CREATIVE GAMING INC, 10KSB, 1997-10-22

CREATIVE GAMING INC
10KSB, 1997-10-22
MISCELLANEOUS AMUSEMENT & RECREATION

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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, 1997

Commission file number 0-17642

CREATIVE GAMING, 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)

(973) 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 $356,668.

The aggregate market value of the voting stock held by non-affiliates
of the registrant as of October 17, 1997 was $2,650,198.

The number of shares outstanding of each of the registrant's classes of
common equity on October 17, 1997 was 26,290,728 shares of Common Stock, no
par value, and no shares of Preferred Stock, $1.00 par value.

DOCUMENTS INCORPORATED BY REFERENCE

NONE

CREATIVE GAMING, INC.
Form 10-KSB
Fiscal Year Ended May 31, 1997

Table of Contents
-----------------

Part I Page
- ------ ----

Item 1. Description of Business 2

Item 2. Description of Property 13

Item 3. Legal Proceedings 13

Item 4. Submission of Matters to a Vote of
Security Holders 13

Part II
- -------

Item 5. Market for Common Equity and Related Stockholder Matters 14

Item 6. Management's Discussion and Analysis or Plan of
Operations 16

Item 7. Financial Statements 18

Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 18

Part III
- --------
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the
Exchange Act 18

Item 10. Executive Compensation 20

Item 11. Security Ownership of Certain Beneficial Owners and
Management 22

Item 12. Certain Relationships and Related Transactions 24

Item 13. Exhibits, Lists and Reports on Form 8-K 24

Financial Statements F-1

Signatures 33

PART I

Item 1. Description of Business
-----------------------
General

Creative Gaming, 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 "CGI." As a result of the
change in strategic focus as described in the succeeding
paragraph, the Company's Board of Directors sought and obtained
shareholders' consent, at the Annual Meeting of Shareholders held
on May 8, 1997, to a change in name from Creative Learning
Products, Inc. (its name since incorporation) to Creative Gaming,
Inc. in order to describe better the future operations of CGI.

CGI is in the process of converting into a developer of
offshore casino gaming vessels, other gaming facilities and
entertainment as well as the development of real estate in the
Branson, Missouri area. Management's intentions are that the
primary future focus of CGI during the fiscal year ending May 31,
1998 ("fiscal 1998") and the ensuing fiscal year will be on
utilizing a vessel for gaming cruises originating in New York
City (the "Gaming Vessel Project") (see the section "Gaming
Vessel Project" in this Item 1 to this Report) conducted on
behalf of the Company through CGI Vessel, Inc. ("CGIV"), a
wholly-owned subsidiary of the Company incorporated in December
1996. The projects to open, through another wholly-owned
subsidiary Creative Gaming International, Inc. ("CGII")
incorporated in March 1994 (the "Branson Projects"), a Native
American Indian gaming casino near Seneca, Missouri and a
hotel/convention center, and a time sharing facility on sites
purchased by CGII in Christian County, Missouri are currently at
a standstill, while the other Branson Project to present a play
in Branson, Missouri has been abandoned (see the section "Branson
Projects" in Item 1 to this Report). 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 (i.e., the Gaming Vessel Project) will not begin
to produce revenues for CGI until the first half of calendar
1998, if not later, and that the other projects will take
approximately one to two years after their resumption 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, 1997, the Company's principal wholly-owned
operating subsidiaries were (1) Kards for Kids, Inc. ("KFK"), an
original subsidiary of the Company, (2) John Patrick Productions,
Inc. ("JPP"), the net assets of which were acquired effective
July 1, 1994, (3) CGII and (4) CGIV. CGI's results of operations
for the fiscal years ended May 31, 1997 ("fiscal

1997") and 1996 ("fiscal 1996"), which are included in Item 7 to this
Report, reflect, in addition to the Company, the consolidated operations
of these subsidiaries.

KFK 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. KFK sells its products directly to the consumer
and through mail order, retailers and distributors. Management
has had preliminary discussions which dealt with a possible sale
or license of certain assets relating to KFK business and prior
to fiscal 1996 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
KFK operations were producing revenues.

JPP is engaged primarily in the mail order business with
products consisting of instructional video tapes and other
products related to gaming.

Gaming Vessel Project

On November 13, 1996 the Company, through CGII, purchased, for
approximately $523,000, a hull for the purpose of converting the
hull into an offshore gaming vessel. CGI planned to utilize the
vessel for gaming cruises originating in New York (i.e. the
Gaming Vessel Project). On March 7, 1997 ownership of the vessel
was transferred from CGII to CGIV to account for its operations
as a separate entity. Because of the significant costs to be
incurred in refurbishing the hull (estimated to be $25,000,000),
the Company is considering the leasing or purchasing of a smaller
vessel (at a cost estimated to be $7,000,000) which is already
usable as a gaming vessel. CGIV would, in such circumstances,
defer the refurbishing of the hull pending revenues from the
other vessel and/or additional funding in an amount sufficient to
fund such costs of refurbishing. CGI is currently evaluating
sites in New York to determine where the vessel will be docked.
CGI anticipates a vessel to be in service during the first half
of calendar 1998, if not later. 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 a vessel is
operational and the governmental approvals are obtained, the
vessel will offer dining facilities and possibly entertainment.
As of May 31, 1997, CGI capitalized approximately $211,000 of
costs toward the conversion of the hull into a gaming vessel, and
fully charged to operations approximately $153,000 of other costs
incurred in the Gaming Vessel Project.

Because the Gaming Vessel Project, if consummated, can create a
revenue stream for CGI at an earlier date than the other
contemplated gaming projects (see the sections "Branson Projects"
and "Other Gaming Projects" in this Item 1 to this Report), CGI
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 on a timely
basis.

Branson Projects

Commencing in February 1994, CGI sought to initiate various
projects in or near Branson, Missouri (in the southwest portion
of that State), none of which has come to fruition as of this
date and most of which, if not all, may never produce revenues
for CGI. The Branson Projects

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, CGII 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, CGII 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 purchase price for the land was recorded at
$2,121,788. The sellers of the property hold a mortgage in the
original 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 project has been canceled. However,
management was still of the opinion that the Christian County
Site could be used for a time sharing facility, a theme park, a
hotel/convention center and/or other activities. Management
believed that these contemplated facilities, if opened, would
have been added attractions to produce revenues from persons
otherwise attracted by the other entertainment attractions of
Branson, Missouri not operated by CGI. However, the recent shift
in emphasis to the Gaming Vessel Project has caused management to
temporarily suspend the development of the Christian County Site
as initially contemplated. There can be no assurance that CGI
will eventually utilize the sites for these purposes. Management
believes, based on a recent third party appraisal obtained by the
Company, that the current fair value of the Christian County Site
supports its carrying value as of May 31, 1997.

CGII 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 reference.) 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 CGII, CGII had suspended any further action
by it with respect to the Seneca Facility. Depending on developments,
CGI 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
CGII agree to proceed with the Seneca Facility, as to which there
can be no assurance, because of the governmental approvals, it
might be two years or more after resumption of the project before
revenues could be realized from the Seneca Facility. As of May
31, 1997, all of the costs incurred on the Seneca Facility have
been fully charged to operations.

Because the Gaming Vessel Project, if consummated, can create a
revenue stream at an earlier date than any portion of the Branson
Projects, management believes it more prudent to focus its
immediate efforts on the Gaming Vessel Project.

One of the Branson Projects was to purchase a theater in
Branson, Missouri and produce a play on the life of Roy Rogers.
The rights to the play terminated and the Company contested the
safety of the theater with its owner. Accordingly, this aspect of
the Branson Projects was terminated during fiscal 1996, although
the Company may at a later date seek recovery of $775,000 in
option payments relating to the theater, as to which claim there
can be no assurance of success. (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).

As of May 31, 1996, CGI had fully charged to operations and
retired approximately $2,800,000 of costs incurred on portions of
the Branson Projects relating to the proposed theater acquisition
and joint venture for the Branson Projects.

Other Gaming Projects

As alternatives or additions to the Gaming Vessel Project and
the Branson Projects, CGI has been exploring the possibility of
opening and operating other gaming facilities. To assist the
Company in seeking and negotiating such opportunities with all
the gaming projects, CGI 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. Mr. Freeman
intends to serve as President of CGII and CGIV when financing is
obtained. There can be no assurance that any Other Gaming
Projects will materialize or that thereafter CGI will obtain the
necessary financing or governmental approvals to open and operate
the same. During fiscal 1997, CGI charged to operations
approximately $271,000 of other gaming costs.

Sale of Congress

Effective November 30, 1996, Nightwing Entertainment Group,
Inc. ("Nightwing") purchased all of the assets with a value of
approximately $374,000 and assumed all of the liabilities of
approximately $486,000 of Congress Entertainment, an operating
division of KFK ("Congress"), for 2,000,000 shares of Nightwing
common stock valued at $100,000, pursuant to a purchase agreement
dated October 18, 1996 and an assumption agreement dated November
30, 1996 (the

"Sale Agreement"). (Copies of both agreements with
Nightwing are filed as exhibits to this Report and are
incorporated herein by this reference.) Pursuant to the Sale
Agreement, Nightwing was to file a Form 10 and all required
reports under the Securities Act of 1934, as amended (the
"Exchange Act") and to register under the Securities Exchange Act
of 1933, as amended (the "Securities Act"), the Nightwing common
stock issued to the Company. Congress was a distributor of
quality sell-through pre-recorded video cassettes to schools,
libraries, specialty retail chains and the mass merchandising
market.

As part of a payment agreement between George Spitzer &
Associates ("Spitzer") and the Company, and in conjunction with
the assumption of the Congress liabilities by Nightwing, the
Company placed 45,000 shares of the Common Stock in escrow, to be
released to Spitzer in four years to the extent that the Congress
liability due Spitzer and assumed by Nightwing in the amount of
$45,845 is not paid by Nightwing during the four-year period.

Effective March 1, 1997, because of non-payment of its
liability to the Company, Nightwing executed a convertible
promissory note payable to the Company (the "Note") in the
principal amount of $347,000, at an annual interest rate of 8%
and payable in monthly installments of $14,500 commencing March
31, 1997. The principal amount of the Note included the amount
due the Company from Nightwing, certain other Congress
liabilities assumed by Nightwing that the Company may eventually
be required to pay, and the contingent liability to Spitzer
related to the Common Stock held in escrow.

As of the date of this Report, Nightwing has not complied with
the Exchange Act reporting and common stock registration
provisions of the Sale Agreement, made no payments to the
Company, thereby defaulting on the Note, and caused the Company
to incur additional expenses. The Company has delivered to
Nightwing the required notices of default pursuant to the Note,
and is considering its legal alternatives, including the
commencement of litigation to recover all related costs and
damages of the Company resulting from Nightwing's defaults. As of
May 31, 1997, the Company reserved and charged to operations the
amounts due from Nightwing.

Former Operations

In August 1994 substantially all of the inventory, equipment
and machinery of Roburn International Corporation, a wholly-owned
subsidiary of the Company ("Roburn"), was sold to Modern Mold
International, Inc. ("MMII"). 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 this
transaction. As inducement for such waiver, the Company issued
150,000 shares (the "MMII Indemnity Shares") of the Company's
Common Stock, no par value (the "Common Stock"), to MMII's escrow
agent. Pursuant to the terms of the escrow, the MMII Indemnity
Shares would be released to MMII to the extent necessary to
indemnify MMII for any claims brought against it within one year
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
were used for such purpose and the Company has demanded return
and cancellation of these shares.

Also in August 1994 the remaining assets of Roburn were sold to
Banker's Pen, Inc., ("Banker's") and arrangements were made to
cease the business of Roburn, including making provisions for its
creditors. 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 of the Common Stock
(the "Trade Creditors Shares") for the benefit of the Roburn trade creditors
whose claims Banker's had assumed. As of the date of this report,
95,260 of the Trade Creditors Shares had been issued to Roburn
trade creditors and 54,740 remained for future distribution.
Richard Danziger, the then President of Roburn, agreed to be
responsible for paying the Roburn trade creditors and will
receive the balance of the Trade Creditors Shares to the extent
not used to satisfy Roburn trade creditors' claims. Mr. Danziger
has advised the Company that no further claims will be asserted
and has requested that the remaining shares be released to him,
which claim the Company is reviewing.

Certain Securities Transactions

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,
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 October 17, 1997, the first set of warrants
represented the right to purchase 77,497, 9,687, 14,531, 38,749
and 19,375 shares, respectively, at $1.716, $1.736, $1.594,
$1.536 and $1.536 per share, respectively, and the March 5
Warrants represented the right to purchase an aggregate of
1,249,865 shares at $1.022 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 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 October 17, 1997, the first set of warrants represented the
right to purchase 9,176, 11,012, 4,569 and 18,271 shares,
respectively, at $1.491, $1.703, $1.498 and $2.052 per share,
respectively, and the November 29 Warrants represented the right
to purchase an aggregate of 448,491 shares at $.708 per share.

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 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 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 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 23, 1997, the investor exercised its May 23 Warrant
as to 1,000,000 shares of the Common Stock at $.10 per share after the Company
lowered the exercise price to $.10 per share. In addition, on May 8, 1997,
the Company issued the investor Common Stock purchase warrants expiring
November 7, 1997 (the "November 7 Warrant") and May 7, 1999 (the
"May 7 Warrant") for 1,000,000 and 2,000,000 shares of the Common
Stock, respectively, at exercise prices of $.10 and $.175 per
share, respectively.

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 issued to Peter J. Jegou,
Chairman of the Board, President, and Chief Executive Officer of
the Company, as consideration for the officer's services in
securing gaming opportunities for CGI and as part of an
employment agreement dated as of September 25, 1996 (a copy of
which agreement is filed (by incorporation by reference) as an
exhibit to this report and is incorporated herein by this
reference), a Common Stock purchase warrant expiring August 6,
1999 (the "August 6 Warrant") to purchase 1,500,000 shares of the
Common Stock at $.75 per share. On December 26, 1996, Mr. Jegou
exercised his August 6 Warrant as to 500,000 shares of the Common
Stock after the Company waived the prohibition on exercise prior
to February 7, 1997 and lowered the exercise price to $.25 per
share for such shares. On March 3, 1997, Mr. Jegou exercised his
August 6 Warrant as to 500,000 shares of the Common Stock after
the Company lowered the exercise price to $.25 per share and
subsequently to $.10 per share for such shares.

On August 7, 1996, the Company entered into a consulting
agreement with Lee S. Rosen which modified a previous agreement
dated April 16, 1996. Pursuant to the initial agreement, Mr.
Rosen received a Common Stock purchase warrant expiring April 15,
1999 (the "April 15 Warrant") to purchase 1,000,000 shares of the
Common Stock at an exercise price of $.75 per share. (Copies of
both consulting agreements are filed (by incorporation by
reference) as exhibits to this Report and are incorporated herein
by this reference.) A separate consulting agreement dated April
16, 1996 with a second individual, which included a Common Stock
purchase warrant expiring April 15, 1999 to purchase 2,000,000
shares of the Common Stock, was canceled. The terms of the
modified consulting agreement were for Mr. Rosen to perform
financial, public relation and gaming related 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,
1999 (the "April 16 Warrant") and August 6, 1999 (the
"Consultant's Warrant"), respectively, to purchase 2,000,000 and
1,000,000 shares, respectively, of the Common Stock both
exercisable at $.75 per share. Mr. Rosen also exercised his April
15 Warrant to purchase 1,000,000 shares of the Common Stock at an
exercise price of $.75 per share for gross proceeds of $750,000.
Mr. Rosen retained $400,000 in accordance with his consulting
agreement and the Company received net proceeds of $350,000. Mr.
Rosen exercised his April 16 Warrant as to 2,000,000 shares of
the Common Stock as follows: 500,000 shares at $.25 per share
each on October 7, 1996 and January 16, 1997 after the Company
waived the prohibition on exercise prior to February 7, 1997 and
lowered the exercise price to $.25 per share for such shares;
600,000 shares at $.50 per share on March 13, 1997 after the
Company lowered the exercise price to $.50 per share for such
shares; and 400,000 shares at $.25 per share on April 18, 1997
after the Company lowered the exercise price to $.25 per share
for such shares. On July 2, 1997,

Mr. Rosen exercised the Consultant's Warrant as to 1,000,000 shares of
the Common Stock at an exercise price of $.10 per share after the Company
lowered the exercise to $.10 per share.

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 (the "September 2 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 6, 1997, the
investor exercised its September 2 Warrant as to 1,000,000 shares
of the Common Stock at $.10 per share after the Company lowered
the exercise price to $.10 per share.

On October 10, 1996 and May 2, 1997, the Company issued 100,000
shares and 150,000 shares, respectively of the Common Stock to a
creditor for outstanding debt and anticipated future services.

On November 27, 1996, the Company issued, and a creditor
accepted, 206,991 shares of the Common Stock in satisfaction of
outstanding debt of $206,991 due to the creditor as of May 31,
1996.

On December 23, 1996, the Company sold to an investor 200,000
shares of the Common Stock for gross proceeds of $50,000.

On May 2, 1997, the Company issued 1,333,333 shares of the
Common Stock to a consultant, Harvey Freeman (see the section
"Other Gaming Projects" in this Item 1 to this Report), as an
advance towards a bonus to be due upon achievement of a milestone
in a gaming project.

An investor exercised its warrant expiring December 5, 1999 as
to 200,000 shares of the Common Stock, 100,000 shares at $.21 per
share each on May 2 and May 19, 1997 after the Company lowered
the exercise price to $.21 per share. Also, on June 5, 1997 the
investor exercised its warrant expiring January 2, 2000 as to
100,000 shares of the Common Stock at $.164 per share after the
Company lowered the exercise price to $.164 per share. In
addition, on May 21, 1997, the Company issued the investor a
Common Stock purchase warrant expiring May 20, 2000 to purchase
300,000 shares of the Common Stock at an exercise price of $.50
per share.

On September 29, 1997 an investor group purchased 100,000
shares of a to be designated Series C 12% Convertible Redeemable
Preferred Stock, $1.00 par value (the "Series C Preferred Stock")
of the Company for $100,000. The Company also issued to the group
common stock purchase warrants expiring September 29, 1999 to
purchase 1,000,000 shares of common stock at an exercise price of
$.10 per share. The Purchase Agreement provides that each share
of the Series C Preferred Stock is convertible into 46.5 shares
of common stock or an aggregate of 4,650,000 shares. Also, on
September 29, 1997 the Board of Directors of the Company
authorized a one-for-thirty reverse stock split of common stock.

At the Annual Meeting of the Company on May 8, 1997, the
shareholders voted to increase the authorized shares of the
Common Stock from 25,000,000 shares to 100,000,000 shares.

In compliance with commitments given to various persons, on
January 13, 1997 the Company filed a registration statement under
the Securities Act (the "Registration Statement"), and will
proceed to cause the Registration Statement to become effective
as soon as practicable after the filing of this Report. The
Registration Statement seeks to register the shares issued to
certain holders of the Common Stock, 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 these 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 January 21, 1997, the Company signed a letter retaining an
investment banker in connection with a proposed public offering
of securities up to $20,000,000 for the development and
construction of the Gaming Vessel Project. See the section
"Gaming Vessel Project" in this Item 1 to this Report. (A copy of
this letter is filed as an exhibit to this Report). This source
of financing is still pending.

Management believes that, as a result of the cash flow from
operations and the proceeds of $260,000 received through October
17, 1997 in recent offerings of equity and debt financing and
potential sales of equity through private placements and
exercises of outstanding Common Stock purchase warrants, it will
raise sufficient funds to meet its cash requirements during the
next 12 months based on its current level of commitments. 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 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 and the Branson 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. 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. An example of local regulation is the
recently adopted legislation of the City of New York with which
CGI will have to comply if the vessel is to be docked within the
City's limits which is the current intention. Failure of CGI to
comply with applicable laws and regulations, whether federal
(including IGRA), state, local 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 or, in the case
of the Gaming

Vessel Project, the inability to operate out of New
York City. Because of CGI'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 CGI.

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 offshore gaming and landbased 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,
Florida, Minnesota, Mississippi, Nevada, New Jersey, New York 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
- ----------------

The children's products and mail order business markets, in
which the operations of Kards for Kids and JPP, respectively, are
concentrated, are all highly competitive markets, in which
neither of the entities is a major competitive factor.

Effect on Environmental Regulations

With the change in CGI's business, CGI does not believe that
compliance with federal, state and local laws and regulations
which have been enacted or adopted regulating the discharge of
materials into the environment will have, in the foreseeable
future, any material effect upon the capital expenditures,
earnings or competitive position of CGI. Even with respect to its
existing and former businesses, CGI does not believe that
compliance with such laws and regulations had any material effect
on CGI.

Employees

As of October 17, 1997, CGI employed five persons, all of
whom were full time.

To the extent that the Company is successful in implementing
the Gaming Projects, CGI's personnel requirements will increase
significantly. 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.

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 $3,000.

As part of the Branson Projects, CGII 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 Projects" 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.

Item 3. Legal Proceedings
-----------------

On July 18, 1995, Westminster Securities Corporation and other
plaintiffs ("Westminster") instituted an action in the Supreme
Court of the State of New York, New York County, against the
Company. The action was settled on April 17, 1997 by the Company
with the issuance of 600,000 shares of the Common Stock, which
Westminster was to sell over an eight-month period after which
the Company would be liable to Westminster to the extent that the
aggregate net proceeds from such sales were less $450,000. The
600,000 shares of the Common Stock were sold for net proceeds of
$136,760 resulting in a claim against the Company for $313,240.

There are no 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 CGI.

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

(a) The Annual Meeting of Shareholders was held on May 8, 1997.

(b) Peter J. Jegou, Carol A. Kulina-Jegou, Robert W.
Berend, Harvey I. Freeman and Lee S. Rosen were elected as
directors at the Annual Meeting. Mr. Freeman declined to serve as
a director.

(1) Election of directors

NOMINEE FOR WITHHELD
------- --- --------
Peter J. Jegou 15,996,537 14,225
Carol A. Kulina-Jegou 15,968,537 42,225
Robert W. Berend 15,971,537 39,225
Harvey I. Freeman 15,946,537 64,225
Lee S. Rosen 15,993,537 17,225

(2) Resolution to ratify the appointment by the Board of
Directors of BDO Seidman, LLP as independent
accountants for the fiscal year beginning June 1, 1997.

FOR: 15,999,537
AGAINST: 10,125
ABSTAIN: 1,100

(3) Resolution to approve Amendment to Articles of
Incorporation to effect a change of the name of the
Company from Creative Learning Products, Inc. to
Creative Gaming, Inc.

FOR: 15,947,397
AGAINST: 62,265
ABSTAIN: 1,100

(4) Resolution to approve Amendment to Articles of
Incorporation to increase authorized shares of Common
Stock from 25,000,000 to 100,000,000:

FOR: 15,256,362
AGAINST: 132,800
ABSTAIN: 621,600

(d) There was no proxy contest, so that there was no
settlement between the Company and any participant.

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 1997 and fiscal
1996 as reported by the National Association of Securities
Dealers, Inc. ("NASD") in the Nasdaq System.

Fiscal 1997:
- -----------
High Low
---- ---
Quarter Ended:
-------------

August 31, 1996 $1.969 $0.844
November 30, 1996 1.313 0.531
February 28, 1997 0.781 0.313
May 31, 1997 0.625 0.219

Fiscal 1996:
- -----------
High Low
---- ---
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

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 October 17, 1997 was $.09.

Nasdaq Trading

As of May 31, 1997, the Company complied with all of the
requirements of NASD for continued listing of the Common Stock in
the Nasdaq System except that the Company did not meet the Nasdaq
maintenance requirement of a minimum bid price for the Common
Stock of $1.00 per share. On September 29, 1997 the Board of
Directors approved a one-for-thirty reverse stock split which
would enable the Company to meet this Nasdaq requirement;
however, the Certificate of Amendment to the Certificate of
Incorporation effecting the same has not been filed as yet. Even
if the result of the reverse stock split is sufficient to raise
the bid price of the Common Stock in excess of $1.00 per share,
there can be no assurance that the Common Stock will maintain
such level. As of May 31, 1997, the Company had continued to meet
all of the other maintenance requirements for continued listing
of the Common Stock in the Nasdaq System.

If the Common Stock is delisted from the Nasdaq System at a
later date because of a failure then to comply with the NASD's
maintenance criteria, the Common Stock would continue to be
traded in the over-the-counter market and reported in the NASD's
OTC Bulletin Board or in the "pink sheets" as reported by the
National Quotation Bureau, Inc. If the Common Stock is so deleted
from the Nasdaq System and if, at such time, its bid price is
below $5.00 per share (the bid price has been consistently below
$5.00 per share since the quarter ended November 30, 1994), the
security would become subject to Rule 15g-9 promulgated under the
Exchange Act,

which rule imposes additional sales practices
requirements on a broker-dealer which sells Rule 15g-9 securities
to persons other than the broker-dealer's established customers
and institutional accredited investors (as such tern is defined
in Rule 501(a) under the Securities Act). For transactions
covered under Rule 15g-9, the broker-dealer must make a
suitability determination of the purchaser and receive the
purchaser's written agreement to the transaction prior to the
sale. In addition, broker-dealers, particularly if they are
market makers in the Common Stock have to
comply with the disclosure requirements of Rules 15g-2, 15g-3,
15g-4, 15g-5 and 15g-6 under the Exchange Act unless the transaction
is exempt under Rule 15g-1. Consequently, if the foregoing events occur,
Rule 15g-9 and these other Rules may adversely affect the ability
of broker-dealers to sell or to make markets in the Common stock
and also may adversely affect the ability of purchasers in this
offering to sell their shares in the secondary market.

Holders

The number of holders of record of the Common Stock as of
October 17, 1997 was approximately 230. 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 1,445 beneficial owners of the Common
Stock.

Dividends

The Company has never paid cash or stock dividends and, in view
of CGI'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 1997 decreased by $1,105,238 or 76% as
compared with sales for fiscal 1996. The decrease was principally
due to lower sales volume with a major customer of the Congress
operations sold during fiscal 1997 and from the continued shift
from marketing videos and other products to the emphasis on
gaming projects which have not as yet produced revenues.

GROSS PROFIT

Gross profit for fiscal 1997 decreased by $432,708 or 65% as
compared with gross profit for fiscal 1996. Gross profit margin
for fiscal 1997 was 66% as compared with 46% for fiscal 1996. The
changes were principally due to the decrease in sales during the
period which resulted in changes in customer and product mix with
higher gross margins.

SELLING EXPENSES

Selling expenses for fiscal 1997 decreased by $381,679 or 80%
as compared with these expenses for fiscal 1996. The decrease was
principally due to a shift in expenses from marketing videos and
other products to emphasis on gaming projects which have not as
yet produced revenues.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses for fiscal 1997 increased
by $233,062 or 14% as compared with these expenses in fiscal
1996. The increase was principally due to financial and gaming
consulting expenses incurred during fiscal 1997.

GAMING PROJECTS EXPENSES

Gaming projects expenses increased for fiscal 1997 by $107,646
or 32% as compared with these expenses for fiscal 1996. The
increase was principally due to expenses incurred for the
offshore gaming vessel project during fiscal 1997.

SETTLEMENT EXPENSES

Settlement expenses for fiscal 1997 increased by $729,025 or
816% as compared with these expenses for fiscal 1996. The
increase was principally due to litigation settlement awards
during fiscal 1997 and related legal fees.

IMPAIRMENT OF INTANGIBLES

Impairment of intangibles of $229,764 for fiscal 1997 was due to
the adjustment of intangibles to their fair value at May 31, 1997 based
on undiscounted future cash flows.

LOSS FROM SALE OF OPERATIONS

Loss from sale of operations of $226,329 for fiscal 1997 was
due to the sale of Congress (see the section "Sale of Congress"
in Item 1 to this Report).

INTEREST EXPENSE

Interest expense for fiscal 1997 increased by $74,845 or 123%
compared with interest expense for fiscal 1996. The increase was
principally due to the interest for the full year during fiscal
1997 on the mortgage on property purchased in February 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

CGI's cash position was $121,864 as of May 31, 1997 as compared
with $541,610 as of May 31, 1996 or a decrease of $419,746. Cash
flows from operating activities during fiscal 1997 used cash of
$1,787,701 resulting from the net loss of $3,660,180 adjusted for
depreciation, amortization and impairment of intangibles of
$720,269, payment through the issuances of Common Stock and warrants
of settlement, compensation and consulting expenses of
$306,877, loss from sale of operations of $226,329 and increases in
payables and accruals of $1,004,257 and in prepaid expenses and
other assets of $64,965.

During fiscal 1997, CGII expended $734,491 for gaming vessel costs
and a $93,236 net increase in receivables due from an officer resulting
in net cash used in investing activities of $827,727.

The net cash provided by financing activities during fiscal
1997 was $2,195,682, consisting of net proceeds of short-term
borrowings of $100,000 and proceeds of $1,050,000 and $1,117,000
from issuances of the Common Stock and exercises of Common Stock
purchase warrants, respectively. These proceeds funded
operational requirements, deferred consulting costs and costs of
property purchased. Liabilities of $932,750 were converted to
Common Stock during fiscal 1997.

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.

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 October 17, 1997, the directors and executive officers of
the Company were as follows:

Position(s) Year First Became Director
Name Age with Company or Executive Officer
- ---- --- -------------- -------------------------

Peter J. Jegou 50 Chairman of the Board 1988
of Directors; President and
Chief Executive Officer

Carol A. Kulina-Jegou 48 Secretary and Director 1988

Walter J. Krzanowski 55 Treasurer, Chief Financial 1995
& Chief Accounting Officer

Mr. Jegou, Ms. Kulina-Jegou, Robert W. Berend, Lee S. Rosen and
Harvey I. Freeman were elected as directors by the shareholders
at the Annual Meeting held on May 8, 1997. Mr. Freeman declined
to serve as a director of the Company. Mr. Rosen resigned as a
director effective May 20, 1997 and Mr. Berend resigned as a
director effective September 23, 1997. 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. The Company is seeking a person experienced in the
gaming industry to serve as the President of CGII and as a
director of the Company. There can be, of course, no assurance
that the Company will obtain such a person experienced in the
gaming industry.

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 CGI
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 held
various positions including financial and management information
services as 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 1997, 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 and Messrs. Berend and Rosen who subsequently resigned had
not filed Form 3 in fiscal 1997. As of May 31, 1997, 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 CGI shares of the Common Stock as
additional compensation for their services. There was no other
executive officer whose compensation exceeded $100,000 in fiscal
1997. As indicated in the ensuing tables, the Chief Executive
Officer of the Company has been granted options.

Employment Agreements

The Company entered into an employment agreement dated as of
September 25, 1996 (the "Jegou Employment Agreement"), a copy of
which is filed (by incorporation by reference) as an exhibit to
this Report and which is incorporated herein by this reference,
with Peter J. Jegou to continue to serve as the Company's
Chairman, Chief Executive Officer and President. The Jegou
Employment Agreement provides for (1) a term commencing August 7,
1996 and terminating August 6, 1999; (2) a base salary at the
annualized rate of $200,000; (3) such annual bonus as the Board
of Directors in its sole discretion may determine; and (4) the
grant of a Common Stock purchase warrant expiring August 6, 1999
to purchase 1,500,000 shares of the Common Stock at an exercise
price of $.75 per share (see the section "Options and Warrants to
Directors and Officers" in this Item 10 to this Report).

Summary Compensation Table

The following table sets forth summary compensation information
paid or awarded for fiscal 1997, fiscal 1996 and the fiscal year
ended May 31, 1995 ("fiscal 1995") by the Company to its Chief
Executive Officer and each of CGI's most highly compensated
executive officers who served at the end of fiscal 1997 whose
total annual salary and bonus exceeded $100,000 (there being
none):

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Annual Compensation Long-Term Compensation
----------------------------- -----------------------------------------
Awards Payouts
Other ------------------- --------------------
Name and Annual LTIP
Principle Compen- Restricted Options Payouts All Other
Position Year Salary Bonus sation(1) Stock Award (#) ($) Compensation
- -------- ---- ------ ----- ------- ----------- ------ ------ ------------

Peter J. Jegou, 1997 $180,769 0 $ 7,197 1,500,000 0 0 0
Chief Executive 1996 $159,346 0 $11,807 10,000 0 0 0
1995 $152,957 0 $15,921 0 550,000 0 0
_____________________
<FN>

(1) Automobile expenses.

</TABLE>

Option Grants for Fiscal Year Ended May 31, 1997

No grants of stock options were made during fiscal 1997 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 1997 by any person
named in the Summary Compensation Table holding options which
were eligible to be exercised. The following table sets forth the
fiscal 1997 ending option values of the sole executive officer
named in the Summary Compensation Table:

<TABLE>
<S> <C> <C> <C> <C>
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
- ---- -------- -------- ------------------------- ---------------------------

Peter J. Jegou 0 0 325,000/ $245,000/ (1)
350,000 0
______________________
<FN>

(1) Based on the closing price on May 30, 1997 ($.25) as quoted
in the Nasdaq System and reported by NASD.

</TABLE>

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
Common Stock purchase warrant hereinafter described to Peter J.
Jegou, its Chairman of the Board, President and Chief Executive
Officer. The exercise price of the warrant was below the fair
market value of the Common Stock on the date of grant.

1. 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 CGI
and as part of an employment agreement dated September 25,
1997.

Item 11. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The following table sets forth information, as of October 17,
1997, 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 1997 (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 5,931,585 (2) 18.0%
2019 Ford Road
Sheffield, AL 35660

ZIMCO S.A. 4,200,000 (3) 13.0%
Rue de Neuchatel 8,
CH-2034
PESEUX, Switzerland

Peter J. Jegou (4)(5) 1,907,458 (6) 6.3%
150 Morris Avenue
Springfield, NJ 07081

Carol A. Kulina-Jegou (5)(7) 220,000 (8) 0.8%
150 Morris Avenue
Springfield, NJ 07081

All directors and 2,192,458 (6)(8)(9) 7.2%
executive officers as
a group (3 persons)

_____________________

(1) The percentages computed in this column of the table are
based upon 29,290,728 shares of the Common Stock outstanding
as of October 17, 1997, 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 October 17, 1997.

(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,
3,681,585 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 3,000,000 shares
issuable upon the exercise of the November 7 Warrant and May
7 Warrant, both of which are currently exercisable.

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

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

(6) 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 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, 264,508 shares, and a
Common Stock purchase warrant expiring August 6, 1999

to purchase 500,000 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 Gaming Option as to which the Gaming Option is not
currently exercisable or exercisable within 60 days of
October 17, 1997, and (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.

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

(8) 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.

(9) The amount reported in the table reflects (a) 50,000 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 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 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. (1)

3(a) Copy of Certificate of Incorporation as initially filed
on August 31, 1988. (2)

3(a)(1) Copy of Amendment to Certificate of Incorporation filed
on December 30, 1988. (2)

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

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

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

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

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

3(a)(7) Copy of Amendment to Certificate of Incorporation filed
on January 26, 1994. (4)

3(a)(8) Copy of Certificate of Designations and Preferences of
the Series B Preferred Stock filed on August 12, 1994.
(1)

3(a)(9) Copy of Amendment to Certificate of Designations and
Preferences of the Series B Preferred Stock filed on
February 14, 1995. (4)

3(a)(10) Copy of Amendment to Certificate of Incorporation filed
on May 22, 1997.

3(b) Copy of Amended and Restated By-Laws as adopted by
shareholders on January 12, 1994. (4)

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

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. (2)

10(a)(1) Form of Common Stock Purchase Warrant issued in
connection with February 1992 private placement. (1)

The Company's Common Stock Purchase Warrants expiring
April 4, 1997, January 24, 1999, April 15, 1999, April
16, 1999, August 6, 1999, September 18, 1999, November
29, 1999, December 5, 1999, January 2, 2000, March 15,
2000, September 11, 2000, May 23, 2001, September 2,
2001, October 25, 2001 and January 23, 2002 are
substantially identical tot he form of Common Stock
Purchase Warrant filed as Exhibit 4(b) 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(b) Copy of Purchase Agreement dated as of February 6, 1991
among the Company and the purchasers listed therein.
(4)

10(b)(1) Form of 10% Convertible Note due March 1, 1996 of the
Company is Exhibit B to Exhibit 10(b) hereto. (4)

10(c) Form of Common Stock Purchase Warrant issued in
connection with February 1992 private placement. (1)

10(d) Form of 10% Note due April 29, 1995 of the Company. (3)

10(d)(1) Form of Common Stock Purchase Warrant expiring April
29, 1998 issued by the Company. (3)

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"). (3)

10(e)(1) Copy of letter agreement dated March 17, 1994 between
the Company and Westminster as placement agent. (4)

10(e)(2) Form of Note Purchase Agreement dated May 1, 1993 among
the Company and the listed purchasers. (3)

10(e)(3) Form of 10% Convertible Promissory Note due April 30,
1995 of the Company is Exhibit B to Exhibit 10(e)(2)
hereto. (3)

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. (3)

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

10(e)(6) Form of Common Stock Purchase Warrant expiring April
30, 1995 issued by the Company. (3)

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. (1)

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. (3)

10(e)(9) Copy of Option expiring April 30, 1995 issued by the
Company to the Westminster designees. (1)

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. (5)

10(f) Copy of Placement Agent Agreement dated as of May 27,
1993 by and between the Company and Royce Investment
Group, Inc. ("Royce"). (6)

10(g) Form of 10% Promissory Note dated October 8, 1993
issued by the Company. (7)

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"). (1)

10(h) Copy of Purchase Agreement dated as of February 28,
1994 among the Company and the purchasers listed
therein. (4)

10(h)(1) Form of 8% Convertible Note due August 31, 1994 of the
Company is Exhibit A to Exhibit 10(h) hereto. (4)

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. (1)

10(i) Copy of 8% Promissory Note due June 20, 1995. (1)

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

10(i)(2) Copy of Consent dated October 13, 1994 exchanging Note
filed as Exhibit 10(i) hereto for shares of the Common
Stock of the Company and a Noteholders Warrant. (1)

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

The Company's Options expiring June 8, 1999, June 12,
1999, November 6, 1999 and July 6, 2000 are substantially
identical to the form of Option filed (by incorporation
by reference) as Exhibit 4(f) 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(k) Copy of 10% Promissory Note due March 26, 1996. (7)

10(k)(1) Copy of Letter dated August 31, 1995 exchanging Note
filed as Exhibit 10(k) hereto for shares of the Common
Stock of the Company and a Common Stock purchase
warrant expiring March 5, 1998 (the "March 5 Warrant"). (7)

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

10(m) Copy of 10% Promissory Note due December 29, 1995. (5)

10(m)(1) Copy of 10% Promissory Note due January 12, 1996. (5)

10(m)(2) Copy of 10% Promissory Note due January 18, 1996. (5)

10(m)(3) Copy of the 10% Promissory Note due April 21, 1996. (5)

10(m)(4) Copy of Letter dated August 31, 1995 exchanging Notes
filed as Exhibits 10(m), 10(m)(1), 10(m)(2) and

10(m)(3) for shares of the Common Stock of the Company
and a March 5 Warrant. (5)

10(n) Copy of 10% Promissory Note due June 5, 1996. (8)

10(n)(1) Copy of 10% Promissory Note due June 27, 1996. (8)

10(n)(2) Copy of 10% Promissory Note due July 30, 1996. (8)

10(n)(3) Copy of 10% Promissory Note due August 6, 1996. (8)

10(n)(4) Copy of Letter dated November 30, 1995 exchanging 10%
Promissory Notes (filed as Exhibits 10(n), 10(n)(1),

10(n)(2) and 10(n)(3) for shares of the Common Stock
and a Common Stock Purchase Warrant expiring March 5,
1998. (8)

10(o) Copy of Consulting Agreement dated as of April 16, 1996
between the Company and Lee S. Rosen. (9)

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

10(p) 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. (3)

10(p)(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. (3)

10(p)(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. (3)

10(p)(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. (3)

10(q) Copy of letter agreement dated February 28, 1994
between the Company and Bauer Cohen Company, Inc.
("Bauer Cohen"). (4)

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

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

10(q)(3) Copy of letter agreement dated June 9, 1994 between the
Company and Bauer Cohen. (1)

10(q)(4) Copy of letter agreement dated August 4, 1994 between
the Company and Bauer Cohen. (1)

10(r) 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. (1)

10(s) Copy of Real Estate Contract dated March 16, 1994
between Peter Jegou and Edward Cohen, as Buyer, and
Cook Hollow Company, as Seller. (1)

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

10(s)(2) Copy of Change Addendum dated November 17, 1994 to
Exhibit 10(s) hereto. (1)

10(s)(3) Copy of Letter dated December 13, 1995 extending option
terms of Exhibit 10(s) hereto. (11)

10(s)(4) Copy of Letter dated January 5, 1995 extending option
terms of Exhibit 10(s) hereto. (11)

10(s)(5) Copy of Assignment dated as of January 5, 1996 between
Creative Gaming Joint Venture, Creative Gaming
International, Inc. ("Creative Gaming") and the
Company. (11)

10(s)(6) Copy of Agreement dated February 28, 1996 between Cook
Hollow Company as Seller, and Creative Gaming and the
Company as Buyer. (11)

10(s)(7) Copy of Promissory Note dated February 28, 1996 from
Creative Gaming to Cook Hollow Company is Exhibit B to
Exhibit 10(s)(6) hereto. (11)

10(s)(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(s)(6) hereto. (11)

10(s)(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(s)(6) hereto. (11)

10(s)(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(s)(6) hereto. (11)

10(s)(11) Copy of Standstill Agreement effective June 22, 1996
between Cook Hollow Company, as Seller, and Creative
Gaming, as Buyer.

10(t) Management Agreement dated as of October 20, 1995
between Eastern Shawnee Tribe of Oklahoma (the "Tribe")
and Creative Gaming. (8)

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

10(t)(2) Copy of Letter dated December 13, 1995 extending option
terms of Exhibit 10(t) hereto. (8)

10(t)(3) Copy of Loan Agreement relating to Exhibit 10(t)
hereto. (12)

10(u) Copy of Lease dated February 26, 1993 between MAP
Investment Co., as landlord, and John Patrick
Productions, Inc., as tenant. (1)

10(u)(1) Copy of Lease dated May 13, 1995 between Rambo Realty,
Inc., as landlord, and John Patrick Productions, Inc.,
as tenant. (5)

10(v) Copy of Agreement dated June 13, 1994 between Roburn
and National Pen Corporation (later changed to Modern
Mold International, Inc. ("MMII")). (1)

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

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

10(v)(3) Copy of Amendment No. 3 dated October 6, 1994 to the
Agreement filed as Exhibit 10(v) hereof. (1)

10(v)(4) Copy of Escrow Agreement dated July 25, 1994 among
Mission Valley Escrow, MMII and Roburn. (1)

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

10(v)(6) Copy of Amendment No. 2 dated October 6, 1994 to the
Escrow Agreement filed as Exhibit 10(v)(4) hereof. (1)

10(w) Copy of Agreement dated August 15, 1994 among Banker's
Pen, Inc. ("Banker's), the Company and Roburn. (1)

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

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

10(w)(3) Copy of Escrow Agreement dated August 9, 1994 among the
Company, Roburn, Richard Danziger and Uscher, Quiat,
Uscher & Strull as Escrow Agent. (1)

10(w)(4) Copy of Agreement dated August 15, 1994 among the
Company, Banker's, Richard Danziger and Gold. (1)

10(x) Copy of Agreement dated January 11, 1994 among Congress
Entertainment, Ltd., Charles Staley, Barry Hirschberg,
Hirschberg Productions, Inc., the Company, and Kards
for Kids. (1)

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

10(x)(2) Copy of Employment Agreement effective as of January
11, 1994 between Charles Staley and Kards for Kids. (1)

10(x)(3) Copy of Consulting Agreement effective as of January
11, 1994 between Barry Hirschberg and Kards for Kids. (1)

10(x)(4) Copy of Letter Agreement dated January 11, 1994 among
Barry Hirschberg, Charles Staley and Kards for Kids. (1)

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

10(x)(6) Copy of Agreement dated October 18, 1996 by and among
the Company, Kards for Kids, Inc. and Nightwing
Entertainment Group, Inc. (14)

10(y) Copy of Trademark License Agreement dated January 15,
1987 between Carol Kulina-Jegou and Kards for Kids,
Inc. (2)

10(z) 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(aa) Copy of Subscription Agreement dated January 25, 1995
between Shirley A. Walker and the Company. (5)

10(bb) Copy of Purchase and Sale Agreement dated as of October
__, 1996 by and among Jerry Ward Cars, Inc., Edward
Lockel, Jim's Truck and Equipment, Inc. and CGI. (14)

10(bb)(1) Copy of Sale Agreement dated March 7, 1997 between
Creative Gaming and CGI Vessel, Inc.

10(cc) Copy of Employment Agreement dated as of September 25,
1996 by and between the Company and Peter J. Jegou. (13)

21 List of Subsidiaries of the Company. (5)
______________________________

(1) 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.

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

(3) 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.

(4) 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.

(5) 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.

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

(7) 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.

(8) 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.

(9) 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.

(10) Filed as an exhibit to the Company's Registration
Statement on Form S-8, File No. 333-13343, and
incorporated herein by this reference.

(11) 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.

(12) Filed as an exhibit to the Company's Annual Report on
Form 10-KSB for the fiscal year ended May 31, 1996 and
incorporated herein by this reference.

(13) Filed as an exhibit to the Company's Registration
Statement on Form S-8, File No. 333-13847, 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, 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, 1997.

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 GAMING, INC.
Registrant

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

Dated: October 20, 1997

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 October 20, 1997 in the capacities
indicated:

Signatures Title

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

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

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

CREATIVE GAMING, INC. AND SUBSIDIARIES

TABLE OF CONTENTS TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Indenpendent Certified Public Accountants F-2

Consolidated Balance Sheet as of May 31, 1997 F-3

Consolidated Statement of Operations-
Years Ended May 31, 1997 and 1996 F-5

Consolidated Statements of Stockholders' Equity-
Years Ended May 31, 1997 and 1996 F-6

Consolidated Statements of Cash Flows-
Years Ended May 31, 1997 and 1996 F-7

Notes to Consolidated Financial Statements F-8

Report of Independent Certified Public Accountants

Stockholder of
Creative Gaming, Inc.
Springfield, New Jersey

We have audited the accompanying consolidated balance sheet of Creative
Gaming, Inc. and Subsidiaries (formerly Creative Learning Products, Inc.)
as of May 31, 1997, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the two years in the period
ended May 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to report 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 peform the audits
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the consolidated financial statements. An audit also includes assessing
the accounting principles used and estimates made by management, as well as
evaluating the overall consolidated finacial statement presentation. We
believe that our audits provide a reasonable basis for our report.

The accompanying consolidated finacial statements have been prepared
assuming that the Company will continue as a going concern. As discussed
in Note 1 to the consolidated financial statements, the Company has suffered
substantial recurring losses from operations and has a deficit in working
capital at May 31, 1997. The Company has been dependent on sales of equity
securities and exercises of warrants to meet its cash flow requirements
that raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1.
The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

Because of the significance of the uncertainty of the Company's ability to
continue as a going concern, as discussed in the preceding paragraph, we are
unable to express, and we do not express, an opinion on these financial
statements.

/s/ BDO Seidman, LLP
- --------------------
BDO Seidman, LLP

New York, New York

October 20, 1997

CREATIVE GAMING, INC. AND SUBSIDIARIES

Consolidated Balance Sheet
May 31, 1997

ASSETS

Current assets:
Cash $ 121,864
Accounts receivable - net of
allowance for doubtful
accounts of $4,792 27,944
Inventories (Note 4) 56,168
Prepaid expenses and other current
assets (Note 3) 159,171
Total current assets 365,147

Property and equipment:
Land 2,410,452
Gaming vessel 734,491
Furniture and equipment, net 23,326
---------
Net property and equipment 3,168,269
---------

Other assets:
Receivable from officer (Note 5) 182,364
Deferred consulting expenses
(Note 11b) 321,404
Intangibles, net of accumulated
amortization of $594,511 194,896
--------
Total other assets 698,664
--------

$4,232,080
==========

See Notes to Consolidated Financial Statements.

CREATIVE GAMING, INC. AND SUBSIDIARIES

Consolidated Balance Sheet
May 31, 1997

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Short-term loan (Note 6) $ 94,099
Accounts payable, accrued expenses
and other liabilities 591,928
Payable and accrued settlement
expenses (Notes 9b) 366,925
Payable and accrued legal fees 409,518
Payable and accrued taxes 220,863
Collateralized legal fees payable
(Note 11c) 156,250
----------
Total current liabilities 1,839,583
----------

Long-term liabilities:
Long-term debt (Note 7) 1,001,157
Collateralized settlement
payable (Notes 3 and 11c) 45,844
----------
Total long-term liabilities 1,047,001
----------

Commitments and contingencies (Note 9)

Stockholders' equity (Notes 11 and 13):
Common stock, no par value; authorized:
100,000,000 shares;issued and
outstanding: 24,058,128 shares 19,273,330
Additional paid-in capital 3,198,592
Accumulated deficit (20,674,332)
Unearned consulting and other
expenses related to issued
and/or escrowed common stock (452,094)
-------------
Total stockholders' equity 1,345,496
-------------

$ 4,232,080
=============

See Notes to Consolidated Financial Statements.

CREATIVE GAMING, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

Year Ended May 31,
------------------
1997 1996
---- ----

Net sales $ 356,668 $ 1,461,906
Cost of goods sold 120,149 792,679
------------ ------------

Gross profit 236,519 669,227
------------ ------------

Selling expenses 98,349 480,028
General and administrative expenses 1,948,027 1,714,963
Gaming projects expenses 440,070 332,424
Settlement expenses 818,324 89,299
Loss from sale of operations (Note 3) 226,329 -
Impairment of intangibles (Note 1c) 229,764 -
Interest expense 135,836 60,991
------------ -----------
3,896,699 2,677,705
------------ -----------

Net loss $(3,660,180) $(2,008,478)
============= ===========

Net loss per share $ (.17) $ (.18)
======= =======

See Notes to Consolidated Financial Statements.

<TABLE>

CREATIVE GAMING, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For the Two Years Ended May 31, 1997

Unearned and/or Additional
Preferred Common Stock Escrowed Common Stock(b) Paid-In Accumulated Subscriptions
Stock (a) Shares Amount Shares Amounts Capital Deficit Receivable
--------- ------ ------- ------ ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Balance, May, 31, 1995 $ 200,000 9,627,820 $13,097,429 0 $ 0 $2,679,541 $(15,005,674) $(30,000)

Issuance of Common Stock 3,684,563 2,949,862
Retirement of preferred stock (200,000) 200,000
Reduction of subscriptions
receivable 30,000
New loss for year ended May 31,
1996 (2,008,478)
--------- ---------- ---------- --------- ------ --------- ----------- -------
Balance, May 31, 1996 0 13,312,383 16,047,291 0 0 2,879,541 (17,014,152) 0

Issuance of warrants:
Compensation to consultants 176,553
Employee compensation 129,113
Debt of issuance costs 13,385
Exercise of warrants:
Cash 5,066,667 1,117,000
Offset to accounts payable 533,333 400,000
Issuances of common stock:
Payments to vendors 2,096,745 506,250 1,628,333 (452,094)
Cash 2,400,000 1,050,000
Employee compensation 49,000 16,029
In settlement of litigation 600,000 136,760

New loss for year ended May 31,
1997 (3,660,180)
-------- ----------- ----------- --------- ---------- ---------- ------------- --------
Balance, May 31, 1997 $ 0 24,058,128 $19,273,330 1,628,333 $(452,094) $3,198,592 $(20,674,332) $ 0
======== =========== =========== ========= ========== ========== ============= ========
<FN>

a) All Preferred Stock transactions represented shares of the Preferred
Stock at $1.00 per share.
b) Shares are to be earned based on future operations, passage of time or
payment of certain payables.

</TABLE>

See Notes to Consolidated Financial Statements.

CREATIVE GAMING, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows

Year Ended May 31,
------------------
1997 1996
---- ----
Cash flows from operating activities:
Net loss $(3,660,180) $(2,008,478)
------------ ------------
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 232,681 273,849
Amortization of deferred consulting expenses 257,824 -
Impairment of intangibles 229,764 -
Paid from issuances of common stock and
warrants:
Settlement expenses 139,948 -
Compensation and consulting expenses 166,929 -
Loss from sale of operations 226,329 -
Other, net (320,288) 30,000
Changes to operating assets and liabilities:
Accounts receivable 46,498 (18,235)
Inventories (24,054) 65,208
Prepaid expenses and other assets (87,409) (102,180)
Accounts Payable and accrued expenses 159,636 303,845
Payable and accrued legal fees 100,583 208,597
Payable and accrued settlement expenses 366,925 -
Payable and accrued taxes 220,863 -
Collateralized legal fees payable 156,250 -
---------- ----------
Total adjustments 1,872,479 761,084
---------- ----------
Net cash used in operating activities (1,787,701) (1,247,394)
----------- -----------

Cash flows from investing activities:
Purchases of property (734,491) (1,491,605)
Advances to officer, net of repayments (93,236) 2,925
---------- -----------
Net cash used in investing activities (827,727) (1,488,680)
---------- -----------

Cash flows from financing activities:
Proceeds from short-term borrowings 169,454 625,000
Repayment of short-term borrowings (69,454) (74,000)
Proceeds from long-term borrowings - 1,072,475
Repayment of long-term debt (71,318) -
Proceeds from issuances of common stock 1,050,000 1,322,370
Proceeds from exercises of warrants 1,117,000 209,590
--------- ---------
Net cash provided by financing activities 2,195,682 3,155,435
--------- ---------

Net increase (decrease) in cash (419,746) 419,361
Cash at beginning of year 541,610 122,249
---------- ----------
Cash at end of year $ 121,864 $ 541,610
=========== ===========

Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 80,819 $ 11,858
=========== ==========
Supplemental schedule of non-cash financing
activities:
Debt and other liabilities converted to common
stock $ 932,750 $1,417,902
========== ==========

CREATIVE GAMING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TWO YEARS ENDED MAY 31, 1997

Note 1 - Business and Principles of Consolidation

Creative Gaming, Inc. (the "Company"), formerly Creative
Learning Products, Inc., was formed in August 1988 to provide
management and administrative services to its wholly-owned
subsidiaries. The operating subsidiaries of the Company include
Creative Gaming International, Inc., CGI Vessel, Inc., Kards For
Kids, Inc. and John Patrick Productions, Inc. The Company and its
operating subsidiaries are collectively referred to herein as "CGI".

CGI is in the process of converting to an entity offering
offshore gaming vessels, other gaming facilities, entertainment
and development of real estate. CGI sells 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 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.

CGI's accompanying consolidated financial statements have been
prepared on a going concern basis. During the past several years,
CGI has experienced substantial recurring losses from operations and
has a working capital deficit. CGI has been dependent, in part, on
proceeds from sales of debt and equity securities and the exercise of
warrants and options. While management believes its ability to raise
additional capital will provide sufficient cash for CGI to meet its
operating requirements for the year ending May 31, 1998 and manage its
working capital deficit, there can be no assurances that CGI will
maintain its ability to continue as a going concern.

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 is
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, 1997 and 1996 was
approximately $11,600 and $44,500, respectively. Accumulated
depreciation on furniture and equipment for the year ended May
31, 1997 was approximately $89,500. Land is not a depreciable
asset. The gaming vessel is recorded at cost, and expenditures
associated with readying it for its intended use are capitalized.
Expenditures for maintenance and repairs are charged to expense
as incurred, whereas

expenditures for renewals and betterments are generally capitalized.
Furniture and equipment is being depreciated over their estimated
useful lives of 3-10 years.

c) Intangibles

Intangibles, including customer lists and goodwill, are
recorded at fair value and are amortized over five years.
Amortization expense for the years ended May 31, 1997 and 1996
was approximately $206,700 and $209,500, respectively. CGI
assesses the fair value of such intangibles based upon several
factors, including management's intention with respect to the
operations and those operations' projected undiscounted cash
flows. As of May 31, 1997, CGI adjusted the fair value of
intangibles and charged to operations approximately $230,000.

d) Loss Per Share

Loss per share is based upon the weighted average
shares outstanding of 20,968,347 and 10,996,147 for the years
ended May 31, 1997 and 1996, respectively. Losses per share 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

CGI adopted 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" for the year
ended May 31, 1997. The adoption of SFAS No. 121 as of June 1,
1996 did not have a material effect on the consolidated financial
statements.

In October 1995, the Financial Accounting Standards Board
("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. Effective December 16, 1995, CGI has
reflected all issuances of equity instruments to non-employees
at their respective fair values.

In February 1997, the FASB issued SFAS No. 128, "Earnings Per
Share", which is effective for fiscal years beginning after
December 15, 1997. CGI will adopt SFAS No. 128 on June 1, 1998.
The adoption of this standard is not expected to have a material
effect on CGI's consolidated financial statements.

In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income", which established standards for reporting
and display of comprehensive income, its components

and accumulated balances. Comprehensive income is defined to include
all changes in equity except those resulting from investments by
distributions to owners. Among other disclosures, SFAS No. 130
requires that all items that are required to be recognized under
current accounting standards as components of comprehensive
income be reported in a financial statement that is displayed
with the same prominence as other financial statements.

SFAS No. 130, effective for all years beginning after December
31, 1997, requires comparative information for earlier years to
be restated and early adoption is permitted. CGI intends to adopt
SFAS No. 130 effective June 1, 1998. Results of operations and
financial position will be unaffected by implementation of this
standard.

In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information", which is
effective for fiscal years beginning after December 15, 1997.
This standard establishes disclosure requirements for operating
segments' products and services, geographic areas, and major
customers. CGI will adopt SFAS No. 131 on June 1, 1998. The
adoption of this standard will not impact CGI's 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 - Sale of Operations

Effective November 30, 1996, all the assets of an operating
division of CGI were sold to and all its liabilities were assumed
by a purchaser for 2,000,000 shares of the purchaser's restricted
common stock.

Effective March 1, 1997, the purchaser executed a convertible
promissory note payable to CGI (the "Note") in the principal
amount of $347,000 at an annual interest rate of 8% and payable
in monthly installments of $14,500 commencing March 31, 1997. The
principal amount of the Note included the net amount due CGI from
the purchaser, and potential and contingent liabilities CGI may
eventually be required to pay. As part of the sale, CGI placed
45,000 shares of common stock in escrow until such contingent
liabilities are satisfied. Due to non-payment of the Note, CGI
has charged to operations the entire balance, which has been
reflected as a component of the loss on the sale.

The value of the purchaser's common stock, included in prepaid expenses
and other current assets, was reduced to $20,000 as of May 31, 1997.

Note 4 - Inventories

Inventories of continuing operations consisted of the following
at May 31, 1997:
Raw materials $ 11,392
Work-in-process 4,381
Finished goods 40,395

Note 5 - Receivable From Officer

As of May 31, 1997, the receivable from officer represents
amounts advanced to CGI's President and Chief Executive Officer.

Note 6 - Short-term Loan

On March 19, 1997, CGI executed a term note for $100,000, at an
annual interest rate of 12%, due in one year. In conjunction with
this note, CGI issued a common stock purchase warrant expiring in
four years to purchase 100,000 shares of common stock at $.25 per
share. The fair value of this warrant was recorded as prepaid
interest and is being amortized over the life of the note.

Note 7 - Long-term Debt

On February 28, 1996, CGI, as part of its purchase of certain
property, 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. Effective
May 31, 1997 the payment terms of the mortgage were extended to a
payment due June 1, 1998 for full principal balance and accrued
interest. As part of the agreement to extend the due date of the
mortgage, CGI issued 100,000 shares of common stock to the
sellers and placed a lien on adjacent property owned by CGI as
collateral for the mortgage.

Note 8 - Income Taxes

As of May 31, 1997, the primary component of CGI's deferred tax
asset consisted of its net operating loss carryforwards ("NOL").
The deferred tax benefit related to the NOL has been fully
reserved.

As of May 31, 1997, CGI has NOL's of approximately $19,400,000
which are available to offset future taxable income, if any,
through 2012.

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.

Note 9 - Commitments and Contingencies

a) Leases

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

Year ended May 31,
------------------
1998 $38,200
1999 5,100
2000 1,200

Rent expense was approximately $57,400 and $103,000 for the
years ended May 31, 1997 and 1996, respectively.

b) Litigation

On July 18, 1995, a placement agent and ten other persons
instituted an action in the Supreme Court of the State of New
York against CGI. The action was settled on April 17, 1997 by
CGI with the issuance of 600,000 shares of common stock, which
the plaintiffs were to sell over an eight-month period after
which CGI would be liable to the plaintiffs to the extent that
the aggregate net proceeds from such sales were less than
$450,000, which was charged to operations. The 600,000 shares of
common stock were sold for net proceeds of $136,760 resulting in
a claim against CGI for $313,240, which was accrued as
settlement payable as of May 31, 1997.

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

c) Employment Agreement

CGI entered into an employment agreement effective August 7,
1996 for three years with its Chief Executive Officer and
President which provides for minimum compensation of $200,000,
$200,000 and $37,000 for the years ending May 31, 1998, 1999 and
2000, respectively.

Note 10 - Major Customers

During the year ended May 31, 1996 an individual customer
accounted for approximately 42% of sales from operations. No
other customers accounted for 10% or more of sales from
operations during the years ended May 31, 1997 and 1996.

Note 11 - Common Stock

a) Fiscal 1996 Equity Transactions

On July 18, 1995, a placement agent and ten other persons
instituted an action in the Supreme 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 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 common
stock at an exercise price of $1.50. Due to the antidilutive
provisions of this warrant, an aggregate of 143,535 shares of
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 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 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 common stock and common stock
purchase warrants expiring November 29, 1999 to purchase,
commencing November 30, 1996, 250,000 shares of 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 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 common stock at an
exercise price of $1.00 per share.

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 common stock and a common stock purchase warrant
expiring December 5, 1999 to purchase, commencing December 6,
1996, 200,000 shares of 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 common stock and a common stock purchase warrant
expiring January 2, 2000 to purchase, commencing January 3,
1997, 100,000 shares of 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 January 31, 1996, the holder of an aggregate of $25,000 in
principal amount of CGI'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 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
shares of 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 common stock. The Company paid a private placement fee
of $19,600 to an agent for this offering.

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

purchase, commencing May 31, 1996, 1,000,000 shares of 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 CGI'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, CGI issued 172,850 shares
of common stock in exchange for various services rendered. The
stock was valued at the value of the services rendered.

b) Exercises of Warrants

On August 7, 1996 the Company issued to an officer of the
Company, as consideration for the officer's services in securing
gaming opportunities for CGI and as part of an employment
agreement dated as of September 25, 1996, a common stock
purchase warrant expiring August 6, 1999 to purchase 1,500,000
shares of common stock at $.75 per share commencing February 7,
1997. On December 26, 1996, the officer exercised his warrant as
to 500,000 shares of common stock after the Company waived the
prohibition on exercise prior to February 7, 1997 and lowered
the exercise price to $.25 per share for such shares. On March
3, 1997, the officer exercised his warrant as to 500,000 shares
of common stock after the Company lowered the exercise price to
$.25 per share and subsequently to $.10 per share for such
shares.

On August 7, 1996, the Company entered into a consulting
agreement with an individual which modified a previous agreement
dated April 16, 1996. Pursuant to the initial agreement, the
individual received a common stock purchase warrant expiring
April 15, 1999 to purchase 1,000,000 shares of common stock at
an exercise price of $.75 per share. The terms of the modified
consulting agreement were for the individual to perform
financial, public relation and gaming related 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, 1999 and August 6, 1999, respectively, to purchase
2,000,000 and 1,000,000 shares, respectively, of common stock
both exercisable at $.75 per share. The individual exercised his
warrant expiring April 15, 1999 to purchase 1,000,000 shares of
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. The individual exercised his
warrant expiring April 16, 1999 to purchase 2,000,000 shares of
common stock as follows: 500,000 shares at $.25 per share each
on October 7, 1996 and January 16, 1997 after the Company waived
the prohibition on exercise prior to February 7, 1997 and
lowered the exercise price to $.25 per share for such shares;
600,000 shares at $.50 per share on March 13, 1997 after the
Company lowered the exercise price to $.50 per share for such
shares; and 400,000 shares at $.25 per share on April 18, 1997
after the Company lowered the exercise price to $.25 per share
for such shares. These transactions were recorded as deferred
consulting costs at their fair values totaling $579,228 and are
being amortized over the life of the consulting agreement.
Amortization expense for the year ended May 31, 1997 amounted to
$257,824. On July 2, 1997, the individual exercised his warrant
expiring August 6, 1999 to purchase 1,000,000 shares of common
stock at an exercise price of $.10 per share after the Company
lowered the exercise price to $.10 per share.

An investor exercised its warrant expiring December 5, 1999 as
to 200,000 shares of common stock, 100,000 shares at $.21 per
share each on May 2 and May 19, 1997 after the Company lowered
the exercise price to $.21 per share. Also, on June 5, 1997 the
investor exercised its warrant expiring January 2, 2000 as to
100,000 shares of common stock at $.164 per share after the
Company lowered the exercise price to $.164 per share. In
addition, on May 21, 1997, the Company issued the investor a
common stock purchase warrant expiring May 20, 2000 to purchase
300,000 shares of common stock at an exercise price of $.50 per
share.

On May 6, 1997, an investor exercised its warrant expiring
September 2, 2001 as to 1,000,000 shares of common stock at $.10
per share after the Company lowered the exercise price to $.10
per share.

On May 23, 1997, an investor exercised its warrant expiring
May 23, 2001 as to 1,000,000 shares of common stock at $.10 per
share after the Company lowered the exercise price to $.10 per
share. In addition, on May 8, 1997, the Company issued common
stock purchase warrants expiring November 7, 1997 and May 7,
1999, both commencing June 18, 1997, for 1,000,000 and 2,000,000
shares of common stock, respectively, at exercise prices of $.10
and $.175 per share, respectively.

The previous five paragraphs reflect, through the exercises of
warrants, the issuance of 6,200,000 shares of common stock for
amounts of $1,117,000 of cash proceeds, $400,000 of payments to
consultants and $136,760 of settlement costs.

c) Payments to Vendors

In June 1996, the Company issued to an individual for services
rendered 50,000 shares of 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 common stock in satisfaction of outstanding
debt of $63,296 as of May 31, 1996.

On November 27, 1996, CGI issued and a creditor accepted
206,991 shares of common stock in satisfaction of outstanding
debt of $206,991 as of May 31, 1996.

During the year ended May 31, 1997, CGI issued 164,421 shares
of common stock in exchange for various services rendered. The
stock was valued at the fair values of the services rendered.

On October 10, 1996 and on May 2, 1997, CGI issued 100,000
shares and 150,000 shares, respectively, of common stock to a
creditor for outstanding debt and anticipated future services.
These shares were recorded at their fair values at dates of
issuance totaling $156,250. Proceeds from the sale of these
shares will be applied toward the liabilities of CGI due the
creditor.

On May 2, 1997, CGI issued 1,333,333 shares of common stock to
a consultant as an advance to be earned upon achievement of a
milestone in a gaming project upon the opening of a casino.

45,000 shares are being held in escrow to guarantee the
satisfaction of a settlement owed by the division of CGI sold in
November 1996.

The previous six paragraphs reflect the issuances of 2,096,745
shares of common stock to vendors in the aggregate amount of
$506,250. 1,628,333 of these shares of common stock are

either held in escrow to be released upon the occurrence of a future
event or the proceeds upon sale by the holder are to be applied
to satisfy outstanding debt of CGI, and are recorded as unearned
or escrowed common stock at a value of $452,094 as of May 31,
1997.

d) Employee Compensation

During the year ended May 31, 1997, CGI issued to employees as
compensation 49,000 shares of common stock valued at their fair
values of $16,029.

e) Private Placements

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 common stock.

On December 23, 1996, the Company sold to an investor 200,000
shares of common stock for gross proceeds of $50,000.

The previous three paragraphs reflect the issuances of
2,400,000 shares of common stock for net cash proceeds of
$1,050,000.

f) Stock Options and Warrants

At May 31, 1997, an aggregate of 16,379,727 shares of common
stock were issuable upon (i) the exercise of warrants
(15,326,730 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 Company has issued various options and warrants to
purchase its common stock. Effective December 16, 1995, under
the accounting provisions of SFAS No. 123, the Company has
valued its stock options and warrants granted to non-employees
in accordance with the fair-value-based method. The Company
estimates the fair value of each stock option and warrant at the
grant date by using the Black-Scholes option pricing model. Key
assumptions used to apply this pricing model include: an assumed
50% discount on the underlying stock appropriate for its
nonmarketable and restrictive characteristics; a life estimated
as the midpoint of the period between issuance and expiration
dates; a volatility factor of 39.5%; a risk-free rate of return
using the yield at the grant date of a U.S. Treasury security
with a maturity date approximating the estimated life used in
the analysis; and no dividends paid for all years.

The following is a summary of the activity of options and
warrants to purchase shares of common stock for the year ended
May 31, 1997:

Options Warrants (a)
Outstanding Weighted Outstanding Weighted
Shares Average Shares Average
Purchasable Exercise Price Purchasable Exercise Price
----------- -------------- ----------- --------------
May 31, 1996 1,030,000 $1.10 10,132,121 $1.05
Granted 9,320,000 $ .61
Exercised (6,200,000) $ .29
Dilutions 2,074,609
--------- ---------
May 31, 1997 1,030,000 $1.10 15,326,730 $ .74

The following summarizes information about options and
warrants to purchase common stock at May 31, 1997:

Range of Original Exercise Prices
Options Warrants (a)
$.75-$1.50 $.10-$1.49 $1.50-$4.00 $.10-$4.00
---------- ---------- ----------- ----------
Outstanding May 31, 1997:
Shares purchasable 1,030,000 7,432,257 7,894,473 15,326,730
Weighted - average
exercise price $1.10 $.41 $1.03 $.74
Weighted - average
remaining contractual
life (years) 2.27 1.43 1.09 1.25

Exercisable at May 31, 1997:
Shares purchasable 555,000 4,332,257 7,894,473 12,226,730
Weighted - average
exercise price $1.11 $.60 $1.03 $ .87

(a) Various warrants contain antidilutive provisions, for
which the cumulative additional shares reserved are included.

Note 12 - Business Segments

The primary business segments of CGI 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 1997 and
1996 is as follows:

Video and Other
Gaming Projects Product Distribution
--------------- --------------------
1997 1996 1997 1996
Sales $ - $ - $356,668 $1,461,906
Operating Loss (1,063,342) (676,269) (1,074,004) (751,497)
Identifiable Assets 3,200,021 2,413,534 305,981 1,157,738
Depreciation and
Amortization 286 2,801 228,558 269,971
Capital Expenditures 734,491 1,481,305 - 10,300

Note 13 - Subsequent Events

On June 5, 1997 the Company issued to an investor 200,000
shares of common stock for gross proceeds of $30,000 and issued
a common stock purchase warrant expiring June 29, 2001 to
purchase 200,000 shares of common stock at an exercise price of
$.25 per share, commencing December 30, 1997.

On June 21, 1997 the Company entered into a consulting
agreement with an individual to perform financial and public
relation consulting services for a period of three months. The
Company issued 500,000 shares of common stock to the individual
for these services.

On July 29, 1997 CGI issued 100,000 shares of common stock
each to two individuals for services rendered and issued to each
individual a common stock purchase warrant expiring August 5,
2000 to purchase 100,000 shares of common stock at an exercise
price of $.25 per share.

On September 29, 1997, the Company entered into an agreement
for an investor group to purchase 100,000 shares of a to be
designated Series C 12% Convertible Redeemable Preferred Stock,
$1.00 par value (the "Series C Preferred Stock") of the Company
for $100,000. The Company also issued to the group common stock
purchase warrants expiring September 29, 1999 to purchase
1,000,000 shares of common stock at an exercise price of $.10
per share. The agreement provides that each share of the Series
C Preferred Stock is convertible into 46.5 shares of common
stock or an aggregate of 4,650,000 shares. Also on September 29,
1997, the Board of Directors of the Company agreed to a one-for-
thirty reverse stock split of common stock, as of a date yet to
be determined.

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-1-1996
<PERIOD-END> MAY-31-1997
<CASH> 121,864
<SECURITIES> 0
<RECEIVABLES> 27,944
<ALLOWANCES> 0
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0
0
<COMMON> 19,273,330
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<TOTAL-REVENUES> 0
<CGS> 120,149
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</TABLE>