CREATIVE LEARNING PRODUCTS INC, 10KSB, 1996-09-16

CREATIVE LEARNING PRODUCTS INC
10KSB, 1996-09-16
PAPER & PAPER PRODUCTS

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U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-KSB

[X] Annual Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 (Fee required) for the fiscal year ended MAY 31, 1996

Commission file number 0-17642

CREATIVE LEARNING PRODUCTS, INC.
(Name of Small Business Issuer in its Charter)

NEW JERSEY 22-2930106
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

150 MORRIS AVENUE, SPRINGFIELD, NJ 07081
(Address of Principal Executive Offices) (Zip Code)

(201) 467-0266

(Issuer's Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Exchange Act:

NONE

Securities registered under Section 12(g) of the Act:

COMMON STOCK, NO PAR VALUE

(Title of Class)

Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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

Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will 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-KSB
or any amendment to this Form 10-KSB. [ ]

The issuer's revenues for its most recent fiscal year were $1,461,906.

The aggregate market value of the voting stock held by non-affiliates of
the registrant as of September 10, 1996 was $17,296,533.

The number of shares outstanding of each of the registrant's classes of
common equity on September 10, 1996 was 16,637,383 shares of Common Stock, no
par value, and no shares of Preferred Stock, $1.00 par value.

DOCUMENTS INCORPORATED BY REFERENCE

NONE
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CREATIVE LEARNING PRODUCTS, INC.
FORM 10-KSB

FISCAL YEAR ENDED MAY 31, 1996

TABLE OF CONTENTS

Part I Page

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

Item 1. Description of Business...................................... 2

Item 2. Description of Property...................................... 14

Item 3. Legal Proceedings............................................ 15

Item 4. Submission of Matters to a Vote of Security Holders.......... 16

Part II

- - -------

Item 5. Market for Common Equity and Related Stockholder Matters..... 16

Item 6. Management's Discussion and Analysis or Plan of Operations... 17

Item 7. Financial Statements......................................... 19

Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure..................................... 19

Part III

- - --------

Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act............ 19

Item 10. Executive Compensation....................................... 20

Item 11. Security Ownership of Certain Beneficial Owners and
Management................................................... 23

Item 12. Certain Relationships and Related Transactions............... 25

Item 13. Exhibits, Lists and Reports on Form 8-K...................... 25

Financial Statements..................................................... F-1

Signatures............................................................... 35
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PART I

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

Creative Learning Products, Inc. (the "Company") was incorporated on
August 31, 1988 under the laws of the State of New Jersey to provide
management and administrative services to its wholly-owned subsidiaries. The
Company and its operating subsidiaries are collectively referred to herein as
"CLP."

Since February 1994, the Company has been engaged in the process of
attempting to convert CLP from an entity only offering a line of children's
products and writing instruments into an entity which primarily would be
offering gaming facilities and equipment, a hotel convention center, a theme
park and a time sharing facility and entertainment to its customers. Management
intends that the primary future focus of CLP will be on various gaming projects
(see the sections "Gaming Vessel Project," "Branson Project" and "Other Gaming
Projects" in this Item 1 to this Report) conducted on behalf of the Company
through Creative Gaming International, Inc. ("CGI"), a wholly-owned subsidiary
of the Company incorporated in March 1994. Assuming that definitive agreements
are executed and that the Company obtains necessary governmental approvals and
adequate financing, as to none of which there can be any assurance, management
believes that the earliest project will not begin to produce revenues for CLP
until the first half of 1997 and that most projects will take approximately one
to two years to produce revenues, if not longer. There can be no assurance that
any of these contemplated timetables will be realized. In addition, the Company
has been restructuring its capitalization through the issuance of its equity
securities, in private placements and upon the exercise of warrants, and the
satisfaction of other indebtedness. See the section "Certain Securities
Transactions" in this Item 1 to this Report.

EXISTING OPERATIONS

As of May 31, 1996, the Company's principal wholly-owned operating
subsidiaries were (1) Kards for Kids, Inc. ("KFK"), an original subsidiary of
the Company, which includes its Congress Entertainment division ("Congress"),
(2) John Patrick Productions, Inc. ("JPP"), the net assets of which were
acquired effective July 1, 1994, and (3) CGI. CLP's results of operations for
the fiscal years ended May 31, 1996 ("fiscal 1996") and 1995 ("fiscal 1995"),
which are included in Item 7 to this Report, reflect, in addition to the
Company, the consolidated operations of KFK (including Congress), JPP since its
acquisition, and CGI.

KFK, through its Kards for Kids division ("Kards For Kids"), markets and
distributes products for children between the ages of 18 months and 12 years,
including stationery, cards, workbooks, paper activity placemats and educational
video and audio cassettes. Congress is a distributor of quality sell-through
pre-recorded video cassettes to schools, libraries, specialty retail chains and
the mass merchandising market.

Kards for Kids sells its products directly to the consumer through mail order
and through retailers and distributors. Kards for Kids products are sold at
retail through major national and

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regional toy chains, supermarkets, mass market chains, so-called "price clubs",
drug chains and individually owned and operated card and book stores. Management
has had preliminary discussions which dealt with a possible sale or license of
certain assets relating to Kards for Kids business and had, in addition, during
fiscal 1995, reduced the marketing of such operations to a minimum. However, as
of the date of this Report, no commitment to sell had been made nor were there
any pending negotiations and Kards for Kids operations were producing revenues.

Effective July 1, 1994, an inactive subsidiary of the Company acquired the
net assets of John Patrick Productions, Inc. (the "Old John Patrick"), which was
engaged in the mail order business, and began to operate the business of the Old
John Patrick under JPP. (A copy of the Agreement and Plan of Reorganization
relating to the acquisition of the Old John Patrick assets is filed (by
incorporation by reference) as an exhibit to this Report and is incorporated
herein by this reference). As consideration for such acquisition, the Company
issued 200,000 shares of its then newly created Series B Preferred Stock, $1.00
par value (the "Series B Preferred Stock"), to Old John Patrick and 265,000
shares of the Common Stock, no par value (the "Common Stock"), to the Old John
Patrick shareholders. The Company also issued 18,000 shares of the Common Stock
to unaffiliated persons as finder's fees for the acquisition. In April 1996, Old
John Patrick surrendered the shares of the Series B Preferred Stock to the
Company, which the Company retired in May 1996. JPP is engaged in the mail order
business with products consisting of instructional video tapes and other
products related to gaming.

BRANSON PROJECT

Commencing in February 1994, CLP sought to initiate various projects in or
near Branson, Missouri (in the southwest portion of that State) (the "Branson
Project"), none of which has come to fruition as of this date and most of which,
if not all, may never produce revenues for CLP. The Branson Project contemplated
construction, financing and managing of one or two Native American gaming
facilities, production of a musical play, purchase of a theater in Branson and
the opening of a theme park, a hotel/convention center and time sharing
facilities.

On March 31, 1995, CGI purchased a 37-acre site in Christian County, Missouri
which abuts the site referred to in the following paragraph. The purchase price
for the land was recorded at $288,664. (A copy of the agreement relating to this
purchase is filed (by incorporation by reference) as an exhibit to this Report
and is incorporated herein by this reference.)

On February 28, 1996, CGI purchased a 728-acre site in Christian County,
Missouri, abutting approximately two and a half miles along State Highway 65,
the main road between Springfield, Missouri and Branson, Missouri. (A copy of
the agreement relating to the purchase is filed (by incorporation by reference)
as an exhibit to this Report and is incorporated herein by this reference.) The
aggregate purchase price for the land was recorded at $2,121,788. The sellers of
the property have agreed to hold a mortgage in the amount of $1,072,475 (see
Note 7 to Consolidated Financial Statements in Item 7 to this Report). This
property and the property in the preceding paragraph are jointly referred to as
the "Christian County Site".

Management's initial intention was to use a portion of the Christian County
Site to construct, finance and manage, under the Indian Gaming Regulatory Act of
1988 (the "IGRA"), a gaming facility for the Eastern Shawnee Tribe of Oklahoma
(the "Tribe"). For various reasons, such

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project has been canceled. However, management is of the opinion that the
Christian County Site can be used for a time sharing facility, a theme park, a
hotel/convention center and/or other activities. Based on management's review of
the current real estate market in Christian County, Missouri, management is of
the opinion that the Christian County Site can be resold for an amount in excess
of the aggregate purchase prices, and has retained a real estate broker in an
attempt to sell a major portion of such site. There can be no assurance that CGI
will be able to use the sites for these purposes or, in the alternative, can
resell parts or all of both sites at a later date at a price or prices in excess
of the cost thereof.

CGI had also entered into a management agreement with the Tribe to construct,
finance and manage, pursuant to IGRA, a Class A/Class III gaming facility near
Seneca, Missouri (the "Seneca Facility"). (A copy of the management agreement
and the related loan agreement with the Tribe are filed (by incorporation by
reference) as exhibits to this Report and are incorporated herein by this
Report.) The IGRA creates a three-tiered classification of gaming operations and
provides for varying degrees of federal, state and tribal regulation over each
class. Class I gaming, over which Indian tribes exercise exclusive regulatory
control, consists of social games for minimal prizes or as part of tribal
ceremonies or celebrations. Class II gaming includes bingo, pull tabs and other
bingo-type games, while Class III gaming includes all other forms of gaming,
such as video games, slot machines, table games (i.e., blackjack, craps and
roulette) and parimutuel wagering.

Because of a federal circuit court decision invalidating the statutory right
of the Secretary of the Interior to dedicate land in trust for Native American
Indian tribes under the Indian Reorganization Act and a pending battle for
control of the Tribe, with one of the issues being the management agreement with
CGI, CGI has suspended any further action by it with respect to the Seneca
Facility. Depending on developments, the Company will review whether it will
attempt to proceed with the project or whether it will seek to recover sums
previously advanced to the Tribe (including $120,000 to an affiliate of the
Tribe to acquire the site), recognizing that, because the Tribe is a sovereign
nation, legal actions against it may be difficult. Even if the Tribe and CGI
agree to proceed with the Seneca Facility, as to which there can be no
assurance, because of the governmental approvals, especially in view of the
aforementioned and other judicial decisions, it might be two years or more
before revenues could be realized from the Seneca Facility. For this reason,
management believes it more prudent to proceed first with other gaming projects.
As of May 31, 1996, CLP had fully charged to operations $261,703 of the costs
incurred on the Seneca Facility.

In 1994 CLP intended to implement the Branson Project as a joint venture with
the Bauer Cohen Company, Inc. ("Bauer Cohen"). The proposed joint venture was
evidenced by four agreements (copies of which are filed (by incorporation by
reference) as exhibits to this Report and are incorporated hereby by this
reference). However, negotiations with Bauer Cohen for a definitive joint
venture agreement have terminated, primarily because of disputes as to the
availability of funding. As of the current time, it is highly unlikely that the
proposed joint venture will be revived, especially because neither of the
prospective "partners" are making any effort in that direction.

Peter J. Jegou, the Chief Executive Officer of the Company, and Edward H.
Cohen, a principal of Bauer Cohen, acting as agents for the proposed joint
venture (the "Agents"), entered

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into an option and purchase agreement dated March 28, 1994 with Five Star
Productions, Inc. ("Five Star Productions") under the terms of which the Agents
agreed to purchase the Five Star Theatre, which is a 2,700 seat theater, an
adjacent 13,000 square foot building and 18 acres of land owned by the Five Star
Productions (the "Theatre"). (A copy of the agreement relating to the option and
purchase is filed (by incorporation by reference) as an exhibit to this Report
and is incorporated herein by this reference.) Under the terms of the agreement,
the Agents paid $150,000 upon execution and subsequently an aggregate of
$625,000. All such funds were advanced by the Company. The closing under the
option/purchase agreement was scheduled for December 31, 1994. The purchase
price was $13,000,000, of which the $775,000 in option payments was to be
credited against the purchase price. On or about October 20, 1994, the Company
became aware of certain allegations relating to the Theatre which placed in
question the safety of the Theatre. The Company, accordingly, asserted that the
proposed joint venture had the right, which Five Star Productions contested, to
extend the closing date under the agreement until a final determination as to
the safety and structural soundness was made based upon an inspection by
qualified engineers. There can be no assurance that, if CGI (to which all rights
to the Theatre were assigned) seeks to pursue purchase, Five Star Productions
will agree or that, if the Company seeks the recovery of the $775,000 in option
payments, it will recover the same from Five Star Productions.

As of May 31, 1996, CLP had fully charged to operations and retired
$2,797,228 of costs incurred on the proposed joint venture and Five Star
Productions portions of the Branson Project.

GAMING VESSEL PROJECT

The Company, through CGI, is negotiating to purchase a hull for the purpose
of converting the hull into an offshore gaming vessel. CGI plans to utilize the
vessel for gaming cruises originating in Southern Florida for part of the year
and possibly New York during the summer months. The Company is currently
evaluating several sites in Southern Florida and New York to determine where the
vessel, if purchased, will be docked. CGI anticipates the vessel to be in
service during the first half of calendar 1997. Certain governmental approvals
will be necessary before the vessel can be put into service as a gaming vessel
and there can be no assurance that such approvals will be obtained. Management
contemplates that, if the vessel is purchased and the governmental approvals
obtained, the vessel will offer dining facilities and possibly entertainment.

Because the vessel project, if consummated, can create a revenue stream for
CLP at an earlier date than the other contemplated gaming projects (see the
section "Branson Project" in this Item 1 to this Report), the Company intends to
give priority to this project and, if successful, to consider other gaming
vessel projects. There can be no assurance that management's expectations will
be realized, whether on a timely basis or otherwise.

OTHER GAMING PROJECTS

In March 1995, CGI began negotiations with a privately-held company
headquartered in Ocean Springs, Mississippi which was the lessee of an
approximate 60-acre site located along the Mississippi River in St. Louis,
Missouri and the adjoining county, seeking the right to open a

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gaming facility on approximately 15 acres of the site. (A copy of the Agreement
dated as of April 1, 1995 relating to the proposed transaction is filed as an
exhibit to this Report and is incorporated herein.) The negotiations for this
project have been terminated, including separate negotiations with an unrelated
third party to acquire a vessel for possible use in this project. As of May 31,
1996, CLP had fully charged to operations and retired $31,820 of costs incurred
on this project.

As alternatives or additions to the Branson Project and the Gaming Vessel
Project, CLP has been exploring the possibility of opening and operating other
gaming facilities, such as an Indian gaming facility in a state other than
Missouri and non-Indian gaming facilities in other states. To assist the Company
in seeking and negotiating such opportunities, CLP has been using, since May
1995, the services of Harvey Freeman as a consultant. Mr. Freeman was formerly
Executive Vice President of the Trump Organization and is familiar with its and
other gaming operations. There can be no assurance that any of these other
gaming prospects will result in a definitive agreement or that thereafter CGI
will obtain the necessary financing or governmental approvals to open and
operate the same. As of May 31, 1996, CLP had fully reserved and charged to
operations $188,834 of other gaming costs incurred and retired $172,711 of these
costs.

FORMER OPERATIONS

Until August 1994, Roburn International Corporation, a wholly-owned
subsidiary of the Company ("Roburn"), which acquired its assets and business in
January 1993, engaged in the business of manufacturing, imprinting and selling
writing instruments and other products to the advertising specialty industry.
Roburn was reported in the Company's consolidated financial statements as a
discontinued operation as of May 31, 1994.

Pursuant to an Agreement dated as of June 13, 1994, as amended (copies of
which agreement and amendments thereto are filed (by incorporation by reference)
as exhibits to this Report and are incorporated herein by this reference),
substantially all of Roburn's inventory, equipment and machinery was sold in
August 1994 to Modern Mold International, Inc. ("MMII") for the purchase price
of $465,430. Part of the proceeds were used to facilitate prepayment of the
Company's 10% Convertible Notes due April 30, 1995 (the "April 30 Convertible
Notes") in the principal amount of $500,000 (all of which Notes were either
prepaid or converted), thereby releasing the holders' security interests in the
equipment and machinery sold to MMII. (Copies of the April 30 Convertible Note,
its related Note Purchase Agreement dated May 1, 1993 and its related Security
Agreements dated as of May 1, 1995 are filed (by incorporation by reference) as
exhibits to this Report and are incorporated herein by this reference.)

MMII waived compliance with Article 6 of the Uniform Commercial Code as
adopted in the State of New Jersey (the "Bulk Sales Law") in connection with its
purchase of the inventory, machinery and equipment from Roburn. As inducement
for such waiver, the Company issued 150,000 shares of the Common Stock (the
"MMII Indemnity Shares") to MMII's escrow agent. Pursuant to the terms of the
escrow, the MMII Indemnity Shares will be released to MMII to the extent
necessary to indemnify MMII for any claims brought against it by Roburn's
creditors as a result of Roburn's and MMII's failure to comply with the Bulk
Sales Law. As of this date, no shares have been used for such purpose and the
Company is seeking to terminate the escrow.

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Pursuant to a letter agreement dated as of August 15, 1994 (the "Banker's
Agreement") among Banker's Pen, Inc., a Delaware corporation ("Banker's"),
Roburn and the Company, and two other contemporaneous letter agreements among
Richard Danziger, the then President of Roburn, the Company and Roburn, the
remaining assets of Roburn were sold to Banker's and arrangements were made to
cease the business of Roburn, including making provisions for its creditors.
(Copies of these letter agreements including the Banker's Agreement, are filed
(by incorporation by reference) as exhibits to this Report and are incorporated
herein by this reference.) Banker's waived compliance with the Bulk Sales Laws
in connection with Roburn's sale of assets to Banker's. As inducement for such
waiver, the Company agreed to indemnify and hold harmless Banker's for all
claims of Roburn's creditors, except for the trade creditors claims, and made
available to an escrow agent 150,000 shares (the "Trade Creditors Shares") of
the Common Stock for the benefit of the Roburn trade creditors whose claims
Banker's had assumed. The Company also deposited with the escrow agent an
aggregate of approximately $162,430, the balance of Roburn accounts receivable
after payment to a factor and a note from Banker's for $15,000. As of September
10, 1996, 95,260 of the Trade Creditors Shares had been issued to Roburn trade
creditors and 54,740 remained for future distribution. The Roburn escrow agent
had also advised the Company that, as of August 31, 1996, there remained
outstanding approximately $42,000 in claims from trade creditors and no funds in
the Roburn escrow fund, although the escrow agent still held the note from
Banker's. Mr. Danziger, who agreed to be responsible for implementing the plan
to pay the Roburn trade creditors, will receive the balance of the Trade
Creditors Shares to the extent not used to satisfy Roburn trade creditors'
claims.

CERTAIN SECURITIES TRANSACTIONS

On September 8, 1994, in a private placement pursuant to regulation D under
the Securities Act of 1933, as amended (the "Securities Act"), the Company sold
to Bennett Management & Development Corp. ("Bennett"), for gross proceeds of
$2,250,000, 2,250,000 shares of the Common Stock. The Company also issued to
Bennett a Common Stock purchase warrant expiring March 7, 1998 (the "Private
Placement Warrant") to purchase 2,250,000 shares of the Common Stock at $1.50
per share. Due to the antidilution provisions in the Private Placement Warrant,
as of September 10, 1996, this warrant represented the right to purchase
3,120,520 shares at $1.082 per share.

During October 1994, commencing October 13, 1994, warrant holders exercised:
(1) all of the Common Stock purchase warrants expiring July 20, 1995 to purchase
an aggregate of 1,000,000 shares at $.75 per share; (2) Common Stock purchase
warrants expiring July 20, 1997 (the "Additional Warrants") to purchase an
aggregate of 485,000 shares at $1.00 per share; and (3) Common Stock purchase
warrants expiring March 7, 1998 (the "Noteholders Warrants") to purchase an
aggregate of 437,500 shares at $1.50 per share. The Company received an
aggregate of $1,891,250 in gross proceeds from these exercises. Per an agreement
with its then investment banker to pay 5% of the gross proceeds for any warrant
as to which it solicited an exercise, the Company paid the investment banker an
aggregate of $94,563. After these exercises, there remained outstanding
Additional Warrants and Noteholders Warrants to purchase 515,000 and 465,541
shares, respectively. Due to the antidilution provisions in the Additional
Warrants, as of

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September 10, 1996, these warrants represented the rights to purchase 1,339,464
shares at $.384 per share. The Noteholder Warrants are further discussed in the
following three paragraphs.

Also during October 1994, the holder of a 10% Promissory Note accepted
275,486 shares of the Common Stock and a Noteholders Warrant to purchase 275,486
shares of the Common Stock at $1.50 per share in full satisfaction of the
principal and interest due on such Note. Due to the antidilution provisions in
the Noteholders Warrant, as of September 10, 1996, this Noteholders Warrant
represented the right to purchase 382,070 shares of the Common Stock at $1.082
per share.

Also during October 1994, the holders of the Company's 8% Convertible Notes
due August 31, 1994 accepted an aggregate of 525,000 shares of the Common Stock
and Noteholders Warrants to purchase an aggregate of 525,000 shares of the
Common Stock at $1.50 per share in full satisfaction of the principal and
interest due on such Notes.

Also during October 1994, the holder of the Company's 8% Promissory Note due
June 20, 1995 accepted 102,555 shares of the Common Stock and a Noteholders
Warrant to purchase 102,555 shares of the Common Stock at $1.50 per share in
full satisfaction of the principal and interest due on such Notes. Certain of
the Noteholders Warrants described in this and the preceding paragraph were
exercised as described in the third preceding paragraph so that these former
noteholders or their transferees held Noteholders Warrants to purchase an
aggregate of 190,055 shares. Due to the antidilution provisions in the
Noteholders Warrant, as of September 10, 1996, these Noteholders Warrants
represented the right to purchase 263,587 shares of the Common Stock at $1.082
per share.

On November 7, 1994, the Company issued and a major creditor accepted 100,000
shares of the Common Stock and a Common Stock purchase warrant expiring November
1, 1998 to purchase 100,000 shares of the Common Stock at $1.50 per share in
satisfaction of outstanding debt due the creditor as of May 31, 1994. Due to its
antidilution provisions, as of September 10, 1996, this warrant represented the
right to purchase 132,600 shares at $1.131 per share.

On January 25, 1995, the Company issued 175,000 shares of the Common Stock
pursuant to a private placement to a private investor for the purchase price of
$262,500. Also, on the same date, the investor exercised an option which would
have expired October 15, 1995 at a reduced exercise price and purchased 25,000
shares of the Common Stock for an aggregate purchase price of $37,500. On June
8, 1995, the Company issued a 10% Promissory Note due September 7, 1995 (the
"Investor's Note") in the principal amount of $50,000 to the investor. As
additional consideration for this loan, the Company reduced the exercise price
of the investor's Common Stock purchase warrant expiring March 15, 2000 from
$1.50 to $1.00 per share. In consideration of the investor's extension of the
maturity date of the Investor's Note to November 7, 1995, the Company issued to
the investor a Common Stock purchase warrant expiring September 11, 2000 to
purchase, commencing September 12, 1996, 10,000 shares of the Common Stock at
$1.00 per share. The Investor's Note was satisfied by a cash payment of $27,389
($25,000 for principal and $2,389 for interest) and the issuance of 40,667
shares of the Common Stock (667 shares in lieu of interest due).

On March 30, April 13, April 19, June 27, and July 21, 1995, the Company
issued to two unaffiliated lenders 10% Promissory Notes due the earlier of (1)
December 29, 1995, January 12,

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January 18, March 26, and April 21, 1996, respectively, or (2) a closing of an
anticipated private placement as to which the Company's then investment banker
was to act as placement agent, in the principal amounts of $400,000, $50,000,
$75,000, $200,000, and $100,000, respectively, and Common Stock purchase
warrants expiring September 28, October 12, October 18, December 26, and July
20, 2000, respectively, to purchase 50,000, 6,250, 9,375, 20,000, and 12,500
shares, respectively, of the Common Stock, at exercise prices of $2.66, $2.69,
$2.47, $2.38, and $2.38 per share, respectively. Effective August 31, 1995, the
holders of these notes accepted an aggregate of 851,230 shares of the Common
Stock and Common Stock purchase warrants expiring March 5, 1998 (the "March 5
Warrants") to purchase an aggregate of 851,230 shares of the Common Stock at an
exercise price of $1.50 per share in full satisfaction of all principal
($825,000) and interest ($26,230) due. Due to the antidilution provisions in the
above warrants, as of September 10, 1996, the first set of warrants represented
the right to purchase 65,508, 8,198, 12,298, 32,795 and 16,397 shares,
respectively, at $2.028, $2.05, $1.883, $1.814 and $1.814 per share,
respectively, and the March 5 Warrants represented the right to purchase an
aggregate of 1,058,008 shares at $1.207 per share.

On July 24, 1995, the Company issued to a shareholder a Common Stock purchase
warrant expiring January 24, 1999 to purchase 83,333 shares of the Common Stock
at $1.00 per share, for which the shareholder agreed to seek financing for the
Company and settled certain claims against the Company.

On August 30, 1995, a corporate investor exercised its warrant expiring
October 27, 1998 to purchase 140,000 shares of the Common Stock at an exercise
price of $1.50. Due to the antidilutive provisions of this warrant, an aggregate
of 143,535 shares of the Common Stock were issued at the adjusted price of $1.46
for proceeds of $209,590.

On September 5, September 29, October 31, and November 7, 1995, the Company
issued to an unaffiliated lender 10% Promissory Notes due the earlier of (1)
June 5, June 27, July 30, and August 6, 1996, respectively, or (2) a closing of
an anticipated private placement as to which the Company's then investment
banker was to act as placement agent, in the principal amounts of $50,000,
$60,000, $25,000, and $100,000, respectively, and Common Stock purchase warrants
expiring February 28, March 27, April 29, and May 6, 2001, respectively, to
purchase 6,250, 7,500, 3,125, and 12,500 shares, respectively, of the Common
Stock, at exercise prices of $2.19, $2.50, $2.19, and $3.00 per share,
respectively. Effective November 30, 1995, the holder of these notes accepted an
aggregate of 317,529 shares of the Common Stock and Common Stock purchase
warrants expiring November 29, 2001 (the "November 29 Warrants") to purchase,
commencing November 30, 1996, an aggregate of 317,529 shares of the Common Stock
at an exercise price of $1.00 per share in full satisfaction of all principal
($235,000) and interest ($3,147) due. Due to the antidilution provisions in the
above warrants, as of September 10, 1996, the first set of warrants represented
the right to purchase 7,768, 9,321, 3,867 and 15,467 shares, respectively, at
$1.762, $2.012, $1.77 and $2.425 per share, respectively, and the November 29
Warrants represented the right to purchase an aggregate of 379,701 shares at
$.836 per share.

On November 30, 1995, the Company, in a private placement pursuant to
Regulation S promulgated under the Securities Act, sold to two non-"U.S.
persons" in "off-shore transactions", for gross proceeds of $250,000, 250,000
shares of the Common Stock and Common Stock purchase warrants expiring November
29, 1999 to purchase, commencing November 30, 1996,

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250,000 shares of the Common Stock at an exercise price of $1.50 per share. The
Company paid a private placement fee of $25,000 to an agent for this offering.
(The terms "U.S. persons" and "off-shore transactions", as used in this Report,
are used as defined in paragraphs (o) and (i), respectively, of Rule 902 of
Regulation S under the Securities Act).

On December 6, 1995, the Company, pursuant to Regulation S under the
Securities Act, sold to a non-"U.S. person" in an "off-shore transaction", for
gross proceeds of $200,000, 200,000 shares of the Common Stock and a Common
Stock purchase warrant expiring December 5, 1999 to purchase, commencing
December 6, 1996, 200,000 shares of the Common Stock at an exercise price of
$1.00 per share. The Company paid a private placement fee of $20,000 to an agent
for this offering.

On January 3, 1996, the Company, pursuant to Regulation S under the
Securities Act, sold to a non-"U.S. person" in an "off-shore transaction", for
gross proceeds of $100,000, 100,000 shares of the Common Stock and a Common
Stock purchase warrant expiring January 2, 2000 to purchase, commencing January
3, 1997, 100,000 shares of the Common Stock at an exercise price of $1.50 per
share. The Company paid a private placement fee of $10,000 to an agent for this
offering.

On February 6, 1996, the Company, pursuant to Regulation S under the
Securities Act, sold to a non-"U.S. person" in an "off-shore transaction", for
gross proceeds of $200,000, 196,928 shares of the Common Stock. The Company paid
a private placement fee of $23,000 to an agent for this offering.

On February 12, 1996, the Company, pursuant to Regulation S under the
Securities Act, sold to a non-"U.S. person" in an "off-shore transaction", for
gross proceeds of $170,000, 145,299 shares of the Common Stock. The Company paid
a private placement fee of $19,600 to an agent for this offering.

On May 31, 1996, the Company, pursuant to Regulation S under the Securities
Act, sold to a non-"U.S. person" in an "off-shore transaction", for gross
proceeds of $600,000, 1,200,000 shares of the Common Stock and issued a Common
Stock purchase warrant expiring May 23, 2001 (the "May 23 Warrant") to purchase
1,000,000 shares of the Common Stock at an exercise price of $1.00 per share.
The Company paid a private placement fee of $100,000 to an agent for this
offering.

On May 31, 1996, the holder of an aggregate of $48,000 in principal amount of
the Company's 8.5% and 10% Promissory Notes accepted in full settlement of all
principal and interest due, an aggregate of 36,525 shares of the Common Stock
(4,525 shares in lieu of interest due).

On August 7, 1996, the Company entered into a consulting agreement with an
individual, which modified a previous agreement dated April 16, 1996. (Copies of
both consulting agreements are filed (by incorporation by reference) as exhibits
to this Report and are incorporated herein by this reference.) The terms of the
consulting agreement were for the individual to perform financial and public
relation consulting services for a period of two years at a cost of $400,000,
and included the issuance of Common Stock purchase warrants expiring April 16
and August 6, 1999, respectively, to purchase, both commencing August 7, 1996,
2,000,000 and 1,000,000 shares, respectively, of the Common Stock both at $.75
per share. The

10
<PAGE> 12
individual also exercised his warrant issued on April 16, 1996 and expiring
April 15, 1999 to purchase 1,000,000 shares of the Common Stock at an exercise
price of $.75 per share for gross proceeds of $750,000. The individual retained
$400,000 in accordance with his consulting agreement and the Company received
net proceeds of $350,000.

On August 22, 1996, the Company, pursuant to Regulation S under the
Securities Act, sold to three non-"U.S. persons" in "off-shore transactions",
for gross proceeds of $500,000, 1,000,000 shares of the Common Stock.

On September 4, 1996, the Company, pursuant to Regulation S under the
Securities Act, sold to a non-"U.S. person" in an "off-shore transaction", for
gross proceeds of $600,000, 1,200,000 shares of the Common Stock and issued a
Common Stock purchase warrant expiring September 2, 2001 to purchase 1,000,000
shares of the Common Stock at an exercise price of $1.00 per share. The Company
paid a private placement fee of $100,000 to an agent for this offering.

In compliance with a commitment given to various persons, the Company intends
to file a registration statement under the Securities Act, as soon as
practicable after the filing of this Report, registering the shares issued to
certain holders of the Common Stock and the shares of the Common Stock
underlying certain Common Stock purchase warrants for issuance by the Company
and certain shares for resale by the holders thereof, most of which shares will
only be issued after exercise of Common Stock purchase warrants and stock
options. The offer and sale of such shares, depending on the timing thereof, may
have an adverse impact on the market price for the Common Stock.

FINANCING

On October 28, 1994, the Company received a letter (the "Financing Letter")
from Bennett, the investor in the September 1994 private placement, which
offered to extend a secured line of credit of up to $20,000,000 for the
purchase, development and construction of approved projects undertaken by the
joint venture relating to the Branson Project. See the section "Branson Project"
in this Item 1 to this Report. (A copy of the Financing Letter is filed (by
incorporation by reference) as an exhibit to this Report and is incorporated
herein by this reference. The term of the Financing Letter was subsequently
extended to December 15, 1995. (Copies of such extensions are filed as exhibits
to this Report and are incorporated herein by this reference.) Because Bennett
and its corporate affiliates, in March 1996, filed a petition in bankruptcy
under the Federal Bankruptcy Code, this source of potential financing for CLP
has ended.

Management believes that, as a result of the cash flow from current
operations and the aggregate of $1,400,000 raised through September 10, 1996 in
recent offerings pursuant to Regulation S under the Securities Act and the
exercise of warrants, CLP has sufficient funds to meet its cash requirements
during the next 12 months based on its current level of commitments. Management
also believes that such funds will be supplemented by cash realized from the
sales of equity through private placements and the exercise of outstanding
Common Stock purchase warrants and stock options. Should one of the proposed
gaming projects require funds for implementation, management believes, based on
its discussions with persons in the investment banking community, that any funds
required for such a project can be obtained. There can be no assurances that the
market price of the Common Stock will be conducive to the exercise of

11
<PAGE> 13
Common Stock purchase warrants and stock options, nor that funds can be obtained
to finance a specific project if required will be available and, if available,
on acceptable terms.

GOVERNMENTAL REGULATION

CGI, as it attempts to implement the gaming aspects of the Gaming Vessel
Project, the Branson Project and Other Gaming Projects (collectively the "Gaming
Projects"), assuming definitive agreements are executed, as to which there can
be no assurance, will become subject to extensive governmental regulations, many
of which have not been the subject of definitive interpretations. In general,
both Indian and non-Indian gaming is extensively regulated by the federal, state
and, in the case of Indian gaming, tribal governments and authorities and
additional regulatory provisions are expected to be adopted as the Indian and
non-Indian gaming industries continue to develop. Failure of CGI to comply with
applicable laws and regulations, whether federal (including IGRA), state or
tribal, could result in, among other things, CGI not receiving approval of its
proposed management agreement with the Tribe or, if approved, the termination of
such gaming management agreement. Because of CLP's intended future dependence on
the Gaming Projects for its revenues, any such denial of approval or termination
of the agreements would have a material adverse effect on CLP.

CGI's proposed business operations on land to be dedicated to the United
States Government in trust for the Tribe are subject to approval, regulation and
oversight by, among others, the Bureau of Business Affairs, the Secretary of the
United States Department of Interior, the National Indian Gaming Commission
("NIGC") and Eastern Shawnee Tribe authorities. For example, CGI's proposed
management agreement for Class II or Class III gaming facilities must be
approved by the NIGC and the terms of the management agreement must conform to
NIGC requirements. In addition, in order to conduct Class III gaming for the
Branson Project there must be a tribal compact between the Tribe and the State
of Missouri. (For an explanation of the difference between Class II gaming and
Class III gaming, see the section "Branson Project" in this Item 1 to this
Report). In addition to these requirements, a management agreement will not be
approved by the NIGC unless federally conducted background checks of the
directors and certain officers of CGI, certain holders of CGI's equity interests
and certain "interested parties" in the management agreement have been
substantially completed. If there is a tribal compact between the Tribe and the
State of Missouri under which CGI may manage a Class III casino, there may be
even more stringent requirements for background checks. Background checks and
NIGC approvals may take several months to complete. Inquiries by the NIGC and
the State of Missouri may not be limited to CGI, but may extend to the Company,
including its directors, certain officers and certain shareholders.

Although there is no tribal approval necessary for the Gaming Vessel Project,
there can be no assurance that federal, state and, if necessary, local
governmental approvals will be given and, if given, how long the approval
process will take.

12
<PAGE> 14
COMPETITION

Gaming

The gaming industry, including the development, operation and management of
casinos, is highly competitive, especially given the rapid rate at which the
industry is expanding. CGI's proposed gaming activities, including casino
development, operation and management, will compete with other forms of gaming
and with other entities for gaming opportunities. Any gaming facilities
developed, operated or managed by CGI will compete with gaming facilities of
varying quality and size that already exist or may be built in the future,
including gaming facilities that are part of national or regional chains. Any
facilities of CGI will compete with well established gaming operations in
various states, including Colorado, Connecticut, Minnesota, Mississippi, Nevada,
New Jersey and South Dakota. It is likely that other states will also approve
various forms of gaming. The Company believes that the majority of the companies
in the gaming industry, including companies which develop, operate or manage
casinos, have available to them substantially greater financial resources with
more experienced personnel than the Company. Competition in the future may be
affected by periodic overbuilding, which can adversely affect patronage levels,
changes in local market conditions, changes in regional and local population and
disposable income characteristics, and changes in travel patterns and
preferences.

CGI will also compete with other forms of gaming, including pull tab games,
card clubs, parimutuel betting on horse racing and dog racing and
state-sponsored lotteries. Finally, CGI will compete with other, non-gaming
forms of entertainment.

Other Operations

Assuming that CGI will open a theme park in Christian County, Missouri,
management recognizes that such operation will compete with the Disney, Six
Flags and other well established theme parks in the United States, many of which
have greater financial resources than CGI will have even if the Company raises
the required financing, as to which there can be no assurance. Management also
recognizes that there will be substantial competition for the other contemplated
operations of the Branson Project, such as the time sharing facility and the
hotel/convention center. Management believes, however, that the contemplated
hotel/convention center, theme park and/or the time sharing facility, if opened,
will be added attractions to produce revenues from persons otherwise attracted
by the contemplated gaming facilities, if opened, and the other entertainment
attractions of Branson, Missouri not affiliated with CGI.

The children's products, video distribution, and mail order business markets,
in which the operations of Kards for Kids, Congress and JPP, respectively, are
concentrated, are all highly competitive markets, in which none of the entities
is a major competitive factor.

EFFECT ON ENVIRONMENTAL REGULATIONS

With the change in CLP's business, CLP does not believe that compliance with
federal, state and local laws and regulations which have been enacted or adopted
regulating the discharge of

13
<PAGE> 15
materials into the environment will have, in the foreseeable future, any
material effect upon the capital expenditures, earnings or competitive position
of CLP. Even with respect to its existing and former businesses, CLP does not
believe that compliance with such laws and regulations had any material effect
on CLP.

EMPLOYEES

As of September 10, 1996, CLP employed 8 persons, of whom 7 were full time.

To the extent that the Company is successful in implementing the Gaming
Projects, CGI's personnel requirements will increase significantly. The Company
also anticipates CGI may be required to develop and undertake a major training
program at the Seneca Facility if all governmental approvals are obtained and
the other problems resolved to open the same. In addition, with regard to gaming
facilities on Indian Land, the management company will generally be required to
recruit and give preference in hiring and promotion to individuals of Native
American heritage in order to comply with Tribal Employment Rights Ordinances
(ordinances adopted by most tribes, including the Tribe). While the Company
believes that CGI will be able to attract and retain a sufficient number of
employees to satisfy its future requirements, the competition for such
employees, particularly at management levels, will increase significantly in the
future if gaming expands throughout the United States. As indicated in Item 9 to
this Report, the Company is seeking a President for CGI even prior to launching
the operational aspects of the Gaming Projects.

To the extent that CGI obtains a partner to operate any of the Gaming
Projects, its personnel requirements may be reduced.

ITEM 2. DESCRIPTION OF PROPERTY

JPP currently leases 2,800 square feet of space at 150 Morris Avenue,
Springfield, New Jersey pursuant to a lease expiring March 31, 1998 at a monthly
base rental of $2,750, which increases to $3,000 effective April 1, 1997. CLP
currently uses 1,100 square feet of such space and subleases the remaining.

JPP also leases 4,400 square feet of office and warehouse space at 604 Route
611, Tannersville, Pennsylvania pursuant to leases which expire December 31,
1996 and March 31, 1997, at a monthly rental of $1,000 and $1,600, respectively.

As part of the Branson Project, CGI acquired in Christian County, Missouri a
37-acre site for $288,664 on March 31, 1995 and a 728-acre site for $2,121,788
on February 28, 1996 (see the section "Branson Project" in Item 1 to this
Report).

Copies of the leases and other agreements referred to in this Item 2 to this
Report are filed (by incorporation by reference) as exhibits to this Report and
are incorporated herein by this reference.

14
<PAGE> 16
ITEM 3. LEGAL PROCEEDINGS

On June 25, 1993, Parker Printing Co. instituted an action in the Superior
Court of New Jersey, Mercer County, against the Company, two of its
subsidiaries, Peter J. Jegou and Carol Kulina-Jegou, both executive officers and
sole directors of the Company, seeking (1) compensatory damages of $125,000 for
defendants allegedly diverting printing work from the plaintiff; (2) liquidated
damages of $125,000 on the same cause of action; (3) compensatory damages
aggregating $38,500 for printing work performed by the plaintiff; and (4)
compensatory damages aggregating $15,500 relating to finance charges, plus
counsel fees and interest. Mr. Jegou and Ms. Kulina-Jegou are being sued as
guarantors of the Company's and its subsidiaries' obligations to the plaintiff.
The court has stayed proceedings against them pending resolution of the claim
against the other defendants. Such defendants are vigorously contesting
plaintiff's claims and believe that they have valid defenses to some or all of
the plaintiff's allegations. Motions for summary judgment by both the plaintiff
and the defendants have been denied by the court and the action is in the early
stages of discovery.

On July 18, 1995, Westminster Securities Corporation ("Westminster"), the
nine former holders (the "Noteholders") of the April 30 Convertible Notes and
Generation Capital Associates as assignee of certain of the Noteholders, as
plaintiffs, served the Company in an action in the Supreme Court of the State of
New York, New York County, against the Company and Royce Investment Group, Inc.
("Royce"), the Company's investment banker, alleging as the first cause of
action that the Company has failed to file on or before February 23, 1994 a
registration statement under the Securities Act with respect to the shares of
the Common Stock issuable upon the conversion of the April 30 Convertible Notes
and the shares issuable upon the exercise of Common Stock purchase warrants
expiring April 30, 1996 and, as a result, had breached its obligations under the
Placement Agent Agreement dated April 30, 1993 (the "Placement Agent's
Agreement") between the Company and Westminster and the Warrant Agreement dated
May 1,1993 (the "Warrant Agreement") among the Company, Westminster and the
Noteholders, as a result of which breaches the plaintiffs are alleged to have
suffered damages of no less than $3.00 per share and/or Warrant, as the case may
be. The plaintiffs as their second cause of action alleged that Royce tortuously
interfered with the Placement Agent's Agreement, the Warrant Agreement and the
Note Purchase Agreement dated May 1, 1993 among the Company and the Noteholders,
thereby depriving the plaintiffs of a substantial profit because the plaintiffs'
securities could not be freely traded. The plaintiffs seek damages of not less
than $2,000,000, plus interest, on each of the two causes of action and punitive
damages against Royce in an amount to be determined. The Company and Royce have
answered the complaint and discovery has been completed. The Company has
asserted certain affirmative defenses to the complaint and intends to contest
this litigation vigorously. The parties are awaiting a trial date. Because the
decision will be determined by a jury at trial, no definitive opinion as to the
outcome of this litigation can be given at the current time.

There are no other pending legal proceedings against the Company and/or its
subsidiaries in which the claim for damages, exclusive of interests and costs,
exceeds 10% of the current assets of CLP.

15
<PAGE> 17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET DATA

The Common Stock trades on the Nasdaq System under the symbol "CLPI".

Set forth below is the quarterly trading range of the high and low prices for
the Common Stock during fiscal 1996 and fiscal 1995 as reported by the NASD in
the Nasdaq System.

Fiscal 1996:

High Low

------ -------
<S> <C> <C>
Quarter Ended:

August 31, 1995 $3.25 $2.125
November 30, 1995 3.125 2.00
February 28, 1996 2.625 1.563
May 31, 1996 2.00 0.656
</TABLE>

Fiscal 1995:

High Low

------ -------
<S> <C> <C>
Quarter Ended:

August 31, 1994 $3.875 $1.125
November 30, 1994 5.25 3.50
February 28, 1995 3.875 2.25
May 31, 1995 3.125 1.50
</TABLE>

The foregoing quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not represent actual transactions.

The closing sales price of the Common Stock as reported on the Nasdaq System
on September 10, 1996 was $1.063.

NASDAQ TRADING

As of May 31, 1996, the Company complied with all of the requirements of the
National Association of Securities Dealers, Inc. ("NASD") for continued listing
of the Common Stock in the Nasdaq System.

As of May 31, 1995, the Company did not meet such capital and surplus
maintenance requirement (i.e., it had a stockholders' equity of $941,296). The
Company was subsequently able to demonstrate compliance based on its balance
sheet as of August 31, 1995.

16
<PAGE> 18
HOLDERS

The approximate number of holders of record of the Common Stock as of
September 10, 1996 was 205. In addition, the Company, based on copies of annual
reports and proxy statements requested in connection with the last Annual
Meeting of Shareholders, believes that there are 600 beneficial owners of the
Common Stock.

DIVIDENDS

The Company has never paid cash or stock dividends and, in view of CLP's
history of losses and the cash requirements to launch the Gaming Projects, the
Board of Directors does not anticipate payment of dividends in the foreseeable
future.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements included in Item 7 to this Report.

RESULTS OF OPERATIONS

SALES

Sales for fiscal 1996 decreased by $26,531 or 2% as compared with sales for
fiscal 1995. The sales decrease was principally due to an increase in the sales
of video products offset by a larger decrease in children's products and writing
instruments.

GROSS PROFIT

Gross profit for fiscal 1996 decreased by $143,719 or 18% as compared with
gross profit for fiscal 1995. The gross profit decrease was the result of sales
with reduced gross margins and the adjustment of inventory to the lower of cost
or market and net realizable values.

SELLING EXPENSE

Selling expense decreased for fiscal 1996 by $79,417 or 14% as compared with
this expense in fiscal 1995. The decrease was principally due to a shift in
expenses from marketing current products to emphasis on gaming projects.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses decreased for fiscal 1996 by $165,884 or
8% as compared with these expenses in fiscal 1995, principally due to a
reduction in professional fees.

RESERVE FOR GAMING PROJECTS

Reserve for gaming projects decreased by $2,614,737 or 89% as compared with
reserve for gaming projects in fiscal 1995, primarily due to the termination of
the proposed joint venture and the related theater and play production projects
(see the section "Branson Project" in Item 1 to this Report).

17
<PAGE> 19
OFFICERS' STOCK OPTION EXPENSE

Officers' stock option expense of $904,688 for fiscal 1995 was due to the
accounting for options granted to officers during the year to reflect the excess
of the then current market values of the Common Stock over the transaction
prices when issued. No officers' stock option expense was recorded for fiscal
1996.

DEBT CONVERSION EXPENSE

Debt conversion expense of $398,749 for fiscal 1995 was due to the accounting
for debt converted to the Common Stock during the year to reflect the excess of
the then current market values of the Common Stock over the transaction prices
when issued. No debt conversion expense was recorded for fiscal 1996.

INTEREST EXPENSE

Interest expense for fiscal 1996 decreased by $9,510 or 13% as compared with
interest expense for fiscal 1995. The interest expense decrease was principally
due to less interest on short-term debt in fiscal 1996 offset by interest on the
mortgage on property purchased in fiscal 1996.

NAFTA

The North American Free Trade Act does not have a significant effect on the
consolidated operations.

INFLATION

Inflation does not have an impact on the consolidated operations.

LIQUIDITY AND CAPITAL RESOURCES

As of May 31, 1996, CLP had cash of $541,610 and a working capital deficit of
$343,227 compared to cash of $122,249 and a working capital deficit of $934,307
as of May 31, 1995. During fiscal 1996, CLP funded its operations principally
from the sales of shares of the Common Stock and proceeds received from
short-term debt.

The Company intends to file a registration statement under the Securities Act
that will register shares of the Common Stock as soon as practicable after the
filing of this Report. It is management's position that the filing of the
registration will encourage the exercise of some of the underlying outstanding
Common Stock purchase warrants. There can be no assurance that the Company will
be able to raise this additional financing.

18
<PAGE> 20
ITEM 7. FINANCIAL STATEMENTS

See accompanying Table of Contents to Consolidated Financial Statements on
page F-1 following Item 13 to this Report.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

DIRECTORS AND OFFICERS

As of August 31, 1996, the directors and executive officers of the Company
were as follows:

Position(s) Year First Became Director

Name Age with Company or Executive Officer

- - ---- --- ------------ --------------------------
<S> <C> <C> <C>
Peter J. Jegou 49 Chairman of the Board 1988
of Directors; President and
Chief Executive Officer

Carol A. Kulina-Jegou 46 Secretary and Director 1988

Walter J. Krzanowski 54 Chief Financial & Chief 1995
Accounting Officer
</TABLE>

Mr. Jegou and Ms. Kulina-Jegou were elected as directors by the
shareholders at the Annual Meeting held on January 12, 1994. Each director
serves until the next Annual Meeting of Shareholders and until his or her
respective successor is duly elected and qualifies. Executive officers are
elected by the Board to serve at the discretion of the directors.

As a result of the consummation of a private placement in September 1994, the
Board agreed to increase the number of directors from two to seven and to add a
designee of the investor in that private placement, a designee the placement
agent in such offering, and a designee of the Company's then investment banker.
Although the Company believes that these rights to designate a director may no
longer be effective, the Board intends to increase the number of directors later
in 1996 and are seeking appropriate candidates. In addition, the Company is
seeking a person experienced in the gaming industry to serve as the President of
CGI and as a director of the Company. There can be, of course, no assurance that
the Company will increase the number of directors or that the Company will
obtain a person experienced in the gaming

19
<PAGE> 21
industry to serve as the President of CGI and as a director of the Company and,
if obtained, when.

BUSINESS HISTORY

Each of Peter J. Jegou and Carol A. Kulina-Jegou has had as his or her
principal occupation for more than the past five years an executive position
with the Company and/or its then subsidiaries. Effective December 31, 1995, Ms.
Kulina-Jegou ceased to serve CLP as an executive officer and an employee.

Walter J. Krzanowski has been Chief Financial Officer and Chief Accounting
Officer of the Company since July 7, 1995. From January to June 1995, Mr.
Krzanowski served as an independent consultant providing financial services to
the Company. From September 1993 to December 1994, Mr. Krzanowski was
self-employed, acting as a consultant to a number of companies providing
accounting, financial reporting and data processing services. From April 1986 to
August 1993, Mr. Krzanowski was Director of Finance for Zenith Laboratories,
Inc., a generic pharmaceutical company. Prior to joining Zenith Laboratories,
Mr. Krzanowski held various financial positions with Hoffmann-LaRoche, Inc., a
major pharmaceutical company, from 1966 to 1986.

No director serves as a director of another company which has a security
registered under Section 12(b) or (g) of the Exchange Act or which is an
investment company registered under the Investment Company Act of 1940, as
amended.

FAMILY RELATIONSHIPS

Peter J. Jegou and Carol A. Kulina-Jegou are husband and wife. There are no
other family relationships among the directors and executive officers of the
Company.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Based solely on a review of Forms 3 and 4 furnished to the Company under Rule
16a-3(e) promulgated under the Exchange Act with respect to fiscal 1996, the
Company is not aware of any director or officer of the Company who failed to
file on a timely basis, as disclosed in such forms, reports required by Section
16(a) of the Exchange Act during fiscal 1996 or prior years, except that Peter
J. Jegou, an executive officer and a director, who was late in filing two Forms
4, each as to one item in fiscal 1995. As of May 31, 1996, the Company was not
aware of any beneficial owner of 10% or more of the outstanding shares of the
Common Stock, which is the only security of the Company registered under
Section 12 of the Exchange Act, except for David Slyman as the transferee of
Bennett as disclosed in Item 11 to this Report. The Company believes that Mr.
Slyman filed late a Form 3 relating to his beneficial ownership in fiscal 1995.

ITEM 10. EXECUTIVE COMPENSATION

The Company has not adopted any plan providing for stock appreciation rights,
restricted stock, stock options, phantom stock or similar type of stock benefits
and has no other long-term incentive plan in effect. The Company has, from time
to time, issued to employees of CLP shares

20
<PAGE> 22
of the Common Stock as additional compensation for their services, including
10,000 shares to the Chief Executive Officer of the Company during fiscal 1996.
There was no other executive officer whose compensation exceeded $100,000 in
fiscal 1996. As indicated in the ensuing tables, the Chief Executive Officer of
the Company has been granted options.

SUMMARY COMPENSATION TABLE

The following table sets forth summary compensation information paid or
awarded for fiscal 1996, fiscal 1995 and the fiscal year ended May 31, 1994
("fiscal 1994") by the Company to its Chief Executive Officer and each of CLP's
most highly compensated executive officers who served at the end of fiscal 1995
whose total annual salary and bonus exceeded $100,000 (there being none):

Annual Compensation Long-Term Compensation

----------------------------------------- -------------------------------------------------
Awards Payouts
Other ---------------------- -----------------------

Name and Annual LTIP
Principal Compen- Restricted Options Payouts All Other
Position Year Salary Bonus sation(1) Stock Award (#) ($) Compensation
- - --------- ---- ------ ----- --------- ----------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Peter J. Jegou, 1996 $159,346 0 $11,807 10,000 0 0 0
Chief Executive 1995 $152,957 0 $15,921 0 550,000 0 0
Officer 1994 $141,633(2) 0 $14,595 0 125,000 0 0
</TABLE>

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

(1) Automobile expenses.

(2) Mr. Jegou was entitled to receive $171,357 in salary during fiscal 1994.
Due to the serious financial constraints under which the Company was then
operating, Mr. Jegou waived $29,724 in compensation, which amount was
credited to additional paid-in capital.

OPTION GRANTS FOR FISCAL YEAR ENDED MAY 31, 1996

No grants of stock options were made during fiscal 1996 to the sole executive
officer named in the Summary Compensation Table.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES

No options were exercised during fiscal 1996 by any person named in the
Summary Compensation Table holding options which were eligible to be exercised.
The following table sets forth the fiscal 1996 ending option values of the sole
executive officer named in the Summary Compensation Table:

21
<PAGE> 23
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised in the
Shares Value Options at FY-End Money Options at FY-End
Name Acquired Received Exercisable/Unexercisable Exercisable/Unexercisable
- - ---- -------- -------- ------------------------- ---------------------------
<S> <C> <C> <C> <C>
Peter J. Jegou 0 0 325,000/ $262,813/(1)
350,000 0
</TABLE>

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

(1) Based on the closing price on May 31, 1996 ($1.8125) as quoted in the
Nasdaq System and reported by NASD.

COMPENSATION TO DIRECTORS

No compensation is paid to a director, as such, for his or her services, but,
by resolution of the Board of Directors, a fixed sum and expenses for actual
attendance at each regular or special meeting of the Board may be authorized.

OPTIONS AND WARRANTS TO DIRECTORS AND OFFICERS

During the past two fiscal years, the Company has issued the stock options
and Common Stock purchase warrant hereinafter described to Peter J. Jegou, its
Chairman of the Board, President and Chief Executive Officer and a director, and
Carol A. Kulina-Jegou, its Secretary and a director and, until December 31,
1995, its Executive Vice President. The exercise prices of all of the options
and the warrants were below the fair market value of the Common Stock on the
respective date of grant.

1. On November 7, 1994, the Company granted to Mr. Jegou an option expiring
November 6, 1999 (the "Loan Option") to purchase 150,000 shares of the
Common Stock at $.75 per share. The consideration for this grant was Mr.
Jegou's agreement not to have his 10% Note due April 29, 1995 (the "10%
Note") in the then principal amount of $167,000 prepaid in March 1994 as
were the 10% Notes of the other noteholders. During fiscal 1994 and 1995,
payments of $70,150 and $96,850, respectively, were made to Mr. Jegou with
respect to the 10% Note.

2. On November 7, 1994, the Company granted to Mr. Jegou an option expiring
November 6, 1999 (the "Gaming Option") to purchase 400,000 shares of the
Common Stock at $1.00 per share. The consideration for this grant was Mr.
Jegou's services in connection with the Branson Project. The Gaming Option
became exercisable as to 50,000 shares on May 7, 1995 and the balance was
to become exercisable in installments based upon the occurrence of
specified developments ion the Branson Project. On September 3, 1996, in
consideration of the fact that consummation of the Branson project was not
likely to occur, at least not during the next two years, the Gaming Option
was amended to become exercisable as to the remaining 350,000 shares
whenever a gaming vessel was to be put into service. For information as to
the Branson Project and a proposed gaming vessel project, see the sections
"Branson Project" and "Gaming Vessel Project" in Item 1 to this Report.

22
<PAGE> 24
3. On November 7, 1994 the Company granted to Ms. Kulina-Jegou an option
expiring November 6, 1999 (the "Retirement Option") to purchase 50,000
shares of the Common Stock at $1.00 per share. The consideration for the
Retirement Option was her years of service to CLP and her then
contemplated retirement. The Retirement Option first became exercisable on
December 31, 1995 when Ms. Kulina-Jegou resigned as Executive Vice
President, and retired as an employee, of the Company.

4. On August 7, 1996, the Company granted to Mr. Jegou a Common Stock
purchase warrant expiring August 6, 1999 (the "August 6 Warrant") to
purchase, commencing February 7, 1997, 1,500,000 shares of the Common
Stock at $.75 per share. The consideration for the August 6 warrant was
Mr. Jegou's services in developing alternative gaming projects for CLP and
the fact he was continuing to serve without an employment agreement.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information, as of September 10, 1996, with
respect to (1) any person or "group" known to the Company to be the beneficial
owner of more than five percent of the Common Stock; (2) each director of the
Company; (3) the Chief Executive Officer of the Company; (4) each other
executive officer who earned more than $100,000 in fiscal 1996 (of which there
were none); and (5) all directors and executive officers as a group. Each
beneficial owner has advised the Company that he or she has sole voting and
investment power as to the shares of the Common Stock, except that the warrants
and options described in the notes below do not have any voting power until
exercised and may not be sold or otherwise transferred except in compliance with
the Securities Act.

Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class(1)
- - ------------------- -------------------- -------------------

David Slyman 5,370,520(2) 27.2%
2019 Ford Road
Sheffield, AL 35660

ZIMCO S.A. 2,200,000(3) 12.5%
Rue de Neuchatel 8,
CH-2034
PESEUX, Switzerland

Jesse Greenfield 905,484(4) 5.2%
c/o Guaranty and Trust Company
P.O. Box 8963
Wilmington, DE 19889

Peter J. Jegou (5)(6) 758,266(7) 4.4%
150 Morris Avenue
Springfield, NJ 07081

23
<PAGE> 25
Carol A. Kulina-Jegou (6)(8) 220,000(9) 1.3%
150 Morris Avenue
Springfield, NJ 07081

All directors and 1,018,266(7)(9)(10) 5.9%
executive officers as
a group (3 persons)

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

(1) The percentages computed in this column of the table are based upon
16,637,383 shares of the Common Stock outstanding as of September 10,
1996, which amount excludes 150,000 shares (i.e., the MMII Indemnity
Shares) held in escrow as security in the event a creditor of Roburn
asserts a claim against MMII as the purchaser of the Roburn assets and is
not otherwise satisfied (see the section "Former Operations" in Item 1 to
this Report). Effect is given, where appropriate, pursuant to Rule
13d-3(d)(3)(i) under the Exchange Act, to shares issuable upon the
exercise of options and warrants which are currently exercisable or
exercisable within 60 days of September 10, 1996.

(2) According to a Schedule 13D filed by the holder under the Exchange Act,
the holder acquired the shares reported in the table from Bennett, the
purchaser from the Company in the September 1994 private placement. The
shares include, after giving effect to the antidilution provisions
thereof, 3,120,520 shares of the Common Stock issuable upon the exercise
of the Private Placement Warrant which is currently exercisable.

(3) The shares reported in the table include 1,000,000 shares issuable upon
the exercise of the May 23 Warrant, which is currently exercisable.

(4) The shares reported in the table include, after giving effect to the
antidilution provisions thereof, (a) 247,928 shares issuable upon the
exercise of Common Stock purchase warrants expiring January 7, 1999, which
are currently exercisable, and (b) 382,070 shares issuable upon the
exercise of a Noteholders Warrant, which is currently exercisable.

(5) A director, Chairman of the Board, President and Chief Executive Officer
of the Company.

(6) Peter J. Jegou and Carol A. Kulina-Jegou are husband and wife.

(7) The shares reported in the table include those issuable upon the
exercise of an option expiring May 18, 1999 to purchase 125,000 shares
of the Common Stock, the Loan Option to purchase 150,000 shares of the
Common Stock, the Gaming Option to purchase 50,000 shares of the Common
Stock, a warrant expiring one year after the effective date of a
related registration statement of the Company to be filed to purchase
16,000 shares of

24
<PAGE> 26
the Common Stock, a warrant acquired in a February 1992 private placement
and expiring April 29, 1998 to purchase, after giving effect to the
antidilution provisions thereof, 221,316 shares, and a Common Stock
purchase warrant expiring April 30, 1996 to purchase 25,000 shares of the
Common Stock, all of which are currently exercisable. The shares reported
in the table do not include (a) 350,000 shares issuable upon the exercise
of the Employment Option as to which the Employment Option is not
currently exercisable or exercisable within 60 days of September 10, 1996,
(b) 3,856 shares of the Common Stock to be issued to Mr. Jegou in lieu of
any claim by him to accumulated but undeclared and unpaid dividends on the
Series A Preferred Stock, 51,412 shares of which he converted as of May
31, 1994 into 12,853 shares of the Common Stock, and (c) 1,500,000 shares
issuable upon the exercise of the August 6 Warrant which is not currently
exercisable or exercisable within 60 days of September 10, 1996.

(8) A director and the Secretary of the Company.

(9) The shares reported in the table include those issuable upon the exercise
of the Retirement Option to purchase 50,000 shares of the Common Stock,
which Option became exercisable only on her retirement on December 31,
1995.

(10) The amount reported in the table reflects (a) 25,000 shares of the Common
Stock and (b) 15,000 shares of the Common Stock issuable upon the exercise
of an option expiring July 6, 2000, owned by another executive officer of
the Company.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Carol Kulina-Jegou, Executive Vice President, the Secretary and a director of
the Company, owns the copyrights for Kards for Kids' children's stationery, card
and paper activity products. Ms. Kulina-Jegou also owns the following
trademarks: "Mommy I Can Do It Myself"; "Kards for Kids"; and "Mommy I Can Learn
Myself". Pursuant to a Trademark License Agreement dated January 15, 1987,
effective retroactive to May 18, 1986 (the "Trademark License"). (A copy of the
Trademark License Agreement is filed (by incorporation by reference) as an
exhibit to this Report and is incorporated herein by this reference.) Ms.
Kulina-Jegou retains the right to inspect the materials, manufacturing and
recording processes employed by Kards for Kids in the manufacturing of the
prerecorded video cassette tapes in order to maintain quality control over the
products. The Trademark License has remained effective despite the resignation
of Ms. Kulina-Jegou effective December 31, 1995. See the section "Directors and
Officers" in Item 9 to this Report. Ms. Kulina-Jegou is in the process of
negotiating with Kards For Kids a royalty for the copyrights and trademarks,
which royalty will not exceed 5% of gross revenues as previously agreed.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

All of the following exhibits designated with a footnote reference
are incorporated herein by reference to a prior registration
statement filed under the Securities Act

25
<PAGE> 27
or a periodic report filed by the Company pursuant to Section 13 or
15(d) of the Exchange Act. If no footnote reference is made, the
exhibit is filed with this Report.

Number Exhibit
- - ------ -------

2(a) Copy of Agreement and Plan of Reorganization dated as of November
30, 1992 by and between the Company and Roburn International
Corporation, as amended on April 8, 1993 and April 19, 1993. (1)

2(a)(1) Copy of Agreement and Plan of Reorganization dated as of May 27,
1994 by and among the Company, Creative Crafts Acquisition
Corporation, a subsidiary of the Company, John Patrick Productions,
Inc., John Patrick, Dwight F. Davis and Frederick P. Ost. (2)

3(a) Copy of Certificate of Incorporation as initially filed on August
31, 1988. (3)

3(a)(1) Copy of Amendment to Certificate of Incorporation filed on December
30, 1988. (3)

3(a)(2) Copy of Amendment to Certificate of Incorporation filed on September
12, 1991. (4)

3(a)(3) Copy of Certificate of Designations and Preferences of the Series
A Preferred Stock filed on September 12, 1991. (4)

3(a)(4) Copy of Amendment to Certificate of Incorporation filed on May
22, 1992. (4)

3(a)(5) Copy of Amendment to Certificate of Incorporation filed on June
23, 1992. (4)

3(a)(6) Copy of Amendment to Certificate of Incorporation filed on August
25, 1993. (4)

3(a)(7) Copy of Amendment to Certificate of Incorporation filed on
January 26, 1994. (5)

3(a)(8) Copy of Certificate of Designations and Preferences of the Series
B Preferred Stock filed on August 12, 1994. (2)

3(a)(9) Copy of Amendment to Certificate of Designations and Preferences
of the Series B Preferred Stock filed on February 14, 1995. (6)

3(b) Copy of Amended and Restated By-Laws as adopted by shareholders
on January 12, 1994. (5)

4(a) Specimen of Common Stock certificate. (5)

10(a) Form of Warrant Agency Agreement dated as of April 27, 1989 between
the Company and Continental Stock Transfer & Trust Company as
Warrant Agent. (3)

10(a)(1) Form of Common Stock Purchase Warrant expiring April 27, 1995
(originally April 27, 1994 until extended by the Board of
Directors of the Company) issued by the Company. (3)

10(b) Copy of Purchase Agreement dated as of February 6, 1991 among the
Company and the purchasers listed therein. (5)

10(b)(1) Form of 10% Convertible Note due March 1, 1996 of the Company is
Exhibit B to Exhibit 10(b) hereto. (5)

26
<PAGE> 28
Number Exhibit
- - ------ -------

10(c) Form of Common Stock Purchase Warrant issued in connection with
February 1992 private placement. (7)

10(d) Form of 10% Note due April 29, 1995 of the Company. (4)

10(d)(1) Form of Common Stock Purchase Warrant expiring April 29, 1998
issued by the Company. (4)

The Company's Common Stock Purchase Warrant expiring July 20, 1995,
July 20, 1997, March 5, 1998, March 7, 1998, May 26, 1998, October
27, 1998, January 7, 1999, November 1, 1999, November 6, 1999, July
20, 2000, September 28, 2000, October 12, 2000, October 20, 2000,
December 26, 2000, February 28, 2001, March 27, 2001, April 29, 2001
and May 6, 2001 are substantially identical to the form of Common
Stock Purchase Warrant filed (by incorporation by reference) as to
the form of Common Stock Purchase Warrant filed as Exhibit 10(d)(1)
hereto except as to the name of the holder, the expiration date and
the exercise price and, accordingly, pursuant to Instruction 2 to
Item 601 of Regulation S-K under the Securities Act are not
individually filed.

10(e) Copy of Placement Agent Agreement dated April 30, 1993 by and
between the Company and Westminster Securities Corporation
("Westminster"). (4)

10(e)(1) Copy of letter agreement dated March 17, 1994 between the Company
and Westminster as placement agent. (5)

10(e)(2) Form of Note Purchase Agreement dated May 1, 1993 among the
Company and the listed purchasers. (4)

10(e)(3) Form of 10% Convertible Promissory Note due April 30, 1995 of the
Company is Exhibit B to Exhibit 10(d)(e) hereto. (4)

10(e)(4) Copy of Security Agreement dated as of May 1, 1993 by and between
Roburn International Corporation, a subsidiary of the Company
("Roburn"), and Westminster as designated agent for the
Noteholders. (4)

10(e)(5) Copy of Warrant Agreement dated May 1, 1993 among the Company,
Westminster, as agent, and the warrant holders to be named. (8)

10(e)(6) Form of Common Stock Purchase Warrant expiring April 30, 1995
issued by the Company. (4)

The Company's Common Stock Purchase Warrant expiring January 24,
1999, April 15, 1999, August 6, 1999, November 29, 1999, December 5,
1999, January 2, 2000, March 15, 2000, May 23, 2001 and October 28,
2001 are substantially identical to the form of Common Stock
Purchase Warrant filed as Exhibit 10(e)(5) hereto except as to the
name of the holder, the expiration date and the exercise price and,
accordingly, pursuant to Instruction 2 to Item 601 of Regulation S-K
under the Securities Act are not individually filed.

27
<PAGE> 29
Number Exhibit
- - ------ -------

10(e)(7) Copy of letter dated June 8, 1994 from the Company to Westminster
extending expiration date of Warrant filed as Exhibit 10(e)(6)
hereto to April 30, 1996. (2)

10(e)(8) Form of Common Stock Purchase Warrant expiring April 30, 1995
issued by the Company to the Westminster designees is the same as
Exhibit 10(e)(6) hereto. (4)

10(e)(9) Copy of Option expiring April 30, 1995 issued by the Company to
the Westminster designees. (2)

10(e)(10) Copy of letter dated February 10, 1995 to Westminster's counsel
confirming that extension of expiration date from April 30, 1995 to
April 30, 1996 effected by Exhibit 10(e)(7) hereto was also intended
to apply to the Warrants and Options, copies of which are filed as
Exhibits 10(e)(8) and 10(e)(9) hereto. (8)

10(f) Copy of Placement Agent Agreement dated as of May 27, 1993 by and
between the Company and Royce Investment Group, Inc. ("Royce"). (9)

10(g) Form of 10% Promissory Note dated October 8, 1993 issued by the
Company. (9)

10(g)(1) Copy of Consent dated October 13, 1994 exchanging Note filed as
Exhibit 10(g) hereto for shares of the Common Stock of the Company
and a Common Stock Purchase Warrant expiring March 7, 1998 (the
"Noteholders Warrant"). (2)

10(h) Copy of Purchase Agreement dated as of February 28, 1994 among
the Company and the purchasers listed therein. (5)

10(h)(1) Form of 8% Convertible Note due August 31, 1994 of the Company is
Exhibit A to Exhibit 10(h) hereto. (5)

10(h)(2) Copies of Consents dated October 13, 1994 exchanging Notes filed
as Exhibit 10(h)(1) hereto for shares of the Common Stock of the
Company and Noteholders Warrants. (2)

10(i) Copy of Common Stock Purchase Warrant expiring April 4, 1997. (11)

10(j) Copy of 8% Promissory Note due June 20, 1995. (2)

10(j)(1) Copy of Letter dated June 20, 1994 modifying Warrants expiring
July 20, 1995 and July 20, 1997 hereto for one of the holders. (2)

10(j)(2) Copy of Consent dated October 13, 1994 exchanging Note filed as
Exhibit 10(l) hereto for shares of the Common Stock of the
Company and a Noteholders Warrant. (2)

10(k) Copy of Option expiring May 18, 1999 issued by the Company to Peter
J. Jegou. (2)

10(k)(1) Copy of Option expiring November 6, 1994 issued by the Company to
Peter J. Jegou. (8)

10(k)(2) Copy of Option expiring November 6, 1994 issued by the Company to
Peter J. Jegou relating to the Branson Project. (8)

28
<PAGE> 30
Number Exhibit
- - ------ -------

10(l) Copy of Option expiring November 6, 1999 issued by the Company to
Carol A. Kulina-Jegou. (8)

10(m) Copy of Option expiring June 8, 1999 issued by the Company. (8)

10(m)(1) Copy of Option expiring June 12, 1999 issued by the Company. (8)

10(n) Copy of 10% Promissory Note due March 26, 1996. (12)

10(n)(1) Copy of Letter dated August 31, 1995 exchanging Note filed as
Exhibit 10(q) hereto for shares of the Common Stock of the Company
and a Common Stock purchase warrant expiring March 5, 1998 (the
"March 5 Warrant"). (2)

10(o) Copy of 10% Promissory Note due September 7, 1995 (and
subsequently extended to November 7, 1995). (8)

10(p) Copy of 10% Promissory Note due December 29, 1995. (8)

10(p)(1) Copy of 10% Promissory Note due January 12, 1996. (8)

10(p)(2) Copy of 10% Promissory Note due January 18, 1996. (8)

10(p)(3) Copy of the 10% Promissory Note due April 21, 1996. (8)

10(p)(4) Copy of Letter dated August 31, 1995 exchanging Notes filed as
Exhibits 10(u), 10(u)(1), 10(u)(2) and 10(u)(3) for shares of the
Common Stock of the Company and a March 5 Warrant. (8)

10(q) Copy of 10% Promissory Note due June 5, 1996. (12)

10(q)(1) Copy of 10% Promissory Note due June 27, 1996. (12)

10(q)(2) Copy of 10% Promissory Note due July 30, 1996. (12)

10(q)(3) Copy of 10% Promissory Note due August 6, 1996. (12)

10(q)(4) Copy of Letter dated November 30, 1995 exchanging 10% Promissory
Notes (filed as Exhibits 10(v), 10(v)(2), 10(v)(4) and 10(v)(6) for
shares of the Common Stock and a Common Stock Purchase Warrant
expiring March 5, 1998. (12)

10(r) Copy of Consulting Agreement dated as of April 16, 1996 between
the Company and Lee S. Rosen. (13)

10(r)(1) Copy of Consulting Agreement dated as of August 7, 1996 between
the Company and Lee S. Rosen. (13)

10(s) Copy of Lease dated January 1, 1989 by Peter J. Jegou and Carol
A. Jegou to the Company for the premises located at 3567 Kennedy
Road, South Plainfield, New Jersey together with amendments dated
June 1, 1990 and March 1, 1991. (4)

10(s)(1) Copy of Mortgage dated December 19, 1989 by Peter J. Jegou and
Carol A. Jegou to The Howard Savings Bank with respect to
property located at 3567 Kennedy Road, South Plainfield, New
Jersey. (4)

29
<PAGE> 31
Number Exhibit
- - ------ -------

10(s)(2) Copy of Guaranty by the Company dated June 20, 1990 of payment by
Peter J. Jegou and Carol A. Jegou under Mortgage dated December
19, 1989 by Peter J. Jegou and Carol A. Jegou to The Howard
Savings Bank. (4)

10(s)(3) Copy of Contract dated June 10, 1993 between Peter J. Jegou and
Carol A. Jegou, as seller, and Robert Mikuski, as buyer of property
located at 3567 Kennedy Road, South Plainfield, New Jersey. (4)

10(t) Copy of Employment Agreement dated as of January 21, 1993 by and
between Richard Danziger and Roburn. (1)

10(u) Copy of Assignment dated May 12, 1993 by Gold Communications,
Inc. ("Gold"), to the Company of an agreement dated January 5,
1993 among Gold, 2 C Co. Corp. and 3 CPCO Corp. (the
"Agreement"), together with a copy of the Agreement. (4)

10(v) Copy of Financial Consulting Agreement dated July 21, 1993 by and
between the Company and Royce. (9)

10(w) Copy of Lease dated May 1, 1987 between Central Bergen Properties
and Roburn International Corporation for premises located at 170
Kipp Avenue, Elmwood Park, New Jersey, together with Lease
Extension and Amendment dated October 18, 1991. (4)

10(x) Copy of Security Agreement (Accounts Receivable) dated December
27, 1993 by and between Roburn and Ambassador Factors Division of
Fleet Corp. ("Ambassador"). (14)

10(x)(1) Copy of Security Agreement (Inventory) dated December 27, 1993 by
and between Roburn and Ambassador. (14)

10(x)(2) Copy of Agreement of Guaranty of all Liability with Collateral
dated December 27, 1993 by and between the Company and
Ambassador. (14)

10(x)(3) Copy of Agreement of Guaranty of all Liability with Collateral dated
December 27, 1993 by and between Peter J. Jegou and Carol A.
Kulina-Jegou and Ambassador. (13)

10(y) Copy of letter agreement dated February 28, 1994 between the
Company and Bauer Cohen Company, Inc. ("Bauer Cohen"). (5)

10(y)(1) Copy of letter agreement dated February 26, 1994 between Bauer
Cohen and The Eastern Shawnee Tribe of Oklahoma. (2)

10(y)(2) Copy of letter agreement dated March 1, 1994 between FK Capital,
Inc. and Bauer Cohen. (2)

10(y)(3) Copy of letter agreement dated June 9, 1994 between the Company
and Bauer Cohen. (2)

30
<PAGE> 32
Number Exhibit
- - ------ -------

10(y)(4) Copy of letter agreement dated August 4, 1994 between the Company
and Bauer Cohen. (2)

10(z) Copy of Option to Purchase Real Estate dated March 28, 1994 by
and between Five Star Productions, Inc., as Optionor, and Edward
H. Cohen and Peter Jegou, as Optionees. (2)

10(aa) Copy of Real Estate Contract dated March 16, 1994 between Peter
Jegou and Edward Cohen, as Buyer, and Cook Hollow Company, as
Seller. (2)

10(aa)(1) Copy of Special Agreements Addendum dated March 17, 1994 to
Exhibit 10(aa) hereto. (2)

10(aa)(2) Copy of Change Addendum dated November 17, 1994 to Exhibit 10(aa)
hereto. (2)

10(aa)(3) Copy of Letter dated December 13, 1995 extending option terms of
Exhibit 10(aa) hereto. (12)

10(aa)(4) Copy of Letter dated January 5, 1995 extending option terms of
Exhibit 10(aa) hereto. (12).

10(aa)(5) Copy of Assignment dated as of January 5, 1996 between Creative
Gaming Joint Venture, Creative Gaming International, Inc.
("Creative Gaming") and the Company. (15)

10(aa)(6) Copy of Agreement dated February 28, 1996 between Cook Hollow
Company as Seller, and Creative Gaming and the Company as Buyer.
(15)

10(aa)(7) Copy of Promissory Note dated February 28, 1996 from Creative
Gaming to Cook Hollow Company is Exhibit B to Exhibit 10(aa)(6)
hereto. (15)

10(aa)(8) Copy of Future Advance Obligation Wraparound Deed of Trust dated
as of February 28, 1996 between Creative Gaming, Gary A. Powell,
as Trustee, and Cook Hollow Company is Exhibit C to Exhibit
10(aa)(6) hereto. (15)

10(aa)(9) Copy of Wraparound Mortgage Agreement effective February 28, 1996
between Creative Gaming as Borrower, and Cook Hollow Company, as
Lender, is Exhibit D to Exhibit 10(aa)(6) hereto,. (15)

10(aa)(10) Copy of Indemnity Agreement effective February 28, 1996 among
Creative Gaming and the Company, as Indemnitors, and Cook Hollow
Company, as Indemnitee, is Exhibit E to Exhibit 10(aa)(6)
hereto. (15)

10(bb) Management Agreement dated as of October 20, 1995 between Eastern
Shawnee Tribe of Oklahoma (the "Tribe") and Creative Gaming. (12)

10(bb)(1) Option Agreement dated as of November 8, 1995 between the Tribe and
CGI. (12)

10(bb)(2) Copy of Letter dated December 13, 1995 extending option terms of
Exhibit 10(bb) hereto. (12)

10(bb)(3) Copy of Loan Agreement relating to Exhibit 10(bb) hereto.

31
<PAGE> 33
Number Exhibit
- - ------ -------

10(cc) Copy of Lease dated February 26, 1993 between MAP Investment Co.,
as landlord, and John Patrick Productions, Inc., as tenant. (2)

10(cc)(1) Copy of Lease dated May 13, 1995 between Rambo Realty, Inc., as
landlord, and John Patrick Productions, Inc., as tenant. (8)

10(dd) Copy of Agreement dated June 13, 1994 between Roburn and National
Pen Corporation (later changed to Modern Mold International, Inc.
("MMII")). (2)

10(dd)(1) Copy of Amendment No. 1 to the Agreement filed as Exhibit 10(dd)
hereof. (2)

10(dd)(2) Copy of Amendment No. 2 dated August 8, 1994 to the Agreement
filed as Exhibit 10(dd) hereof. (2)

10(dd)(3) Copy of Amendment No. 3 dated October 6, 1994 to the Agreement
filed as Exhibit 10(dd) hereof. (2)

10(dd)(4) Copy of Escrow Agreement dated July 25, 1994 among Mission Valley
Escrow, MMII and Roburn. (2)

10(dd)(5) Copy of Amendment No. 1 dated August 8, 1994 to the Escrow
Agreement filed as Exhibit 10(dd)(4) hereof. (2)

10(dd)(6) Copy of Amendment No. 2 dated October 6, 1994 to the Escrow
Agreement filed as Exhibit 10(dd)(4) hereof. (2)

10(ee) Copy of Agreement dated August 15, 1994 among Banker's Pen, Inc.
("Banker's), the Company and Roburn. (2)

10(ee)(1) Copy of Agreement dated as of August 15, 1994 among Richard
Danziger, the Company and Roburn. (2)

10(ee)(2) Copy of Agreement dated August 10, 1994 among Richard Danziger,
the Company and Roburn. (2)

10(ee)(3) Copy of Escrow Agreement dated August 9, 1994 among the Company,
Roburn, Richard Danziger and Uscher, Quiat, Uscher & Strull as
Escrow Agent. (2)

10(ee)(4) Copy of Agreement dated August 15, 1994 among the Company,
Banker's, Richard Danziger and Gold. (2)

10(ff) Copy of Agreement dated January 11, 1994 among Congress
Entertainment, Ltd., Charles Staley, Barry Hirschberg, Hirschberg
Productions, Inc., the Company, and Kards for Kids. (2)

10(ff)(1) Copy of Agreement dated January 11, 1994 between Hirschberg
Productions, Inc. and Kards for Kids. (2)

10(ff)(2) Copy of Employment Agreement effective as of January 11, 1994
between Charles Staley and Kards for Kids. (2)

10(ff)(3) Copy of Consulting Agreement effective as of January 11, 1994
between Barry Hirschberg and Kards for Kids. (2)

32
<PAGE> 34
Number Exhibit
- - ------ -------

10(ff)(4) Copy of Letter Agreement dated January 11, 1994 among Barry
Hirschberg, Charles Staley and Kards for Kids. (2)

10(ff)(5) Copy of Lease dated June 30, 1995 between Grant Holmes, Inc., as
landlord, and Congress Entertainment, Ltd., as tenant. (8)

10(gg) Copy of Trademark License Agreement dated January 15, 1987
between Carol Kulina-Jegou and Kards for Kids, Inc. (3)

10(hh) Copy of Lease dated January 7, 1994 between John Higgins, Sr. and
Roburn. (2)

10(hh)(1) Copy of Guaranty dated February 20, 1994 by the Company of
Roburn's obligations under the Lease filed as Exhibit (ss)
hereto. (2)

10(ii) Copy of Real Estate Sales Contract dated April 11, 1994 between
Peter J. Jegou and Edward Cohen, Buyer, and Wayne and Levita
Lindsey, Seller. (2)

10(jj) Copy of Letter dated October 28, 1994 between Bennett Management
& Development Corporation and the Company. (2)

10(jj)(1) Copy of Letter dated January 20, 1995 extending term of Letter
filed as Exhibit 10(jj) hereto. (8)

10(jj)(2) Copy of Letter dated April 10, 1995 extending term of Letter
filed as Exhibit 10(jj) hereto. (8)

10(jj)(3) Copy of Letter dated September 20, 1995 extending term of Letter
filed as Exhibit 10(jj) hereto. (8)

10(kk) Copy of Letter dated April 1, 1995 by and among MAO, Inc., the
Company, Creative Gaming and Gold & Wachtel, LLP. (8)

10(kk)(1) Copy of Letter of Intent dated August 1995 by and among 9400
Riverview, L.L.C., the Company and Creative Gaming. (8)

10(kk)(2) Copy of proposed lease between 9400 Riverview, L.L.C. and Creative
Gaming. (8)

10(ll) Copy of Letter dated October 6, 1995 between Royce and the
Company. (8)

10(mm) Copy of Letter dated October 6, 1995 between Americorp
Securities, Inc. and the Company. (8)

10(nn) Copy of Subscription Agreement dated January 25, 1995 between
Shirley A. Walker and the Company. (8)

21 List of Subsidiaries of the Company. (8)

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

(1) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q
for the quarter ended February 28, 1993 and incorporated herein by
this reference.

33
<PAGE> 35
Number Exhibit
- - ------ -------

(2) Filed as an exhibit to the Company's Annual Report on Form 10-KSB
for the fiscal year ended May 31, 1994 and incorporated herein by
this reference.

(3) Filed as an exhibit to the Company's Registration Statement on Form
S-18, File No. 33-27027, and incorporated herein by this reference.

(4) Filed as an exhibit to the Company's Annual Report on Form 10-KSB
for the fiscal year ended May 31, 1993 and incorporated herein by
this reference.

(5) Filed as an exhibit to the Company's Quarterly Report on Form 10-QSB
for the quarter ended February 28, 1994 and incorporated herein by
this reference.

(6) Filed as an exhibit to the Company's Quarterly Report on Form 10-QSB
for the quarter ended November 30, 1993 and incorporated herein by
this reference.

(7) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q
for the quarter ended February 29, 1992 and incorporated herein by
this reference.

(8) Filed as an exhibit to the Company's Annual Report on Form 10-KSB
for the fiscal year ended May 31, 1995 and incorporated herein by
this reference.

(9) Filed as an exhibit to the Company's Current Report on Form 8-K
dated July 21, 1993 and incorporated herein by this reference.

(10) Filed as an exhibit to the Company's Quarterly Report on Form 10-QSB
for the quarter ended August 31, 1993 and incorporated herein by
this reference.

(11) Filed as an exhibit to the Company's Registration Statement on Form
S-8, File No. 33-77940, and incorporated herein by this reference.

(12) Filed as an exhibit to the Company's Quarterly Report on Form 10-QSB
for the quarter ended November 30, 1995 and incorporated herein by
this reference.

(13) Filed as an exhibit to the Company's Registration Statement on Form
S-8 filed on June 7, 1996 and incorporated herein by this reference.

(14) Filed as an exhibit to the Company's Quarterly Report on Form 10-QSB
for the quarter ended November 30, 1993 and incorporated herein by
this reference.

(15) Filed as an exhibit to the Company's Quarterly Report on Form 10-QSB
for the quarter ended February 29, 1996 and incorporated herein by
this reference.

(b) Reports on Form 8-K

There were no current Reports on Form 8-K filed during the
quarter ended May 31, 1996.

34
<PAGE> 36
CREATIVE LEARNING PRODUCTS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Certified Public Accountants....................... F-2

Consolidated Balance Sheet at May 31, 1996............................... F-3

Consolidated Statements of Operations -
Years Ended May 31, 1996 and 1995.................................... F-5

Consolidated Statements of Stockholders' Equity -
Years Ended May 31, 1996 and 1995.................................... F-6

Consolidated Statements of Cash Flows -
Years Ended May 31, 1996 and 1995.................................... F-7

Notes to Consolidated Financial Statements............................... F-8
</TABLE>

F-1
<PAGE> 37
[BDO Seldman, LLP Letterhead]

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders
Creative Learning Products, Inc.
Springfield, New Jersey

We have audited the accompanying consolidated balance sheet of Creative
Learning Products, Inc. and Subsidiaries as of May 31, 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the two years in the period ended May 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We 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, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Creative Learning
Products, Inc. and Subsidiaries as of May 31, 1996, and the results of their
operations and their cash flows for each of the two years in the period ended
May 31, 1996 in conformity with generally accepted accounting principles.

/s/ BDO Seidman, LLP

BDO Seidman, LLP

New York, New York
September 10, 1996

F-2
<PAGE> 38
CREATIVE LEARNING PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
May 31, 1996

ASSETS

<TABLE>
<S> <C>
Current Assets:
Cash .......................................................... $ 541,610
Accounts receivable - net of allowance for doubtful accounts
of $5,219 ................................................... 111,299
Inventories (Note 4) .......................................... 209,447
Receivable from officers (Note 5) ............................. 89,128
Prepaid expenses and other current assets ..................... 98,269
----------
Total current assets ..................................... 1,049,753
----------

Property and Equipment:
Land (Note 6) ................................................. 2,410,452
Machinery and equipment ....................................... 83,137
Furniture and fixtures ........................................ 39,323
----------
2,532,912
Less accumulated depreciation ................................. 81,152
----------
Property and equipment-net ............................... 2,451,760
----------
Other Assets:
Intangibles, net of accumulated amortization of $404,295 ...... 643,056
Miscellaneous ................................................. 111,682
----------
Total other assets ....................................... 754,738
----------
$4,256,251
==========
</TABLE>

See Notes to Consolidated Financial Statements.

F-3
<PAGE> 39
CREATIVE LEARNING PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
May 31, 1996

LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<S> <C>
Current Liabilities:
Current maturities of long-term debt ....................... $ 121,884
Accounts payable ........................................... 1,129,492
Accrued expenses and other current liabilities ............. 141,604
------------
Total current liabilities ............................. 1,392,980
------------

Long-term Debt (Note 7):
Long-term debt, less current maturities of $121,884 ........ 950,591
------------
Commitments and Contingencies (Note 9)

Stockholders' Equity:
12% Cumulative redeemable preferred stock (2,000,000
shares authorized): Series B, par value $1.00; issued and
outstanding: none (Note 12) .............................. --
Common stock, no par value; authorized: 25,000,000 shares;
issued and outstanding: 13,312,383 shares (Note 11) ...... 16,047,291
Additional paid-in capital ................................. 2,879,541
Accumulated deficit ........................................ (17,014,152)
------------
Total stockholders' equity ............................ 1,912,680
------------
$ 4,256,251
============
</TABLE>

See Notes to Consolidated Financial Statements.

F-4
<PAGE> 40

CREATIVE LEARNING PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Year Ended May 31,
------------------
1996 1995
---- ----
<S> <C> <C>
Net sales .................................... $ 1,461,906 $ 1,488,437
Cost of goods sold ........................... 792,679 675,491
----------- -----------

Gross profit ................................. 669,227 812,946
----------- -----------

Selling expenses ............................. 480,028 559,445
General and administrative expenses .......... 1,804,262 1,970,146
Reserve for gaming projects (Note 2) ......... 332,424 2,947,161
Officers' stock option expense ............... -- 904,688
Debt conversion expense ...................... -- 398,749
Interest expense ............................. 60,991 70,501
----------- -----------
2,677,705 6,850,690
----------- -----------
Net loss ..................................... $(2,008,478) $(6,037,744)
=========== ===========

Net loss per share ........................... $ (.18) $ ( .81)
=========== ===========
</TABLE>

See Notes to Consolidated Financial Statements.

F-5
<PAGE> 41
CREATIVE LEARNING PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE TWO YEARS ENDED MAY 31, 1996

<TABLE>
<CAPTION>
Additional
Preferred Common Stock Paid-In Accumulated Subscriptions
Stock (a) Shares Amount Capital Deficit Receivable
--------- ------ ------ ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, May 31, 1994 ............... $ 200,000 2,996,782 $ 5,971,855 $ 1,376,104 $ (8,967,930) $ (33,750)

Issuances of preferred stock ........ 200,000
Issuances of common stock ........... 6,581,038 6,925,574
Conversions of preferred stock ...... (200,000) 50,000 200,000
Reduction of subscriptions receivable 3,750
Additions to paid-in capital ........ 1,303,437
Net loss for year ended May 31, 1995 (6,037,744)
--------- ---------- ----------- ------------ ------------ ------------
Balance, May 31, 1995 ............... 200,000 9,627,820 13,097,429 2,679,541 (15,005,674) (30,000)

Issuances of common stock ........... 3,684,563 2,949,862
Retirement of preferred stock ....... (200,000) 200,000
Reduction of subscriptions receivable 30,000
Net loss for year ended May 31, 1996 (2,008,478)
--------- ---------- ----------- ------------ ------------ ------------

Balance, May 31, 1996 ............... $ 0 13,312,383 $16,047,291 $ 2,879,541 $(17,014,152) $ 0
========= ========== =========== ============ ============ ============
</TABLE>

a) All Preferred Stock transactions represented shares of the Preferred Stock at
$1.00 per share.

See Notes to Consolidated Financial Statements.

F-6
<PAGE> 42
CREATIVE LEARNING PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year Ended May 31,
------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss ............................................ $(2,008,478) $(6,037,744)
----------- -----------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ..................... 273,849 229,186
Reserve for gaming projects ....................... 332,424 2,947,161
Stock option and debt conversion expenses ......... -- 1,303,437
Other non-cash operating expenses ................. 30,000 7,375
Changes to operating assets and liabilities:

Accounts receivable .............................. (18,235) 13,786
Inventories ...................................... 65,208 (31)
Receivable from officer .......................... 2,925 (92,053)
Prepaid expenses and other assets ................ (102,180) (867)
Accounts payable ................................. 476,290 202,125
Accrued expenses and other current liabilities ... 36,151 (151,718)
----------- -----------
Total adjustments .............................. 1,096,432 4,458,401
----------- -----------
Net cash used in operating activities ........ (912,046) (1,579,343)
----------- -----------
Cash flows from investing activities:
Increase in gaming project costs .................... (332,423) (3,160,661)
Additions to property and equipment ................. (1,491,605) (314,737)
Net proceeds from sale of Roburn .................... -- 282,520
----------- -----------
Net cash used in investing activities ........ (1,824,028) (3,192,878)
----------- -----------
Cash flows from financing activities:
Repayment of short-term borrowings .................. (74,000) (789,500)
Proceeds from short-term borrowings ................. 625,000 1,374,000
Proceeds from long-term borrowings .................. 1,072,475 --
Repayment of long-term debt ......................... -- (100,608)
Repayment of convertible notes ...................... -- (312,500)
Proceeds from issuances of stock .................... 1,531,960 4,612,938
----------- -----------
Net cash provided by financing activities .... 3,155,435 4,784,330
----------- -----------
Net increase in cash .................................... 419,361 12,109
Cash at beginning of year ............................... 122,249 110,140
----------- -----------
Cash at end of year ..................................... $ 541,610 $ 122,249
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest .............. $ 11,858 $ 54,265
=========== ===========
Supplemental schedule of non-cash financing activities:
Debt and other liabilities converted to Common Stock $ 1,417,902 $ 2,013,761
=========== ===========
</TABLE>

See Notes to Consolidated Financial Statements.

F-7
<PAGE> 43
CREATIVE LEARNING PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TWO YEARS ENDED MAY 31, 1996

NOTE 1 - PRINCIPLES OF CONSOLIDATION AND ORGANIZATION

Creative Learning Products, Inc. (the "Company") was formed in August 1988
to provide management and administrative services to its wholly-owned
subsidiaries. The Company and its operating subsidiaries are collectively
referred to herein as "CLP".

The operating subsidiaries of the Company sell their products, consisting of
educational videos, books, gaming related items and children's paper products,
through mail order and through retailers, brokers and distributors. The Company
also is attempting to convert to an entity offering gaming facilities and
equipment, a hotel convention center, a theme park, a time sharing facility and
entertainment. A former business, which was sold in August 1994, was engaged in
the manufacturing, imprinting and selling of writing instruments and other
products to the advertising specialty industry.

The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly owned. Significant intercompany
accounts and transactions have been eliminated in consolidation.

The Company's accompanying consolidated financial statements have been
prepared on a going concern basis which contemplates continued future revenues
from operations and proceeds from sales of debt and equity securities and the
exercise of warrants and options. Management of the Company believes the sales
from operations together with its ability to raise additional capital will
provide sufficient cash for the Company to meet its operating requirements for
the year ending May 31, 1997.

To facilitate comparison with the current year, certain amounts in the prior
year have been reclassified.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out method) or
market and reflect write-downs to net realizable value.

b) PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation was provided at
rates designed to recover the cost of property and equipment over their
estimated service lives. Depreciation expense for the years ended May 31, 1996
and 1995 was $44,514 and $34,388, respectively. Expenditures for maintenance and
repairs are charged to expense as incurred, whereas expenditures for renewals
and betterments are generally capitalized. Major classifications of property and
equipment and their estimated useful lives were as follows:

F-8
<PAGE> 44

<TABLE>
<CAPTION>
Classification Useful Lives
-------------- ------------
<S> <C>
Machinery and equipment........................ 3 - 10 years
Furniture and fixtures......................... 3 - 5 years
</TABLE>

c) OTHER ASSETS

Gaming project amounts are recorded at cost and when deemed appropriate are
reclassified in the balance sheet or reserved and charged to operations on a
project-by-project basis. Gaming projects deemed unlikely to materialize are
retired. Gaming project costs reserved and charged to operations for the years
ended May 31, 1996 and 1995 were $332,424 and $2,947,161, respectively. For the
year ended May 31, 1996, gaming projects in the amount of $3,001,759 were
retired and all remaining gaming projects were fully reserved.

Intangibles, including customer lists and goodwill, are recorded at their
determined value at time of purchase and are amortized over five years.
Amortization expense for the years ended May 31, 1996 and 1995 was $209,470 and
$194,825, respectively. The Company assesses the recoverability of goodwill
based upon several factors, including management's intention with respect to the
acquired operations and those operations' projected undiscounted cash flows.

d) PER SHARE AMOUNTS

Per share amounts are based upon the weighted average Common Stock shares
outstanding of 10,996,147 and 7,432,471 for the years ended May 31, 1996 and
1995, respectively. Losses per share of Common Stock were computed by dividing
the corresponding loss for each year by the weighted average number of shares of
Common Stock outstanding for each year. Common stock equivalents are not
included because the effect would be anti-dilutive.

Fully diluted computations are not shown because all potentially dilutive
securities would have an anti-dilutive effect on per share amounts.

e) USE OF ESTIMATES

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.

f) RECENT ACCOUNTING PRONOUNCEMENTS

In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." The Company will adopt SFAS No. 121 as of June 1, 1996 and its
implementation is not expected to have a material effect on the consolidated
financial statements.

F-9
<PAGE> 45

In October 1995, FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 establishes a fair value method for accounting for
stock-based compensation plans either through recognition or disclosure. The
Company intends to adopt the employee stock-based compensation provisions of
SFAS No. 123 by disclosing the pro forma net income and pro forma net income per
share amounts assuming the fair value method was adopted June 1, 1995. The
adoption of this standard will not impact the Company's consolidated results of
operations, financial position or cash flows.

g) FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying values of financial instruments including cash, accounts
receivable and accounts payable approximate fair value due to the relatively
short maturities of these instruments. The carrying value of the long-term debt
approximates fair value.

NOTE 3 - ACQUISITIONS

Effective July 1, 1994, the Company purchased certain assets and the
business of John Patrick Productions, Inc., which was engaged in the mail order
business selling instructional videos and other products relating to gaming, for
200,000 shares of the Series B Preferred Stock valued at $200,000, 283,000
shares of the Common Stock valued at $495,250, and the assumption of $429,150 of
liabilities. The acquisition has been accounted for by the purchase method of
accounting. The operating results of such acquisition are included in the
Company's consolidated results of operations from the date of acquisition.

The following unaudited pro forma summary presents the consolidated results
of operations as if the above acquisition had occurred at the beginning of the
period presented and does not purport to be indicative of what would have
occurred had the acquisition been made as of that date.

<TABLE>
<CAPTION>
Year Ended May 31, 1995
-----------------------
(Unaudited)

<S> <C>
Sales........................................ $ 1,528,291
Cost of goods sold........................... 684,531
-----------
Gross profit................................. 843,760
Expenses..................................... 6,928,106
-----------
Net loss..................................... $(6,084,346)
===========
</TABLE>

NOTE 4 - INVENTORIES

Inventories of continuing operations consisted of the following at May 31,
1996:

<TABLE>
<S> <C>
Raw materials....................... $112,912
Work-in-process..................... 9,656
Finished goods...................... 86,879
--------
$209,447
========
</TABLE>

F-10
<PAGE> 46

NOTE 5 - RECEIVABLE FROM OFFICERS

In December 1994, the Company paid $92,053 as part of the liquidation of the
indebtedness on property, formerly leased to the Company and of which the
Company was a guarantor, owned by Peter J. Jegou and Carol A. Kulina-Jegou, the
officers and directors of the Company, and with other net advances, resulted in
a balance of $89,128 receivable from officers as of May 31, 1996.

NOTE 6 - PURCHASE OF LAND

On February 28, 1996, the Company purchased a 728-acre parcel of land at an
aggregate purchase price of $2,121,788. The sellers of the property have agreed
to hold a mortgage in the amount of $1,072,475 (see Note 7).

NOTE 7 - LONG-TERM DEBT

Long-term debt consisted of the following at May 31, 1996:

<TABLE>
<S> <C>
10% note payable due
February 28, 1998 (a)............... $1,072,475
Less current portion................ (121,884)
----------
$ 950,591
==========
</TABLE>

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

(a) On February 28, 1996, the Company, as part of its purchase of property (see
Note 6), was issued a 10% mortgage from the sellers in the principal amount
of $1,072,475, with payments of $50,000 (including interest) due every
three months and a final payment of principal and interest due at the end
of two years. The Company made the first mortgage payment on June 6, 1996.

NOTE 8 - INCOME TAXES

The Company has adopted SFAS No. 109, "Accounting for Income Taxes." Under
this method, deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's current deferred tax assets as of May 31, 1996 are
as follows:

<TABLE>
<S> <C>
Difference between book and tax reserves, net.......... $ 184,000
Net operating loss carryforward........................ 6,258,000
Valuation allowance.................................... (6,442,000)
-----------
$ 0
===========
</TABLE>

At May 31, 1996, the Company has a total net operating loss ("NOL")
carryforward of $15,770,000 which expires as follows: 2004 ($77,000), 2005
($465,000), 2006 ($1,113,000), 2007 ($1,361,000), 2008 ($979,000), 2009
($3,281,000), 2010 ($4,040,000) and 2011 ($4,454,000).

F-11
<PAGE> 47

As a result of various "ownership changes" occurring prior to fiscal 1996,
future utilization of the Company's NOL carryforwards are subject to certain
limitations under Section 382 of the Internal Revenue Code.

The deferred tax benefit related to the NOL carryforward has been fully
reserved.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

a) LEASES

The Company leases its office and warehouse facilities and equipment
pursuant to non-cancelable operating leases expiring through October 1999. The
following are the future minimum annual rental payments:

<TABLE>
<CAPTION>
Year ended May 31,
------------------
<S> <C>
1997...................... 77,500
1998...................... 38,200
1999...................... 5,100
2000...................... 1,200
</TABLE>

Rent expense was approximately $103,000 and $69,000 for the years ended May
31, 1996 and 1995, respectively.

b) LITIGATION

During June 1993, an action was instituted against the Company, two
subsidiaries and two officers/directors seeking (1) compensatory damages of
$125,000 for allegedly diverting printing work from the plaintiff; (2)
liquidated damages of $125,000 on the same cause of action; (3) compensatory
damages aggregating $38,500 for printing work performed by the plaintiff; and
(4) compensatory damages aggregating $15,500 relating to finance charges, plus
counsel fees and interest. The officers/directors are being sued as guarantors
of the Company's and its subsidiaries' obligations to the plaintiff. The court
has stayed proceedings against them pending resolution of the claim against the
other defendants. Such defendants are vigorously contesting the plaintiff's
claims and believe that they have valid defenses to some or all of the
plaintiff's allegations. Motions for summary judgment by both the plaintiff and
the defendants have been denied by the court and the action is in the early
stages of discovery.

The Company is, and has been from time to time, a defendant in various legal
actions, including the matters discussed in the preceding paragraphs. Management
believes that the ultimate outcome of these pending actions or claims will not
have a material adverse effect on the Company's consolidated financial position.

On July 18, 1995, a placement agent and ten other persons served the Company
in an action in the Supreme Court of the State of New York, New York County,
against the Company and its investment banker alleging as the first cause of
action that the Company had failed to file on or before February 23, 1994 a
registration statement under the Securities Act with respect to the shares of
the Common Stock issuable upon the conversion of the Company's 10% Convertible

F-12
<PAGE> 48

Notes due April 30, 1995 and the shares issuable upon the exercise of the Common
Stock purchase warrants expiring April 30, 1996 and, as a result, had breached
its obligations under the Placement Agent Agreement dated April 30, 1993 (the
"Placement Agent's Agreement") between the Company and the placement agent and
the Warrant Agreement dated May 1,1993 (the "Warrant Agreement") among the
Company, the placement agent and the noteholders, as a result of which breaches
the plaintiffs are alleged to have suffered damages of no less than $3.00 per
share and/or warrant, as the case may be. The plaintiffs, as their second cause
of action, alleged that the investment banker tortuously interfered with the
Placement Agent's Agreement, the Warrant Agreement and the Note Purchase
Agreement dated May 1, 1993 among the Company and the noteholders, thereby
depriving the plaintiffs of a substantial profit because the plaintiffs'
securities could not be freely traded. The plaintiffs seek damages of not less
than $2,000,000, plus interest, on each of the two causes of action and punitive
damages against the investment banker in an amount to be determined. The Company
has asserted certain affirmative defenses to the complaint and intends to
contest this litigation vigorously. The Company and its investment banker have
answered the complaint and discovery has been completed. The parties are
awaiting a trial date. Consequently, the ultimate resolution of the above claim
cannot presently be determined, and the consolidated financial statements do not
include any adjustment that may result from the ultimate outcome.

c) CONSULTING AGREEMENTS

On April 16, 1996, the Company entered into consulting agreements with two
individuals. The terms of the consulting agreements were for the individuals to
perform financial and public relation consulting services for a period of two
years at costs of $133,000 and $267,000, respectively, payable to the
individuals no later than September 30, 1996, and included the issuance of
warrants expiring April 15, 1999 to purchase 1,000,000 and 2,000,000 shares,
respectively, of the Common Stock at an exercise price of $.75 per share. On
August 7, 1996, the second consulting agreement ($267,000) was canceled, the
second warrant (2,000,000 shares) was rescinded, and the first consulting
agreement was modified (see Note 14).

NOTE 10 - MAJOR CUSTOMERS

During the years ended May 31, 1996 and 1995, an individual customer
accounted for approximately 42% and 21%, respectively, of sales from operations.
No other customers accounted for 10% or more of sales from operations during
such periods.

NOTE 11 - COMMON STOCK

On July 24, 1995, the Company issued to a shareholder a Common Stock
purchase warrant expiring January 24, 1999 to purchase 83,333 shares of the
Common Stock at an exercise price of $1.00 commencing January 24, 1996, for
which the shareholder agreed to seek financing for the Company and settled
certain claims against the Company.

On August 30, 1995, a corporate investor exercised its warrant expiring
October 27, 1998 to purchase 140,000 shares of the Common Stock at an exercise
price of $1.50. Due to the

F-13
<PAGE> 49

antidilutive provisions of this warrant, an aggregate of 143,535 shares of the
Common Stock were issued at the adjusted price of $1.46 for proceeds of
$209,590.

On August 31, 1995, the holders of an aggregate of $825,000 in principal
amount of the Company's short-term 10% Promissory Notes accepted, in full
settlement of all principal and interest due, an aggregate of 851,230 shares of
the Common Stock (26,230 shares in lieu of interest due) and Common Stock
purchase warrants expiring March 5, 1998 to purchase an aggregate of 851,230
shares of the Common Stock at an exercise price of $1.50 per share commencing
August 31, 1996.

On November 30, 1995, the Company, in a private placement pursuant to
Regulation S promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), sold to two non-"U.S. persons" in "off-shore transactions",
for gross proceeds of $250,000, 250,000 shares of the Common Stock and Common
Stock purchase warrants expiring November 29, 1999 to purchase, commencing
November 30, 1996, 250,000 shares of the Common Stock at an exercise price of
$1.50 per share. The Company paid a private placement fee of $25,000 to an agent
for this offering. (The terms "U.S. persons" and "off-shore transactions", as
used in this Report, are used as defined in paragraphs (o) and (i),
respectively, of Rule 902 of Regulation S under the Securities Act).

On November 30, 1995, the holder of an aggregate of $235,000 in principal
amount of the Company's short-term 10% Promissory Notes accepted, in full
settlement of all principal and interest due, an aggregate of 317,529 shares of
the Common Stock (4,196 shares in lieu of interest due) and a Common Stock
purchase warrant expiring March 5, 1998 to purchase, commencing November 30,
1996, an aggregate of 317,529 shares of the Common Stock at an exercise price of
$1.00 per share.

On January 31, 1996, the holder of an aggregate of $25,000 in principal
amount of the Company's 10% Promissory Note due November 7, 1995 accepted, in
full settlement of all principal and interest due, an aggregate of 40,667 shares
of the Common Stock (667 shares in lieu of interest due).

On February 6, 1996, the Company, pursuant to Regulation S under the
Securities Act, sold to a non-"U.S. person" in an "off-shore transaction", for
gross proceeds of $200,000, 196,928

F-14
<PAGE> 50

shares of the Common Stock. The Company paid a private placement fee of $23,000
to an agent for this offering.

On February 28, 1996, the Company, as part of its purchase of a 728-acre
parcel of land, issued 30,000 shares of the Common Stock to the sellers of the
property.

On May 31, 1996, the Company, pursuant to Regulation S under the Securities
Act, sold to a non-"U.S. person" in an "off-shore transaction", for gross
proceeds of $600,000, 1,200,000 shares of the Common Stock and a Common Stock
purchase warrant expiring May 23, 2001 to purchase, commencing May 31, 1996,
1,000,000 shares of the Common Stock at an exercise price of $1.00 per share.
The Company paid a private placement fee of $100,000 to an agent for this
offering.

On May 31, 1996, the holder of an aggregate of $48,000 in principal amount
of the Company's 8.5% and 10% Promissory Notes accepted, in full settlement of
all principal and interest due, an aggregate of 36,525 shares of Common Stock
(4,525 shares in lieu of interest due).

During the year ended May 31, 1996, the Company issued 172,850 shares of the
Common Stock in exchange for various services rendered. The stock was valued at
the value of the services rendered.

At May 31, 1996, an aggregate of 11,185,118 shares of Common Stock were
issuable upon (i) the exercise of warrants (10,132,121 shares), (ii) the
exercise of options (1,030,000 shares) and (iii) the issuance of shares (22,997)
in lieu of dividends on the conversion of Convertible Preferred Stock.

The following is a summary of options and warrants to purchase shares of the
Common Stock as of May 31, 1996:

<TABLE>
<CAPTION>
Outstanding
Shares Purchasable Exercise Price
Options Warrants (a) Per Share (a)
------- ------------ --------------
<S> <C> <C> <C>
May 31, 1995......... 1,089,999 5,759,364 $ .75 - $4.00
Granted.............. 15,000 3,883,967 $ .75 - $3.06
Exercised............ (143,535) $1.46
Canceled............. (74,999) (550,000)
Dilutions............ 1,182,325
--------- ----------
May 31, 1996......... 1,030,000 10,132,121 $ .75 - $4.00
========= ==========
Exercisable as of
May 31, 1996....... 555,000 8,238,674 $ .75 - $3.50
========= ==========
</TABLE>

F-15
<PAGE> 51

(a) Various warrants contain antidilutive provisions, for which the
cumulative additional shares reserved are included. The price for warrants
exercised reflect the antidilutive shares issued. All other prices per share are
shown before allowing for their antidilutive provisions.

NOTE 12 - SERIES B PREFERRED STOCK

In August 1994 the Company issued 200,000 shares of the Series B $1.00 par
value, 12% Cumulative Redeemable Preferred Stock valued at $200,000. In April
1996, the shareholder surrendered its 200,000 shares of the Series B Preferred
Stock to the Company, which the Company retired in May 1996. The rights to the
Series B Preferred Stock dividends had been waived by the shareholder since
issuance. The $200,000 value of the retired Series B Preferred Stock was applied
to additional paid-in capital.

NOTE 13 - BUSINESS SEGMENTS

The primary business segments of the Company consist of 1) gaming projects
and 2) the distribution of educational and entertainment videos and other
related products. Information concerning the Company's business segments in
fiscal 1996 and 1995 is as follows:

<TABLE>
<CAPTION>
Video and Other
Gaming Projects Product Distribution
--------------- --------------------
1996 1995 1996 1995

<S> <C> <C> <C> <C>
Sales............................. $ -- $ -- $1,461,906 $1,488,437
Operating Loss.................... (676,269) (3,328,004) (751,497) (564,415)
Identifiable Assets............... 2,413,534 878,572 1,157,738 1,462,658
Depreciation and Amortization..... 2,801 -- 269,971 229,186
Capital Expenditures.............. 1,481,305 288,664 10,300 11,768
</TABLE>

NOTE 14 - SUBSEQUENT EVENTS

In June 1996, the Company issued to an individual for services rendered
50,000 shares of the Common Stock and a Common Stock purchase warrant expiring
June 11, 2001 to purchase 50,000 shares of Common Stock at an exercise price of
$1.50 per share commencing December 12, 1996.

On June 27, 1996, the Company issued and a creditor accepted 47,000 shares
of the Common Stock in satisfaction of outstanding debt of $63,296 as of May 31,
1996.

On August 7, 1996 the Company issued to an officer of the Company a Common
Stock purchase warrant expiring April 15, 1999 to purchase, commencing February
7, 1997, 1,500,000 shares of the Common Stock at $.75 per share.

On August 7, 1996, the Company entered into a consulting agreement with an
individual, which modified a previous agreement (see Note 9). The terms of the
consulting agreement were for the individual to perform financial and public
relation consulting services for a period of two years at a cost of $400,000,
and included the issuance of Common Stock purchase warrants expiring April 16
and August 6, 1999, respectively, to purchase, both commencing August 7, 1996,
2,000,000 and 1,000,000 shares, respectively, of the Common Stock both at $.75
per share.

F-16
<PAGE> 52

The individual also exercised his warrant expiring April 15, 1999 to purchase
1,000,000 shares of the Common Stock at an exercise price of $.75 per share for
gross proceeds of $750,000. The individual retained $400,000 in accordance with
his consulting agreement and the Company received net proceeds of $350,000.

F-17
<PAGE> 53
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.

CREATIVE LEARNING PRODUCTS, INC.
Registrant

By: /s/ Peter J. Jegou
--------------------------------
Peter J. Jegou, President

Dated: September 12, 1996

Pursuant to the requirements of the Securities Act of 1933, this Report has
been signed below by the following persons on behalf of the Registrant on
September 12, 1996 in the capacities indicated:

Signatures Title
---------- -----

/s/ Peter J. Jegou Principal Executive
- - ----------------------------------- Officer and Director
(Peter J. Jegou)

/s/ Walter J. Krzanowski Chief Financial
- - ----------------------------------- Officer
(Walter J. Krzanowski)

/s/ Carol A. Kulina-Jegou Director
- - -----------------------------------
(Carol A. Kulina-Jegou)

35
<PAGE> 54
Exhibits Filed with Annual Report on Form-10KSB
For the Fiscal Year Ended May 31, 1996

Index
- - ------------------------------------------------------------------------------

Number Exhibit
- - ------ -------
10(bb)(3) Copy of Loan Agreement relating to Exhibit 10(bb) hereto

27 Financial Data Schedule

<PAGE> 1
LOAN AGREEMENT

THIS AGREEMENT is made as of the 8th day of October, 1995, between the
Eastern Shawnee Tribe of Oklahoma (herein the "Tribe"), and Creative Gaming
International, a Nevada corporation (herein "Lender"), on the other hand.

1. RECITALS.

1.1 Tribe is recognized as eligible by the Secretary of the Interior
for the special programs provided by the United States to Indians and is
recognized as possessing powers of self-government. Tribe is entering into and
executing this agreement pursuant to and in accordance with its powers under
its Constitution, Bylaws (or comparable organizing documents) and other Tribal
laws and resolutions.

1.2 The Tribe and Lender desire to utilize their respective powers and
abilities to establish a class III gaming project on certain lands identified
by the parties in Article III, section 3.36 of that certain gaming management
contract executed concurrently herewith ("Management Contract"), which lands
are designated therein and hereinafter as "Site." Tribe intends to use the Site
for the purpose of raising funds through gaming for Tribal governmental and
other purposes as provided in the Indian Gaming Regulatory Act, 25 U.S.C.
Section 2701 et seq. ("IGRA").

1.3 Development of the Site for gaming purposes may require
governmental approvals. Lender has agreed to loan funds to Tribe to obtain such
approvals and for other matters prior to the approval of the Management
Contract, all of which loans shall be deemed the "Preapproval Loan." The
Preapproval Loan shall be deemed to encompass separate and independent
obligations from those obligations contained in the Management Contract or any
other agreement of the parties, and are evidenced by this Loan Agreement and
the Note executed concurrently herewith, which Loan Agreement and Note are
referred to collectively hereinafter as the "Loan Documents." The Loan
Documents constitute agreements of the parties which are not in conflict with
Section 4.1 or any other part of the Management Contract. The Loan Documents
shall be deemed controlling between the parties until they and the obligations
contained therein are merged into a duly approved Management Contract. For
purposes of the Loan Documents, Approval Date shall mean the date Management
Contract is approved by the parties and appropriate governmental agencies.

1.4 In addition to the Preapproval Loan, Lender has agreed to make
certain loans to Tribe in connection with construction and operation of the
Project and related purposes under the Management Contract ("Postapproval
Loan"). The obligation for funding the Postapproval Loan and Lender's other
obligations under the Management Contract, other than those specifically
contemplated to occur prior to such approval, will not arise until the
Management Contract has been duly approved by the NIGC and any other
Governmental Agency required to do so under applicable law. If the Management
Contract is not approved by such Governmental Agency, only the Preapproval Loan
will have been made, and the Loan Documents shall survive independently from the
Management Contract. In the event the Management Contract is duly approved, the
Loan Documents shall merge into the Management Contract, and all principal and
interest due under the Loan Documents thereupon shall be made part of the
principal and interest due under the Postapproval Loan in the Management
Contract.

E-1
<PAGE> 2
1.5 Neither this Loan Agreement nor the Note executed concurrently
herewith provides for, or is intended to provide for, any gaming management or
any other services or constitutes a "management contract" as that term is used
in IGRA and all terms in this Loan Agreement and said Note shall be construed
with that intention in mind.

2. LOAN.

Subject to the terms and conditions of this Agreement, Lender agrees to
release to Tribe, and Tribe agrees to borrow from Lender, said Preapproval Loan
in an amount not to exceed One Million Dollars ($1,000,000), the proceeds of
which are to be used in connection with the purposes set forth in the Recitals
above, and which Recitals are made a material part of this Agreement. Such loan
funds include but are not limited to:

a. $120,000 already advanced, which Tribe has used in connection with
establishing its ownership of the Site.

b. $250,000 to be advanced to Tribe upon execution of these Loan
Documents and the Management Contract, for Tribal legal fees for the above
purposes and such other Governmental Agency approval efforts in connection with
the purposes of this Loan as Tribe and Lender shall determine.

c. Such monies as may be advanced by Lender to assist in preparing the
Site for construction in anticipation of approval of the Management Contract.

d. Such other monies expended by Lender as shall relate to the
purposes set forth herein and in the Management Contract.

3. NOTE.

The Preapproval Loan will be evidenced by a Note executed concurrently
herewith. The Note shall bear interest on the unpaid principal balance accrued
from the date of signing of this Note on funds released on or before such date,
and from the release of other funds after such date. Interest shall be computed
at the rate of New York Prime plus two (2) percentage points per annum, as per
Section 11.2 in the Management Contract and as referenced in the Wall Street
Journal on the date when interest first applies, provided any interest charged
shall not exceed the maximum permitted by law. The Preapproval Loan, including
all accrued but unpaid interest, shall be incorporated into the principal of
the Postapproval Loan upon the Approval Date, if any. In the event there is no
Approval Date within the 5 years anticipated in the Management Contract, or the
parties have mutually determined, which determination shall be made in good
faith, that there is not going to be an Approval Date within such time, the
Loan shall be amortized over 84 equal monthly payments commencing on the 25th
day of the month after the month of the expiration of said 5-year period or of
such determination ("Payment Day"), whichever first occurs, and each
installment thereafter shall be due on the corresponding Payment Day of each
succeeding month. The balance of all unpaid principal and interest shall be
due and payable on the Payment Day of the 84th month following the month in
which the first installment is due.

E-2
<PAGE> 3

4. CONDITIONS OF LENDING.

The obligation of Lender to continue its performance under this
Agreement and to make any further advances shall be conditioned on the
following, which Tribe warrants and represents will be complied with: (a) that
the Site can be utilized for the gaming purposes contemplated in compliance
with applicable law including freedom from litigation or condemnation; (b) that
the obligations of Tribe hereunder continue to be enforceable; (c) the issuance
by the Tribe (or its Gaming Commissioner or other authorized agency or
official) and any other governmental agency so required under law (including
but not limited to IGRA) or in any Compact applicable under IGRA, of a license
authorizing Lender (as both Lender under the Loan Documents and Manager under
the Management Contract) and its officers, directors, shareholders, affiliates,
principals and financial sources, to the extent necessary for Lender to fulfill
its obligations under the Loan Documents and as Manager under the Management
Contract. Such license(s) shall not be revoked except for good and reasonable
cause, after notice and hearing and after all appeal rights have been
exhausted; (d) The Loan Documents shall have been duly executed; acknowledged
(where appropriate), and delivered to Lender by the required parties, all in
form and substance satisfactory to Lender, and recorded as reasonably required
by Lender; (e) Lender shall have received approval of the Loan Documents by the
BIA, NIGC and/or the Secretary, as Lender shall reasonably determine may be
required so that such documents may be enforced in accordance with their terms;
(f) Lender shall have received evidence satisfactory to it that the Tribe is
the beneficial owner of the Site and controls its title and use; (g) All
representations and warranties made by Tribe in the Management Contract and the
Loan Documents, including the Recitals, shall have been true and correct on and
as of the date of each advance with the same effect as if made on such date;
(h) There shall have been no uncured defaults under the Management Contract and
Loan Documents, regardless of whether any applicable grace period has expired
or Government Agency approval has been obtained.

5. NONWAIVER.

The failure of Lender to demand the satisfaction of any one or more of
the foregoing conditions precedent as to the initial and/or any subsequent
advance under the Note will not constitute a waiver of such condition as to any
later advances or in any manner prejudice the rights of Lender thereafter to
require full compliance with the terms of this Agreement.

6. ADVANCES, RECORDS AND AUDITS.

Advances to meet the purposes set forth in this Agreement will be made
by Lender from time to time on the written request of Tribe accompanied by all
written supporting documentation as Lender shall reasonably require to ensure
that the funds shall be used for the intended purposes and no other, including
but not limited to such invoices, receipts, inventories, certificates of
insurance, surveys, title policy endorsements, lien waivers, certificates
relating to the provisions of this Agreement, and such other instruments as
might reasonably be required by Lender. Tribe's requests shall be made on the
form prescribed by Lender. Tribe shall keep current books and records in
accordance with generally accepted accounting principles as to all advances
received and expended. Lender shall have access, for the purpose of inspection,
auditing and copying, to all such books and records at all reasonable times and
places.

E-3
<PAGE> 4
7. REPRESENTATIONS AND WARRANTIES.

Tribe's representations and warranties, as set forth in the Notes, are
hereby incorporated by reference as if fully set forth hereat.

8. DEFAULT.

8.1 Tribe's Default. Lender may terminate all obligations of Lender to
make further disbursements under the Management Contract and Loan Documents, and
Lender may declare the Note and all other indebtedness and obligations of Tribe
owing to Lender to be immediately due and payable under the terms set forth in
the Note, which are hereby incorporated by reference as if fully set forth
hereat.

9. ARBITRATION; COURTS; IMMUNITY WAIVER.

9.1 Arbitration. All disputes arising under the Loan Documents shall be
resolved as provided in Article XIX (including all subsections) and Article XX
(including all subsections) of the Management Contract, and such provisions,
including but not limited to all consents to the jurisdiction of arbitration
tribunals and courts and waivers of sovereign immunity in connection therewith,
are hereby expressly repeated and incorporated by reference as if fully set
forth hereat, with those changes being implied as may be necessary because of
the difference between the obligations herein and the identity of the parties
(for example, "Creative" in the Management Contract shall be equivalent to
"Lender" herein; "Contract" shall mean "Loan Documents" or any of them, and so
forth) to give effect to the intent of this Section 9 to provide the same
resolution and remedies as provided therein.

10. MISCELLANEOUS.

10.1 No Waiver; Cumulative Remedies. No failure on the part of Lender
to exercise, and no delay in exercising, any right or remedy hereunder, or
otherwise provided by law or equity, will operate as a waiver thereof. Each
right and remedy provided under the Management Contract and Loan Documents is
distinct and cumulative to all other rights or remedies provided thereunder or
afforded by law or equity, and may be exercise concurrently, independently, or
successively, in any order whatsoever.

10.2 Survival of Representations. All representations and warranties made
herein shall survive the Loan hereunder and the delivery of the Management
Contract and Loan Documents.

10.3 No Third Party Beneficiaries or Assignment. Nothing in this
Agreement, express or implied, is intended to confer upon any person, other than
the parties hereto and their approved successors and permitted assigns, any
rights or remedies under or by reason of this Agreement.

10.4 Approvals. When approval by any party is required hereunder, such
approval will not be unreasonably withheld or delayed.

10.5 Notices. Any notices, requests, demands or other communications
required or permitted hereunder shall be sufficient if made in writing and (i)
delivered personally, or (ii) sent by certified mail, postage prepaid, return
receipt requested and addressed to the appropriate party at its address(es) as
set

E-4

<PAGE> 5
out in the Management Contract, which addresses are hereby incorporated by
reference, or to such other address as such party may substitute by written
notice as above provided.

10.6 Binding Effect; Joint and Several Liability; Agents. This
Agreement shall be binding on Tribe and Lender and their approved successors
and assigns and will inure to the benefit of Tribe and Lender and their
approved successors and assigns. In exercising any rights hereunder or taking
any action provided for herein, Lender may act through its employees, agents or
independent contractors as authorized by Lender.

Executed and delivered as of the date first above written.

"TRIBE" "LENDER"
Eastern Shawnee Tribe of Oklahoma Creative Gaming International, Inc.

/s/ George J. Captain /s/ Peter J. Jegou
- - --------------------------------- -----------------------------------

By: George J. Captain By: Peter J. Jegou
Title: Chief Title: CEO

E-5

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<CASH> 541,610
<SECURITIES> 0
<RECEIVABLES> 200,427
<ALLOWANCES> 0
<INVENTORY> 209,447
<CURRENT-ASSETS> 1,049,753
<PP&E> 2,532,912
<DEPRECIATION> 81,152
<TOTAL-ASSETS> 4,256,251
<CURRENT-LIABILITIES> 1,392,980
<BONDS> 950,591
0
0
<COMMON> 16,047,291
<OTHER-SE> (14,134,611)
<TOTAL-LIABILITY-AND-EQUITY> 4,256,251
<SALES> 1,461,906
<TOTAL-REVENUES> 0
<CGS> 792,679
<TOTAL-COSTS> 2,284,290
<OTHER-EXPENSES> 332,424
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 60,991
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,008,478)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> 0

</TABLE>