GREATE BAY CASINO CORP, 10-K405, 2000-03-30

GREATE BAY CASINO CORP
10-K405, 2000-03-30
MISCELLANEOUS AMUSEMENT & RECREATION

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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1999
-------------------------------------------------

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

For the transition period from ______________________ to _______________________

Commission file number 1-6339
-------------------------------

GREATE BAY CASINO CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

DELAWARE 75-1295630
- ------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

c/o Advanced Casino Systems Corporation
200 Decadon Drive, Suite 100
Egg Harbor Township, New Jersey 08234
- ---------------------------------------- -------------------------------
(Address of principal executive offices) (Zip Code)

(Registrant's telephone number, including area code): (609) 441-0704
--------------------------

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

Common Stock,
par value $.10 per share
- ------------------------------- ------------------------------------
Title of each class Name of exchange on which registered

Securities registered pursuant to Section 12(g) of the Act: None

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. Yes X No
----- -----

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

The aggregate market value of the voting stock held by non-affiliates of the
registrant, based on the closing price of such stock on March 27, 2000, was
$644,143. For the purposes of this computation, all officers, directors and 5%
beneficial owners of the registrant are deemed to be affiliates. Such
determination should not be deemed an admission that such officer, directors and
beneficial owners are, in fact, affiliates of the registrant. As of March 27,
2000, 5,186,627 shares of Common Stock, $.10 par value per share, were
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated by reference into the
indicated part or parts of this report.

None

1
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PART I

ITEM 1. BUSINESS

General
- -------

Greate Bay Casino Corporation, a Delaware corporation, and its subsidiaries
("GBCC" or the "Company") is currently engaged in the development and sale of
casino-related information technology systems. In prior years, GBCC was also
engaged in casino-related operations consisting of management and consulting
contracts with gaming facilities located in Aurora, Illinois (the "Aurora
Casino") and Tunica County, Mississippi (the "Tunica Casino") and ownership and
operation of the Sands Hotel and Casino in Atlantic City, New Jersey (the
"Sands"). GBCC's common stock is listed on the OTC Bulletin Board Service under
the trading symbol "GEAAQ". On December 31, 1996, Hollywood Casino Corporation
("HCC", a Delaware corporation) which owned approximately 80% of the outstanding
common stock of GBCC, distributed such stock to its shareholders. As a result,
approximately 36% of GBCC's outstanding stock is owned by Jack E. Pratt, Edward
T. Pratt, Jr. and William D. Pratt and by certain general partnerships and
trusts controlled by the Pratts and by other family members (collectively, the
"Pratt Family"). The Pratt Family also owns approximately 54% of HCC, which
also owns the Aurora Casino and the Tunica Casino. The principal executive
offices of GBCC are located at 200 Decadon Avenue, Suite 100, Egg Harbor
Township, New Jersey 08234, telephone (609) 441-0704.

Prior to the Restructuring (as defined below), GBCC's casino-related
operations were carried out through its indirect, wholly owned subsidiary, Pratt
Casino Corporation ("PCC"), and PCC's various subsidiaries. PCC earned
consulting fees from the Tunica Casino and was the limited partner in the entity
which held the management contract on the Aurora Casino. The PCC subsidiaries
included in the following discussion are:

New Jersey Management, Inc. ("NJMI") -- the subsidiary which, prior to
July 7, 1998, was responsible for the operations of the Sands under
a management agreement.
PRT Funding Corp. ("PRT Funding") -- issuer of $85 million of 11 5/8% senior
notes, due 2004 (the "PRT Funding Notes"). The PRT Funding Notes were
guaranteed by PCC.
Pratt Management, L.P. ("PML") - a limited partnership which managed the
operations of the Aurora Casino and which, prior to April 1, 1997, was
wholly owned by GBCC (see below).
Greate Bay Hotel and Casino, Inc. ("GBHC") - owner of the Sands.
GB Property Funding Corp. ("GB Property Funding") -- issuer of $185 million
of 10 7/8% First Mortgage Notes, due 2004 (the "10 7/8% First Mortgage
Notes").
GB Holdings, Inc. ("Holdings") - a holding company which owns GBHC and GB
Property Funding. Effective on December 31, 1998, PCC's ownership of
Holdings was reduced to 79%.

On January 5, 1998, GBHC, Holdings, and GB Property Funding, each filed
petitions for relief under Chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the District of New
Jersey (the "New Jersey Bankruptcy Court"). Each company continues to operate
in the ordinary course of business, as set forth in the Bankruptcy Code, and
each company's executive officers and directors remain in office, subject to the
supervision of the New Jersey Bankruptcy Court. On June 1, 1999, a plan of
reorganization was filed by the debtors with the New Jersey Bankruptcy Court.
The reorganization plan, as filed, provided for the secured bondholders to
receive new debt and 100% of the equity ownership of Holdings in exchange for
their claims and for unsecured creditors to receive a partial cash settlement of
their claims. Subsequent to the filing of a reorganization plan by the debtors,
two competing plans were filed by (1) Park Place Entertainment Corporation, a
large and diversified gaming company with significant operations in Atlantic
City, and (2) jointly by High River Limited Partnership, an

2
<PAGE>

entity controlled by Carl C. Icahn, and by the Official Committee of Unsecured
Creditors. Both of these plans provide for significant cash infusions by the
plan proponents in exchange for equity in a reorganized Holdings ranging from
46.3% to 57.7% with the secured bondholders to receive the remaining equity in
reorganized Holdings together with new secured debt. None of the plans provide
for any distributions to the present shareholders. A hearing on the adequacy of
the disclosure statements relating to the various plans is scheduled for April
5, 2000.

As a result of the Chapter 11 filings discussed above, GBCC's control over
the filing subsidiaries is subject to supervision of the New Jersey Bankruptcy
Court and GBCC does not expect to have ownership or operating control of such
subsidiaries after reorganization. Furthermore, as a result of a settlement
agreement reached by GBCC and Holdings during September 1998, GBCC no longer
participates in the management of the Sands. Accordingly, Holdings, GB Property
Funding and GBHC are no longer included on the accompanying consolidated balance
sheets of GBCC. As more fully explained in Note 1 of the Notes to Consolidated
Financial Statements, during the period from January 1, 1998 through June 30,
1998, the operations of Holdings and its subsidiaries were accounted for by GBCC
under the equity method of accounting. As a result of GBCC no longer
controlling the operations of the Sands, the continued expectation that
ownership control of Holdings will only be temporary and the September 1998
settlement agreement which resolved certain significant uncertainties, GBCC's
investment in Holdings as well as certain amounts due to Holdings and its
subsidiaries were revalued to a zero basis effective on July 1, 1998.
Accordingly, for periods subsequent to June 30, 1998, GBCC is accounting for its
investment in Holdings under the cost method of accounting.

The filings of petitions for relief by Holdings and its subsidiaries resulted
in a default under the indenture for the PRT Funding Notes; accordingly, the
outstanding principal amount of the PRT Funding Notes accelerated and became
currently due and payable. PRT Funding deferred payment of interest due on the
April 15 and October 15, 1998 and April 15, 1999 payment dates. On October 22,
1998, PRT Funding paid to the bondholders an amount equal to a single semiannual
interest payment ($4.9 million) while negotiations to restructure the PRT
Funding Notes continued. In connection with the Restructuring (as defined
below), PRT Funding paid deferred interest amounting to $6.8 million to the
bondholders on April 30, 1999.

On April 28, 1999, PCC, PRT Funding, NJMI, GBCC, HCC and the holders of
substantially all of the PRT Funding Notes entered into a voting agreement which
provided for the restructuring of the PRT Funding Notes (the "Restructuring").
The voting agreement provided for HCC to acquire the stock of PCC, the parent of
PRT Funding, from GBCC for nominal consideration. When acquired by HCC, PCC's
assets were to consist of its limited partnership interest in a management
contract for the Aurora Casino and its consulting contract for the Tunica Casino
and its liabilities were to consist of a new obligation in the amount of $40.3
million payable in satisfaction of the PRT Funding Notes. The voting agreement
provided for HCC to immediately discharge the obligation.

As part of the Restructuring, holders of the PRT Funding Notes were also to
receive 100% of the remaining assets of PCC and its subsidiaries not acquired by
HCC. Such assets consisted primarily of claims against Holdings, GB Property
Funding and GBHC in their Chapter 11 proceedings.

3
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As a result of the Chapter 11 filings and plan of reorganization of PCC, PRT
Funding and NJMI, GBCC's control over the filing subsidiaries was subject to
supervision of the Delaware Bankruptcy Court. GBCC did not expect to have
ownership or operating control of such subsidiaries after reorganization. As
more fully explained in Note 1 of the Notes to Consolidated Financial
Statements, GBCC's investment in PCC and its subsidiaries as well as certain
intercompany balances with PCC and its subsidiaries were revalued to a zero
basis effective on May 25, 1999. Accordingly, for periods subsequent to May 25,
1999, GBCC accounted for its investment in PCC under the cost method of
accounting. As part of the Restructuring, GBCC sold its interest in PCC to HCC
in October 1999.

GBCC and its subsidiaries currently have debt outstanding to HCC consisting
of (1) demand notes and accrued interest thereon totaling $9.5 million at
December 31, 1999 and (2) a 14 7/8% secured promissory notes due 2006 in the
amount of $40.4 million at December 31, 1999. GBCC's only current operating
subsidiary is ACSC. The current levels of ACSC's assets and operations are not
sufficient to provide debt service on the HCC obligations and, consequently,
GBCC is currently insolvent. GBCC has commenced discussions with HCC to
restructure its obligations; however, there can be no assurance at this time
that such discussions will result in a restructuring of GBCC's obligations with
HCC.

The insolvency of GBCC raises substantial doubt about its ability to continue
as a going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties.

Advanced Casino Systems Corporation
- -----------------------------------

In implementing its marketing and operating strategy, the Aurora Casino, the
Tunica Casino and the Sands all use proprietary casino information technology of
Advanced Casino Systems Corporation ("ACSC"), GBCC's computer services and
information technology subsidiary. ACSC's technology includes table game and
slot machine monitoring systems which enable casinos to track and rate patron
play through the use of a casino player's card. These systems provide
management with the key characteristics of patron play as slot machines are
connected with, and information with respect to table games can be input into
its data base monitoring system. When patrons use the casino player's card at
slot machines or table games, the information is immediately available to
management and allows management to implement marketing programs to recognize
and reward patrons during their visits to the casino. Certain of these
marketing programs allow patrons to automatically credit themselves with
complimentaries based on their levels of play. Such promotions and
complimentaries include free meals, hotel accommodations, retail merchandise,
parking and sweepstakes giveaways based on slot machine patrons' gross wagering.
ACSC's systems also allow casino management to monitor, analyze and control the
granting of gaming credit, promotional expenses and other marketing costs.

During 1997, ACSC began marketing its casino information technology systems,
previously restricted to use by its affiliates, to unaffiliated gaming
companies. To date, ACSC has completed contracts to implement such systems in
six unaffiliated casinos and is currently negotiating to obtain additional
contracts.

ACSC's computer service revenues are derived primarily from system
installation contracts and from sales to affiliates. System installation
contracts generally require an extended period of time to complete and represent
significant, but nonrecurring revenue earned from a given customer. Upon
completion of an installation, ACSC may continue to recognize service or
maintenance revenues from the customer at a much reduced amount. Accordingly,
in order to maintain its current level of revenues, ACSC needs to continue to
obtain installation contracts. For the years ended December 31, 1999, 1998 and
1997, respectively, installation contracts accounted for approximately 61%, 66%
and 40% of ACSC's revenues and affiliate sales accounted for approximately 23%,
22% and 42% of ACSC's revenues.

4
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Competition
- -----------

ACSC competes with other providers of casino software in marketing its casino
information technology systems. Due to the limited number of customers in the
gaming industry, competition is intense. There are approximately three
significant competitors to ACSC, some of which have greater resources for both
marketing and implementation. Technological innovation is also a key factor in
the industry. Management believes that its systems are state of the art and can
compete effectively with other casino software system providers.

Regulation
- ----------

Because the casino industry is highly regulated at the state level, ACSC is
required to be licensed in order to provide services to casino operators in most
jurisdictions. Generally, licensing requires that ACSC and its officers,
including officers of GBCC, be investigated and found suitable by state
authorities. In addition, ACSC must meet periodic reporting requirements and
provide other information to state authorities as requested. The suspension or
revocation of a license could materially impact ACSC's ability to carry on its
business activities.

Employees
- ---------

At December 31, 1999, GBCC had approximately 50 employees, none of whom are
represented under collective bargaining agreements. Management considers its
labor relations to be good.

ITEM 2. PROPERTIES

ACSC, leases approximately 13,000 square feet of office space for its
operating and administrative needs in Egg Harbor Township, New Jersey. The
lease is for a period terminating in September 2002.

ITEM 3. LEGAL PROCEEDINGS

Subsidiary Chapter 11 Filings and Related Litigation
- ----------------------------------------------------

On January 5, 1998, Holdings, GB Property Funding and GBHC each filed
petitions for relief under Chapter 11 of the Bankruptcy Code. Each company
continues to operate in the ordinary course of business, as set forth in the
Bankruptcy Code, and each company's executive officers and directors remain in
office, subject to the jurisdiction of the New Jersey Bankruptcy Court. On
January 11, 1999, the New Jersey Bankruptcy Court terminated the debtors'
exclusive right to file a plan of reorganization. On June 1, 1999, a plan of
reorganization was filed by the debtors with the New Jersey Bankruptcy Court.
The reorganization plan, as filed, provided for the secured bondholders to
receive new debt and 100% of the equity ownership of Holdings in exchange for
their claims and for unsecured creditors to receive a partial cash settlement of
their claims. Subsequent to the filing of a reorganization plan by the debtors,
two competing plans were filed by (1) Park Place Entertainment Corporation, a
large and diversified gaming company with significant operations in Atlantic
City, and (2) jointly by High River Limited Partnership, an entity controlled by
Carl C. Icahn, and by the Official Committee of Unsecured Creditors. Both of
these plans provide for significant cash infusions by the plan proponents in
exchange for equity in a reorganized Holdings ranging from 46.3% to 57.7% with
the secured bondholders to receive the remaining equity in reorganized Holdings
together with new secured debt. None of the plans provide for any distributions
to the present shareholders. A hearing on the adequacy of the disclosure
statements relating to the various plans is scheduled for April 5, 2000.

The filings of such petitions by Holdings and its subsidiaries resulted in a
default under the indenture for the PRT Funding Notes; accordingly, the
outstanding principal amount of the PRT Funding Notes

5
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accelerated and became currently due and payable. PRT Funding deferred payment
of interest due on the April 15 and October 15, 1998 and April 15, 1999 interest
payment dates. On October 22, 1998, PRT Funding paid to the bondholders an
amount equal to a single semiannual interest payment ($4.9 million) while
negotiations to restructure the PRT Funding Notes continued. In connection with
the Restructuring, PRT Funding paid deferred interest amounting to $6.8 million
to the bondholders on April 30, 1999.

On April 28, 1999, PCC, PRT Funding, NJMI, GBCC, HCC and the holders of
substantially all of the PRT Funding Notes entered into a voting agreement which
provided for the restructuring of the PRT Funding Notes. The voting agreement
provided for HCC to acquire the stock of PCC from GBCC for nominal
consideration. When acquired by HCC, PCC's assets were to consist of its
limited partnership interest in a management contract for the Aurora Casino and
its consulting contract for the Tunica Casino and its liabilities were to
consist of a new obligation in the amount of $40.3 million payable in
satisfaction of the PRT Funding Notes. The voting agreement provided for HCC to
immediately discharge the obligation.

On May 22, 1998, GBHC filed a motion with the New Jersey Bankruptcy Court
seeking to reject its existing management agreement with NJMI. A substitute
agreement (the "Interim Agreement") was entered into and approved by the New
Jersey Bankruptcy Court on July 7, 1998 and the motion to reject the management
agreement was approved by the New Jersey Bankruptcy Court on September 28, 1998.
As a consequence of the September 1998 settlement agreement described below,
GBCC and GBHC may no longer assert claims against each other with respect to the
operation of the management contract and, with the passage of time, the
cancellation thereof.

On July 27, 1998, GBHC filed an action in the New Jersey Bankruptcy Court
against GBCC, certain affiliates of GBCC and Jack E. Pratt, Edward T. Pratt, Jr.
and William D. Pratt as directors of GBCC and former directors of GBHC
(collectively, the "GBCC Parties"), which alleged, among other things,
usurpation of corporate opportunities of GBHC and breach of fiduciary duty with
respect to GBHC in connection with the acquisition of certain land parcels in
Atlantic City, New Jersey. The action sought, among other things, to enjoin the
GBCC Parties from transferring the land parcels to third parties and to require
that the land parcels be conveyed to GBHC. The action sought to enjoin GBCC
from using the tax net operating loss carryforwards ("NOL's") of GBHC.

6
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21% of the stock ownership of Holdings to an unconsolidated entity. Such
transfer was accomplished effective as of December 31, 1998. In addition, the
settlement agreement also allowed GBHC to offset its working capital loan from
GBCC in the amount of $8 million together with interest accrued thereon against
claim asserted by GBHC against GBCC under the existing tax allocation
agreements.

GBCC licenses the "Sands" name under a license agreement dated as of May 19,
1987, which rights are sublicensed to GBHC. The license agreement has a term of
99 years and requires a royalty payment of the greater of 1.5% of gross room
charges, as defined in the agreement, payable monthly, or $100,000 per calendar
year. The license agreement may be terminated by either party in the event of a
material breach, bankruptcy, suspension of normal business operations or certain
other actions by the other party. GBCC intends to terminate the license
agreement as a result of the licensor's suspension of normal business operations
evidenced by the destruction of the Sands Hotel and Casino in Las Vegas in 1996.
Pursuant to the terms of the sublicense agreement, termination of the license
agreement results in automatic termination of the sublicense agreement. GBCC
filed a motion with the New Jersey Bankruptcy Court to allow GBCC's termination
of the license agreement and the resulting termination of the sublicense
agreement; the New Jersey Bankruptcy Court denied such motion. As a result,
GBCC may not be able to terminate the license agreement, although the New Jersey
Bankruptcy Court may, at some future time, allow GBCC to do so. If unable to
terminate the license agreement, GBCC may remain liable for future royalty
payments. GBCC filed an appeal to the decision of the New Jersey Bankruptcy
Court on March 10, 1999; such appeal was denied on June 10, 1999. GBCC has
filed an appeal of such decision.

On April 22, 1999, GBHC filed a motion with the New Jersey Bankruptcy Court
seeking to disallow NJMI's pre-petition claims with respect to management fees.
In November 1999, a compromise was reached establishing the amount of the claim
at $75,000. The ultimate settlement of this amount is subject to the
confirmation of a plan of reorganization by the New Jersey Bankruptcy Court.

Planet Hollywood Litigation
- ---------------------------

In 1996, Planet Hollywood International, Inc. and Planet Hollywood (Region
IV), Inc. filed a complaint in the United States District Court for the Northern
District of Illinois, Eastern Division, against GBCC and against HCC and certain
of its subsidiaries seeking (1) a declaratory judgment that it was entitled to
use the name "Planet Hollywood" for a casino and (2) damages. In its complaint,
Planet Hollywood alleged, among other things, that GBCC and HCC had, in
operating the Hollywood Casino concept, infringed on their trademark, service
mark and trade dress and had engaged in unfair competition and deceptive trade
practices. GBCC and HCC and its subsidiaries filed counterclaims seeking (1) a
declaratory judgment that Planet Hollywood was not entitled to use the name
"Planet Hollywood" for a casino and (2) damages. The counterclaims alleged,
among other things, that Planet Hollywood had, through its planned use of its
mark in connection with casino services, infringed on GBCC and HCC's service
marks and trade dress and had engaged in unfair competition. The trial
commenced on July 19, 1999 and was completed on July 26, 1999. On August 25,
1999, GBCC, HCC and the other defendants filed a motion to dismiss the
declaratory judgment claims of all parties asserting, among other things, that
as a result of Planet Hollywood's reported deteriorating financial condition
and perceived inability to enter into the casino business, there was no longer
any actual case or controversy. On October 12, 1999, Planet Hollywood (Region
IV), Inc. filed a petition for reorganization under Chapter 11 of the United
States Bankruptcy Code. On December 3, 1999 the judge entered a judgment in
favor of GBCC and HCC with respect to the damage claims brought by Planet
Hollywood and granted their motion to dismiss the declaratory judgment claims of
all parties. Planet Hollywood has filed a notice of appeal of the judgment with
the Seventh Circuit Court of Appeals.

Other Litigation
- ----------------

7
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alleging negligent advice and breach of contract with respect to the tax
consequences resulting from the spin-off of GBCC's stock to HCC's shareholders
on December 31, 1996. The lawsuit is currently in the discovery stage with a
trial currently scheduled to begin in September 2000.

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

During the fourth quarter of 1999, no matter was submitted to a vote of
security holders through the solicitation of proxies or otherwise.

PART II

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

GBCC's common stock traded on the American Stock Exchange under the symbol
"GBY" until January 8, 1998. The common stock of GBCC is now traded on the OTC
Bulletin Board Service under the trading symbol "GEAAQ". The prices set forth
in the following table represent actual transactions.
<TABLE>
<CAPTION>
Period High Low
------ ----- -----
<S> <C> <C>

1999
First Quarter $ .44 $ .23
Second Quarter .31 .06
Third Quarter .34 .06
Fourth Quarter .34 .08
1998
First Quarter $2.13 $0.61
Second Quarter 1.17 0.33
Third Quarter 0.75 0.13
Fourth Quarter 0.34 0.02
</TABLE>

At March 27, 2000, there were approximately 3,900 holders of record of
GBCC's common stock.

No dividends have been paid on GBCC's common stock in the past and GBCC has
no plans to pay dividends in the foreseeable future.

8
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ITEM 6. SELECTED FINANCIAL DATA

The following tables present selected financial data for GBCC and are
qualified in their entirety by the consolidated financial statements, including
the notes thereto, appearing elsewhere in this Form 10-K. The data as of
December 31, 1999 and 1998, and for the years ended December 31, 1999, 1998 and
1997, have been derived from the audited consolidated financial statements of
GBCC presented in Item 8.
<TABLE>
<CAPTION>
Statement of Operations Data: Year Ended December 31,
---------------------------------------------------------------
1999(1, 2) 1998(1) 1997 1996 1995
----------- ------------ ------------ ---------- ----------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net revenues.......................................... $ 6,422 $ 8,971 $ 263,691 $ 284,563 $ 305,420
---------- --------- --------- --------- ---------
Expenses:
Departmental......................................... 2,933 1,314 216,247 240,944 230,749
General and administrative........................... 5,621 4,724 16,192 19,363 21,983
Depreciation and amortization........................ 181 129 14,464 19,868 20,553
---------- --------- --------- --------- ---------
Total expenses...................................... 8,735 6,167 246,903 280,175 273,285
---------- --------- --------- --------- ---------
(Loss) income from operations......................... (2,313) 2,804 16,788 4,388 32,135
---------- --------- --------- --------- ---------
Non-operating income (expenses):
Interest income...................................... 667 942 1,486 1,852 2,397
Interest expense..................................... (10,303) (16,194) (38,246) (39,851) (38,975)
Equity in earnings of limited partnership............ 2,660 6,494 5,012 - -
Gain on elimination of investment in Pratt
Casino Corporation.................................. 85,633 - - - -
Equity in earnings of and gain on elimination of
investment in GB Holdings, Inc...................... - 31,233 - - -
Restructuring costs.................................. (230) (1,548) (505) - -
Gain (loss) on disposal of assets.................... - 472 2,120 (1,795) 56
---------- --------- --------- --------- ---------
Total non-operating income (expense), net........... 78,427 21,399 (30,133) (39,794) (36,522)
---------- --------- --------- --------- ---------
Income (loss) before income taxes, extraordinary and
other items.......................................... 76,114 24,203 (13,345) (35,406) (4,387)
Write off deferred financing costs.................... - - (6,515) - -
---------- --------- --------- --------- ---------
Income (loss) before income taxes and
extraordinary item................................... 76,114 24,203 (19,860) (35,406) (4,387)
Income tax benefit (provision)........................ 7 287 (1,014) (160) 100
---------- --------- --------- --------- ---------
Income (loss) before extraordinary item............... 76,121 24,490 (20,874) (35,566) (4,287)
Extraordinary item:
Gain on early extinguishment of debt................. - - 310 - -
---------- --------- --------- --------- ---------
Net income (loss)................................... $ 76,121 $ 24,490 $ (20,564) $ (35,566) $ (4,287)
========== ========= ========= ========= =========

Basic and diluted income (loss) per common share:
Income (loss) before extraordinary item.............. $ 14.68 $ 4.72 $ (4.02) $ (6.86) $ (.83)
Extraordinary item................................... - - .06 - -
---------- --------- --------- --------- ---------
Net income (loss)................................... $ 14.68 $ 4.72 $ (3.96) $ (6.86) $ (.83)
========== ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Data: December 31,
--------------------------------------------------------------
1999(1,2) 1998(1) 1997(1) 1996 1995
---------- --------- --------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Total assets.......................................... $ 8,862 $ 19,946 $ 15,752 $ 221,345 $ 250,116
Total debt............................................ $ 40,446 $ 120,040 $ 115,949 $ 326,024 $ 329,123
Shareholders' deficit................................. $ (42,505) $(118,626) $(143,116) $(159,207) $(138,415)

</TABLE>
(1) As a result of the Chapter 11 filings by Holdings, GB Property Funding and
GBHC, GBCC's control over these subsidiaries is subject to supervision of
the New Jersey Bankruptcy Court and GBCC does not expect to be in control of
such subsidiaries after reorganization.

9
<PAGE>

Furthermore, as a result of a settlement agreement reached by GBCC and
Holdings in September 1998, GBCC no longer participates in the management of
the Sands. Accordingly, these subsidiaries are excluded from the
consolidated balance sheets of GBCC at December 31, 1999, 1998 and 1997. As
more fully explained in Note 1 of the Notes to Consolidated Financial
Statements of GBCC, during the period from January 1, 1998 through June 30,
1998, the operations of Holdings and its subsidiaries were accounted for by
GBCC under the equity method of accounting. As a result of GBCC no longer
controlling the operations of the Sands, the continued expectation that
ownership control of Holdings will only be temporary and the September 1998
settlement agreement which resolved certain significant uncertainties,
GBCC's investment in Holdings as well as certain amounts due to Holdings and
its subsidiaries were revalued to a zero basis effective on July 1, 1998.
Accordingly, for periods subsequent to June 30, 1998, GBCC is accounting for
its investment in Holdings under the cost method of accounting.

(2) As a result of the Chapter 11 filings and plan of reorganization of PCC, PRT
Funding and NJMI, GBCC's control over the filing subsidiaries was subject to
supervision of the Delaware Bankruptcy Court. GBCC did not expect to have
ownership or operating control over such subsidiaries after reorganization.
As more fully explained in Note 1 of the Notes to Consolidated Financial
Statements, GBCC's investment in PCC and its subsidiaries as well as certain
amounts due from PCC and its subsidiaries were revalued to a zero basis
effective on May 25, 1999. Accordingly, for period subsequent to May 25,
1999, GBCC accounted for its investment in PCC under the cost method of
accounting. As part of the Restructuring, GBCC sold its interest in PCC to
HCC in October 1999.

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<PAGE>

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

This Annual Report on Form 10-K contains forward-looking statements about
the business, financial condition and prospects of GBCC. The actual results
could differ materially from those indicated by the forward-looking statements
because of various risks and uncertainties including, among other things,
changes in competition, economic conditions, tax regulations, state regulations
applicable to the gaming industry in general or GBCC in particular, and other
risks indicated in GBCC's filing with the Securities and Exchange Commission.
Such risks and uncertainties are beyond management's ability to control and, in
many cases, can not be predicted by management. When used in this Annual Report
on Form 10-K, the words "believes", "estimates", "anticipates" and similar
expressions as they relate to GBCC or its management are intended to identify
forward-looking statements.

LIQUIDITY AND CAPITAL RESOURCES

Operating Activities

In prior years, GBCC and its subsidiaries conducted three major business
activities: (1) non-casino operations and the management thereof, (2) management
services for casino operations and (3i) ownership of the Sands Hotel and Casino
in Atlantic City, New Jersey. As a result of the Chapter 11 filings by PCC, PRT
Funding and NJMI and the resulting plan of reorganization confirmed in October
1999, GBCC no longer provides casino-related management services. As a result
of Holdings and GBHC's Chapter 11 filings, GBCC does not anticipate that it will
retain an equity position in the Sands. Accordingly, GBCC's current business
activity consists solely of the operations of ACSC.

ACSC licenses casino information technology systems to HCC's casino
facilities, the Sands and non-affiliated casino companies. The results of
ACSC's operations for the years ended December 31, 1999, 1998 and 1997 are set
forth below:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Computer service revenues 5,945,000 $5,255,000 $1,740,000
---------- ---------- ----------
Computer service expenses 2,933,000 1,304,000 516,000
General and administrative 3,924,000 2,492,000 1,463,000
Depreciation and amortization 181,000 130,000 44,000
---------- ---------- ----------

7,038,000 3,926,000 2,023,000
---------- ---------- ----------

(Loss) income from operations (1,093,000) $1,329,000 $ (283,000)
========== ========== ==========
</TABLE>

The decrease in operating income during 1999 compared to 1998 is due to
increased salary and personnel costs and overhead costs associated with ACSC's
sales of information technology products to unaffiliated third parties (see
"Results of Operations" below).

11
<PAGE>

continue to obtain installation contracts. The following table demonstrates
ACSC's dependence on installation contracts and on sales to affiliates:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Total percentage of period revenues
attributable to installation
contracts 61.3% 65.7% 40.4%
Percentage of period revenues attributable
to affiliate sales 22.8% 22.5% 42.2%
</TABLE>

GBCC and its subsidiaries continue to have debt outstanding to HCC consisting
of (1) demand notes (the "GBCC Notes") and accrued interest thereon totaling
$9.5 million at December 31, 1999 and (2) a 14 7/8% secured promissory note due
2006 (the "PPI Funding Notes") in the amount of $40.4 million at December 31,
1999 (see "Financing Activities" below). The current level of ACSC's operations
is not sufficient to provide debt service on the obligations to HCC and,
consequently, GBCC is currently insolvent. GBCC has commenced discussions with
HCC to restructure its obligations; however, there can be no assurance at this
time that such discussions will result in a restructuring of GBCC's obligations
to HCC.

Financing Activities

During 1994, GBCC issued $40.5 million discounted principal amount of
deferred interest notes (the "PPI Funding Notes") to HCC in exchange for $38.8
million principal amount of 15 1/2% notes issued by another GBCC subsidiary and
held by HCC. Effective as of April 1, 1997, HCC acquired from PPI Corporation
the general partnership interest in PML which, prior to October 14, 1999, held
the Aurora Management contract. The acquisition price for the general
partnership interest included a note in the amount of $3.8 million and the
assignment of $7.6 million discounted amount of the PPI Funding Notes to PPI
Corporation. Annual principal and interest payments by HCC on the $3.8 million
note have approximated the general partner's share of annual partnership
distributions which were made to HCC. During 1997, HCC forgave $23.6 million
discounted principal amount of the PPI Funding Notes. The remaining PPI Funding
Notes have a maturity value of $47.6 million. Payment of interest on the PPI
Funding Notes is deferred through February 17, 2001 at which time interest will
become payable semiannually with the unpaid balance due on February 17, 2006.

The GBCC Notes include $6.5 million borrowed from HCC during the third
quarter of 1996. Such borrowing accrues interest at the rate of 13 3/4% per
annum payable quarterly commencing October 1, 1996. GBCC loaned the proceeds
from this loan to GBHC on similar terms. The loan to GBHC along with the
related interest receivable were cancelled as part of a settlement agreement
approved by the New Jersey Bankruptcy Court on September 2, 1998.

As previously described, GBCC has commenced discussions with HCC to
restructure its obligations; however, there can be no assurance at this time
that such discussions will result in a restructuring of GBCC's obligations to
HCC.

12
<PAGE>

Capital Expenditures and Other Investments

Property and equipment additions during the year ended December 31, 1999
totaled $51,000. Management anticipates that capital expenditures during 2000,
consisting only of ongoing equipment replacements and enhancements at ACSC, will
not be significant.

RESULTS OF OPERATIONS

General

As a result of the filings by Holdings, GB Property Funding and GBHC, GBCC's
control over the filing subsidiaries is subject to the supervision of the New
Jersey Bankruptcy Court. GBCC does not expect to have ownership or operating
control of such subsidiaries after reorganization. Accordingly, the
accompanying consolidated statement of operations for the year ended December
31, 1998 reflects the operations of the filing subsidiaries for periods from
January 1, 1998 through June 30, 1998 under the equity method of accounting and
for periods subsequent to June 30, 1998 (including the year ended December 31,
1999) under the cost method of accounting. For the year ended December 31,
1997, however, the accompanying consolidated statement of operations includes
the operations of Holdings and its subsidiaries on a consolidated basis.

As a result of the filings by PCC, NJMI and PRT Funding, GBCC's control over
these subsidiaries was subject to the supervision of the Delaware Bankruptcy
Court and GBCC did not expect to have ownership or control of such subsidiaries
after reorganization. Accordingly, the accompanying consolidated statement of
operations for the year ended December 31, 1999 reflects the operations of PCC
and its subsidiaries under the cost method of accounting for periods subsequent
to the filings (May 25, 1999). GBCC sold its interest in PCC to HCC during
October 1999 as part of the Restructuring. The accompanying consolidated
statements of operations for the years ended December 31, 1998 and 1997 include
the activities of PCC, NJMI and PRT Funding on a consolidated basis.

Prior to April 1, 1997, GBCC controlled both the general and limited
partnership interests in PML, the entity which held the management contract on
the Aurora Casino. Accordingly, the operations of PML were consolidated with
GBCC on the accompanying consolidated statement of operations for the first
quarter of 1997. HCC acquired the general partnership interest in PML from a
subsidiary of GBCC effective April 1, 1997. From that date until October 14,
1999, GBCC held only the limited partnership interest in PML, which was
presented under the equity method of accounting on the accompanying consolidated
statements of operations for such periods.

13
<PAGE>

The operations of Holdings and its subsidiaries which are included in the
consolidated statement of operations for the year ended December 31, 1997
represent in excess of 97% of both consolidated net revenues and operating
expenses. As a result, comparisons of the results of operations for 1998 with
1997 would be meaningless. Accordingly, the following table sets forth GBCC's
proforma (loss) income from operations for the year ended December 31, 1997,
exclusive of Holdings and its subsidiaries ("the GBCC Group").
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1999 1998 Proforma 1997
----------- ---------- -------------
<S> <C> <C> <C>
Revenues:
Computer services $ 5,945,000 $5,255,000 $ 1,529,000
Sands management fee - 2,405,000 5,430,000
Aurora Casino management fee - - 2,727,000
Other 477,000 1,311,000 3,180,000
----------- ---------- -----------

Total revenues 6,422,000 8,971,000 12,866,000
----------- ---------- -----------
Expenses:
General and administrative 5,621,000 4,724,000 4,213,000
Other operating expenses 2,933,000 1,314,000 340,000
Depreciation and
amortization 181,000 129,000 402,000
----------- ---------- -----------

Total expenses 8,735,000 6,167,000 4,955,000
----------- ---------- -----------

(Loss) income from operations $(2,313,000) $2,804,000 $ 7,911,000
=========== ========== ===========

</TABLE>
GBCC Group
- ----------

Revenues

Computer service revenues at ACSC increased by $690,000 (13.1%) and $3.7
million (243.7%), respectively, during the years ended December 31, 1999 and
1998 compared to the prior years. As previously noted, the increases result
from ACSC's sales and marketing efforts implemented in 1997 to expand and sell
its casino information technology systems to third party purchasers. Through
December 31, 1999 six contracts for the sale and installation of such systems to
unaffiliated casinos have been obtained and completed.

Management fees earned by NJMI under the NJMI management contract with the
Sands decreased by $3 million (55.7%) during the year ended December 30, 1998
compared to 1997. As discussed in Note 6 of the Notes to Consolidated Financial
Statements, such decrease resulted from a revised fee arrangement providing for
a fixed fee of $165,000 per month effective May 1, 1998. The original
management agreement provided for significantly higher fees which were based on
revenues and gross operating profits at the Sands. The 1998 decrease also
results from the rejection of the management contract in September 1998.

Prior to April 1, 1997, GBCC held both the general and limited partnership
interests in the entity which held the management contract on the Aurora Casino.
For periods subsequent to April 1, 1997, GBCC held only the limited partnership
interest and, accordingly, accounted for its investment under the equity method
of accounting as discussed below (see "Results of Operations - Equity in
Earnings of Limited Partnership").

Other revenues decreased $834,000 (63.6%) in 1999 compared to 1998 as
consulting fees earned by PCC with respect to the Tunica Casino ceased to be
included in GBCC's consolidated results of operations upon the Chapter 11 filing
by PCC on May 25, 1999. Such fees amounted to $477,000 in 1999 compared

14
<PAGE>

to $1.2 million in both 1998 and 1997. Other revenues decreased by $1.9 million
(58.8%) in 1998 compared to 1997 due to the loss of management and termination
fees in the amounts of $263,000 and $1.5 million, respectively, earned by GBCC
in 1997 with respect to a hotel/casino it managed in San Juan, Puerto Rico.

General and Administrative Expenses

The GBCC Group's general and administrative expenses increased by $897,000
(19%) and $511,000 (12.1%), respectively, during the years ended December 31,
1999 and 1998 compared to the prior years. The 1999 and 1998 increases result
primarily from costs associated with the additional sales volume at ACSC. The
1998 increase also reflects the provision of reserves for collectability by
various members of the GBCC Group with respect to certain receivables from GBHC
and others. General and administrative expenses during 1997 also include
$418,000 of costs associated with the management of the Aurora Casino prior to
the acquisition of the general partnership interest by HCC effective April 1,
1997.

Other Operating Expenses

Other operating expenses increased by $1.6 million (123.2%) and $974,000
(286.5%), respectively, during the years ended December 31, 1999 and 1998
compared to the prior years primarily due to costs associated with ACSC's sales
and installation activities.

Depreciation and Amortization

Depreciation and amortization expense increased $52,000 (40.3%) in 1999
compared to 1998 due to additional capital expenditures by ACSC in 1999 as well
as to a full year's depreciation during 1999 on assets acquired by ACSC in 1998.
The GBCC Group's depreciation and amortization expense decreased by $273,000
(67.9%) during the year ended December 31, 1998 compared to 1997. As a result
of the default under the indenture for the PRT Funding Notes, all deferred
financing costs were written off at December 31, 1997. The resulting $358,000
decrease in amortization expense compared to 1997 was partially offset by an
$85,000 increase in depreciation expense due to an increase in ACSC's
depreciable assets.

GBCC Consolidated
- ------------------

Interest

Consolidated interest income for GBCC decreased $275,000 (29.2%) and $544,000
(36.6%), respectively, during the years ended December 31, 1999 and 1998
compared to the prior years as less cash was available for investment purposes.

Interest expense decreased $5.9 million (36.4%) during 1999 compared to 1998
as interest expense with respect to the PRT Funding Notes was no longer
recognized subsequent to the May 1999 filings under Chapter 11 by PCC and its
subsidiaries. Interest expense on the PRT Funding Notes during 1999 was $4
million compared to $9.9 million in 1998. Interest expense decreased by $22.1
million (57.7%) during 1998 compared to the prior year primarily due to the
absence of interest on Holdings' 10 7/8% First Mortgage Notes ($19.9 million
during 1997) and to HCC's forgiveness of $23.6 million discounted value of PPI
Funding Notes at December 31, 1997.

Equity in Earnings of Limited Partnership

Effective February 17, 1994, PCC acquired the limited partnership interest in
PML, a limited partnership which earned management fees from the operation of
the Aurora Casino. The Agreement of Limited Partnership of PML provided for
distributions to PCC of 1% of the first $84,000 of net income earned by PML each
month and 99% of any net income earned above such amount, with all remaining

15
<PAGE>

income distributed to the general partner. GBCC reflected its equity in the
earnings of PML only through the May 25, 1999 deconsolidation of PCC, which held
the limited partnership interest. The $2.7 million earned prior to May 25, 1999
compares favorably to the $2.4 million earned during the first five months of
1998, reflecting improved operations at the Aurora Casino, on which management
fees earned by PML were based. GBCC's equity in the earnings of PML increased
to $6.5 million during the year ended December 31, 1998 compared to $5 million
earned during 1997. Prior to April 1, 1997, PML's results of operations were
consolidated with those of GBCC; therefore, the $5 million equity in earnings
for 1997 only reflects nine months of such earnings. Restated on a comparable
twelve month period basis, GBCC's equity in the earnings of PML for 1997 would
have been $7 million. The resulting decline to $6.5 million in 1998 reflects
the reduction in management fees earned by PML due to a significant increase in
gaming taxes imposed on the Aurora Casino's operations. Management fees are
based, in part, on the operating results of the Aurora Casino.

Equity in Earnings of and Gain on Elimination of Investment in GB Holdings,
Inc.

GBCC's equity in the earnings of Holdings for the year ended December 31,
1998 amounted to $3.7 million and represents equity in earnings for the period
from January 1, 1998 through June 30, 1998. Effective July 1, 1998, GBCC
eliminated its investment in Holdings and is no longer recognizing equity in the
earnings of Holdings and its subsidiaries. For the year ended December 31,
1997, the results of operations of Holdings and its subsidiaries were
consolidated with those of GBCC. Had such operating results been accounted for
under the equity method of accounting, GBCC would have reported equity in losses
of $17.1 million for the year ended December 31, 1997. The significant
improvement in earnings during 1998 compared to the prior year is primarily due
to declines in interest expense which have more than offset costs associated
with the reorganization under Chapter 11.

As a result of GBCC no longer controlling the operations of the Sands, the
expectation that control of Holdings will only be temporary and the September
1998 settlement agreement which resolved certain significant uncertainties,
GBCC's investment in Holdings and its subsidiaries as well as certain
intercompany balances with Holdings were revalued to a zero basis effective on
July 1, 1998. The elimination of the investment in and intercompany balances
with Holdings resulted in a gain amounting to $27.5 million during the year
ended December 31, 1998.

Gain on Elimination of Investment in Pratt Casino Corporation

As a result of the filing of petitions for relief under Chapter 11 by PCC,
NJMI and PRT Funding on May 25, 1999, GBCC did not expect to have ownership or
operating control of these subsidiaries after reorganization. Accordingly,
these subsidiaries are no longer included in the consolidated financial
statements of GBCC for any period subsequent to May 25, 1999. GBCC's investment
in PCC and its subsidiaries as well as certain intercompany balances with PCC
and its subsidiaries were revalued to a zero basis effective on May 25, 1999.
The elimination of the investment in and intercompany balances with PCC resulted
in a gain amounting to $85.6 million for the year ended December 31, 1999.

Restructuring Costs

Restructuring costs decreased by $1.3 million (85.1%) during 1999 compared to
1998 as such costs were no longer reflected in GBCC's consolidated results of
operations subsequent to the May 25, 1999 Chapter 11 filings by PCC and its
subsidiaries. In addition to the deconsolidation, restructuring costs as a
whole were substantially reduced in 1999 due to progress made during 1998 which
ultimately led to the successful completion of the Restructuring. The 1998
increase in restructuring costs results from professional fees and other
corporate overhead costs associated with the default of the PRT Funding Notes
and efforts to restructure the obligations. Professional fees with respect to
GBHC's Chapter 11 filing ($505,000) were expensed during 1997.

16
<PAGE>

Gain on Disposal of Assets

The 1998 gain results from the sale to GBHC of GBCC's rights under an option
agreement to acquire a parcel of land in Atlantic City from an unrelated third
party. GBCC recognized gains during 1997 from liquidating distributions
received from a joint venture with respect to the sale of a managed hotel
property in Orlando, Florida and from the early termination of a leasehold
arrangement.

Income Tax Provision

On July 27, 1998 GBHC filed an action in the Bankruptcy Court against GBCC,
certain affiliates of GBCC and Jack E. Pratt, Edward T. Pratt, Jr. and William
D. Pratt as directors of GBCC and former directors of GBHC (collectively, the
"GBCC Parties"), which sought, among other things, to enjoin GBCC from using the
tax net operating loss carryforwards ("NOL's") of GBHC. On September 2, 1998,
the GBCC Parties reached a settlement with GBHC which was approved by the New
Jersey Bankruptcy Court. The terms of the settlement agreement provided, among
other things, that GBHC be included in the consolidated federal income tax
return of GBCC for 1997 and 1998 enabling GBCC to utilize GBHC's tax NOL's. The
agreement also provided that on or before December 31, 1998, GBCC would cause
Holdings and its subsidiaries to be deconsolidated from the GBCC federal income
tax return by means of transferring 21% of the stock ownership of Holdings to an
unconsolidated entity. Such transfer was accomplished effective as of December
31, 1998.

As a result of the settlement agreement, Holdings and its subsidiaries are no
longer included in the consolidated tax return of GBCC for periods subsequent to
December 31, 1998. The deconsolidation and sale of PCC and its subsidiaries has
also resulted in those entities no longer being included in GBCC's consolidated
tax returns for periods subsequent to October 1999. Due to the availability of
NOL's originating in prior years and uncertainties regarding GBCC's ability to
continue as a going concern, management is unable to determine that realization
of deferred tax assets resulting from NOL's and temporary differences is more
likely than not. Accordingly, under the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes", GBCC has provided
valuation allowances for substantially all of the deferred tax assets at
December 31, 1999 and 1998. The remaining deferred tax assets represent state
timing differences expected to be utilized.

The Internal Revenue Service has been examining the consolidated federal
income tax returns of HCC for the years 1993 through 1996 during which period
GBCC was included. Such examination for 1993 and 1994 has been completed and
resulted in adjustments to GBCC's consolidated NOL's and deferred tax assets,
but in no additional tax obligations. The Internal Revenue Service is
continuing its examination of the consolidated federal income tax returns of
HCC, including GBCC, for 1995 and 1996. Until such examination is completed,
allocations of tax attributes and additional alternative minimum tax or regular
tax obligations, if any, can not be determined. Due to the inclusion of
Holdings and its subsidiaries in such consolidated returns, an as yet
undetermined portion of any resulting tax liability to GBCC may be recoverable
from Holdings. As a result, management is presently unable to estimate the
ultimate impact of the examination on the consolidated financial position or
results of operations of GBCC

Write Off Deferred Financing Costs

At December 31, 1997, remaining deferred financing costs associated with the
10 7/8% First Mortgage Notes ($4.3 million) and the PRT Funding Notes ($2.2
million) were written off.

17
<PAGE>

Extraordinary Item

A subsidiary of Holdings acquired $2.5 million of 10 7/8% First Mortgage
Notes at a discount of $375,000 with which to make its scheduled July 1997
principal payment. Such gain was partially offset by the write off of
associated financing costs, resulting in a net gain from early extinguishment of
debt amounting to $310,000.

Year 2000 Compliance

At the beginning of the year 2000, computer programs that had date sensitive
software might have recognized a date using "00" as the year 1900 rather than
2000. Such an error could have resulted in a system failure or miscalculations
causing disruptions of operations including, among other things, a temporary
inability to process transactions or engage in similar normal business
activities.

In preparation for the Year 2000, management conducted a program to prepare
the Company's computer systems and applications as well as its non-information
technology (embedded microchip) systems. Such program included the use of both
internal and external resources to test and, if necessary, modify or replace
software applications. Year 2000 date conversion projects were completed on a
timely basis and the cost of acquiring, testing and converting such systems
proved to be minimal. The Company also communicated with its significant
suppliers to determine the extent to which GBCC's information systems might have
been vulnerable to those third parties' failure to resolve their Year 2000
issues. Such suppliers either confirmed their compliance or new suppliers were
located.

As a result of its planning and implementation efforts, GBCC experienced no
significant disruptions to any of its computer systems and non-information
technology systems and management believes that all such systems have
successfully responded to the Year 2000 change. The Company also encountered no
significant Year 2000 problems with its vendors or suppliers. Management is
continuing to monitor the Company's systems and communicate with its suppliers
and vendors to ensure that any latent Year 2000 problems that might arise are
promptly addressed.

Market Risk

The Company does not have and does not expect to have any securities subject
to interest rate fluctuations. Management believes that all market risks are
immaterial.

Inflation

Management believes that in the near term, modest inflation, together with
competition for qualified and experienced personnel, will continue to cause
increases in operating expenses, particularly labor and employee benefits costs.

Seasonality

Management believes that with the termination of its management contracts and
limited partnership interest in such contracts, seasonality will no longer
materially affect GBCC's results of operations.

18
<PAGE>

ITEM 8. INDEX TO FINANCIAL STATEMENTS

Page
----
Greate Bay Casino Corporation and Subsidiaries:

Independent Auditors' Report...................................... 20

Information Regarding Predecessor Independent Public Accountants.. 21

Consolidated Balance Sheets as of December 31, 1999
and 1998......................................................... 22

Consolidated Statements of Operations for the Years
Ended December 31, 1999, 1998 and 1997........................... 24

Consolidated Statement of Changes in Shareholders'
Deficit for the Three Years Ended December 31, 1999.............. 25

Consolidated Statements of Cash Flows for the Years
Ended December 31, 1999, 1998 and 1997........................... 26

Notes to Consolidated Financial Statements........................ 27

19
<PAGE>

INDEPENDENT AUDITORS' REPORT
----------------------------

To Greate Bay Casino Corporation:

We have audited the accompanying consolidated balance sheets of Greate Bay
Casino Corporation (the Company and a Delaware corporation) and subsidiaries as
of December 31, 1999 and 1998 and the related consolidated statements of
operations, changes in shareholders' deficit and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Greate Bay Casino Corporation and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 1 to the consolidated financial statements, during 1997 and 1998, the
Company was in violation of certain indenture covenants, which resulted in the
acceleration of the due date of the Company's debt obligations. At December 31,
1999, the insolvency of the Company and the current level of its operating
revenues raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans concerning these matters are also described
in Note 1. The consolidated financial statements do not include any adjustments
that might result from the outcome of these uncertainties.

Deloitte & Touche LLP
Dallas, Texas
February 25, 2000

20
<PAGE>

INFORMATION REGARDING PREDECESSOR INDEPENDENT PUBLIC ACCOUNTANTS
FOR THE YEAR ENDED DECEMBER 31, 1997

The financial statements of Greate Bay Casino Corporation ("GBCC") for the
year ended December 31, 1997 were examined by Arthur Andersen LLP, independent
public accountants, whose report thereon dated March 23, 1998 was included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1997.
Such report was qualified with respect to the Company's ability to continue as a
going concern due to acceleration of the due date of the Company's debt
obligations.

In October 1998, GBCC filed a complaint against Arthur Andersen LLP and
others alleging negligent advice with respect to certain tax consequences
resulting from the spin-off of GBCC's stock held by Hollywood Casino Corporation
to its shareholders on December 31, 1996. The Company subsequently engaged
Deloitte & Touche LLP as its new certifying accountants.

Because of the foregoing litigation, Arthur Andersen LLP believes that it is
no longer independent with respect to GBCC and consequently has informed the
Company that it is unable to reissue its report for the year ended December 31,
1997. As a result, Arthur Andersen LLP's report for that year is not included
in this Annual Report on Form 10-K.

Even if Arthur Andersen LLP were to reissue its report for the year 1997,
there can be no assurance that such report would be identical to the report
dated March 23, 1998, or that such reissued report would not include additional
qualifications. However, GBCC is not aware of any subsequent events,
transactions or other matters that would affect Arthur Andersen LLP's report.

21
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

ASSETS
<TABLE>
<CAPTION>

December 31,
-------------------------
1999 1998
----------- ------------
<S> <C> <C>

Current Assets:
Cash and cash equivalents $4,801,000 $10,616,000
Accounts receivable, net of allowance of $28,000 in 1999 391,000 367,000
Inventories 599,000 378,000
Due from affiliates 1,088,000 1,303,000
Refundable deposits and other
current assets 457,000 938,000
---------- -----------

Total current assets 7,336,000 13,602,000
---------- -----------

Investment in Limited Partnership - 3,104,000
---------- -----------

Operating Equipment 771,000 1,564,000
Less - accumulated depreciation
and amortization (438,000) (1,100,000)
---------- -----------

Net operating equipment 333,000 464,000
---------- -----------

Other Assets:
Due from affiliates, net of valuation allowances 1,180,000 2,767,000
Other assets 13,000 9,000
---------- -----------

Total other assets 1,193,000 2,776,000
---------- -----------

$8,862,000 $19,946,000
========== ===========

</TABLE>

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

22
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

LIABILITIES AND SHAREHOLDERS' DEFICIT

December 31,
------------------------------
1999 1998
-------------- --------------

Current Liabilities:
Current maturities of long-term debt $ - $ 85,000,000
Borrowings from affiliate 6,750,000 6,750,000
Accounts payable 1,223,000 2,232,000
Accrued liabilities -
Salaries and wages 188,000 235,000
Interest 2,722,000 8,780,000
Other 15,000 239,000
Other current liabilities 23,000 296,000
------------- -------------

Total current liabilities 10,921,000 103,532,000
------------- -------------

Long-Term Debt 40,446,000 35,040,000
------------- -------------

Commitments and Contingencies

Shareholders' Deficit:
Common stock, $.10 par value per
share; 10,000,000 shares authorized;
5,186,627 shares issued and outstanding 519,000 519,000
Additional paid-in capital 75,212,000 75,212,000
Accumulated deficit (118,236,000) (194,357,000)
------------- -------------

Total shareholders' deficit (42,505,000) (118,626,000)
------------- -------------

$ 8,862,000 $ 19,946,000
============= =============

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

23
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

Year Ended December 31,
-------------------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Revenues:
Casino $ - $ - $234,477,000
Rooms - - 9,691,000
Food and beverage - - 32,968,000
Computer services 5,945,000 5,255,000 1,529,000
Other 477,000 3,716,000 10,030,000
------------ ------------ ------------

6,422,000 8,971,000 288,695,000
Less - Promotional allowances - - (25,004,000)
------------ ------------ ------------

Net revenues 6,422,000 8,971,000 263,691,000
------------ ------------ ------------

Expenses:
Casino - - 199,746,000
Rooms - - 2,590,000
Food and beverage - - 10,815,000
Other 2,933,000 1,314,000 3,096,000
General and administrative 5,621,000 4,724,000 16,192,000
Depreciation and amortization 181,000 129,000 14,464,000
------------ ------------ ------------

Total expenses 8,735,000 6,167,000 246,903,000
------------ ------------ ------------

(Loss) income from operations (2,313,000) 2,804,000 16,788,000
------------ ------------ ------------

Non-operating income (expenses):
Interest income 667,000 942,000 1,486,000
Interest expense (10,303,000) (16,194,000) (38,246,000)
Gain on elimination of investment in Pratt
Casino Corporation 85,633,000 - -
Equity in earnings of Limited Partnership 2,660,000 6,494,000 5,012,000
Equity in earnings of and gain on elimination
of investment in GB Holdings, Inc. - 31,233,000 -
Restructuring costs (230,000) (1,548,000) (505,000)
Gain on disposal of assets - 472,000 2,120,000
------------ ------------ ------------

Total non-operating income (expense), net 78,427,000 21,399,000 (30,133,000)
------------ ------------ ------------

Income (loss) before income taxes,
extraordinary and other items 76,114,000 24,203,000 (13,345,000)
Write off deferred financing costs - - (6,515,000)
------------ ------------ ------------

Income (loss) before income taxes and
extraordinary item 76,114,000 24,203,000 (19,860,000)

Income tax benefit (provision) 7,000 287,000 (1,014,000)
------------ ------------ ------------

Income (loss) before extraordinary item 76,121,000 24,490,000 (20,874,000)

Extraordinary item:
Gain on early extinguishment of debt - - 310,000
------------ ------------ ------------

Net income (loss) $ 76,121,000 $ 24,490,000 $(20,564,000)
============ ============ ============

Basic and diluted net income (loss)
per common share:
Income (loss) before extraordinary item $ 14.68 $ 4.72 $ $(4.02)
Extraordinary item - .06
------------ ------------ ------------

Net income (loss) $ 14.68 $ 4.72 $ (3.96)
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.

24
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
For the Three Years Ended December 31, 1999
<TABLE>
<CAPTION>

Common Stock Additional
---------------------- Paid-in Accumulated
Shares Amount Capital Deficit
------------ -------- ----------- --------------
<S> <C> <C> <C> <C>

BALANCE, January 1, 1997 5,186,627 $519,000 $38,557,000 $(198,283,000)
Sale of general partnership interest - - 13,024,000 -
Forgiveness of debt by affiliate - - 23,631,000 -
Net loss - - - (20,564,000)
--------- -------- ----------- -------------

BALANCE, December 31, 1997 5,186,627 519,000 75,212,000 (218,847,000)
Net income - - - 24,490,000
--------- -------- ----------- -------------

BALANCE, December 31, 1998 5,186,627 519,000 75,212,000 (194,357,000)
Net income - - - 76,121,000
--------- -------- ----------- -------------

BALANCE, December 31, 1999 5,186,627 $519,000 $75,212,000 $(118,236,000)
========= ======== =========== =============

</TABLE>

The accompanying notes to consolidated financial statements
are an integral part of this consolidated statement.

25
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

Year Ended December 31,
-------------------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 76,121,000 $ 24,490,000 $(20,564,000)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Extraordinary item - - (310,000)
Write off deferred financing costs - - 6,515,000
Depreciation and amortization, including
accretion of debt discount 5,587,000 4,848,000 21,952,000
Gain on disposal of assets - (472,000) (2,120,000)
Provision for doubtful accounts 50,000 115,000 3,408,000
Equity in earnings of Limited Partnership (2,660,000) (6,494,000) (5,012,000)
Distributions received from Limited Partnership 4,038,000 5,646,000 4,856,000
Gain on elimination of investment in Pratt Casino
Corporation (85,633,000) - -
Equity in earnings of and gain on elimination of investment
in GB Holdings, Inc. - (31,233,000) -
Deferred income tax provision (benefit) 27,000 (287,000) 220,000
Increase in accounts receivable (52,000) (306,000) (607,000)
(Decrease) increase in accounts payable and
other accrued liabilities (2,874,000) 7,923,000 (902,000)
Net change in other current assets and liabilities (523,000) (1,235,000) 2,991,000
Net change in other noncurrent assets and liabilities 220,000 (807,000) 1,922,000
------------ ------------ ------------

Net cash (used in) provided by operating activities (5,699,000) 2,188,000 12,349,000
------------ ------------ ------------

INVESTING ACTIVITIES:
Purchases of property and equipment (51,000) (247,000) (3,915,000)
Deconsolidation of Pratt Casino Corporation (868,000) - -
Deconsolidation of GB Holdings, Inc. - - (13,871,000)
Increase in cash from sale of subsidiary - 245,000 -
Decrease in cash from sale of Limited Partnership - (451,000)
Proceeds from disposal of assets - 1,300,000 59,000
Collections on notes receivable 803,000 611,000 353,000
Obligatory investments - - (2,876,000)
Short-term investments - - 2,000,000
Investments in and advances to unconsolidated affiliates - - (6,500,000)
Distributions from unconsolidated affiliate - - 750,000
------------ ------------ ------------

Net cash (used in) provided by investing activities (116,000) 1,909,000 (24,451,000)
------------ ------------ ------------

FINANCING ACTIVITIES:
Repayments of short-term credit facilities - - (2,000,000)
Repayments of long-term debt - (36,000) (2,334,000)
------------ ------------ ------------

Net cash used in financing activities - (36,000) (4,334,000)
------------ ------------ ------------

Net (decrease) increase in cash and cash equivalents (5,815,000) 4,061,000 (16,436,000)
Cash and cash equivalents at beginning of year 10,616,000 6,555,000 22,991,000
------------ ------------ ------------

Cash and cash equivalents at end of year $ 4,801,000 $ 10,616,000 $ 6,555,000
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.

26
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Organization, Business and Basis of Presentation

Greate Bay Casino Corporation ("GBCC"), a Delaware corporation, is
currently engaged in the development, installation and maintenance of casino
systems through its wholly owned subsidiary, Advanced Casino Systems Corporation
("ACSC"). In prior years, GBCC and its other subsidiaries were also engaged in
the operation and management of and provision of services to casino properties,
including the ownership and operation of the Sands Hotel and Casino located in
Atlantic City, New Jersey (the "Sands") and, prior to October 13, 1999,
contracts to manage and consult with gaming facilities located in Aurora,
Illinois (the "Aurora Casino") and Tunica County, Mississippi (the "Tunica
Casino") (see Notes 6 and 7). As explained below, the GBCC subsidiary which
owns the Sands is currently in Chapter 11 proceedings and GBCC does not expect
to have ownership or operating control after reorganization. The GBCC
subsidiary which held the management and consulting contracts completed its
reorganization under Chapter 11 in October 1999 and is no longer owned by GBCC.
Accordingly, as further described below, the activities of the subsidiaries
which own the Sands and which held the management contracts with the Aurora and
Tunica casinos are no longer included in the operating results of GBCC.

On December 31, 1996, Hollywood Casino Corporation ("HCC"), owner of
approximately 80% of the outstanding common stock of GBCC, distributed such
stock to its shareholders. As a result, approximately 36% of GBCC's outstanding
stock is owned by Jack E. Pratt, Edward T. Pratt, Jr. and William D. Pratt and
by certain general partnerships and trusts controlled by the Pratts and by other
family members (collectively, the "Pratt Family"). The Pratt Family also owns
approximately 54% of HCC. HCC owns the Aurora Casino and the Tunica Casino.

Until October 1999, HCC owned the general partnership interest in Pratt
Management, L.P. ("PML"), the limited partnership which held the management
contract on the Aurora Casino. Such ownership interest was acquired from PPI
Corporation, a wholly owned subsidiary of GBCC, effective April 1, 1997. As a
result, GBCC's limited partnership interest in PML which was held by its wholly
owned subsidiary, Pratt Casino Corporation ("PCC"), was presented under the
equity method of accounting (see Note 7). As explained below, the operating
results of PCC including its equity in the earnings of PML for periods
subsequent to May 25, 1999 are not included in the consolidated results of
operations of GBCC.

On January 5, 1998, GB Holdings, Inc. ("Holdings"), at that time a wholly
owned subsidiary of GBCC, together with Holdings' wholly owned subsidiaries, GB
Property Funding Corp. ("GB Property Funding") and Greate Bay Hotel and Casino,
Inc. ("GBHC"), filed petitions for relief under Chapter 11 of the United States
Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court
for the District of New Jersey (the "New Jersey Bankruptcy Court"). Each
company continues to operate in the ordinary course of business, as set forth in
the Bankruptcy Code, and each company's executive officers and directors remain
in office, subject to the jurisdiction of the New Jersey Bankruptcy Court. On
June 1, 1999, a plan of reorganization was filed by the debtors with the New
Jersey Bankruptcy Court. The reorganization plan, as filed, provided for the
secured bondholders to receive new debt and 100% of the equity ownership of
Holdings in exchange for their current claims and for unsecured creditors to
receive a partial cash settlement of their claims. Subsequent to the filing of
a reorganization plan by the debtors, two competing plans were filed by (1) Park
Place Entertainment Corporation, a large and diversified gaming company with
significant operations in Atlantic City, and (2) jointly by High River Limited
Partnership, an entity controlled by Carl C. Icahn, and by the Official
Committee of Unsecured Creditors. Both of these plans provide for significant
cash infusions by the plan proponents in exchange for equity in a reorganized
Holdings ranging from 46.3% to 57.7% with the secured bondholders to receive the
remaining equity in reorganized Holdings

27
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

together with new secured debt. None of the plans provide for any distributions
to the present shareholders. A hearing on the adequacy of the disclosure
statements relating to the various plans is scheduled for April 5, 2000.
Effective on December 31, 1998, GBCC's ownership of Holdings was reduced to 79%
(see Note 10).

As a result of the Chapter 11 filings, GBCC's control over the filing
subsidiaries is subject to supervision of the New Jersey Bankruptcy Court and
GBCC does not expect to have ownership or operating control of such subsidiaries
after reorganization. Prior to July 7, 1998, New Jersey Management, Inc.
("NJMI"), a wholly owned subsidiary of GBCC, was responsible for the operations
of the Sands under a management agreement with GBHC (see Note 6). On May 22,
1998, GBHC filed a motion with the Bankruptcy Court seeking to reject the
existing management agreement with NJMI. A substitute agreement (the "Interim
Agreement") was entered into on June 27, 1998 and approved by the New Jersey
Bankruptcy Court on July 7, 1998. Under the Interim Agreement, NJMI continued
to provide certain agreed upon services to GBHC until September 28, 1998.
Furthermore, as the result of a settlement agreement reached by GBCC and
Holdings during September 1998 (see Note 10), GBCC no longer controls the
management of the Sands. Accordingly, Holdings, GB Property Funding and GBHC
are no longer included on the accompanying consolidated balance sheets. During
the period from January 1, 1998 through June 30, 1998, the operations of
Holdings and its subsidiaries were accounted for under the equity method of
accounting (see Note 9). As a result of GBCC no longer controlling the
operations of the Sands, the expectation that ownership control of Holdings will
only be temporary and the September 1998 settlement agreement which resolved
certain significant uncertainties, GBCC's investment in Holdings and its
subsidiaries as well as certain amounts due to Holdings (see Note 6) were
revalued to a zero basis effective on July 1, 1998. The elimination of the
investment in and amounts due to Holdings resulted in a gain of $27,510,000
which has been combined with equity in the earnings of Holdings on the
accompanying consolidated statement of operations for the year ended December
31, 1998. Accordingly, for periods subsequent to June 30, 1998, GBCC has
accounted for its investment in Holdings under the cost method of accounting.

The filings under Chapter 11 by Holdings, GB Property Funding and GBHC
resulted in a default under the indenture for $85,000,000 principal amount of 11
5/8% senior notes due 2004 (the "PRT Funding Notes") issued by PRT Funding Corp.
("PRT Funding"), an indirect, wholly owned subsidiary of GBCC. Accordingly, the
outstanding principal amount of the PRT Funding Notes accelerated and became
currently due and payable. PCC, as guarantor of the PRT Funding Notes, did not
have sufficient assets to satisfy the outstanding amounts applicable to the PRT
Funding Notes. PRT Funding deferred payment of interest due on the April 15 and
October 15, 1998 and April 15, 1999 interest payment dates. On October 22,
1998, PRT Funding paid to the bondholders an amount equal to a single semiannual
interest payment ($4,941,000) while negotiations to restructure the PRT Funding
Notes continued. In connection with the Restructuring (as defined below) PRT
Funding paid deferred interest amounting to $6,768,000 to the bondholders on
April 30, 1999.

On April 28, 1999, PCC, PRT Funding, NJMI, GBCC, HCC and the holders of
substantially all of the PRT Funding Notes entered into a voting agreement which
provided for the restructuring of the PRT Funding Notes (the "Restructuring").
The voting agreement provided for HCC to acquire the stock of PCC, the parent of
PRT Funding, from GBCC for nominal consideration. When acquired by HCC, PCC's
assets were to consist of its limited partnership interest in its management
contract for the Aurora Casino and a consulting contract for the Tunica Casino
and its liabilities were to consist of a new obligation in the amount

28
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

of $40,329,000 payable in satisfaction of the PRT Funding Notes. The voting
agreement provided for HCC to immediately discharge the obligation.

As part of the Restructuring, holders of the PRT Funding Notes were also to
receive 100% of the remaining assets of PCC and its subsidiaries not acquired by
HCC. Such assets consist primarily of claims against Holdings, GB Property
Funding and GBHC in their Chapter 11 proceedings (see discussion of Greate Bay
Holdings, L.L.C. in Note 9).

The successful completion of the Restructuring required that PCC, PRT
Funding and NJMI file for protection under Chapter 11 with the above
transactions included as part of a pre-negotiated plan of reorganization. Such
petitions for relief were filed on a May 25, 1999 in the United States
Bankruptcy Court for the District of Delaware (the "Delaware Bankruptcy Court")
and the related plan of reorganization was filed on May 26, 1999. The plan was
confirmed by the Delaware Court on October 1, 1999. On October 13, 1999, GBCC
sold its ownership of PCC, which held the consulting agreement with the Tunica
Casino and the limited partnership interest in PML (see Notes 6 and 7) to HCC.
When sold by GBCC, PCC's assets consisted of the limited partnership interest
and the consulting agreement valued in the aggregate at $40,329,000. PCC's
liabilities consisted of an obligation in the amount of $40,329,000 payable in
satisfaction of the PRT Funding Notes. HCC settled the obligation on October
14, 1999. GBCC's claims against Holdings, GB Property Funding and GBHC in their
Chapter 11 proceedings as well as other claims previously held by PCC, PRT
Funding and NJMI were conveyed to Greate Bay Holdings, L.L.C., a new GBCC
subsidiary, for the benefit of the PRT Funding noteholders (see Note 9). GBCC
recorded a charge against the gain on elimination of investment in PCC in the
amount of $496,000 during the fourth quarter of 1999 representing the transfer
of its claims for the benefit of the PRT Funding noteholders.

As a result of the Chapter 11 filings and plan of reorganization of PCC,
PRT Funding and NJMI, GBCC's control over the filing subsidiaries was subject to
supervision of the Delaware Bankruptcy Court and GBCC did not expect to have
ownership or operating control of such subsidiaries after reorganization.
Accordingly, GBCC's investment in PCC and its subsidiaries as well as certain
intercompany balances with PCC and its subsidiaries were revalued to a zero
basis effective on May 25, 1999. The elimination of the investment in and
intercompany balances with PCC resulted in a gain of $86,129,000 on the
accompanying consolidated statement of operations for the year ended December
31, 1999. For periods subsequent to May 25, 1999 and before October 14, 1999,
GBCC accounted for its investment in PCC under the cost method of accounting.

GBCC's only significant remaining operating activity is the development,
installation and maintenance of casino systems by ACSC. GBCC and its
subsidiaries continue to have debt outstanding to HCC consisting of (1) demand
notes and accrued interest thereon totaling $9,472,000 at December 31, 1999 (see
Notes 3 and 6) and (2) a 14 7/8% secured promissory note due 2006 in the amount
of $40,446,000 at December 31, 1999 (see Note 4). The current level of ACSC's
operations is not sufficient to provide debt service on the HCC obligations and,
consequently, GBCC is currently insolvent. GBCC has commenced discussions with
HCC to restructure its obligations; however, there can be no assurance at this
time that such discussions will result in a restructuring of GBCC's obligations
to HCC.

29
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The insolvency of GBCC raises substantial doubt about its ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of these
uncertainties.

(2) Summary of Significant Accounting Policies

The significant accounting policies followed in the preparation of the
accompanying consolidated financial statements are discussed below. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Principles of consolidation -

Except as explained in Note 1 with respect to PCC, Holdings and their
respective subsidiaries, the consolidated financial statements include the
operating activities and cash flows of GBCC and its wholly owned subsidiaries.
All significant intercompany transactions have been eliminated. Investments in
unconsolidated affiliates, including joint ventures, that are 50% or less owned
are accounted for by the equity method.

Revenue recognition -

ACSC, a wholly owned subsidiary of GBCC, licenses casino information
technology systems to affiliates of GBCC as well as to non-affiliated casino
companies. Certain of ACSC's sales of software to third parties are pursuant to
agreements which specify modifications to be made, require on-going vendor
support or provide for other specialized terms and conditions. In recognizing
revenue under such agreements, ACSC has adopted and complies with the reporting
requirements of Statement of Position 97-2, "Software Revenue Recognition" ("SOP
97-2") issued by the American Institute of Certified Public Accountants. The
provisions of SOP 97-2 require, among other things, that revenue from software
sales that do not require significant production, modification or customization
be recognized when evidence of an arrangement exists, delivery has occurred, the
fee is fixed as determinable and collectability is probable. Software sales for
which significant modifications are required are recognized under a percentage-
of-completion method based on costs incurred to date compared with total
estimated costs.

Casino revenues, promotional allowances and departmental expenses -

The Sands recognized the net win from gaming activities (the difference
between gaming wins and losses) as casino revenues. Casino revenues were net of
accruals for anticipated payouts of progressive and certain other slot machine
jackpots and certain progressive table game payouts.

The estimated value of rooms, food and beverage and other items which were
provided to customers without charge were included in revenues and a
corresponding amount was deducted as promotional allowances. The costs of such
complimentaries were included as casino expenses on the accompanying
consolidated statement of operations for the year ended December 31, 1997.
Costs of complimentaries

30
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

allocated from the rooms, food and beverage and other operating departments to
the casino department during the year ended December 31, 1997 were as follows:

1997
-----------

Rooms $ 5,617,000
Food and beverage 28,144,000
Other 2,991,000
-----------

$36,752,000
===========

Cash and cash equivalents -

Cash and cash equivalents are generally comprised of cash and investments
with original maturities of three months or less, such as commercial paper,
certificates of deposit and fixed repurchase agreements.

Allowance for doubtful accounts -

The allowance for doubtful accounts is maintained at a level considered
adequate to provide for possible future losses. Provisions for doubtful
accounts amounting to $50,000 and $115,000, respectively, were made during 1999
and 1998. Provisions for doubtful accounts at the Sands amounting to $3,195,000
were made during the year ended December 31, 1997.

Inventories -

Inventories are stated at the lower of cost (on a first-in, first-out basis)
or market.

Property and equipment -

Operating equipment is recorded at cost and is being depreciated utilizing
the straight-line method over estimated useful lives of three to 15 years.

Deferred financing costs -

The costs of issuing long-term debt, including all underwriting, legal and
accounting fees, were deferred and were being amortized over the term of the
related debt issue. As a result of the filings under Chapter 11 on January 5,
1998, remaining deferred financing costs in the amount of $6,515,000 were
determined to be unrealizable and were written off on the accompanying
consolidated statement of operations for the year ended December 31, 1997.
Amortization of deferred financing costs was $1,072,000 for the year ended
December 31, 1997.

Long-lived assets -

Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
requires, among other things, that an entity review its

31
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

long-lived assets and certain related intangibles for impairment whenever
changes in circumstances indicate that the carrying amount of an asset may not
be fully recoverable. As a result of its review, GBCC does not believe that any
such changes have occurred.

Accrued insurance -

GBCC is self insured for a portion of its general liability, certain health
care and other liability exposures. Accrued insurance includes estimate of such
accrued liabilities based on an evaluation of the merits of individual claims
and historical claims experience; accordingly, GBCC's ultimate liability may
differ from the amounts accrued.

Income taxes -

From May 1992 through December 31, 1996, GBCC's results of operations were
included in HCC's consolidated federal income tax return. Pursuant to
agreements between HCC and GBCC, GBCC's provision for federal income taxes was
based on the amount of tax which would have been provided if a separate federal
income tax return had been filed.

Interest expense -

Interest expense includes the accretion of debt discount amounting to
$5,406,000, $4,719,000 and $7,488,000, respectively, during the years ended
December 31, 1999, 1998 and 1997.

Net income (loss) per common share -

Earnings per share is presented for both earnings per common share assuming
no dilution (basic earnings per share) and earnings per common share assuming
full dilution (diluted earnings per share). Basic earnings per common share is
calculated by dividing the net income (loss) by the weighted average number of
shares of common stock outstanding. Diluted earnings per common share is
calculated for periods in which income from continuing operations was earned by
dividing the components of net income by the weighted average number of shares
of common stock and potential common shares outstanding. All potential common
shares are excluded from the calculation of diluted net loss per share for
periods during which a loss was incurred because the effect of their inclusion
would be antidilutive.

For each of the years ended December 31, 1999, 1998 and 1997, there were no
potential common shares outstanding and basic and diluted income (loss) per
share were the same. The weighted average number of shares of common stock used
in the calculation of both basic and diluted income (loss) per share was
5,186,627 for each of the years ended December 31, 1999, 1998, and 1997.

Recent accounting pronouncement -

In June 1998, the FASB issued a new statement, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), which has been amended to be
effective for fiscal years beginning after June 15, 2000. SFAS 133 requires,
among other things, that derivatives be recorded on the balance sheet at fair
value. Changes in the fair value of derivatives may, depending on circumstances,
be recognized in earnings or

32
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

deferred as a component of shareholders' equity until a hedged transaction
occurs. GBCC does not believe the adoption of SFAS 133 will have a significant
impact on its financial position or results of operations.

(3) Short-Term Credit Facilities and Borrowings from Affiliates

GBCC and its subsidiaries had outstanding affiliate borrowings from HCC of
$6,750,000 as of both December 31, 1999 and 1998. During the third quarter of
1996, GBCC borrowed $6,500,000 from HCC on a demand basis with interest at the
rate of 13 3/4% per annum payable quarterly commencing October 1, 1996; such
funds were loaned by GBCC to GBHC for working capital purposes on the same
terms. On September 2, 1998, the working capital loans to GBHC were cancelled
as part of a settlement agreement among GBCC and Holdings, together with certain
of their subsidiaries (see Notes 6 and 10). In addition, a $250,000 loan from
HCC with interest at the rate of 14% per annum payable semiannually was due on
April 1, 1998; to date, such payment has not been made.

GBHC made an advance to a GBCC subsidiary in the amount of $5,672,000. The
GBCC subsidiary which received the advance is insolvent and GBCC has no
obligation with respect to the advance. A settlement agreement entered into by
GBCC and GBHC during September 1998 (see Note 10) provides, among other things,
that GBHC preserves whatever rights of offset, if any, it might have with
respect to such advance together with accrued interest thereon against
$15,000,000 of subordinated loans made to GBHC by other GBCC subsidiaries (see
Note 6). As GBHC's only recourse, if any, is against intercompany obligations
already fully reserved by GBCC, the advance, together with accrued interest of
$4,602,000, were eliminated from the consolidated balance sheet of GBCC and are
included in the gain of $27,510,000 on elimination of investment in Holdings
included on the accompanying consolidated statement of operations for the year
ended December 31, 1998.

(4) Long-Term Debt and Pledge of Assets

The January 5, 1998 filings for relief under Chapter 11 of the Bankruptcy
Code by Holdings, GB Property Funding and GBHC constituted a default under the
indenture for the PRT Funding Notes. Accordingly, the outstanding principal
amount of the PRT Funding Notes accelerated, became currently due and payable
and was classified as current on the accompanying consolidated balance sheet at
December 31, 1998. On May 25, 1999, PRT Funding , PCC and NJMI filed petitions
for relief under Chapter 11 of the Bankruptcy Code and their plan of
reorganization was confirmed by the Delaware Bankruptcy Court on October 1,
1999.

33
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31,
--------------------------
1999 1998
------------ ------------

11 5/8% senior notes, due 2004 (a) $ - $ 85,000,000
14 7/8% secured promissory note, due 2006, net of
discount of $7,157,000,000 and $12,562,000,
respectively (b) 40,446,000 35,040,000
------------ ------------

Total indebtedness 40,446,000 120,040,000
Less - current maturities - 85,000,000
------------ ------------

Total long-term debt $ 40,446,000 $ 35,040,000
============ ============

- -----------------

(a) On February 17, 1994, PRT Funding issued the PRT Funding Notes. Interest
on the PRT Funding Notes accrued at the rate of 11 5/8% per annum, payable
semiannually commencing October 15, 1994. The PRT Funding Notes were
cancelled as part of the Restructuring (see Note 1).

(b) On February 17, 1994, PPI Funding Corp., a subsidiary of GBCC, issued
$40,524,000 discounted principal amount of new deferred interest notes (the
"PPI Funding Notes") to HCC in exchange for the $38,779,000 principal
amount of 15 1/2% unsecured notes (the "PCPI Notes") held by HCC and issued
by PCPI Funding Corp., another subsidiary of GBCC. The PPI Funding Notes
were discounted to yield interest at the rate of 14 7/8% per annum and had
a face value of $110,636,000. Subsequent principal payment by PPI Funding
Corp. reduced the maturity value of the notes to $98,353,000 at December
31, 1996. During the second quarter of 1997, HCC assigned $13,750,000
undiscounted principal amount of the PPI Funding Notes to PPI Corporation
as consideration, in part, for HCC's acquisition of the general partnership
interest in PML (see Note 6). Such assignment reduced the maturity value
of the notes to $84,603,000. At December 31, 1997, an additional
$37,000,000 undiscounted face value ($23,631,000 discounted value) of the
PPI Funding Notes was forgiven by HCC, further reducing the maturity value
to $47,603,000. Because of the continued affiliation of HCC and GBCC, the
forgiveness of debt was reflected by GBCC as a credit to paid-in capital on
the accompanying consolidated statement of changes in shareholders' deficit
at December 31, 1997. Payment of interest on the PPI Funding Notes is
deferred through February 17, 2001 at which time interest will become
payable semiannually, with the maturity value of the note ($47,603,000) due
on February 17, 2006. The PPI Funding Notes are collateralized by a pledge
of all of the common stock of a subsidiary of GBCC.

Interest paid amounted to $6,768,000, $4,968,000, and $30,102,000,
respectively, during the years ended December 31, 1999, 1998 and 1997.

34
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(5) Income Taxes

Components of GBCC's benefit (provision) for income taxes consist of the
following:
<TABLE>
<CAPTION>

Year Ended December 31,
-----------------------------------------
1999 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>

Federal income tax (provision) benefit:
Current $ (29,000) $ - $ -
Deferred (10,412,000) (9,012,000) (7,322,000)
State income tax (provision) benefit:
Current 63,000 - (794,000)
Deferred (27,000) (21,000) (36,000)
Valuation allowance 10,412,000 9,320,000 7,138,000
------------ ----------- -----------

$ 7,000 $ 287,000 $(1,014,000)
============ =========== ===========
</TABLE>

GBCC paid federal income taxes during the year ended December 31, 1999 of
$29,000; no federal income taxes were paid during the years ended December 31,
1998 or 1997. Total state income taxes paid by GBCC for the years ended
December 31, 1999, 1998 and 1997 amounted to $178,000, $319,000 and $193,000,
respectively.

A reconciliation between the calculated tax (provision) benefit based on the
statutory rates in effect and the effective tax rates follows:
<TABLE>
<CAPTION>

Year Ended December 31,
------------------------------------------
1999 1998 1997
------------- ------------ -------------
<S> <C> <C> <C>

Calculated income tax (provision) benefit $(26,640,000) $(8,229,000) $ 6,647,000
Excludable cancellation of debt income 16,710,000 - -
Forgiveness of debt by affiliate - - 8,035,000
Other (475,000) (804,000) 506,000
Valuation allowance change 10,412,000 9,320,000 (16,202,000)
------------ ----------- ------------
Tax benefit (provision) as shown on
consolidated statements of operations $ 7,000 $ 287,000 $ (1,014,000)
============ =========== ============
</TABLE>

As a result of the distribution of GBCC's stock by HCC to its shareholders at
December 31, 1996, GBCC is no longer included in HCC's consolidated federal
income tax return. In addition, as a result of a settlement agreement entered
into in September 1998 (see Note 10), Holdings and its subsidiaries are no
longer included in the consolidated tax return of GBCC for periods subsequent to
December 31, 1998. The deconsolidation and sale of PCC and its subsidiaries has
also resulted in those entities no longer being included in GBCC's consolidated
tax return for periods subsequent to October 1999. As of December 31, 1999,
GBCC and its remaining subsidiaries have net operating loss carryforwards
("NOL's") totaling approximately $14,900,000 for federal income tax purposes,
none of which begin to expire before the year 2012. Additionally, GBCC has
alternative minimum tax credits and other tax credits available totaling

35
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

$29,000 and $511,000, respectively. Alternative minimum tax credits do not
expire and the other tax credits expire in 2000 ($97,000) and 2001 ($414,000).
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109") requires that the tax benefit of such NOL's and credit
carryforwards, together with deferred tax assets resulting from temporary
differences, be recorded as an asset and, to the extent that management can not
assess that the utilization of such asset is more likely than not, a valuation
allowance should be recorded. Due to the availability of NOL's originating in
prior years and uncertainties regarding GBCC's ability to continue as a going
concern, management is unable to determine that realization of such asset is
more likely than not and, thus, has provided valuation allowances for
substantially all of the deferred tax asset for all periods presented. The
remaining deferred tax assets at December 31, 1999 and 1998 represent state
timing differences expected to be utilized.

The components of the net deferred tax asset are as follows:

December 31,
---------------------------
1999 1998
------------ -------------

Deferred tax assets:
Net operating loss carryforwards $ 5,060,000 $ 11,946,000
Allowance for doubtful accounts 94,000 130,000
Alternative minimum tax credit 29,000 -
Investment and jobs tax credits 511,000 2,339,000
Other liabilities and accruals 11,000 113,000
Deferred financing costs - 1,374,000
Other - 242,000
----------- ------------

Deferred tax asset 5,705,000 16,144,000
Valuation allowance (5,683,000) (16,095,000)
----------- ------------

$ 22,000 $ 49,000
=========== ============

Sales or purchases of GBCC common stock by certain five percent stockholders,
as defined in the Internal Revenue Code of 1986, as amended (the "Code"), can
cause a "change of control", as defined in Section 382 of the Code, which would
limit the ability of GBCC to utilize these loss carryforwards in later tax
periods. Should such a change of control occur, the amount of annual loss
carryforwards available for use would most likely be substantially reduced.
Future treasury regulations, administrative rulings or court decisions may also
effect GBCC's future utilization of its loss carryforwards.

36
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

recoverable from Holdings. As a result, management is presently unable to
estimate the ultimate impact of the examination on the consolidated financial
position or results of operations of GBCC.

(6) Transactions with Related Parties

PML, a limited partnership wholly owned through March 31, 1997 by GBCC,
earned management fees pursuant to a management agreement with Hollywood Casino
- - Aurora, Inc. ("HCA"), an HCC subsidiary. Such fees included a base management
fee equal to 5% of the Aurora Casino's operating revenues (as defined in the
agreement) subject to a maximum of $5.5 million annually, and an incentive fee
equal to 10% of gross operating profit (as defined in the agreement to generally
include all revenues, less expenses other than depreciation, interest,
amortization and taxes). Effective as of April 1, 1997, HCC acquired the
general partnership interest in PML from PPI Corporation, a wholly owned
subsidiary of GBCC (see Note 7). Management fees earned by GBCC prior to the
April 1, 1997 sale of the general partnership interest amounted to $2,727,000.

In April 1997, HCC issued a five-year note in the original amount of
$3,800,000 and assigned $13,750,000 undiscounted principal amount ($7,597,000
discounted value) of PPI Funding Notes (see Note 4) and $350,000 of accrued
interest due from GBCC to PPI Corporation in exchange for the general
partnership interest in PML. The difference between the historical cost of PPI
Corporation's investment in PML and the selling price ($13,024,000) was recorded
as a credit to paid-in capital in 1997 (see Note 11). The $3,800,000 note was
payable in monthly installments of $83,000, including interest at the rate of
14% per annum, commencing on May 1, 1997, with additional quarterly variable
principal payments commencing on July 1, 1997 in an amount equal to the general
partner's share of quarterly cash distributions, as defined, from PML. The note
was amended as of the October 12, 1999 acquisition of PCC by HCC (see Note 1) to
provide for monthly installments of $83,000 including interest and additional
quarterly principal payments of $21,000 beginning January 1, 2000. The
remaining note balances at December 31, 1999 and 1998 are $2,033,000 and
$2,836,000, respectively. Of those balances, $853,000 and $622,000,
respectively, are included in current amounts due from affiliates and $1,180,000
and $2,214,000, respectively, are included in noncurrent amounts due from
affiliates at December 31, 1999 and 1998. Interest income on the note from HCC
amounted to $348,000, $439,000 and $383,000 , respectively, during the years
ended December 31, 1999, 1998 and 1997. Accrued interest receivable of $24,000
and $34,000, respectively, is included in amounts due from affiliates on the
accompanying consolidated balance sheets at December 31, 1999 and 1998.

Prior to May 1, 1998, NJMI was responsible for the operations of the Sands
under a management agreement with GBHC. NJMI was entitled to receive annually
(1) a basic consulting fee of 1.5% of "adjusted gross revenues," as defined, and
(2) incentive compensation of between 5% and 7.5% of gross operating profits in
excess of certain stated amounts should annual "gross operating profits," as
defined, exceed $5,000,000. On May 22, 1998, GBHC filed a motion with the New
Jersey Bankruptcy Court seeking to reject the existing management agreement with
NJMI. The Interim Agreement was entered into on June 27, 1998 and was approved
by the Bankruptcy Court on July 7, 1998. Under the Interim Agreement, effective
as of May 1, 1998 and terminating on September 28, 1998, NJMI continued to
provide certain agreed upon services to GBHC at a monthly fee of $165,000 of
which $122,000 was paid on a monthly basis in arrears and the remaining $43,000
was deferred and is to be paid upon confirmation of GBHC's plan of
reorganization by the New Jersey Bankruptcy Court. All management fees
terminated upon the granting of

37
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

GBHC's motion to reject the management contract by the New Jersey Bankruptcy
Court on September 28, 1998. As a consequence of the September 1998 settlement
agreement (see Note 10), GBCC and GBHC may no longer assert claims against each
other with respect to the operation of the management contract and, with the
passage of time, the cancellation thereof.

Fees earned by NJMI under the management agreement and Interim Agreement
amounted to $2,405,000 for the year ended December 31, 1998. Management fees
receivable from the Sands at December 31, 1998 amounted to $267,000 net of a
valuation allowance of $115,000. Of the amount receivable at December 31, 1998,
$30,000, net of the aforementioned valuation allowance, which was earned prior
to GBHC's bankruptcy filing, was included in noncurrent due from affiliates on
the accompanying consolidated balance sheet and remains subject to terms of a
reorganization plan which requires confirmation by the New Jersey Bankruptcy
Court (see Note 10).

Pursuant to a consulting agreement which was terminated effective October 13,
1999 with Hollywood Casino - Tunica, Inc. ("HCT"), the HCC subsidiary which owns
and operates the Tunica Casino, a subsidiary of PCC received monthly consulting
fees of $100,000. Fees during 1999 amounting to $477,000 earned prior to the
deconsolidation of PCC on May 25, 1999 are included on the accompanying
consolidated statement of operations for 1999. Total fees earned for each of
the years ended December 31, 1998 and 1997 amounted to $1,200,000.

HCC and its subsidiaries allocate certain general and administrative costs to
GBCC and its subsidiaries pursuant to services agreements. Net allocated costs
and fees charged to GBCC and its subsidiaries by HCC and its subsidiaries
amounted to $610,000, $974,000 and $1,843,000, respectively, during the years
ended December 31, 1999, 1998 and 1997. In connection with such charges,
payables in the amount of $20,000 and $172,000 are included in accounts payable
on the accompanying consolidated balance sheets at December 31, 1999 and 1998,
respectively.

ACSC provides computer, marketing and other administrative services to GBHC
and to HCC and its subsidiaries. Computer services provided include hardware,
software and operator support and, for the most part, such services are billed
by ACSC at its direct cost plus expenses incurred. ACSC and HCT entered into a
Computer Services Agreement dated as of January 1, 1994 and renewed through
December 31, 1999 to provide such services and to license or sublicense to HCT
computer software necessary to operate HCT's casino, hotel and related
facilities and business operations. HCT pays ACSC for such equipment and
licenses such software at amounts and on terms and conditions that ACSC provides
to unrelated third parties. HCT also paid ACSC a fixed license fee of $33,600
per month. ACSC's agreements to provide services to HCA and HCT terminated on
October 13 and December 31, 1999, respectively. ACSC continues to provide
services to these HCC subsidiaries on an as needed basis at third party
consulting rates while negotiations for new service agreements continue. ACSC's
billings to HCC and its subsidiaries for such services amounted to $1,285,000,
$1,147,000 and $809,000 for the years ended December 31, 1999, 1998 and 1997,
respectively. Unpaid charges from HCC and its subsidiaries included in due from
affiliates on the accompanying consolidated balance sheets for the years ended
December 31, 1999 and 1998 amounted to $106,000 and $122,000, respectively.
Billings to GBHC amounted to $818,000 and $787,000, respectively, for the years
ended December 31, 1999 and 1998. Unpaid charges to GBHC included in due from
affiliates on the accompanying consolidated balance sheets at December 31, 1999
and 1998 amounted to $76,000 and $252,000, respectively.

38
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Many of the marketing and administrative services now provided to HCC and its
subsidiaries by ACSC were previously provided by GBHC. Such charges amounted to
$704,000 during the year ended December 31, 1997. ACSC has outstanding payables
to GBHC amounting to $159,000 and $241,000, respectively, at December 31, 1999
and 1998 included in accounts payable on the accompanying consolidated balance
sheets.

Interest expense with respect to borrowings from HCC is set forth below:

Year Ended December 31,
----------------------------------
1999 1998 1997
---------- ---------- ----------

PPI Funding Notes (Note 4) $5,406,000 $4,719,000 $7,488,000
Short-term borrowings (Note 3) 941,000 942,000 977,000

Accretion of interest on the PPI Funding Notes is included in the
outstanding note payable balances at December 31, 1999 and 1998. Interest
accrued on short-term borrowings at December 31, 1999 and 1998, which amounted
to $2,722,000 and $1,781,000, respectively, is included in interest payable on
the accompanying consolidated balance sheets.

GBHC issued a promissory note in the amount of $10,000,000 on February 17,
1994 to PRT Funding. Such note accrued interest at the rate of 14 5/8% per annum
payable semiannually commencing on August 17, 1994. The principal amount of the
note was due on February 17, 2005. During the first quarter of 1997, GBHC also
borrowed $5,000,000 from PCC for working capital purposes. Such borrowing
accrued interest at the rate of 14 5/8% per annum payable semiannually
commencing July 15, 1997. During 1997, interest on such notes eliminated in
consolidation. In accordance with certain provisions of the September 1998
settlement agreement with GBCC (see Note 10), GBHC preserved whatever rights of
offset, if any, it might have with respect to an advance made by GBHC to a GBCC
subsidiary in the amount of $5,672,000 (see Note 3) against the $10,000,000 and
$5,000,000 loans described above. As a result of (1) GBHC no longer being
included as a consolidated subsidiary and (2) GBHC's filing under Chapter 11
making prospects for ultimate collection doubtful, the notes, together with
accrued interest of $5,652,000, were fully reserved on the accompanying
consolidated balance sheet at December 31, 1998.

During the third quarter of 1996, GBCC loaned $6,500,000 to GBHC for working
capital purposes. Such advance accrued interest at the rate of 13 3/4% per
annum, payable quarterly commencing October 1, 1996. An additional $1,500,000
was loaned to GBHC during the first quarter of 1997 on the same terms. Repayment
of such advances and the payment of the related interest were subject to terms
of a reorganization plan which requires confirmation by the New Jersey
Bankruptcy Court and to approval by the New Jersey Casino Control Commission
(the "Casino Commission"). Prior to December 31, 1997, the interest on such
notes eliminated in consolidation. For the same reasons cited in the previous
paragraph, the total advances to GBHC of $8,000,000, together with the related
interest receivable of $1,496,000, were reflected as an adjustment to GBCC's
negative investment in Holdings at December 31, 1997. On September 2, 1998, the
working capital loans to GBHC were cancelled as part of a settlement agreement
among GBCC and Holdings, together with certain of their subsidiaries, and HCC
(see Note 10).

39
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(7) Investment in Pratt Management, L.P.

Prior to the Restructuring in October 1999 (see Note 1) and since April 1,
1997, PCC held the limited partnership interest in PML which earned management
fees from the Aurora Casino and incurred operating and other expenses with
respect to its management thereof. As the limited partner in PML, PCC received
1% of the first $84,000 of net income earned by the partnership each month and
99% of any income earned above such amount. PML earned management fees
amounting to $3,583,000 during 1999 prior to the deconsolidation of PCC on May
25, 1999, $8,872,000 for the year ended December 31, 1998 and $6,882,000 for the
period from April 1, 1997 through December 31, 1997. Prior to April 1, 1997,
PML was wholly owned by subsidiaries of GBCC and, accordingly, was included as a
consolidated subsidiary. PML also incurred operating and other expenses
amounting to $498,000, $1,313,000 and $1,070,000, respectively, during the
comparable periods for which management fees were earned in 1999, 1998 and 1997.

(8) Regulatory Matters

GBHC and NJMI conducted gaming operations in Atlantic City, New Jersey and
operated a hotel and several restaurants, as well as related support facilities.
The operation of an Atlantic City casino/hotel is subject to significant
regulatory control. During 1996, the Casino Commission renewed GBHC's license
to operate the Sands through September 30, 2000 (subject to review of the Sands'
financial stability) and renewed NJMI's license to manage the Sands through
September 30, 2000. Terms of the license required GBCC to comply with periodic
financial reporting requirements as well as obtain prior Casino Commission
approval of certain cash transactions with affiliates. Relief from such
requirements and conditions was granted by the Casino Commission on February 2,
2000. If it were determined that gaming laws were violated by a licensee, the
gaming license held by each licensee could be conditioned, suspended or revoked.
In addition, the licensees and other persons involved could be subject to
substantial fines.

Casino licensees are required to make certain approved investments in New
Jersey or to pay an investment alternative tax. Casino licensees may obtain
investment credits by purchasing bonds at below-market interest rates from the
Casino Reinvestment Development Authority (the "CRDA") or by making qualified
investments ("obligatory investments") approved by the CRDA. This governmental
agency administers the statutorily mandated investments made by casino licensees
and is required to expend the monies received by it for eligible projects
defined in the statute. Provisions for valuation allowances on obligatory
investments during the year ended December 31, 1997 amounted to $1,241,000.

40
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(9) Summarized Combined Financial Information of and Transactions With
Unconsolidated Affiliates

Holdings -

As discussed in Note 1, the operations of Holdings and its subsidiaries
were accounted for under the equity method of accounting for the six month
period from January 1, 1998 through June 30, 1998. Due to the significance of
Holdings' operations, summarized consolidated results of operations of Holdings
for the six month period ended June 30, 1998 are set forth below. For the year
ended December 31, 1997, Holdings' results of operations were included on the
accompanying consolidated statement of operations. Balance sheet information as
of December 31, 1998 is not presented for the reasons cited in Note 1 with
respect to GBCC's no longer exercising control over Holdings and its
subsidiaries. Transactions with Holdings and its subsidiaries are included in
Note 6.

Six Months Ended
June 30, 1998
-----------------

Net revenues $114,066,000
------------

Departmental expenses 95,499,000
General and administrative expenses 7,115,000
Depreciation and amortization 5,825,000
------------

Total operating expenses 108,439,000
------------

Income from operations 5,627,000
------------

Interest, net 899,000
Gain on disposal of assets 28,000
------------

Total non-operating income 927,000
------------

Income before taxes and other item 6,554,000
Income tax provision -
------------

Income before other items 6,554,000
Reorganization and other related costs (2,831,000)
------------

Net income $ 3,723,000
============

41
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Greate Bay Holdings, L.L.C. -

Greate Bay Holdings, L.L.C. is an indirect, wholly owned limited liability
subsidiary of GBCC formed in October 1999 for the purpose of holding the
remaining assets of PCC not acquired by HCC in connection with the
Restructuring. Such assets consist primarily of claims against Holdings, GB
Property Funding and GBHC in their Chapter 11 proceedings. Greate Bay Holdings,
L.L.C. has no operating activities and all transactions, once approved by the
Delaware Bankruptcy Court, are accounted for as an adjustment to its net assets
and obligations. In accordance with the plan of reorganization confirmed by the
Delaware Bankruptcy Court in October 1999, the holders of the PRT Funding Notes
will at some future date receive whatever assets of Greate Bay Holdings, L.L.C.
remain in final settlement of their claims. Accordingly, because control by
GBCC of Greate Bay Holdings, L.L.C. is temporary and because all of its net
assets have an offsetting liability to the holders of the PRT Funding Notes, the
accounts of Greate Bay Holdings, L.L.C. are not included in the accompanying
consolidated balance sheet of GBCC at December 31, 1999.

The schedule below sets forth the accounts of Greate Bay Holdings, L.L.C. at
December 31, 1999.
<TABLE>
<CAPTION>

<S> <C>
Cash and cash equivalents $ 402,000
Receivables from Holdings and its subsidiaries (1) 23,247,000
-----------

Total assets 23,649,000
-----------

Accounts payable and accrued liabilities 156,000
Due to holders of PRT Funding Notes (1) 23,254,000
Litigation reserve as established by the plan
of reorganization 239,000
-----------

Total obligations 23,649,000
-----------

Net assets $ -
===========
- -----------------
</TABLE>

(1) It is anticipated that Greate Bay Holdings, L.L.C. will realize
substantially less than the carrying amount of the receivables from Holdings
upon confirmation of a plan of reorganization. Amounts due to holders of the
PRT Funding Notes will be reduced correspondingly.

42
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other unconsolidated affiliates -

Summarized combined financial information with respect to certain
unconsolidated joint ventures which were sold in 1997 and 1996 (see below) are
set forth below.
<TABLE>
<CAPTION>

Year Ended December 31,
-------------------------
1998 1997
---------- -------------
<S> <C> <C>

Net revenues $ 12,000 $ 3,114,000
Expenses (31,000) (2,936,000)
Gain on sale of assets - 10,356,000
-------- -----------

Net (loss) income $(19,000) $10,534,000
======== ===========
</TABLE>

Income and losses of GBCC's unconsolidated affiliates have not been
reflected on the accompanying consolidated statements of operations as GBCC's
investments in such affiliates were previously eliminated through the
recognition of prior year losses.

Current assets of such unconsolidated affiliates totalled $49,000 at
December 31, 1998. Current liabilities at December 31, 1998 amounted to $16,000.

In prior years, GBCC earned management and project fees from unconsolidated
affiliates for the management and project supervision of certain hotel
facilities. During the years ended December 31, 1998 and 1997, such fees
amounted to $29,000 and $292,000, respectively.

During 1997, GBCC received $750,000 in distributions as part of the
liquidation of the partnership which owned the Sheraton Plaza hotel in Orlando,
Florida. The hotel property was sold in 1996.

During the fourth quarter of 1996, an unconsolidated partnership in which a
GBCC subsidiary held a 46% interest entered into an agreement for the sale of a
casino/hotel in San Juan, Puerto Rico owned by the partnership and managed by
the GBCC subsidiary. The sale was completed in February 1997 and GBCC received
a fee of $1,475,000 with respect to the termination of its management agreement.

(10) Commitments and Contingencies

Subsidiary Chapter 11 Filings and Related Litigation -

On January 5, 1998, Holdings, GB Property Funding and GBHC filed petitions
for relief under Chapter 11 of the Bankruptcy Code. Each company continues to
operate in the ordinary course of business, as set forth in the Bankruptcy Code,
and each company's executive officers and directors remain in office, subject to
the jurisdiction of the New Jersey Bankruptcy Court. On June 1, 1999, a plan of
reorganization

43
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

was filed by the debtors with the New Jersey Bankruptcy Court. The
reorganization plan, as filed, provided for the secured bondholders to receive
new debt and 100% of the equity ownership of Holdings in exchange for their
current claims and for unsecured creditors to receive a partial cash settlement
of their claims. Subsequent to the filing of a reorganization plan by the
debtors, two competing plans were filed by (1) Park Place Entertainment
Corporation, a large and diversified gaming company with significant operations
in Atlantic City, and (2) jointly by High River Limited Partnership, an entity
controlled by Carl C. Icahn, and by the Official Committee of Unsecured
Creditors. Both of these plans provide for significant cash infusions by the
plan proponents in exchange for equity in a reorganized Holdings ranging from
46.3% to 57.7% with the secured bondholders to receive the remaining equity in
reorganized Holdings together with new secured debt. None of the plans provide
for any distributions to the present shareholders. A hearing on the adequacy of
the disclosure statements relating to the various plans is scheduled for April
5, 2000.

The filings of petitions for relief by Holdings and its subsidiaries resulted
in a default and automatic acceleration under the indenture for the PRT Funding
Notes. On April 28, 1999, PCC, PRT Funding, NJMI, GBCC, HCC and the holders of
substantially all of the PRT Funding Notes entered into a voting agreement with
HCC which provided for the Restructuring of the PRT Funding Notes. The voting
agreement provided for HCC to acquire the stock of PCC, the parent of PRT
Funding, from GBCC for nominal consideration. When acquired by HCC, PCC's assets
were to consist of its limited partnership interest in a management contract for
the Aurora Casino and a consulting contract for the Tunica Casino and its
liabilities were to consist of a new obligation in the amount of $40,329,000 in
satisfaction of the PRT Funding Notes. The voting agreement provided for HCC to
immediately discharge the obligation (see Note 1).

On May 22, 1998, GBHC filed a motion with the New Jersey Bankruptcy Court
seeking to reject the management agreement with NJMI (see Note 6). The Interim
Agreement was entered into and approved by the New Jersey Bankruptcy Court on
July 7, 1998 and the motion to reject the management agreement was approved by
the New Jersey Bankruptcy Court on September 28, 1998. As a consequence of the
September 1998 settlement agreement described below, GBCC and GBHC may no longer
assert claims against each other with respect to the operation of the management
contract and, with the passage of time, the cancellation thereof.

44
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On July 27, 1998, GBHC filed an action in the New Jersey Bankruptcy Court
against GBCC, certain affiliates of GBCC and Jack E. Pratt, Edward T. Pratt, Jr.
and William D. Pratt as directors of GBCC and former directors of GBHC
(collectively, the "GBCC Parties"), which alleged, among other things,
usurpation of corporate opportunities of GBHC and breach of fiduciary duty with
respect to GBHC in connection with the acquisition of certain land parcels in
Atlantic City, New Jersey. The action sought, among other things, to enjoin the
GBCC Parties from transferring the land parcels to third parties and to require
that the land parcels be conveyed to GBHC. The action also sought to enjoin
GBCC from using the tax NOL's of GBHC.

On September 2, 1998, the GBCC Parties reached a settlement with GBHC which
was approved by the New Jersey Bankruptcy Court. The terms of the settlement
agreement provided, among other things, (1) that the GBCC Parties convey the
land parcels and related mortgage note to GBHC in exchange for a cash payment
equal to the GBCC Parties' cost in such land parcels with an additional $500,000
payment due upon confirmation of a plan of reorganization by the New Jersey
Bankruptcy Court and (2) that GBHC be included in the consolidated federal
income tax return of GBCC for 1997 and 1998 enabling GBCC to utilize GBHC's tax
NOL's. The agreement also provided that on or before December 31, 1998, GBCC
would cause Holdings and its subsidiaries to be deconsolidated from the GBCC
federal income tax return by means of transferring 21% of the stock ownership of
Holdings to an unconsolidated entity. Such transfer was accomplished effective
as of December 31, 1998. In addition, the settlement agreement also allowed
GBHC to offset its working capital loan from GBCC in the amount of $8,000,000
together with interest accrued thereon (see Note 6) against a claim asserted by
GBHC against GBCC under the existing tax allocation agreements.

On April 22, 1999, GBHC filed a motion with the New Jersey Bankruptcy Court
seeking to disallow NJMI's pre-petition claims (see Note 6). In November 1999,
a compromise was reached establishing the amount of the claim at $75,000. The
ultimate settlement of this amount is subject to the confirmation of a plan of
reorganization by the New Jersey Bankruptcy Court.

45
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

"Planet Hollywood" for a casino and (2) damages. In its complaint, Planet
Hollywood alleged, among other things, that GBCC and HCC had, in operating the
Hollywood Casino concept, infringed on their trademark, service mark and trade
dress and had engaged in unfair competition and deceptive trade practices. GBCC
and HCC and its subsidiaries filed counterclaims seeking (1) a declaratory
judgment that Planet Hollywood was not entitled to use the name "Planet
Hollywood" for a casino and (2) damages. The counterclaims alleged, among other
things, that Planet Hollywood had, through its planned use of its mark in
connection with casino services, infringed on GBCC and HCC's service marks and
trade dress and had engaged in unfair competition. The trial commenced on July
19, 1999 and was completed on July 26, 1999. On August 25, 1999, GBCC and HCC
and the other defendants filed a motion to dismiss the declaratory judgment
claims of all parties asserting, among other things, that as a result of Planet
Hollywood's reported deteriorating financial condition and perceived inability
to enter into the casino business, there was no longer any actual case or
controversy. On October 12, 1999, Planet Hollywood (Region IV), Inc. filed a
petition for reorganization under Chapter 11 of the United States Bankruptcy
Code. On December 3, 1999 the judge entered a judgment in favor of GBCC and HCC
with respect to the damage claims brought by Planet Hollywood and granted their
motion to dismiss the declaratory judgment claims of all parties. Planet
Hollywood has filed a notice of appeal of the judgment with the Seventh Circuit
Court of Appeals.

Other Litigation -

On October 8, 1998, GBCC and HCC filed a complaint in the District Court of
Dallas County, Texas against Arthur Andersen LLP, GBCC and HCC's former
independent accountants, and certain of its partners alleging negligent advice
and breach of contract with respect to the tax consequences resulting from the
spin-off of GBCC's stock to HCC's shareholders on December 31, 1996. The
lawsuit is currently in the discovery stage with a trial currently scheduled to
begin in September 2000.

(11) Operating Leases

GBCC and its subsidiaries lease office space and operating equipment under
lease agreements accounted for as operating leases. The lease agreements expire
at various dates through the year 2004 and several contain automatic renewals
unless notice of termination is given. Some of the operating leases also
include minimal contingent rental payments based on levels of use. Total rental
expense amounted to $389,000, $362,000 and $168,000, respectively, during the
years ended December 31, 1999, 1998 and 1997.

Future minimum lease payments as of December 31, 1999 under operating
leases having an initial or remaining noncancellable lease term in excess of one
year are as follows:

<TABLE>
<S> <C>
2000 $381,000
2001 351,000
2002 173,000
2003 4,000
2004 2,000
--------

$911,000
========

</TABLE>

46
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(12) Supplemental Cash Flow Information

As a result of the May 1999 Chapter 11 filings by PCC, NJMI and PRT
Funding, and as more fully explained in Note 1, GBCC changed to the cost method
of accounting for its investment in PCC. Accordingly, the elimination of the
following non-cash assets and liabilities from GBCC's consolidated balance sheet
has been excluded from the accompanying consolidated statement of cash flows for
the year ended December 31, 1999 as a non-cash transaction.

<TABLE>

<S> <C>
Net current assets $ 463,000
Investment in PML 1,726,000
Accounts payable and accrued liabilities (5,202,000)
Long-term debt (85,000,000)
------------

Net non-cash liabilities $(88,013,000)
============
</TABLE>

During the third quarter of 1998, GBCC transferred ownership of an indirect
subsidiary to GBHC as part of the September 2, 1998 settlement agreement (see
Note 10). In connection with the transfer, certain liabilities of the subsidiary
were assumed by GBHC as follows:

<TABLE>

<S> <C>
Land $ (864,000)
Other assets (1,000)
Net cash received 245,000
Investment in GBHC 28,000
------------

Mortgage note assumed $ (592,000)
============
</TABLE>

As a result of the Chapter 11 filings of Holdings, GB Property Funding and
GBHC, and as more fully explained in Note 1, GBCC adjusted its investment in
Holdings to the equity method of accounting effective as of December 31, 1997.
Accordingly, the elimination of the following non-cash assets and liabilities
from GBCC's consolidated balance sheet has been excluded from the accompanying
consolidated statement of cash flows for the year ended December 31, 1997 as a
non-cash transaction.

<TABLE>

<S> <C>
Accounts receivable, net $ 7,794,000
Other current assets 6,423,000
Net property and equipment 147,716,000
Other noncurrent assets 11,924,000
Long-term debt, including current maturities (192,932,000)
Other current liabilities (25,103,000)
Other noncurrent liabilities (28,293,000)
-------------

Net non-cash liabilities $ (72,471,000)
=============
</TABLE>

47
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the second quarter of 1997, PPI Corporation sold the general
partnership in PML (see Notes 1 and 6) to HCC. The purchase price included the
assignment of certain receivables from GBCC and the issuance of a note to PPI
Corporation. In connection with the sale, certain liabilities of PPI
Corporation were assumed by HCC as follows:
<TABLE>
<CAPTION>

<S> <C>
Assignment of PPI Funding Notes $(7,597,000)
Assignment of interest receivable (350,000)
Note issued (3,800,000)
Interest reserve on PPI Funding Notes (277,000)
Credit to paid-in capital 13,024,000
-----------

Liabilities assumed by HCC $ 1,000,000
===========
</TABLE>

(13) Major Customers

ACSC's computer service revenues are derived primarily from either system
installation contracts or from sales to affiliates. System installation
contracts generally require an extended period of time to complete and represent
significant, but nonrecurring revenue earned from a given customer. Upon
completion of installation, ACSC may continue to recognize service or
maintenance revenues from the customer at a much reduced amount. The following
table demonstrates ACSC's dependence on installation contracts and on sales to
affiliates:
<TABLE>
<CAPTION>

Year Ended December 31,
--------------------------
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>

Total percentage of period revenues
attributable to installation contracts 61.3% 65.7% 40.4%
Percentage of period revenues attributable
to affiliate sales 22.8% 22.5% 42.2%
</TABLE>

(14) Disclosures about Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:

Cash and cash equivalents - The carrying amounts approximate fair value
-------------------------
because of the short maturity of these instruments.

Notes receivable - affiliates - Notes receivable from affiliates are valued
-----------------------------
at carrying amount.

Interest payable - The carrying amount of interest payable approximates
----------------
fair value because of the short maturity of the obligation; however, interest
payable with respect to the PRT Funding Notes at December 31, 1998 was based on
the amount anticipated to be paid upon settlement of claims against PRT Funding.

48
<PAGE>

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Long-term debt - The fair value of the PRT Funding Notes at December 31,
--------------
1998 was estimated based on the quoted market price of the underlying debt
issue. Borrowings from affiliates are valued at the carrying amount.

The estimated carrying amounts and fair values of GBCC's financial
instruments are as follows:
<TABLE>
<CAPTION>

December 31, 1999 December 31, 1998
------------------------------ ------------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
----------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C>
Financial Assets
Cash and cash equivalents $ 4,801,000 $ 4,801,000 $10,616,000 $10,616,000
Notes receivable - affiliates 2,033,000 2,033,000 2,836,000 2,836,000

Financial Liabilities
Interest payable $ 2,722,000 $ 2,722,000 $ 8,780,000 $ 2,781,000
Borrowings from affiliates 6,750,000 6,750,000 6,750,000 6,750,000
11 5/8% PRT Funding Notes - - 85,000,000 42,500,000
14 7/8% PPI Funding Notes 40,446,000 40,446,000 35,040,000 35,040,000
</TABLE>
(15) Selected Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>

Quarter
------------------------------------------------------
First Second Third Fourth
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Year ended
December 31, 1999:
Net revenues $ 2,203,000 $ 1,885,000 $ 1,587,000 $ 747,000
=========== =========== =========== ===========

Net income (loss) $(2,036,000) $83,156,000 $(1,934,000) $(3,065,000)
=========== =========== =========== ===========

Net loss per
common share $ (.39) $ 16.03 $ (.37) $ (.59)
=========== =========== =========== ===========

Year ended
December 31, 1998:
Net revenues $ 2,482,000 $ 2,149,000 $ 1,556,000 $ 2,784,000
=========== =========== =========== ===========

Net income (loss) $ 2,275,000 $(2,187,000) $25,227,000 $ (825,000)
=========== =========== =========== ===========

Net income (loss) per
common share $ .44 $ (.42) $ 4.86 $ (.16)
=========== =========== =========== ===========
</TABLE>

49
<PAGE>

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

GBCC filed a complaint on October 8, 1998 in the District Court of Dallas
County, Texas against Arthur Andersen LLP ("Andersen"), GBCC's former certifying
accountants, and others alleging negligent advice and breach of contract with
respect to the tax consequences resulting from the spin off of its stock held by
Hollywood Casino Corporation ("HCC") to HCC's shareholders on December 31, 1996.

In view of the pending litigation discussed above, the Audit Committee of
GBCC's Board of Directors voted on October 16, 1998 to terminate Andersen as
GBCC's independent accountants. There were no disagreements with Andersen of
the type which would require disclosure under Item 304 of Regulation S-K.
Andersen's report on the consolidated financial statements of GBCC for the past
two years included an explanatory paragraph referring to GBCC's disclosure
concerning substantial doubt about its ability to continue as a going concern.
Such uncertainty resulted from the filing by GBCC's most significant operating
subsidiary on January 5, 1998 of a petition for protection under Chapter 11 of
the United States Bankruptcy Code.

GBCC, with the consideration and approval of its Audit Committee, engaged the
firm of Deloitte & Touche LLP as its new certifying accountants.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Certain information is set forth below concerning the executive officers
and directors of Greate Bay Casino Corporation (the "Company").
<TABLE>
<CAPTION>

Name Age Position
---- --- --------
<S> <C> <C>

John C. Hull...................... 61 Chairman of the Board, Chief Executive
Officer and Director

Edward T. Pratt III............... 44 President and Chief Operating Officer

Edward T. Pratt, Jr............... 76 Vice Chairman of the Board, Treasurer
and Director

William D. Pratt.................. 71 Executive Vice President, General
Counsel, Secretary and Director

Lawrence C. Cole.................. 53 Vice President for Management
Information Systems

Charles F. LaFrano III............ 45 Vice President

Jack E. Pratt..................... 72 Director and formerly Chief Executive
Officer of the Company

Bernard A. Capaldi................ 57 Director

Edward D. Muir.................... 89 Director

Michael J. Chesser................ 51 Director
</TABLE>

50
<PAGE>

Business Experience for Past Five Years

John C. Hull was elected to the positions shown above on January 2, 1998. He
previously served as Corporate Controller of the Company since November 1994.
Mr. Hull also served from April 1994 until January 1998 as Corporate Controller
for Hollywood Casino Corporation ("HCC") which, prior to December 31,1996, owned
approximately 80% of the outstanding common stock of the Company. In addition,
Mr. Hull also served as a financial consultant to both the Company and HCC from
1990 until April 1994. Mr. Hull also served as Principal Accounting Officer for
GB Holdings, Inc. ("Holdings") and GB Property Funding Corp. from November 1994
until January 1998. On January 5, 1998, these GBCC subsidiaries filed petitions
for relief under Chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the District of New Jersey. Mr. Hull also served as
President, Chief Executive Officer and director of Pratt Casino Corporation
("PCC"), PRT Funding Corp. and New Jersey Management, Inc. ("NJMI"), all wholly
owned subsidiaries of the Company, at the time of their filings of petitions for
relief under Chapter 11 of the United States Bankruptcy Code on May 25, 1999.
Mr. Hull also previously served as Principal Accounting Officer of PCC and PRT
Funding Corp. until January 1998.

Edward T. Pratt, Jr. has served as Vice Chairman of the Board and as director
and executive officer of the Company for more than five years. He also serves
as Vice Chairman of the Board, President and Treasurer of HCC. Mr. Pratt also
served until January 2, 1998 as Vice Chairman of the Board of Directors of
Holdings and of GB Property Funding Corp. and as a director of Greate Bay Hotel
and Casino, Inc. ("GBHC"). On January 5, 1998, these three GBCC subsidiaries
filed petitions for relief under Chapter 11 of the United States Bankruptcy Code
in the United States Bankruptcy Court for the District of New Jersey. Mr. Pratt
has been Chief Financial Officer, Principal Accounting Officer and as director
of PCC, PRT Funding and NJMI since January 2, 1998 and also served as Vice
Chairman of the Board of Directors of PCC and PRT Funding from September 1993 to
January 1, 1998 and as Executive Vice President, Treasurer and as a director of
NJMI for more than five years prior to January 1, 1998. On May 25, 1999, these
three subsidiaries of the Company filed petitions for relief under Chapter 11 of
the United States Bankruptcy Code.

William D. Pratt has served as Executive Vice President, Secretary and as
director of the Company for more than five years. He currently serves as
General Counsel and, prior to May 1995, served as General Counsel of the Company
for more than five years. He also serves as Executive Vice President, Secretary
and General Counsel of HCC. Mr. Pratt also served until January 2, 1998 as
Executive Vice President, General Counsel and Secretary of Holdings and of GB
Property Funding Corp. and as a director of GBHC. On January 5, 1998, these
three GBCC subsidiaries filed petitions for relief under Chapter 11 of the
United States Bankruptcy Code. Mr. Pratt also served until his resignation from
such positions in January 1998 as Executive Vice President, Secretary, General
Counsel and as a director of PCC and PRT Funding and as Vice President,
Secretary and a director of NJMI. On May 25, 1999, these three subsidiaries of
the Company filed petitions for relief under Chapter 11 of the United States
Bankruptcy Code.

Edward T. Pratt III was elected President and Chief Operating Officer of the
Company in November 1995. From May 1987 until November 1995, he served the
Company as Executive Vice President --Development and Corporate Affairs. He
also serves as President, Chief Operating Officer and as a director of HCC. Mr.
Pratt served until January 2, 1998 as President, Chief Operating Officer and a
director of Holdings; as Executive Vice President and a director of GB Property
Funding Corp.; and as a director of GBHC. On January 5, 1998, these three GBCC
subsidiaries filed petitions for relief under Chapter 11 of the United States
Bankruptcy Code. Mr. Pratt has been Executive Vice President and Secretary of
PCC, PRT Funding and NJMI since January 2, 1998 and also served as President,
Chief Operating Officer and as a director of PCC and as Executive Vice President
and a director of PRT Funding from September 1993 to January 1, 1998. On May
25, 1999, these three subsidiaries of GBCC filed petitions for relief under
Chapter 11 of the United States Bankruptcy Code.

51
<PAGE>

Lawrence C. Cole has served as Vice President of Management Information
Systems of the Company since December 1987. Mr. Cole also serves as Chief
Executive Officer and President of Advanced Casino Systems Corporation ("ACSC"),
a subsidiary of the Company which licenses software for automated casino
accounting and control systems.

Charles F. LaFrano III has served as Vice President of the Company since
September 1988. He also served as Corporate Controller (Principal Accounting
Officer) of the Company from September 1988 until November 1994. He also serves
as Vice President of Finance for HCC. Mr. LaFrano served until January 2, 1998
as Vice President and Assistant Secretary of Holdings and GB Property Funding
Corp. On January 5, 1998, these GBCC subsidiaries filed petitions for relief
under Chapter 11 of the United States Bankruptcy Code. Mr. LaFrano served until
his resignation from such positions in January 1998 as Vice President and
Assistant Secretary of PCC and PRT Funding. On May 25, 1999, PCC and PRT
Funding filed petitions for relief under Chapter 11 of the United States
Bankruptcy Code.

Jack E. Pratt served as Chairman of the Board and Chief Executive Officer of
the Company for more than five years until January 2, 1998. He is Chairman of
the Board and Chief Executive Officer of HCC. Mr. Pratt served as Chairman of
the Board of Directors and Chief Executive Officer of Holdings and GBHC and as
Chairman of the Board of Directors, President and Chief Executive Officer of GB
Property Funding Corp. until January 2, 1998. On January 5, 1998, these three
GBCC subsidiaries filed petitions for relief under Chapter 11 of the United
States Bankruptcy Code. Mr. Pratt served until his resignation from such
positions in January 1998 as Chairman of the Board and Chief Executive Officer
of PCC, Chairman of the Board of Directors, President and Chief Financial
Officer of PRT Funding and Chairman of the Board of Directors and President of
NJMI. On May 25, 1999, these three subsidiaries of the Company filed petitions
for relief under Chapter 11 of the United States Bankruptcy Code.

Bernard A. Capaldi is a certified public accountant and is a principal of
Capaldi, Reynolds & Associates, P.A., C.P.A.'s in New Jersey, and has held such
position since 1965. He is also the Chairman of the Board of Shore Memorial
Hospital's parent holding company. Mr. Capaldi also served as a director of
PCC, PRT Funding and NJMI at the time they filed for protection under Chapter 11
of the United States Bankruptcy Code.

Edward D. Muir is currently retired. He is a former Senior Vice President of
Rauscher Pierce Refsnes of San Antonio, Texas, an investment banking firm, and
was associated with Rauscher Pierce Refsnes in numerous executive capacities for
more than five years. Mr. Muir also served until January 2, 1998 as a director
of GBHC. On January 5, 1998, GBHC filed a petition for relief under Chapter 11
of the United States Bankruptcy Code.

Michael J. Chesser was elected to the Board of Directors of the Company on
September 9, 1997. He has been President, Chief Executive Officer and a
director of Itron, Inc. since June 1999. From September 1998 until June 1999,
he was self employed as a business consultant. From May to September 1998, Mr.
Chesser was a vice president with Raytheon Company. Prior to that, he served as
President and Chief Operating Officer of Atlantic Energy Corporation since 1994
and served as a director for such company from 1996 until 1997. From 1987 until
1994, Mr. Chesser was Vice President of Baltimore Gas & Electric Company. Mr.
Chesser also served as a director of PCC, PRT Funding and NJMI at the time they
filed for protection under Chapter 11 of the United States Bankruptcy Code.

Family Relationships

Jack E. Pratt, Edward T. Pratt, Jr. and William D. Pratt are brothers (the
"Pratt Brothers"). Edward T. Pratt III, President of the Company, is the son of
Edward T. Pratt, Jr. There is no other family relationship between any of the
directors and any executive officers of the Company or its subsidiaries or
affiliates.

52
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

Summary of Cash and Certain Other Compensation

The following table provides certain summary information concerning
compensation paid or accrued by the Company, and its subsidiaries (exclusive of
Holdings and its subsidiaries) to or on behalf of the Company's Chief Executive
Officer and its other compensated executive officer determined as of the end of
the last fiscal year (hereafter referred to as the named executive officers) for
the fiscal years ended December 31, 1999, 1998 and 1997. No other executive
officers of the Company receive compensation for their services. These
uncompensated officers are employees of and are paid by HCC. HCC bills the
Company pursuant to intercompany allocation agreements ratified by the
respective Boards of Directors. Executive officers of Holdings and its
subsidiaries are not included in the following table as the Company no longer
exercises control over Holdings and no longer includes the operations of
Holdings and its subsidiaries in its consolidated results of operations.
Accordingly, officers of Holdings do not perform policy-making functions on
behalf of the Company.
<TABLE>
<CAPTION>

Annual Compensation Long-Term
-------------------------------- Compensation
Other Annual Awards/ All Other
Name and Principal Position Year Salary Bonus Compensation Options Compensation (1)
- ------------------------------------- ------- --------- -------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>

John C. Hull (2) 1999 $300,000 $150,000 -$ - $4,000
Chief Executive Officer and 1998 302,485 - - - 4,000
Chairman of the Board of Directors 1997 105,419 - - - 1,750
of the Company

Lawrence C. Cole 1999 287,323 50,000 - - 4,000
Vice President of Management 1998 310,312 102,805 - - 4,000
Information Systems of the Company 1997 283,250 15,098 - - 3,500
</TABLE>

__________________________

(1) Includes matching contributions by the Company to The Hollywood Casino
Corporation and Subsidiaries Retirement Savings Plan on behalf of the named
executive officer. See also "Employee Retirement Savings Plan" below.

(2) Amounts shown for John C. Hull represent payments by the Company to HCC for
services provided by Mr. Hull. Mr. Hull held an executive position with HCC
during 1997 and the Company reimbursed HCC for services provided by Mr. Hull
pursuant to an intercompany allocation agreement ratified by the respective
Boards of Directors.

Option Exercises and Holdings

The Pratt Hotel Corporation 1990 Incentive Stock Option Plan (the "Plan")
has expired. No options under the Plan were granted or exercised during 1999 and
no unexercised options remain outstanding.

Employment Contracts

John C. Hull, Chief Executive Officer of the Company, is under an employment
agreement dated as of February 13, 2000 and continuing, unless sooner terminated
by either party, until the earlier of

53
<PAGE>

December 31, 2000 or the completion of certain corporate restructurings. The
terms of Mr. Hull's agreement provide for an annual base salary of $215,000 and
a bonus of $35,000.

Lawrence C. Cole, Vice President of Management Information Systems of the
Company serves under an employment contract, as amended on November 30, 1998,
with a wholly owned subsidiary of the Company. The employment agreement
continues through December 31, 2001 unless sooner terminated by one of the
respective parties. The terms of Mr. Cole's amended contract provides for a
minimum annual base salary of $275,000 subject to annual increases based on
changes in the Consumer Price Index, as defined in the employment contract,
together with incentive bonuses based on operating results. Obligations of the
subsidiary under the employment contract are guaranteed by GBHC.

Employee Retirement Savings Plan

On January 1, 1989, the Company adopted GBHC's qualified defined contribution
plan for the benefit of all of the Company's employees who satisfy certain
eligibility requirements. GBHC had adopted this plan for the benefit of its
eligible employees in November 1984. Upon adoption by the Company, the former
plan changed its name to The Hollywood Casino Corporation and Subsidiaries
Retirement Savings Plan (the "Savings Plan"). Effective December 31, 1998,
employees of GBHC no longer participate in the "Savings Plan," but are
participants in a separate plan with identical coverages. The Savings Plan is
qualified under the requirements of section 401(k) of the Code allowing
participating employees to benefit from the tax deferral opportunities provided
therein. All employees of the Company who have completed one year of service,
as defined, and who have attained the age of 21, are eligible to participate in
the Savings Plan.

The Savings Plan provides for a matching contribution by the Company based
upon certain criteria, including levels of participation by the Company's
employees. The Company incurred matching contributions totaling approximately
$35,000 for the year ended December 31, 1999.

Compensation of Directors

Nonemployee directors of the Company received an annual fee of $25,000 for
service on the Board of Directors and $1,000 for each Board meeting attended
during 1999. The Board of Directors of the Company held four regularly
scheduled meetings during the year ended December 31, 1999. The Board of
Directors of the Company has Audit and Compensation Committees, but does not
have a standing nominating committee. Nonemployee members of the Audit
Committee receive an annual fee of $2,500 for service on the committee and $500
for each committee meeting attended. The Audit Committee which is comprised of
Edward T. Pratt, Jr., Bernard A. Capaldi and Michael J. Chesser met once during
1999. No additional compensation or fees are paid to directors for attending
Compensation Committee meetings.

Compensation Committee Interlocks and Insider Participation

The Compensation Committee of the Board of Directors of the Company is
comprised of Edward D. Muir, Bernard A. Capaldi and Jack E. Pratt. Neither Mr.
Muir nor Mr. Capaldi is a former or current officer or employee of the Company
or any of its subsidiaries. Jack E. Pratt served as an executive officer and
director of the Company until January 2, 1998 and continues to serve as an
executive officer and director of HCC.

54
<PAGE>

REPORT OF THE COMPENSATION COMMITTEE

As members of the Compensation Committee, it is our duty to administer the
Company's various incentive plans, including its incentive stock option plan,
and to review compensation levels of members of management, to evaluate the
performance of management and to consider management succession and related
matters. The Compensation Committee reviews with the Board in detail all
aspects of compensation for all executive officers.

The compensation policy of the Company, which is endorsed by the Compensation
Committee, is that the annual compensation of each officer has been established
to reward long-term strategic management and the enhancement of stockholder
value, as well as to attract and retain key executives critical to the long-term
success of the Company. Such compensation relates to and must be contingent
upon the contributions, responsibilities and relative position in the Company of
each individual officer, as well as the relative performance of the Company.
The Compensation Committee has also taken into consideration competition within
the rapidly expanding gaming industry for experienced personnel as well as other
subjective considerations in its deliberations regarding executive compensation.

Mr. John C. Hull was elected to the position of Chief Executive Officer of
the Company effective January 2, 1998. Pursuant to an employment agreement with
the Company dated as of January 1, 1998 (the "Hull Employment Agreement"), the
annual base salary of Mr. Hull was set at $300,000 effective as of January 1,
1998. There were no adjustments to the annual base salary of Mr. Hull during
fiscal year 1999. Mr. Hull received a bonus during 1999 in the amount of
$150,000 pursuant to the Hull Employment Contract and in recognition of the
successful completion and confirmation of the Plans of Reorganization resulting
from the filings of petitions for relief under Chapter 11 by PRT Funding Corp.,
Pratt Casino Corporation and New Jersey Management, Inc. Mr. Hull entered into
a new employment agreement (the "Revised Agreement") effective as of February
13, 2000. The terms of the Revised Agreement call for an annual base salary of
$215,000 and a bonus of $35,000 upon the completion of certain specified
corporate restructurings. The Revised Agreement expires at the earlier of
December 31, 2000 or the completion of the specified restructurings. There have
been no bonuses paid to Mr. Hull by the Company to date during fiscal year
2000.

This report and the accompanying stock price performance graph are provided
for general informational purposes only pursuant to regulations under the
Securities Exchange Act of 1934. No information contained in this report or the
accompanying graph shall be deemed to be filed in whole or in part for purposes
under the Securities Act of 1933 or the Securities Exchange Act of 1934, or
incorporated by reference into any filing made thereunder.

Compensation Committee

Jack E. Pratt
Bernard A. Capaldi
Edward D. Muir

55
<PAGE>

STOCK PRICE PERFORMANCE

The graph set forth below compares the stock price performance of the Company
with those of the Dow Jones Equity Market Index and the Dow Jones Index for the
Casino Industry for the previous five years. The Company has not paid dividends
over such period of time; however, the comparative equity market and industry
data assumes reinvestment of dividends. The stock price performance shown below
may not be indicative of future stock price performance. (Table substituted for
graph).

Greate Bay Casino Corporation
Stock Price Performance
(January 1, 1995 = 100)

Greate Bay
Equity Casino Casino
Date Index Index Corporation
- ----------------------- ------ ------ -----------
<S> <C> <C> <C>

January 1, 1995 100.0 100.0 100.0
March 31, 1995 109.7 129.4 100.0
June 30, 1995 120.4 144.7 100.0
September 29, 1995 130.2 139.4 115.2
December 29, 1995 137.7 132.6 54.5
March 29, 1996 145.5 161.7 69.7
June 28, 1996 151.7 188.3 190.9
September 30, 1996 156.7 156.5 87.9
December 31, 1996 169.4 144.7 42.4
March 31, 1997 173.3 124.4 36.4
June 30, 1997 202.8 136.6 33.3
September 30, 1997 219.7 159.0 33.3
December 31, 1997 226.9 127.3 30.3
March 31, 1998 257.7 138.6 24.2
June 30, 1998 265.7 123.8 12.1
September 30, 1998 239.0 83.1 6.1
December 31, 1998 291.9 87.1 4.9
March 31, 1999 305.5 116.5 5.7
June 30, 1999 325.9 126.2 1.5
September 30, 1999 304.3 131.2 8.3
December 31, 1999 351.1 131.6 3.0

</TABLE>

56
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners

Based on filings with the Securities and Exchange Commission, no persons,
other than certain directors of the Company, are known who beneficially owned
more than 5% of the outstanding Common Stock as of the March 27, 2000.

Security Ownership of Management

The following table presents the number of shares of Common Stock
beneficially owned by each director, nominee for director and executive officer
named under Item 11. "Executive Compensation" and by all current directors and
officers of the Company as a group as of March 27, 2000:
<TABLE>
<CAPTION>

Shares of Percentage of
Common Stock Outstanding
Beneficially Common
Beneficial Owner Owned (a) Stock
- ------------------------------- ---------------- ------
<S> <C> <C>

Jack E. Pratt.................. 1,051,654(b) 20.3%
Edward T. Pratt, Jr............ 180,469 3.5%
William D. Pratt............... 204,379(c) 3.9%
Edward T. Pratt III............ 314,698(d) 6.1%
John C. Hull................... -- --
Edward D. Muir................. -- --
Bernard A. Capaldi, CPA........ -- -
Michael J. Chesser............. -- --
Lawrence C. Cole............... -- --
All directors and officers as
a group (10 individuals)..... 1,751,200 33.8%
</TABLE>

__________________________

(a) Except as otherwise described, each individual has the sole power to vote
and dispose of the Common Stock beneficially owned by him.

(b) Beneficial ownership is attributable to the following: (1) C.A. Pratt
Partners, Ltd., a Texas limited partnership of which Jack E. Pratt is the
General Partner, owns 58,106 shares (1.1%) of the outstanding common stock
of the Company, (2) 160,492 shares (3.1%) of the outstanding common stock of
the Company held by Mr. Pratt as custodian for his minor children and (3)
174,318 shares (3.4%) of the outstanding common stock of the Company owned
of record by adult children of Mr. Pratt and subject to a proxy giving him
the right to vote such shares and prohibiting the transfer of such shares
without his approval.

(c) Beneficial ownership is attributable to the following: (1) WDP Jr. Family
Trust, for which Mr. Pratt is the Trustee, owns 27,452 shares (less than 1%)
of the outstanding common stock of the Company and (2) 54,906 shares (1.1%)
of the outstanding common stock of the Company owned of record by adult
children of Mr. Pratt and subject to a proxy giving him the right to vote
such shares and prohibiting the transfer of such shares without his
approval.

57
<PAGE>

(d) Beneficial ownership is attributable to 232,188 shares (4.5%) of the
outstanding common stock of the Company owned of record by siblings of Mr.
Pratt and subject to a proxy giving him the right to vote such shares and
prohibiting the transfer of such shares without his approval.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Hollywood Casino Corporation. During 1990, HCC, which was then wholly owned
by the Pratt Family, acquired approximately $38.8 million of unsecured notes
(the "PCPI Notes") issued by PCPI Funding Corp., a subsidiary of the Company.
As part of a refinancing in February 1994 of virtually all of the Company's
casino-related outstanding debt, a newly formed subsidiary of the Company issued
approximately $40.5 million discounted principal amount of new deferred interest
notes (the "PPI Funding Notes") in exchange for the $38.8 million principal
amount of PCPI Notes held by HCC. Interest expense accreted with respect to the
PPI Funding Notes for the year ended December 31, 1999 amounted to $5.4 million.
The PPI Funding Notes were discounted to yield 14 7/8% interest per annum and
had an original face value of $110.6 million. Subsequent principal payments,
the assignment of a portion of the PPI Funding Notes in 1997 (as discussed
below) and the forgiveness of $37 million undiscounted fair value of the PPI
Funding Notes by HCC in 1997 have reduced the maturity value to $84.6 million.

Since May 1992, the Company and its subsidiaries have borrowed funds from
HCC for various purposes. As of December 31, 1998, the outstanding balance on
such borrowings was $6.8 million and, under certain conditions, the Company and
its subsidiaries may obtain additional loans from HCC. Of the amounts borrowed,
$250,000 was due on April 1, 1998 for which payment has not been made. Such
borrowing from HCC continues to bear interest at the rate of 14% per annum,
payable semiannually. The remaining $6.5 million was borrowed from HCC during
1996 on a demand basis with interest at the rate of 13 3/4% per annum payable
quarterly commencing October 1, 1996. Payment of interest on borrowings from
HCC was, prior to February 2, 2000, subject to the approval of New Jersey gaming
authorities. Interest expense on the borrowings from HCC amounted to $942,000
for the year ended December 31, 1999. Interest payable to HCC with respect to
such borrowings amounted to $2.7 million at December 31, 1999.

Hollywood Casino - Aurora, Inc. ("HCA"), a wholly owned subsidiary of HCC,
was organized for the purpose of developing and owning a riverboat gaming
facility in Aurora, Illinois, (the "Aurora Casino") which commenced operations
on June 17, 1993. Effective as of April 1, 1997, a subsidiary of the Company
sold its general partnership interest in the limited partnership which held the
management contract on the Aurora Casino to a subsidiary of HCC. The general
partner received 99% of the first $84,000 of net income earned by the
partnership each month and 1% of any income earned above such amount. The
subsidiary of the Company received from HCC a five-year note in the original
amount of $3.8 million, $7.6 million discounted principal amount of PPI Funding
Notes (see above) and the assignment of certain accrued interest receivable in
exchange for the general partnership interest. The $3.8 million note was
payable in monthly installments of $83,000, including interest at the rate of
14% per annum, commencing on May 1, 1997, with additional quarterly variable
principal payments commencing on July 1, 1997 in an amount equal to the general
partner's share of quarterly cash distributions, as defined, from the limited
partnership. The note was amended as of October 12, 1999 to provide for monthly
installments of $83,000 including interest and additional quarterly principal
payments of $21,000 beginning January 1, 2000. The outstanding principal
balance of the note receivable was $2 million at December 31, 1999. Interest
earned on the note amounted to $348,000 during the year ended December 31, 1999.

HWCC - Tunica, Inc. ("HCT"), a wholly owned subsidiary of HCC, completed
construction of a dockside gaming facility in Tunica County, Mississippi (the
"Tunica Casino"). Pursuant to a consulting agreement with HCT which was
terminated on October 13, 1999, a subsidiary of the Company received monthly
consulting fees of $100,000. Fees earned under the agreement amounted to
$477,000 prior to the deconsolidation of the subsidiary on May 25, 1999.

58
<PAGE>

The Company and its subsidiaries share certain general and administrative
costs with HCC pursuant to a services agreement. Such allocated costs and fees
charged by HCC to the Company amounted to $610,000 during the year ended
December 31, 1999. A payable in the amount of $20,000 in connection with such
allocated costs and fees was due to HCC at December 31, 1999.

A subsidiary of the Company provides computer-related, marketing and other
administrative services to HCC and its casino facilities. The subsidiary has an
agreement with one casino facility which expired on December 31, 1999; such
agreement provided for the sale of computer hardware and information systems
equipment and the licensing of software necessary to operate the facility. The
casino paid prices and fees in amounts and on terms and conditions that the
subsidiary provided to unrelated third parties as well as a fixed license and
consulting fee of $33,600 per month. The subsidiary was also reimbursed for its
direct costs and expenses incurred under this agreement. The GBCC subsidiary
also provided similar services and hardware to another HCC-owned casino facility
which it charged for direct costs and expenses. The GBCC subsidiary's billings
to HCC and its subsidiaries for such products and services amounted to $1.3
million for the year ended December 31, 1999. A receivable in the amount of
$106,000 was due the subsidiary at December 31, 1999 with respect to these
services. Although the agreements to provide services to HCC's casino
facilities expired in 1999, the subsidiary of the Company continues to provide
services to HCC's facilities on an as needed basis at third party consulting
rates while negotiations for new service agreements continue.

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

(a) The following documents are filed as a part of this report:

1. Financial Statements

The financial statements filed as part of this report are listed on the
Index to Financial Statements on page 19.

2. Financial Statement Schedule

-- Independent Auditors' Report
-- Information Regarding Predecessor Independent Public Accountants
-- Schedule II; Valuation and Qualifying Accounts

All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable and therefore have been omitted.

3. Exhibits

@3.1 -- Certificate of Incorporation of Pratt Hotel Corporation
("PHC", now known as GBCC) as amended. (Exhibit 3.1)
#3.2 -- Amendment to Certificate of Incorporation of PHC. (Exhibit
3.2)
@3.3 -- Amended Bylaws of PHC. (Exhibit 3.2)
*4.1 -- Indenture dated as of February 15, 1994 between GB Property
Funding Corp. as Issuer, GB Holdings, Inc. and GBHC as
Guarantors, and Shawmut Bank Connecticut, N.A. as Trustee.
(Exhibit 10.50)
*4.2 -- Mortgage, Fixture Filing and Security Agreement dated February
17, 1994, by GBHC in favor of Shawmut Bank Connecticut,
National Association, as Mortgagee. (Exhibit 10.51)

59
<PAGE>

*4.3 -- Security Agreement dated February 17, 1994 made by GB Property
Funding Corp., GBHC, GB Holdings, Inc., Advanced Casino
Systems International, Inc. Computerized Management Systems
International, Inc. and any Additional Collateral Grantor to
Shawmut Bank Connecticut, National Association, as Trustee.
(Exhibit 10.52)
*4.4 -- Collateral Assignment of Leases dated as of February 17, 1994,
by GBHC, in favor of Shawmut Bank Connecticut, National
Association, as Assignee. (Exhibit 10.53)
++9.1 -- Voting Trust Agreement dated as of December 29, 1998 by and
among Jill Pratt Laferney, formerly Jill A. Pratt, and John R.
Pratt and Jack E. Pratt, Sr.
++9.2 -- Voting Trust Agreement dated as of December 29, 1998 by and
among Shawn Denise Bradshaw and Michael Shannan Pratt and
William D. Pratt, Sr.
++9.3 -- Voting Trust Agreement dated as of December 29, 1998 by and
among Carolyn S. Hickey, Diana Pratt-Wyatt, formerly Diana L.
Heisler, and Sharon A. Naftel, formerly Sharon R. Nash, and
Edward T. Pratt III.
++10.1 -- Management and Administrative Services Agreement dated October
1, 1998, by and between Hollywood Casino Corporation ("HCC")
and GBCC.
+++10.2 -- Agreement dated as of September 2, 1998 by and among GBHC, GB
Holdings, Inc., and GB Property Funding Corp., on the one
hand, and GBCC, PHC Acquisition Corp., Lieber Check Cashing,
LLC, Jack E. Pratt, William D. Pratt, Edward T. Pratt, Jr. and
HCC, on the other. (Exhibit 10.1)
+10.3 -- Amended License Agreement by and between Hughes Properties,
Inc. and PHC dated May 19, 1987. (Exhibit 10.3)
+10.4 -- Tax Allocation Agreement by and among PHC, PPI Corporation,
Greate Bay Hotel Corporation, Pratt Casino Properties, Pacsa
No. 2, Inc., Pacsa No. 3, Inc., Pratt Hotel Funding, Inc. and
Greate Bay Property Funding Corp., effective as of January 1,
1987. (Exhibit 10.17)
+10.5 -- Tax Allocation Agreement by and among Pratt Casino Properties,
BPHC Acquisition, Inc., PHMI, Greate Bay Casino Corporation,
PCPI Funding Corp. and GBHC effective as of January 1, 1987.
(Exhibit 10.18)
###10.6 -- Sixth Amendment to Employment Agreement dated January 1, 1998,
between HCC and Edward T. Pratt, Jr. (Exhibit 10.6)
###10.7 -- Sixth Amendment to Employment Agreement dated January 1, 1998,
between HCC and William D. Pratt. (Exhibit 10.7)
++10.8 -- Amendment to Employment Agreement dated November 30, 1998,
between ACSC and Lawrence C. Cole.
10.9 -- Employment Agreement dated as of February 13, 2000 between
GBCC and John C. Hull.
21.1 -- Subsidiaries of GBCC.
##99.1 -- Voluntary petition for bankruptcy pursuant to Chapter 11 of
the Bankruptcy Code for Greate Bay Hotel and Casino, Inc.
dated January 5, 1998. (Exhibit 99.2)
##99.2 -- Voluntary petition for bankruptcy pursuant to Chapter 11 of
the Bankruptcy Code for GB Holdings, Inc. dated January 5,
1998 (Exhibit 99.3)
##99.3 -- Voluntary petition for bankruptcy pursuant to Chapter 11 of
the Bankruptcy Code for GB Property Funding Corp. dated
January 5, 1998 (Exhibit 99.4)
**99.4 -- Debtor's Second Amended Joint Plan of Reorganization dated
August 16, 1999, as Modified.
**99.5 -- Debtors' "Plan Supplement" in Conjunction with Debtors' Second
Amended Joint Plan of Reorganization Dated August 16, 1999, as
Modified.
**99.6 -- Debtors' First Modification, Pursuant to 11 U.S.C. @1127(a)
and F.R. B.P. 3019, to Debtors' Second Amended Joint Plan of
Reorganization Dated August 16, 1999, as Modified.

60
<PAGE>

@@99.7 -- Petition filed on October 8, 1998 in the District Court of
Dallas County, Texas by Hollywood Casino Corporation and
Greate Bay Casino Corporation ("Plaintiffs") against Arthur
Andersen L.L.P., Richard L. Robbins, Michael E. Gamache,
Daniel J. Meehan, and Brent A. Railsback ("Defendants")
(Exhibit 99.1)

_______________________

@ Incorporated by reference from the exhibit shown in parenthesis to
GBCC's Annual Report on Form 10-K for the fiscal year ended December
31, 1992.

@@ Incorporated by reference from the exhibit shown in parenthesis to
the Form 8-K for GBCC as filed with the SEC on October 22, 1998.

+ Incorporated by reference from the exhibit shown in parenthesis to
Form S-1 Registration Statement (Registration No. 33-58732) for
Hollywood Casino Corporation as filed with the SEC on May 27, 1993.

++ Incorporated by reference from the exhibit shown in parenthesis
filed in GBCC's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998.

+++ Incorporated by reference to the exhibit shown in parenthesis filed
in GBCC's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998 as filed with the SEC on November 23, 1998.

* Incorporated by reference from the exhibit shown in parenthesis to
Form S-1 Registration Statement (Registration No. 33-77502) for
Hollywood Casino Corporation as filed with the SEC on April 8, 1994.

** Incorporated by reference from the same numbered exhibit included in
GBCC's Form 8-K as filed with the SEC on October 22, 1999.

# Incorporated by reference from the exhibit shown in parenthesis to
GBCC's Annual Report on Form 10-K for the fiscal year ended December
31, 1996.

## Incorporated by reference from the exhibit shown in parenthesis to
Form 8-K for GB Property Funding Corp., GB Holdings, Inc. and Greate
Bay Hotel and Casino, Inc. as filed with the SEC on January 9, 1998.

### Incorporated by reference from the exhibit shown in parenthesis
filed in GBCC's Annual Report on Form 10-K for the year ended
December 31, 1997.

(b) Reports on Form 8-K.

On October 22, 1999, the Registrant filed a Form 8-K to report the sale of
Pratt Casino Corporation, its wholly owned subsidiary, to Hollywood Casino
Corporation on October 13, 1999 under the terms of a Plan of
Reorganization confirmed on October 1, 1999 by the United States
Bankruptcy Court for the District of Delaware.

61
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Egg
Harbor Township, State of New Jersey on March 29, 2000.

GREATE BAY CASINO CORPORATION

By: /s/ John C. Hull
--------------------------------------
John C. Hull
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>

Signature Title Date
------------- --------- --------
<S> <C> <C>

/s/ John C. Hull Chief Executive Officer March 29, 2000
- ------------------------------------ --------------
John C. Hull and Director

/s/ Edward T. Pratt, Jr. Treasurer, Principal March 29, 2000
- ------------------------------------ --------------
Edward T. Pratt, Jr. Financial and Accounting
Officer and Director

/s/ Edward T. Pratt III President and Chief March 29, 2000
- ------------------------------------ --------------
Edward T. Pratt III Operating Officer

/s/ William D. Pratt Executive Vice March 29, 2000
- ------------------------------------ --------------
William D. Pratt President, General
Counsel, Secretary
and Director

/s/ Jack E. Pratt Director March 29, 2000
- ------------------------------------ --------------
Jack E. Pratt

/s/ Bernard A. Capaldi Director March 29, 2000
- ------------------------------------ --------------
Bernard A. Capaldi

Director
- ------------------------------------ --------------
Edward D. Muir

/s/ Michael J. Chesser Director March 29, 2000
- ------------------------------------ --------------
Michael J. Chesser
</TABLE>

62
<PAGE>

INDEX TO FINANCIAL STATEMENT SCHEDULE

Greate Bay Casino Corporation and Subsidiaries

-- Independent Auditors' Report

-- Information Regarding Predecessor Independent Public Accountants

-- Schedule II; Valuation and Qualifying Accounts

63
<PAGE>

INDEPENDENT AUDITORS' REPORT
----------------------------

To Greate Bay Casino Corporation:

We have audited the consolidated financial statements of Greate Bay Casino
Corporation and subsidiaries as of and for the years ended December 31, 1999 and
1998 and have issued our report thereon dated February 25, 2000 (included
elsewhere in this Form 10-K). Our audit also includes the financial statement
schedule listed in the index to financial statement schedule. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audit. In our opinion,
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

Deloitte & Touche LLP
Dallas, Texas
February 25, 2000

64
<PAGE>

INFORMATION REGARDING PREDECESSOR INDEPENDENT PUBLIC ACCOUNTANTS
FOR THE YEAR ENDED DECEMBER 31, 1997

The financial statements of Greate Bay Casino Corporation ("GBCC") for the
year ended December 31, 1997 were examined by Arthur Andersen LLP, independent
public accountants, whose report thereon dated March 23, 1998 was included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1997.
Arthur Andersen LLP also issued a report dated March 23, 1998 with respect to
the schedule listed in the index to financial statement schedule for the year
ended December 31, 1997. Such report was also included in the Company's Annual
Report on Form 10-K.

Because of the foregoing litigation, Arthur Andersen LLP believes that it is
no longer independent with respect to GBCC and consequently has informed the
Company that it is unable to reissue its report on the financial statement
schedule for the year ended December 31, 1997. As a result, Arthur Andersen
LLP's report for that year is not included in this Annual Report on Form 10-K.

Even if Arthur Andersen LLP were to reissue its report on the financial
statement schedule for the year 1997, there can be no assurance that such report
would be identical to the report dated March 23, 1998, or that such reissued
report would not include additional qualifications. However, GBCC is not aware
of any subsequent events, transactions or other matters that would affect Arthur
Andersen LLP's report.

65
<PAGE>

SCHEDULE II

GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

Valuation and Qualifying Accounts
<TABLE>
<CAPTION>

Amounts
Balance at Charged to Balance
Beginning Costs and at End
of Period Expenses Deductions Other of Period
----------- ---------- ---------------- ----------------- -----------
<S> <C> <C> <C> <C> <C>

Description
- -------------------------------

Year Ended December 31, 1999:
Valuation allowances on
affiliates receivables $20,977,000 $ 22,000 $ - $ (20,767,000)(1) $ 232,000
Allowance for doubtful
accounts receivable - 28,000 - - 28,000
----------- ---------- --------------- -------------- -----------

$20,977,000 $ 50,000 $ - $ (20,767,000) $ 260,000
=========== ========== =============== ============== ===========

Year Ended December 31, 1998:
Valuation allowance on
affiliate receivables $ 213,000 $2,306,000 $ - $ 18,458,000 (2) $20,977,000
=========== ========== =============== ============== ===========

Year Ended December 31, 1997:
Allowance for doubtful
accounts receivable $15,524,000 $3,195,000 $ (3,764,000)(3) $ (14,955,000)(5) $ -
Valuation allowance on
affiliate receivables - 213,000 - - 213,000
Allowance for obligatory
investments 4,401,000 1,241,000 (71,000)(4) (5,571,000)(5) -
----------- ---------- --------------- -------------- -----------

$19,925,000 $4,649,000 $ (3,835,000) $ (20,526,000) $ 213,000
=========== ========== =============== ============== ===========
- ----------------------------------
</TABLE>

(1) Represents reserves written off in connection with the transfer of affiliate
receivables to Greate Bay Holdings, L.L.C. for the benefit of the PRT
Funding noteholders.

(2) Represents valuation allowances on notes and associated interest due from
Greate Bay Hotel and Casino, Inc., a wholly owned subsidiary of GB Holdings,
Inc. At December 31, 1997, such amounts were reflected as an adjustment to
GBCC's negative investment in GB Holdings, Inc. During 1998, the negative
investment was written off and the outstanding receivables were reclassified
to due from affiliates. The December 31, 1997 adjustment to the negative
investment is reflected above under the caption "Other".

(3) Represents net write-offs of uncollectible accounts.

(4) Represents write-offs of obligatory investments in connection with the
contribution of certain obligatory investments to the Casino Reinvestment
Development Authority.

(5) Represents write-off of allowances resulting from GB Holdings, Inc. and its
subsidiaries no longer being included on the consolidated financial
statements of Greate Bay Casino Corporation.

The accompanying notes to consolidated financial statements
are an integral part of this schedule.

<PAGE>

Exhibit 10.9

------------------

Dated: February 13, 2000

------------------

EMPLOYMENT AGREEMENT

- by and between -

GREATE BAY CASINO CORPORATION

- and -

JOHN C. HULL

------------------
<PAGE>

------------------

TABLE OF CONTENTS

------------------

Page
----

RECITALS.......................................................................1

1. DEFINITIONS...........................................................1

2. PRIOR EMPLOYMENT......................................................2

3. BASIC EMPLOYMENT AGREEMENT............................................3

4. DUTIES OF EMPLOYEE....................................................3

5. ACCEPTANCE OF EMPLOYMENT..............................................3

6. TERM..................................................................4

7. SPECIAL TERMINATION PROVISIONS........................................4

8. COMPENSATION TO EMPLOYEE..............................................4
(a) Base Salary......................................................5
(b) Bonus............................................................5
(c) Employee Benefit Plans...........................................5
(d) Expense Reimbursement............................................5
(e) Licensing Expenses...............................................6
(f) Vacations and Holidays...........................................6

9. LICENSING REQUIREMENTS................................................6

10. CONFIDENTIALITY.......................................................7

11. RESTRICTIVE COVENANT..................................................8

12. BEST EVIDENCE.........................................................8

13. SUCCESSION............................................................8

i
<PAGE>

14. ASSIGNMENT............................................................9

15. AMENDMENT OR MODIFICATION.............................................9

16. GOVERNING LAW.........................................................9

17. NOTICES...............................................................9

18. INTERPRETATION.......................................................10

19. SEVERABILITY.........................................................10

20. DISPUTE RESOLUTION...................................................10

21. WAIVER...............................................................10

22. PAROL................................................................11

23. REIMBURSEMENT OF HOLLYWOOD CASINO
CORPORATION, ETC.....................................................11

24. EXECUTION PAGE.......................................................12

<PAGE>

__________________________________

EMPLOYMENT AGREEMENT
__________________________________

THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the
13/th/ day of February, 2000, by and between GREATE BAY CASINO CORPORATION
("Employer") and JOHN C. HULL ("Employee").

W I T N E S S E T E T H:

WHEREAS, Employer is a corporation, duly organized and existing under the
laws of the State of Delaware, which is involved in gaming related activities
and which has a need for qualified, experienced personnel; and

WHEREAS, Employee is an adult individual currently residing at 6753 East
Park Drive, Fort Worth, Texas 76132;

NOW, THEREFORE, for and in consideration of the foregoing recitals, and in
consideration of the mutual covenants, agreements, understandings, undertakings,
representations, warranties and promises hereinafter set forth, and intending to
be legally bound thereby, Employer and Employee do hereby covenant and agree as
follows:

1. DEFINITIONS. As used in this Agreement, the words and terms
-----------
hereinafter defined have the respective meanings ascribed to them herein, unless
a different meaning clearly appears from the context:

(a) "Cause" means any of the following: (i) Employee's failure (for
-----
any reason other than as the result of a Complete Disability) to
perform Employee's duties under this Agreement with a reasonable
degree of diligence, competence and effectiveness; (ii) Employee's
engagement in any personal misconduct involving dishonesty,
illegality, or moral turpitude which is materially detrimental or
injurious to the business interests, reputation or goodwill of
Employer or Employer's Affiliates; (iii) Employee's engagement in any
material act of dishonesty, disloyalty, or infidelity
<PAGE>

against Employer or Employer's Affiliates; (iv) Employee's breach of
or other failure to perform under any of the material terms and
covenants of this Agreement; (v) Employee's willful violation of any
material policy established by Employer with respect to the operation
of Employer's business and affairs, or the conduct of Employer's
employees; (vi) Employee's insubordination with respect to, or willful
failure, in any material respect, to carry out all reasonable and
lawful instructions issued by, the President of Employer; and (vii)
Employee's failure to maintain in force and in good standing any and
all licenses, permits and/or approvals required of Employee by the
relevant governmental authorities for the discharge of the obligations
of Employee under this Agreement. All determinations of the existence
of "Cause," including without limitation any determination with
respect to performance, reasonableness, effectiveness, materiality and
injury, shall be made in good faith by the Employer's Board of
Directors and shall be conclusive as to all parties.

(b) "Complete Disability" means the inability of Employee, due to
-------------------
illness or accident or other mental or physical incapacity, to perform
his obligations under this Agreement for a period of one hundred
eighty (180) calendar days in the aggregate over a period of five
hundred (500) consecutive calendar days, such "Complete Disability" to
become effective upon the expiration of such one hundred eightieth
(180th) day.

(d) "Employee" means Employee as earlier defined in this Agreement.
--------

(e) "Employer" means Employer as earlier defined in this Agreement.
--------

(f) "Employer's Affiliates" means any parent, subsidiary or affiliated
---------------------
corporation or other legal entity of Employer.

(g) "Prior Employment" means any prior employment Employee has had
----------------
with either Employer or Employer's Affiliates.

2. PRIOR EMPLOYMENT. This Agreement supersedes and replaces any and all
----------------
prior employment agreements, whether written or oral, by and between Employee,
on the one side, and Employer or Employer's Affiliates, on the other side,
including, without limitation, that certain Employment Agreement dated as of
January 1, 1998 (the "1/1/98 Employment Agreement"), between Employer and
Employee. The parties hereto acknowledge and agree that, from January 1,

2
<PAGE>

1998 until February 12, 2000, the 1/1/98 Employment Agreement will govern the
employment arrangement between such parties. From and after the Effective Date,
Employee shall be the employee of Employer under the terms and pursuant to the
conditions set forth in this Agreement.

3. BASIC EMPLOYMENT AGREEMENT. Subject to the terms and pursuant to the
--------------------------
conditions hereinafter set forth, Employer hereby employs Employee during the
Term hereinafter specified to serve in a managerial or executive capacity, under
a title and with such duties not inconsistent with those set forth in Paragraph
4 of this Agreement, as the same may be modified and/or assigned to Employee by
Employer from time to time.

4. DUTIES OF EMPLOYEE. Employee shall perform such duties assigned to
------------------
Employee by Employer as are generally associated with the duties of Chairman of
the Board and Chief Executive Officer, including but not limited to (i) the
efficient and continuous operation of Employer and Employer's Affiliates; (ii)
the selection and delegation of duties and responsibilities of subordinates;
(iii) the direction, review and oversight of all operations and programs under
Employee's supervision; and (iv) such other and further duties specifically
related to such duties as assigned by Employer to Employee. The foregoing
notwithstanding, Employee shall devote such time to Employer's Affiliates as
required by Employer, provided such duties are not inconsistent with Employee's
primary duties to Employer hereunder.

5. ACCEPTANCE OF EMPLOYMENT. Employee hereby unconditionally accepts the
------------------------
employment set forth hereunder, under the terms and pursuant to the conditions
set forth in this Agreement. Employee hereby covenants and agrees that, during
the Term of this Agreement, Employee will devote the whole of his normal and
customary working time and best efforts solely to the performance of Employee's
duties under this Agreement.

3
<PAGE>

6. TERM. The term of this Agreement shall commence on the Effective Date
----
and expire on the first to occur of December 31, 2000 or the successful
consummation of a restructure of Employer and its subsidiaries above the GB
Holdings, Inc. level (the "Term"), unless sooner terminated as provided herein.

7. SPECIAL TERMINATION PROVISIONS. Notwithstanding the provisions of
------------------------------
Paragraph 6 above, this Agreement and all parties' rights and obligations
hereunder shall terminate upon the occurrence of any of the following events:

(a) the death of Employee;

(b) the giving of written notice from Employer to Employee of the
termination of this Agreement upon the Complete Disability of
Employee;

(c) the giving of written notice by Employer to Employee of the
termination of this Agreement upon the discharge of Employee for
Cause;

(d) the giving of written notice by Employer or Employee of the
termination of this Agreement without Cause; provided, however, that
such notice must be accompanied by Employer's written tender to
Employee of Employer's unconditional commitment to continue to pay to
Employee the compensation set forth in Paragraph 8(a) of this
Agreement, under the terms and pursuant to the conditions of this
Agreement; or

(e) cause beyond the control of Employer and without its fault or
negligence. Such causes may include, but are not limited to, acts of
god or a public enemy, acts of government in either its sovereign or
contractual capacity, fires, floods, epidemics, quarantine
restrictions, strikes, riots, freight embargoes, power outages or
unusually severe weather conditions.

8. COMPENSATION TO EMPLOYEE. For and in complete consideration of
------------------------
Employee's full and faithful performance of his duties under this Agreement,
Employer hereby covenants and agrees to pay to Employee, and Employee hereby
covenants and agrees to accept from Employer, the following items of
compensation:

4
<PAGE>

(a) Base Salary. Employer hereby covenants and agrees to pay to Employee,
-----------
and Employee hereby covenants and agrees to accept from Employer, an annual base
salary of Two Hundred Fifteen Thousand and No/100 Dollars ($215,000), effective
on the Effective Date, payable in such equal regular installments as is
Employer's custom and usage. Such base salary shall be exclusive of and in
addition to any other benefits which Employer, in its sole discretion, may make
available to Employee, including, but not limited to, any pension plans, bonus
plans, retirement plans, company life insurance plan, medical and/or
hospitalization plans, or any and all other benefit plans which may from time to
time be in available to executive officers of Employer generally during the Term
of this Agreement.

(b) Bonus. In addition to receiving the base salary prescribed under
-----
Paragraph 8(a) above, Employee shall also be entitled to receive a bonus in the
amount of $35,000 due and payable on the first to occur of December 31, 2000 or
the successful consummation of a restructure of Employer and its subsidiaries
above the GB Holdings, Inc. level.

(c) Employee Benefit Plans. Employer hereby covenants and agrees that it
----------------------
shall include Employee, if otherwise eligible, in any pension plans, retirement
plans, company life insurance plans, medical and/or hospitalization plans,
and/or any and all other benefit plans which may be placed in effect by Employer
during the Term of this Agreement.

(d) Expense Reimbursement. During the Term of this Agreement, Employer
---------------------
shall either pay directly or reimburse Employee for Employee's reasonable
expenses incurred for the benefit of Employer in accordance with Employer's
general policy regarding reimbursement, as the same may be amended, modified or
changed from time to time. Such reimbursable expenses shall include, but are not
limited to, reasonable entertainment and promotional expenses, gift and travel
expenses, dues

5
<PAGE>

and expenses of membership in clubs, professional societies and fraternal
organizations, and the like. Prior to reimbursement, Employee shall provide
Employer with sufficient detailed invoices of such expenses in accordance with
the then applicable guidelines of the Internal Revenue Service so as to permit
Employer to claim a deduction of such expenses.

(e) Licensing Expenses. Employer hereby covenants and agrees that Employer
------------------
shall pay all licensing fees and expenses incurred by Employee in securing and
maintaining such licenses and permits required of Employee in order to perform
his duties under this Agreement.

(f) Vacations and Holidays. Commencing as of the Effective Date of this
----------------------
Agreement, Employee shall be entitled to (i) annual paid vacation leave in
accordance with Employer's standard policy therefor, to be taken at such times
as selected by Employee and approved by Employer, and (ii) the following paid
holidays (or, at Employer's option, an equivalent number of paid days off): New
Year's Day, Dr. Martin Luther King, Jr.'s Birthday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.

9. LICENSING REQUIREMENTS.
----------------------

(a) Employer and Employee hereby covenant and agree that this Agreement may
be subject to the approval of the New Jersey Casino Control Commission and any
other jurisdiction in which Employer or Employer's Affiliates conducts business
(the "Gaming Authorities") pursuant to the provisions of the New Jersey Casino
Control Act and any other applicable law and the regulations promulgated
thereunder. In the event this Agreement is required to be approved by the
Gaming Authorities and is not so approved by the Gaming Authorities, this
Agreement shall immediately terminate and shall be null and void and of no
further force or effect; provided, however, should this Agreement not be
approved by the Gaming Authorities, Employer and Employee shall hereby

6
<PAGE>

covenant and agree that, with the exception of the provisions of Paragraph 8 of
this Agreement, this Agreement shall be deemed modified and amended so as to
receive the appropriate approval from the Gaming Authorities.

(b) Employer and Employee hereby covenant and agree that, in order for
Employee to discharge the duties required under this Agreement, Employee must
continue to hold casino key employee licenses (the "Licenses") as issued by the
Gaming Authorities pursuant to the terms of the Gaming Acts and as otherwise
required by this Agreement. In the event that any of the Gaming Authorities
objects to the renewal of Employee's License, or either of the Gaming
Authorities refuses to renew Employee's applicable License, Employer, at
Employer's sole cost and expense, shall promptly defend such action and shall
take such reasonable steps as may be required to secure such Gaming Authority's
approval. The foregoing notwithstanding, if such Gaming Authority's refusal to
renew Employee's License arises as a result of any of the events described in
Paragraph 1(a) of this Agreement, Employer's obligations under this Paragraph 9
shall not be operative and Employee shall promptly reimburse Employer upon
demand for any expenses incurred by Employer pursuant to this Paragraph 9.

10. CONFIDENTIALITY. Employee hereby warrants, covenants and agrees that,
---------------
without the prior express written approval of Employer, Employee shall hold in
the strictest confidence and shall not disclose to any person, firm, corporation
or other entity, any and all of Employer's confidential data, including, but not
limited to (i) information or other documents concerning Employer's business,
customers or suppliers; (ii) Employer's marketing methods, files and credit and
collection techniques and files; or (iii) Employer's trade secrets and other
"know-how" or information not of a public nature, regardless of how such
information came into the custody of

7
<PAGE>

Employee. The warranty, covenant and agreement set forth in this Paragraph 10
shall not expire, shall survive this Agreement and shall be binding upon
Employee without regard to the passage of time or other events.

11. RESTRICTIVE COVENANT. Employee hereby covenants and agrees that,
--------------------
during the Term of this Agreement, Employee shall not directly or indirectly,
either as a principal, agent, employee, employer, consultant, partner,
shareholder of a closely held corporation or shareholder in excess of five
percent (5%) of a publicly traded corporation, corporate officer or director, or
in any other individual or representative capacity, engage or otherwise
participate in any manner or fashion in any business that is in competition in
any manner whatsoever with the principal business activity of Employer or
Employer's Affiliates, in or about any state in which Employer or Employer's
Affiliates are licensed to conduct casino operations (the "Operating States"),
including any navigable waterways which are wholly within the Operating States,
which are partly within the Operating States and partly without the Operating
States, or which form a boundary between the Operating States and any other
state or body public. Employee hereby further acknowledges and agrees that the
restrictive covenant contained in this Paragraph 11 is reasonable as to
duration, terms and geographical area and that the same protects the legitimate
interests of Employer and Employer's Affiliates, imposes no undue hardship on
Employee and is not injurious to the public.

12. BEST EVIDENCE. This Agreement shall be executed in original and
-------------
"Xerox" or photostatic copies and each copy bearing original signatures in ink
shall be deemed an original.

13. SUCCESSION. This Agreement shall be binding upon and inure to the
----------
benefit of Employer and Employee and their respective successors and assigns.

8
<PAGE>

14. ASSIGNMENT. Employee shall not assign this Agreement or delegate his
----------
duties hereunder without the express written prior consent of Employer thereto.
Any purported assignment by Employee in violation of this Paragraph 14 shall be
null and void and of no force or effect. Employer shall have the right to
assign this Agreement freely; provided, however, that in the event of such an
assignment by Employer and the assignee subsequently defaults under the terms of
this Agreement, Employer shall remain liable for compliance with the terms of
Paragraph 8 of this Agreement.

15. AMENDMENT OR MODIFICATION. This Agreement may not be amended,
-------------------------
modified, changed or altered except by a writing signed by both Employer and
Employee.

16. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Texas in effect on the Effective Date
of this Agreement.

17. NOTICES. Any and all notices required under this Agreement shall be in
-------
writing and shall either hand-delivered; mailed by certified mail, return
receipt requested; or sent via telecopier addressed to:

TO EMPLOYER: Greate Bay Casino Corporation
Two Galleria Tower, Suite 2200
13455 Noel Road, LB 48
Dallas, Texas 75240
Attention: General Counsel

TO EMPLOYEE: John C. Hull
6753 East Park Drive
Fort Worth, Texas 76132

All notices hand-delivered shall be deemed delivered as of the date
actually delivered. All notices mailed shall be deemed delivered as of three (3)
business days after the date postmarked. All notices sent via telecopier shall
be deemed delivered as of the next business day following the

9
<PAGE>

date of the confirmation of delivery. Any changes in any of the addresses listed
herein shall be made by notice as provided in this Paragraph 17.

18. INTERPRETATION. The preamble recitals to this Agreement are
--------------
incorporated into and made a part of this Agreement. Titles of paragraphs are
for convenience only and are not to be considered a part of this Agreement.

19. SEVERABILITY. In the event any one or more provisions of this
------------
Agreement is declared judicially void or otherwise unenforceable, the remainder
of this Agreement shall survive and such provisions shall be deemed modified or
amended so as to fulfill the intent of the parties hereto.

20. DISPUTE RESOLUTION. Except for equitable actions seeking to enforce
------------------
the provisions of Paragraphs 10 and 11 of this Agreement, jurisdiction and venue
for which is hereby granted to the District Court of Dallas County, Texas, any
and all claims, disputes or controversies arising between the parties hereto
regarding any of the terms of this Agreement or the breach thereof, on the
written demand of either of the parties hereto, shall be submitted to and be
determined by final and binding arbitration held in Dallas, Texas in accordance
with the Employment Dispute Resolution Rules of the American Arbitration
Association. This Agreement to arbitrate shall be specifically enforceable in
any court of competent jurisdiction.

21. WAIVER. None of the terms of this Agreement, including this Paragraph
------
21, or any term, right or remedy hereunder shall be deemed waived unless such
waiver is in writing and signed by the party to be charged therewith and in no
event by reason of any failure to assert or delay in asserting any such term,
right or remedy or similar term, right or remedy hereunder.

10
<PAGE>

22. PAROL. This Agreement constitutes the entire agreement between
-----
Employer and Employee with respect to the subject matter hereto and this
Agreement supersedes any prior understandings, agreements or undertakings by and
between Employer and Employee with respect to the subject matter hereof.

23. REIMBURSEMENT OF HOLLYWOOD CASINO CORPORATION, ETC. Each of the
---------------------------------------------------
parties hereto agrees and acknowledges that (a) Employee is currently on the
payroll of Hollywood Casino Corporation, a Delaware corporation ("HCC"), and
shall remain on such payroll for a period of time mutually agreeable to HCC and
Employee, (b) to the extent that HCC pays the compensation to Employee owing
under Paragraph 8 of this Agreement, Employer shall promptly reimburse HCC for
such payments and (c) Employer shall be responsible for paying any compensation
owing under Paragraph 8 of this Agreement not paid by HCC.

11
<PAGE>

IN WITNESS WHEREOF AND INTENDING TO BE LEGALLY BOUND THEREBY, the parties
hereto have executed and delivered this Agreement as of the year and date first
above written.

ATTEST: GREATE BAY CASINO CORPORATION

/s/ William D. Pratt By: /s Edward T. Pratt III
- -------------------- ------------------------------------------
Secretary Name: Edward T. Pratt III
Title: President

/s/ John C. Hull
-----------------------------------------------
JOHN C. HULL

<PAGE>

Exhibit 21.1

SUBSIDIARIES OF GREATE BAY CASINO CORPORATION

State
Name Address Organized

PPI Corporation 200 Decadon Drive, Suite 100 New Jersey
Egg Harbor Township, New Jersey 08234

PPI Funding Corp. 200 Decadon Drive, Suite 100 Delaware
Egg Harbor Township, New Jersey 08234

PCPI Funding Corp. 200 Decadon Drive, Suite 100 Delaware
Egg Harbor Township, New Jersey 08234

Pratt-Hollywood, Inc. 200 Decadon Drive, Suite 100 Delaware
Egg Harbor Township, New Jersey 08234

BPHC Acquisition, Inc. 136 S. Kentucky Avenue New Jersey
Atlantic City, New Jersey 08401

Advanced Casino Systems 200 Decadon Drive, Suite 100 Delaware
Corporation Egg Harbor Township, New Jersey 08234

BPHC Parking Corp. 136 S. Kentucky Avenue New Jersey
Atlantic City, New Jersey 08401

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF GREATE BAY CASINO CORPORATION AND
SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000030117
<NAME> GREATE BAY CASINO CORPORATION
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 4,801 10,616
<SECURITIES> 0 0
<RECEIVABLES> 419 367
<ALLOWANCES> 28 0
<INVENTORY> 599 378
<CURRENT-ASSETS> 7,336 13,602
<PP&E> 771 1,564
<DEPRECIATION> 438 1,100
<TOTAL-ASSETS> 8,862 19,946
<CURRENT-LIABILITIES> 10,921 103,532
<BONDS> 40,446 35,040
0 0
0 0
<COMMON> 519 519
<OTHER-SE> (43,024) (119,145)
<TOTAL-LIABILITY-AND-EQUITY> 8,862 19,946
<SALES> 0 0
<TOTAL-REVENUES> 6,422 8,971
<CGS> 0 0
<TOTAL-COSTS> 2,933 1,314
<OTHER-EXPENSES> (82,311) (31,913)
<LOSS-PROVISION> 50 115
<INTEREST-EXPENSE> 9,636 15,252
<INCOME-PRETAX> 76,114 24,203
<INCOME-TAX> (7) (287)
<INCOME-CONTINUING> 76,121 24,490
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 76,121 24,490
<EPS-BASIC> 14.68 4.72
<EPS-DILUTED> 14.68 4.72

</TABLE>