portion of other long-term notes and
capital leases payable (67,790) (64,536)
--------- ---------
Other long term notes and capital leases payable $ 32,268 $ 193,137
========= =========

(A) These notes were paid in full or otherwise satisfied subsequent to March 31,
1997. See Note 13 Subsequent Event.

The other long-term note payable is due within the year ending March 31,
1998.

32
<PAGE>
The Company entered into two capital leases for four computers and office
furniture. The leases expire in 1998 and 2001. Future minimum lease payments for
capital leases for the years ending March 31, are as follows:

1998 $ 50,659
1999 16,138
2000 16,138
2001 10,758
--------
93,693
Interest and sales tax (23,938)
--------
Net Present Value $ 69,755
========

9. TAXES BASED ON INCOME

The Company adopted SFAS No. 109, "Accounting for Income Taxes", effective
April 1, 1993. Under SFAS No. 109, deferred tax liabilities are determined based
on the difference between financial statement and tax bases of all assets and
liabilities, measured by using the enacted statutory tax rates. The principal
difference between book and tax bases which gives rise to a deferred tax
liability consists of depreciation.

SFAS No. 109 also provides for the recording of a deferred tax asset for
net operating loss carryforwards. For the years ended March 31, 1997 and 1996,
the Company had net operating loss carryforwards amounting to $4,270,977 and
$3,048,958 respectively. The loss carryforwards expire as follows:

1998 $ 111,759
1999 63,406
2000 103,298
2001 340,495
2002 206,292
2003 310,240
2004 76,101
2005 348,266
2006 278,648
2008 12,130
2009 111,926
2010 425,947
2011 602,051
2012 1,280,418
---- ----------
$4,270,977
==========

33
<PAGE>
The loss carryforwards are subject to certain limitations under the
Internal Revenue Code. The Company has recorded a deferred tax asset in each
year amounting to $1,452,132 and $1,036,646 as of March 31, 1997 and 1996,
respectively, as a result of the future tax benefit of the net operating loss
carryforward, determined by applying the enacted statutory rate of 34 percent to
such carryforwards. However, the Company believes that the utilization of these
net operating loss carryforwards could be significantly limited due to a change
in ownership in 1994. Since the ability of the Company to realize the deferred
tax asset is not certain, a valuation allowance has been recorded for both years
in an amount equal to the deferred tax asset.

MARCH 31, MARCH 31,
1997 ACTIVITY 1996
---------- -------- --------
Deferred tax assets:
Net operating loss carryforwards $1,452,132 $415,486 $1,036,646
Valuation allowance for deferred
tax assets (1,452,132) (415,486) (1,036,646)
---------- -------- ----------
Net deferred tax asset $ 0 $ 0 $ 0
========== ======== ==========

Reconciliations between the statutory federal income tax (benefit) rate and the
Company's effective income tax (benefit) rate as a percentage of loss from
continuing operations were as follows:

YEAR ENDED MARCH 31,
----------------------------------------
1997 1996
----------------------------------------
PERCENT DOLLARS PERCENT DOLLARS
------- ------- ------- -------
Tax benefit at statutory federal
rate (34%) $(439,434) (34%) $203,576)
Permanent differences:
Expired NOL & other 23,948 0
Increase in valuation allowance
related to current year net
operating
loss 34% 415,486 34% 203,576
---- --------- ---- --------
Effective income tax benefit rate 0% $ 0 0% $ 0
==== ========= ==== ========

10. STOCK OPTIONS AND WARRANTS

On March 31, 1992, the Board of Directors authorized the issuance of stock
options to various individuals for services rendered, for the purchase of
306,118 shares of the Company's common stock at $0.12 per share, all of which
were exercised as of March 31, 1995.

34
<PAGE>
Additionally, on September 17, 1993, options to purchase 83,334 shares of
the common stock of the Company, were granted in exchange for legal services.
All such options were exercised during the year ended March 31, 1995.

The options were granted as of March 31, 1996, in lieu of cash for
services rendered, as follows:

Options issued for Compensation

SERVICE # OF SHARES
------- -----------
Management 40,000
Management 40,000
Investment Bankers 33,334
Employee Compensation 10,002
Employee Compensation 1,167

The options were granted as of March 31, 1997, in lieu of cash for
services rendered, as follows:

Options issued for Compensation

SERVICE # OF SHARES
------- -----------
Management 33,336
Investment Bankers 233,334
Geological Consulting 14,209
Financial Advisory Services 666,667

The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation". Accordingly, compensation expense of $320,625 has been recorded
in 1997, in accordance with the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and
related Interpretations.

35
<PAGE>
Information regarding the options for 1997 and 1996 is as follows:

1997 1996
--------- -------
Options outstanding, beginning of year 184,501 81,333
Options granted 947,546 119,501
Options exercised (3,334) (9,820)
Options expired (1,167) (6,513)
--------- -------
Options outstanding, end of year 1,127,546 184,501
--------- -------
Options exercisable, end of year 1,127,546 184,501
--------- -------
Options available for grant, end of year - -
========= =======

Weighted average option exercise price information for 1997 and 1996 is
as follows:

1997 1996
---- ----
Outstanding at beginning of year $2.97 $1.64
Granted during the year 2.04 3.78
Exercised during the year 1.00 2.25
Expired during the year 1.00 2.25
Outstanding at end of year 2.19 2.97
Exercisable at end of year 2.19 2.97

Significant option groups outstanding at March 31, 1997 and related
weighted average price and life information is as follows:

OPTIONS OPTIONS EXERCISE REMAINING
GRANT DATE OUTSTANDING EXERCISABLE PRICE LIFE (YEARS)
---------- ----------- ----------- ----- ------------
April 1, 1994 66,667 66,667 $1.50 2
September 12, 1995 33,334 33,334 2.25 4 months
November 20, 1995 80,000 80,000 4.50 1.67
April 11, 1996 280,879 280,879 1.54 2
July 1, 1996 666,667 666,667 2.25 2.25

The weighted average fair value at date of grant for options granted
during 1997 and 1996 was $1.70 and $2.45 per option, respectively. The fair
value of options at date of grant was estimated using the Black-Scholes model
with the following weighted average assumptions:

1997 1996
---- ----
Expected life (years) 3 years 3 years
Interest rate 5.41% 7.03%
Dividend yield - -

36
<PAGE>
Had compensation cost for the Company's stock option plan been determined
based on the fair value at the grant date in 1997 and 1996 consistent with the
provisions of SFAS No. 123, the Company's net loss would have increased to the
proforma amounts indicated below:

1997 1996
---- ----
Net loss - as reported $1,613,078 $598,752
Net loss - proforma 1,925,792 759,552
Loss per share - as reported .20 .07
Loss per share - proforma .23 .09

In connection with the investment banking agreement signed in October
1993, the Company issued stock options during the fiscal year ended March 31,
1995, the Company granted options to its investment bankers, providing for the
issuance of 66,667 shares of stock, at an option price of $1.50 per share. This
option was granted on April 1, 1994, and expires on April 1, 1999, and the
Company issued 33,334 stock options in association with the assistance of that
certain debt offering funded by the Company's investment bankers to remediate
the gaming lots. The option price is $2.25 per share, expiring on August 1,
1997.

Options were also granted in connection with the debt offering that was in
process at the year ended March 31, 1995 to the holders of notes payable by the
Company, as described in Note 7. Such options grant the holders of the notes a
total of 11,667 shares, exercisable at $2.25 per share based upon the debt
subscribed of $350,000 and an additional 4,667 options were granted to the
brokers. The unexercised options expired at March 31, 1996, with 9,167 shares
being exercised by note holders, and 654 shares being exercised by brokers.

During the year ending March 31, 1997, in connection with an investment
banking agreement, the Company issued 233,334 stock options at an option price
of $1.50, expiring April 11, 1999.

Additionally, 14,209 stock options were issued to a Director for services
related to the environmental remediation project, at an option price of $1.50,
expiring April 11, 1999.

The Company granted warrants to purchase 666,667 shares of common stock at
$2.25 a share to Pravin Banker or Assigns for financial advisory services during
1996. These options expire on July 1, 1999.

37
<PAGE>
11. STOCK SUBSCRIPTIONS

During the years ended March 31, 1995 and 1994, the Company recorded a
sale of stock to an accredited individual at $.25 per share totaling $100,000; a
private stock placement, offered to accredited investors, at $1.50 per share
totaling $588,660, (including $295,500 of prepaid stock subscriptions as of
March 31, 1994); and an additional private stock placement at $2.25 per share
totaling $664,582. The proceeds of the private stock placements were recorded
net of offering expenses.

12. RELATED PARTY TRANSACTIONS

In the ordinary course of business, the Company has entered into
transactions with officers, directors and other related entities. The majority
of such transactions include loans made or received from the related party. The
following summarizes such transactions during the years ended March 31, 1997 and
1996.

During the year ended March 31, 1997, the Company paid off a working
capital loan in the amount of $7,034 from Bingle Northwest, an affiliate of the
President. The note payable to ADT Resources, a wholly owned subsidiary of
Aaminex Capital Corporation ("Aaminex"), remained unchanged as of March 31,
1997.

The Company shares office space and other office expenses with Aaminex .
The Company's President is also the President of Aaminex. Under the terms of a
management agreement, the Company is obligated to pay $8,333 per month to
Aaminex for the full-time services of Mr. Winn. Management fees under the
agreement totaled $100,000 annually during the years ended March 31, 1997 and
1996. In addition, the Company's note payable to Aaminex was paid in full during
the year ended March 31, 1997.

Effective December 31, 1996, the Board of Directors and common
stockholders having at least a majority of the voting power of the shares of the
Company authorized and approved the Company to authorize 500,000 shares of
Preferred Stock, $10 par value per share. The preferred stock may be issued in
one or more series, which may be determined at the time of issuance by the Board
of Directors without further action by the common stockholders. On December 31,
1996, the Board of Directors approved the issuance of 125,000 shares of
preferred stock and the Company issued 90,100 shares of 12% cumulative preferred
stock, $10 par value, which are callable by the Company. These shares were
issued in exchange for short term notes payable to Clay County Holdings, Inc.,
an affiliate of the Secretary, and accrued management fees due to Aaminex.
Undeclared cumulative dividends were $27,030 on the 90,100 preferred stock
shares outstanding at March 31, 1997.

38
<PAGE>
The Company, through BSH, Inc., an affiliate of the President and
Secretary in cooperation with the EPA and the Colorado Department of Health
performed environmental analyses and tests and removed all mined waste located
on the gaming site. The Company funded a total of $345,584 to BSH, Inc. to
complete the remediation. No further remediation activity has been required or
is expected of the Company.

On September 9, 1994, Gold Mountain was formed. Per negotiated agreement
with the other three members, the Company's ownership was 40%. The Company had a
nominal cost basis in this ownership. On May 19, 1995, the Company transferred
real estate having a cost basis of $867,283, mortgages payable and certain other
assets to Gold Mountain. The Company received a note receivable from Gold
Mountain in the amount of $919,248 with interest at the rate of 14% per annum
and maturing on March 31, 1997. The Company was required to assume debt totaling
$115,384.

On September 26, 1995, the Company acquired the remaining 60% interest in
Gold Mountain, making it a wholly owned subsidiary. The former members received
a portion of the land owned subject to the underlying mortgages. The Company
conveyed real estate having a cost basis of $242,063 and a note in the amount of
$150,000, which had a balance of $24,693 as of March 31, 1997. In accordance
with this transaction, the Company was released from $115,384 of debt that had
been assumed with the original purchase of equity of Gold Mountain.
Approximately $96,239 of debt was assumed by the former members. In connection
with the acquisition of the remaining interest in Gold Mountain, the value of
the assets owned by Gold Mountain were recorded at management's estimate of
their fair value, with a resulting adjustment to the equity of Gold Mountain.
Intercompany balances have been eliminated in preparing the Company's financial
statements as of March 31, 1997 and 1996.

13. SUBSEQUENT EVENT

39
<PAGE>

40
<PAGE>
(collectively the "Issuers"). These notes mature on August 31, 2004 and bear
interest at 13% per annum. Interest on the notes is payable semi-annually on
each February 28 and August 31, commencing February 28, 1998. Contingent
interest is payable on the notes, on each interest payment date, in an aggregate
amount equal to 5% of the Isle of Capri Black Hawk L.L.C.'s consolidated cash
flow for the two fiscal quarters ending during the January or July immediately
preceding such interest payment date. The notes are secured by a first lien on
substantially all of the existing and future assets of the Issuers and are
without recourse to the members of Isle of Capri Black Hawk, L.L.C. or their
respective parent or affiliate entities.

41
<PAGE>
NEVADA GOLD & CASINOS, INC.
MARCH 31, 1997

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

On June 25, 1997, the Company engaged the services of Pannell Kerr
Forster of Texas, P.C., in Houston, Texas. This constituted a change in
accountants. The financial statements for the previous two years were reported
by Arthur Andersen, LLP, Houston, Texas, who declined to stand for reelection.
Their report dated May 24, 1996, except for Notes 1 and 14 which were dated July
31, 1996, did not contain an adverse opinion or disclaimer of opinion, nor were
they qualified or modified as to audit scope or accounting principles; however,
the reports were qualified due to uncertainties resulting from going concern
issues. The decision to change accountants was approved by resolution of the
Board of Directors. There were no disagreements with the former accountants.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Pursuant to the by-laws of the Company, the Board of Directors has set
the number of Directors for the ensuing year at four, all of whom are proposed
to be elected at the Annual Meeting. In the event any nominee is unable to serve
as a Director at the time of the meeting, the persons named as proxies, therein,
will have discretionary authority to vote the proxies for the election of such
person or persons as may be nominated in substitution by the present Board of
Directors. Management knows of no current circumstances which would render any
nominee named, herein, unable to accept nomination or election. Directors shall
be elected by a plurality of the votes cast by the holders of shares entitled to
vote in the election of Directors, at a meeting of stockholders at which a
quorum is present.

Members of the Board of Directors are elected annually to serve until the next
annual meeting of stockholders and until their successors are elected and
qualified. Messrs. Winn, Burkett, Jayroe and Wen are presently members of the
Board of Directors. Each standing Director has agreed to serve, if elected.

H. THOMAS WINN, 57. Mr. Winn has been the Chairman, CEO, and President of Nevada
Gold & Casinos, Inc., since January 1994. He has also been a Director since
1994. As President of Aaminex Capital Corporation, he was responsible for the
merger of the Colorado property into Pacific Gold Corporation (now Nevada Gold &
Casinos, Inc.). Mr. Winn has served as Chairman of Aaminex Capital Corporation
since 1983. Aaminex Capital Corporation is a financial consulting and venture
capital firm, involved in real estate, mining, and environmental activities. Mr.
Winn has formed numerous investment limited partnerships, and capital formation
ventures, which range from the motion pictures, to commercial real estate and
mining projects.

42
<PAGE>
NEVADA GOLD & CASINOS, INC.
MARCH 31, 1997

PAUL J. BURKETT, 76. Mr. Burkett, Past-President of Pacific Gold Corporation,
was instrumental in the acquisition of the Colorado properties, and of Pacific
Gold Corporation. He is now a Director of Nevada Gold & Casinos, Inc. Mr.
Burkett has been involved in the mining industry for over 40 years. He has also
served on the Board of Directors of Aaminex Capital Corporation for 13 years.
His business for the past five years has concentrated on independent mining and
real estate ventures.

WILLIAM G. JAYROE, 41. Mr. Jayroe has nearly two decades of technology
development, sales and management expertise in the petrochemical field. He began
his career with a "Fortune 500" global oilfield service company and left to
begin his own company, Turbeco, Inc., which was acquired by Flotek Industries,
Inc. in late 1993. Mr. Jayroe is currently President and CEO of Flotek
Industries, Inc., (a public company), which is the parent corporation of USA
Petrovalve, Inc. and Turbeco, Inc.

HUBERT T. WEN, 38. Mr. Wen is President of Tempest, Inc., an apartment investor,
based in Houston, Texas, and is currently an associate with the Grubb & Ellis
Company. Mr. Wen has extensive and diverse experience in the real estate
industry, ranging from residential property investment and development to
high-rise Class A commercial office building management and leasing. Mr. Wen
received a Bachelor of Science degree in Business, Economics, and Mathematics
from Carnegie-Mellon University.

COMMITTEES OF THE BOARD AND ATTENDANCE

The Board of Directors of the Company presently has the following standing
committees:

(A) THE AUDIT COMMITTEE, currently comprised of Messrs. Jayroe and Wen.
The Audit Committee, which held one meeting during the Company's last fiscal
year, is authorized to nominate the Company's independent auditors, and to
review with the independent auditors the scope and results of the audit
engagement.

(B) COMPENSATION COMMITTEE, currently comprised of Messrs. Burkett and
Wen. The Compensation Committee, which held one meeting during the Company's
last fiscal year, recommends compensation levels for Executive Officers and
Directors of the Company.

(C) TECHNICAL COMMITTEE, currently comprised of Messrs. Burkett, Wen, and
Winn. The Technical Committee which held one meeting during the Company's last
fiscal year , is responsible for mining, and real property activities of the
Company.

43
<PAGE>
NEVADA GOLD & CASINOS, INC.
MARCH 31, 1997

Six meetings of the Board of Directors were held during the last fiscal year.
Except for Hubert Wen, who was elected to the Board of Directors in March 1997,
each Director attended at least 75% of meetings, either in person or by
telephone conference calls.

The Company does not have a Directors Nominating Committee, such function being
reserved to the entire Board of Directors.

The Board of Directors unanimously recommends a vote for election of each of the
nominees listed above.

EXECUTIVE OFFICERS

The executive officers of the Company are as follows:

NAME AGE CAPACITY
---- --- --------
H. Thomas Winn (1) 57 President

Elizabeth A. Woods 48 Treasurer

David K. McCaleb 34 Secretary

Paul J. Burkett (1) 76 Vice President
- ------------
(1) Biographical information, with respect to this Officer, was previously
described in Item 1.

ELIZABETH A. WOODS (age 48). Mrs. Woods joined the Company as Treasurer/Chief
Financial Officer in November 1996, and was previously with Post Oak Bank in
Houston for 13 years, where she served as Senior Vice President and Controller.

DAVID MCCALEB (age 34). Mr. McCaleb has been with the Company since 1993, and
has served as Secretary and/or Treasurer of the Company since 1994. For the
prior two years, he operated McCaleb & Associates, a Houston-based accounting
and consulting firm. Previously, Mr. McCaleb spent five years in the banking
industry. He received a Bachelor of Science degree in Finance from the
University of Houston, 1991. Mr. Winn is the father-in-law of Mr. McCaleb. There
is no other family relationship between any present Executive Officers,
Directors and Director Nominees.

44
<PAGE>
NEVADA GOLD & CASINOS, INC.
MARCH 31, 1997

REPORTS

The Company is subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended ("Exchange Act") and is in the process of establishing a
compliance program with respect to the reporting obligations of the Company's
officers, directors, and holders of 10% or more of the Company's equity
securities, (collectively hereinafter referred to as "Reporting Persons") under
the Exchange Act. As a primary result of the Company's failure to have a
compliance program in place, certain Reporting Persons of the Company's equity
securities have not filed the appropriate Forms 3, 4, and 5 on a timely basis.
To date, the required Reporting Persons have filed the appropriate Form 5s,
which include transactions and/or events that otherwise should have been
reported on previous Forms 3 and 4. The Reporting Persons who did not make such
filings on a timely basis for the period ending March 31, 1997, and the number
of such filings include the following:

REPORTING PERSONS NUMBER OF TRANSACTIONS NUMBER OF LATE FILINGS
----------------- ---------------------- ----------------------
Winstock Mining Corporation (US) 3 3

Clay County Holdings, Inc. 11 6

Aaminex Capital Corporation 11 4

Paul J. Burkett 2 2

William G. Jayroe 1 2

H. Thomas Winn 2 2

Fred N. Holabird 2 2

45
<PAGE>
NEVADA GOLD & CASINOS, INC.
MARCH 31, 1997

ITEM 11. EXECUTIVE COMPENSATION

Executive Officer and other Officers of the Company who received total
annual salary and bonus for the fiscal year, ended March 31, 1997, in excess of
$100,000:

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG - TERM
ANNUAL COMPENSATION COMPENSATION
- ------------------------------------------------------------------------- ---------------------------
NAME AND PRINCIPAL FISCAL OTHER ANNUAL ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
H. Thomas Winn, 1997 - - - 25,000 -
President 1996 - - - 30,000 -
1995 - - - - -
</TABLE>
- ------------
(1) Mr. Winn did not receive perquisites or other personal benefits,
securities, or property, valued in excess of 10% of the total of the
reported annual salary and bonus.

The Company does not have any pension plans.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

See "Committees of the Board and Attendance" in Item 10 for a discussion
of the Compensation Committee.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information, as of March 31,
1997 with respect to beneficial ownership of the outstanding common stock by (i)
those stockholders known to the Company (whose address is shown), that are the
beneficial owners of 5% or more of the Company's outstanding voting stock (ii)
each Director of the Company, (iii) all named Executive Officers, and (iv) all
Directors and Officers, as a group.

The outstanding voting securities of the Company (entitled to one vote per
share) is 8,349,046 shares of common stock (as of the record date), in which
stock, the entire voting power of the Company is lodged. The record date for the
determination of shareholders entitled to notice of, and to vote at, this
meeting is March 31, 1997. Pursuant to the bylaws of the corporation, cumulative
voting is not allowed.

46
<PAGE>
NEVADA GOLD & CASINOS, INC.
MARCH 31, 1997

Name and Address of Number of Shares Percent
Beneficial Owner Beneficially Owned of Class
- ---------------- ------------------ --------
Winstock Mining Corporation (US) 1,669,580 20.0%
1506 - 2008 Fullerton Avenue
North Vancouver, British Columbia V7P 3G7

H. Thomas Winn (1) 1,532,898 18.4%
3040 Post Oak Blvd., Suite 675
Houston, Texas 77056

David K. McCaleb (2) 3,058,574 36.6%
3040 Post Oak Blvd., Suite 675
Houston, Texas 77056

Paul J. Burkett (3) 277,526 3.3%
P.O. Box 761
Goldfield, Nevada 89013

Hubert T. Wen (4) 103,169 1.2%
P.O. Box 571595
Houston, Texas 77257-1595

William G. Jayroe (5) 18,752 .2%
7030 Empire Central Drive
Houston, Texas 77040

Aaminex Capital Corp (1) 1,514,564 18.1%
3040 Post Oak Blvd., Suite 675
Houston, Texas 77056

Clay County Holdings, Inc. (2) 3,058,324 36.6%
3040 Post Oak Blvd., Suite 675
Houston, Texas 77056

All Directors and Officers
as a group (5 persons) 4,990,919 59.8%

47
<PAGE>
NEVADA GOLD & CASINOS, INC.
MARCH 31, 1997

(1) Except for options to purchase 18,334 shares, all of the shares listed are
controlled directly or indirectly through Aaminex Capital Corporation, of
which H. Thomas Winn is President. 1,333,334 of these shares are the subject
of an option agreement to exercise the shares held by Winstock Mining Corp.
(U.S.). As long as the option remains contingent and unexercised, Mr. Winn
exercises no voting or investment power, with respect to the shares subject
to the options. The shares listed are the same shares owned by Winstock
Mining Corporation (U.S.). The information in this table shall not be
construed as a statement that Mr. Winn is the beneficial owner of the
securities covered by the statement for purposes of Section 13(d) or 13(g)
of the Securities Act of 1933.

(2) Mr. McCaleb, the Secretary of the company, is also the President of Clay
County Holdings, Inc. Except for 250 shares owned personally by Mr. McCaleb,
the shares indicated are the shares held by Clay County Holdings., Inc. as
set forth above in the table of Beneficial owners. Mr. McCaleb is the
son-in-law of H.
Thomas Winn, the President of the Company.

(3) Included in Mr. Burkett's beneficial ownership are options to purchase
18,334 shares.

(4) Included in Mr. Wen's beneficial ownership are options to purchase 5,000
shares.

(5) Included in Mr. Jayroe's beneficial ownership are options to purchase 12,084
shares.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

48
<PAGE>
NEVADA GOLD & CASINOS, INC.
MARCH 31, 1997

The Company, through BSH, Inc., an affiliate of the President and
Treasurer in cooperation with the EPA and the Colorado Department of Health
performed environmental analyses and tests and removed all mined waste located
on the gaming site. The Company funded a total of $345,584 to BSH, Inc. to
complete the remediation. No further remediation activity has been required or
is expected of the Company.

On September 26, 1995, the Company acquired the remaining 60% interest in
Gold Mountain Development, LLC, making it a wholly owned subsidiary. The former
members received a portion of the land owned subject to the underlying
mortgages. The Company conveyed real estate having a cost basis of $242,063 and
a note in the amount of $150,000, which had a balance of $24,693 as of March 31,
1997. In accordance with this transaction, the Company was released from
$115,384 of debt which had been assumed with the original purchase of equity
into Gold Mountain Development, LLC. Approximately $96,239 of debt was assumed
by the former members. In connection with the acquisition of the remaining
interest in Gold Mountain Development, LLC, the value of the assets owned by
Gold Mountain Development, LLC were recorded at management's estimate of their
fair value, with a resulting adjustment to the equity of Gold Mountain
Development, LLC. Intercompany balances have been eliminated in preparing the
Company's financial statements as of March 31, 1997 and 1996.

49
<PAGE>
NEVADA GOLD & CASINOS, INC.
MARCH 31, 1997

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

(a) FINANCIAL STATEMENTS AND SCHEDULES

REFERENCE - Data submitted herewith and under Item 8

8 Report of independent public accountants

9 Balance sheets

10 Statements of operations

12 Statements of stockholders' equity

13 Statements of cash flows

14 Notes to financial statements

(b) REPORTS ON FORM 8-K

*3.1 - Articles of Incorporation

*3.1a - Amendment to Articles of Incorporation

*3.2 - By-laws

*10.1 - Operating Agreement Caesars Black Hawk, LLC.

*10.2 - Deed of Trust

*10.3 - Master Secured Note

*10.4 - Note Participation Agreement

*21 - Subsidiaries of the Registrant

27 - Financial Data Schedule
- --------------------------
* Previously filed

50
<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, hereunto duly authorized

NEVADA GOLD & CASINOS, INC.

By: /s/ H. THOMAS WINN Sept. 24, 1997
H. Thomas Winn, President

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following person on behalf of the Registrant and
in the capacity and on the date indicated.

NAME & POSITION DATE
--------------- ----
/s/ H. THOMAS WINN
H.Thomas Winn, President Sept. 24, 1997

/s/ PAUL J. BURKETT
Paul J. Burkett, Director Sept. 24, 1997
Vice President - Mining

/s/ WILLIAM G. JAYROE Sept. 24, 1997
William G. Jayroe, Director

/s/ HUBERT T. WEN Sept. 24, 1997
Hubert T. Wen, Director

/s/ ELIZABETH A. WOODS Sept. 24, 1997
Elizabeth A. Woods, Treasurer
And Chief Financial Officer

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 78,245
<SECURITIES> 0
<RECEIVABLES> 82,408
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 160,653
<PP&E> 4,795,370
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,956,023
<CURRENT-LIABILITIES> 1,942,752
<BONDS> 208,900
0
901,000
<COMMON> 1,008,886
<OTHER-SE> 901,485
<TOTAL-LIABILITY-AND-EQUITY> 4,956,023
<SALES> 0
<TOTAL-REVENUES> 94,004
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,368,864
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 338,218
<INCOME-PRETAX> (1,613,078)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,613,078)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,613,078)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)

</TABLE>