PRESIDENT CASINOS INC, 10-K, 1998-05-29

PRESIDENT CASINOS INC
10-K, 1998-05-29
MISCELLANEOUS AMUSEMENT & RECREATION

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

/ X / Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended February 28, 1998
or
/ / Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Commission File Number: 0-20840

PRESIDENT CASINOS, INC.
(Exact name of registrant as specified in its charter)

Delaware 51-0341200
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

802 North First Street, St. Louis, Missouri 63102
Address of principal executive offices

314-622-3000
Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.06 par value
Preferred Stock Purchase Rights
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Registration S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or
amendment to this Form 10-K. /X/
As of May 27, 1998, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was approximately $3,985,992.*
As of May 27, 1998, the number of shares outstanding of the Registrant's
Common Stock was approximately 5,032,926.
* Calculated by excluding all shares that may be deemed to be beneficially
owned by executive officers and directors of the Registrant, without conceding
that all such persons are "affiliates" of the Registrant for purposes of the
federal securities laws.
DOCUMENTS INCORPORATED BY REFERENCE
Part III - The Registrant's definitive Proxy Statement for its annual meeting
of stockholders scheduled to be held August 19, 1998.
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PART I

Items 1. and 2. Business and Properties.

General

President Casinos, Inc. (the "Company") develops, owns and operates
riverboat and/or dockside gaming casinos and related operations through its
subsidiaries. The Company's current gaming facilities and operations are
summarized as follows:

Davenport, Iowa
Managing entity - The Connelly Group, L.P.
Vessel - "President"
Casino square footage - 37,000
Slots - 838
Gaming tables - 43
Opening of casino - April 1, 1991

Biloxi, Mississippi
Managing entity - The President Riverboat Casino-
Mississippi, Inc.
Vessel - "Biloxi Barge"
Casino square footage - 38,000
Slots - 935
Gaming tables - 38
Opening of casino - August 13, 1992
Opening of current facility - June 30, 1995

St. Louis, Missouri
Managing entity - President Riverboat Casino-
Missouri, Inc.
Vessel - "Admiral"
Casino square footage - 56,000
Slots - 1,241
Gaming tables - 69
Opening of casino without slots - May 27, 1994
Opening of casino with slots - December 9, 1994

In addition to its gaming operations, the Company owns and manages certain
hotel and ancillary facilities associated with its casino operations in
Davenport, Iowa and Biloxi, Mississippi and operates two nongaming dinner
cruise, excursion and sightseeing vessels on the Mississippi River in St.
Louis, Missouri. The Company also charters certain of its unused vessels to
unrelated third parties.

The Company was incorporated in the State of Delaware in June 1992 and
completed the initial public offering of its Common Stock in December 1992.
The Company is the successor to businesses operated in St. Louis, Missouri

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since 1985, Davenport, Iowa since October 1990 and Biloxi, Mississippi since
August 1992. The Company's principal executive offices are located in an
approximately 9,500 square foot building owned by the Company at 802 North
First Street, St. Louis, Missouri 63102, and its telephone number is (314)
622-3000.

Current Operations

Davenport Operations

In April 1991, the Company began riverboat gaming operations on the
Mississippi River in Davenport, Iowa on the "President." The Company's
operating license is renewable annually at the discretion of the Iowa Racing
and Gaming Commission after receipt of a renewal application from the Company.
The license was last renewed in April 1998. Davenport, Iowa along with
Bettendorf, Iowa and Rock Island and Moline, Illinois comprise the Quad Cities
metropolitan area. The Quad Cities metropolitan area has a population of
approximately 380,000, and is approximately a three-hour drive from Chicago.

The "President," built in 1924, is a five-deck, steel-hulled passenger
vessel and is approximately 300 feet in length. During the period November
13, 1995 through April 1, 1996, the "President" underwent a $4.0 million
refurbishment and a Coast Guard mandated five-year hull inspection. During
that period the "President" was temporarily replaced with a smaller Company-
owned vessel, "President Casino-Mississippi."

Competition for local customers continues to intensify in the Quad Cities
metropolitan area. In April 1995, a new casino commenced operations in
Bettendorf, Iowa, which is located on the Mississippi River five miles upriver
from the Davenport operations. With the addition of this casino, there are
now four casinos competing in the Quad Cities market within a 25 mile radius
of the "President." One of those casinos is located on the Illinois side of
the Mississippi River where the gaming laws currently require riverboat
casinos to cruise for all of their gaming sessions. The Iowa Racing and
Gaming Commission has the authority to set cruising schedules for Iowa
riverboats and to permit dockside gaming throughout the year. The Company
must currently conduct at least 100 riverboat cruises per year, the timing of
which are set at the Company's discretion with the approval of the Iowa Racing
and Gaming Commission. Iowa riverboats can remain dockside for all other
gaming sessions. A change in the Illinois cruising laws could have an adverse
effect on the Davenport operation. The casino is open 24 hours per day, seven
days per week.

The Company's other Davenport facilities are an adjunct to its gaming
operations and are not viewed as independent profit centers. The Company owns
and operates The Blackhawk Hotel in downtown Davenport, located approximately
two blocks from the "President." The Blackhawk Hotel has 192 rooms and is
connected to the RiverCenter, a 10,000 square foot convention center operated
by the City of Davenport. The hotel also features a 500-seat grand ballroom
and five additional meeting rooms to accommodate meetings and convention
activities. During fiscal 1996, a new 223-room hotel opened directly across

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from the "President." While the new hotel has intensified competition for The
Blackhawk Hotel, management believes the addition of hotel rooms to the Quad
Cities market has improved the marketability of the Quad Cities for the
Company's gaming operations.

Pursuant to a development agreement with the City of Davenport, the Company
submitted to the City plans for the development of certain Company-owned
property located in close proximity to the "President." During fiscal 1996,
the Company and the City reached a mutually acceptable development plan that
included the expansion of the Company's parking areas. The construction was
completed during fiscal 1998 (see Note 11 to the Consolidated Financial
Statements).

The Company leases certain levee property in Davenport, Iowa from the City
of Davenport. This lease expires in 2017. The Company is required to pay
certain boarding and docking fees and a special payment in lieu of property
taxes to the City. These fees currently aggregate to a base amount of
$819,000 plus 82.2 cents per passenger over 1,117,579 passengers. Both the
base amount and per passenger charges related to the docking fees are subject
to an annual 4% escalator.

Biloxi Operations

The Company conducted dockside gaming operations in Biloxi, Mississippi on
"President Casino-Mississippi" from August 13, 1992 through June 18, 1995
through its wholly-owned subsidiary, The President Riverboat Casino-
Mississippi, Inc. ("President Mississippi"). On June 30, 1995, the Company
reopened the Biloxi gaming operations aboard the newly renovated "Biloxi
Barge." Replacing "President Casino-Mississippi" with the "Biloxi Barge"
increased casino square footage from 20,500 to 38,000. In addition, the
"Biloxi Barge" features a full service 175-seat buffet and a 50-seat steak and
seafood restaurant, amenities not available on the previous vessel. Biloxi is
located on the Gulf of Mexico 75 miles east of New Orleans. The Mississippi
Gulf Coast area has a population of approximately 150,000. The Company's
Mississippi gaming license was last renewed in June 1996 for a two-year
period. The license is scheduled to be renewed in June 1998 and management
has been given no indication that it will not be renewed.

Since gaming began in Mississippi in August 1992, competition has increased
significantly in the Mississippi Gulf Coast market. There are currently
twelve casinos operating in this area and a thirteenth under construction,
which is due to open in early 1999. The Company's operating results have been
materially and adversely affected as a result of such increased competition.
The Company also faces competition from gaming operations in the metropolitan
New Orleans area and elsewhere in Louisiana and Mississippi. As of February
28, 1998, the New Orleans metropolitan area had three casinos in operation.

Management believes Biloxi is now moving into a new generation of casino
operations and is becoming a major destination point for gaming entertainment.
The area is becoming more widely known with many guests coming long distances
to enjoy the weather, beaches, golfing and other entertainment. During recent

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years, several large gaming companies have built large hotel/casino complexes
and have captured a significant portion of the Mississippi Gulf Coast market.
This trend continues, with a new large project under construction. Many of
these competitors have substantially greater name recognition and financial
and marketing resources than the Company.

In order to provide the Company with the opportunity to compete more
effectively in the Biloxi market, on February 17, 1995, President Mississippi
Charter Corporation ("Charter Corp."), a wholly-owned, non-guarantor
subsidiary of the Company, entered into a charter agreement (the "Initial
Charter Agreement") with American Gaming and Entertainment, Ltd. ("AGEL").
Pursuant to the Initial Charter Agreement, Charter Corp. agreed to charter the
"Biloxi Barge" from AGEL for an initial term of five years at a cost of
approximately $329,000 per month commencing on June 19, 1995. Under the
Initial Charter Agreement, Charter Corp. is responsible for all insurance,
maintenance and other operating costs relating to the "Biloxi Barge" during
the term of the charter. The Initial Charter Agreement provides that Charter
Corp. may, at its option, extend the term of the Initial Charter Agreement for
two additional five-year terms at the same charter rate. In addition, Charter
Corp. has the option to purchase the "Biloxi Barge" at any time during the
term of the Initial Charter Agreement for a purchase price equal to the lower
of the appraised value or the amortized value (as such terms are defined in
the Initial Charter Agreement); provided, however, that AGEL may refuse to
sell the "Biloxi Barge" for a purchase price of less than 90% of the amortized
value. Charter Corp. acquired approximately 600 slot machines utilized by
AGEL on the "Biloxi Barge" in exchange for the assumption of certain related
indebtedness. The terms of such indebtedness included monthly payments of
$121,000, beginning in June 1995 and ending in August 1997. The Company
retained the vessel "President Casino-Mississippi" for use at the Company's
other gaming operations (see Davenport Operations) and the vessel is currently
for sale or lease. President Mississippi subleases the "Biloxi Barge" from
Charter Corp. for a term of five years on substantially the same terms
contained in the Initial Charter Agreement. AGEL has filed an action against
Charter Corp. and President Mississippi with respect to certain disputed
charter payments under the Initial Charter Agreement and certain related
indebtedness. See "Item 3. Legal Proceedings."

The Company previously had an operating lease with BH Acquisition
Corporation ("BH"), a wholly-owned entity of John E. Connelly, Chairman, Chief
Executive Officer and principal stockholder of the Company, for its Biloxi
mooring site, parking facilities, offices and a warehouse. Rent under the
operating lease agreement was approximately $3.3 million annually, on a triple
net basis. On July 24, 1997, Broadwater Hotel, LLC ("PBLLC"), a limited
liability corporation in which the Company and a wholly-owned entity of Mr.
Connelly have ownership interests, acquired the real estate and improvements
from BH for $40.5 million. The property comprises approximately 260 acres and
includes a marina which contains the Biloxi casino's mooring site, two hotels
and an adjacent 18-hole golf course (collectively, the "Broadwater Property").

The Broadwater Property has been determined by the Secretary of State of
Mississippi to constitute both "tidelands" and "fastlands" under the

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Mississippi Trust Tidelands Act (the "Tidelands Act") and court rulings.
Under the Tidelands Act, land which falls below the mean high tide level may
be determined to constitute "tidelands" by the Secretary of State of
Mississippi. The Tidelands Act provides that land which is designated as
tidelands is deemed to be owned by the State of Mississippi in trust.
Property owners of affected land are provided the first opportunity to
negotiate with the State of Mississippi for a lease of the property. During
December 1996, BH entered into a 40-year lease agreement (the "Fastlands
Lease") with the State of Mississippi for the fastlands for an annual rental
fee of approximately $21,000, adjustable every five years as defined in the
lease agreement. Concurrent with the purchase of PBLLC, BH sold its interest
in the tidelands lease and the Fastlands Lease to PBLLC.

The Broadwater Property's two hotels have approximately 500 rooms and are in
close proximity to the Biloxi convention center. The Company, generally
through tour operators, arranges for groups to be brought to the Broadwater
Property in anticipation that members of these groups will utilize the
Company's gaming facilities.

Management believes that as newer and larger casino complexes enter the
Mississippi Gulf Coast market, it will become more difficult to compete.
Thus, the Company continues to study strategic alternatives related to the
Biloxi casino operation. See "Potential Growth Opportunities-Biloxi,
Mississippi".

St. Louis Operations

On May 27, 1994, the Missouri Gaming Commission licensed the Company to
conduct dockside gaming operations on the "Admiral" in St. Louis, Missouri
through its wholly-owned subsidiary, President Riverboat Casino-Missouri, Inc.
("President Missouri"). The Company's initial license was subsequently renewed
and has been extended through May 2000.

The "Admiral", an approximately 400-foot long vessel, is continuously docked
near the base of the Gateway Arch at a mooring site leased by the Company from
the City of St. Louis.

The Company leases four mooring sites in St. Louis, Missouri from the City
of St. Louis. The Company's leases (including the lease for the mooring site
for the "Admiral") provide that upon the use of a vessel as a gaming facility,
the rentals will increase by an amount equal to 2% of the gross receipts
realized from its riverboat gaming activities (total amount wagered less
winnings paid to wagerers). This percentage may be adjusted (higher or lower)
to equal the gaming rentals charged to other properties in the riverfront area
of St. Louis where gaming is conducted. The "Admiral" is currently the only
gaming property on the St. Louis riverfront.

The St. Louis mooring leases expire on dates ranging from 2002 to 2013,
assuming the exercise of all extension options provided therein. The lease
for the "Admiral" mooring site terminates in December 2008. The extension
options must be approved by the City, which approval the City may not

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unreasonably withhold. However, the City will be deemed to have approved each
extension exercised by the Company if the Company is in compliance with the
lease terms. Each lease grants the City the right to change or cancel the
lease or to relocate the Company's mooring locations for right-of-way, sewer
or flood wall construction purposes. Each lease, except the "Admiral" lease,
allows the City to terminate the lease for any municipal use, including the
economic development of a designated portion of the central river front area
of St. Louis, where the lease sites are located. The City is also permitted
to terminate any lease if the Company does not operate at the leased moorings
for 12 consecutive months.

The Company is currently discussing with the City certain development plans
which would permit the Company to relocate the "Admiral" to a more
advantageous mooring site north of its current site. Such potential mooring
site is less susceptible to flooding, less congested, and provides for
improved patron access and parking.

Competition is intense in the St. Louis market area. There are presently
five other casino companies operating in the market area and competing for
local customers. Two of these are Illinois casino companies operating single
casino vessels on the Mississippi River, one directly across the Mississippi
from the "Admiral" and the second 20 miles upriver in Alton, Illinois. There
are three Missouri casino companies, each of which operates two casino vessels
approximately 20 miles west of St. Louis on the Missouri River. Two of the
three Missouri casino companies opened in March 1997. Riverboats in each of
the states, Illinois and Missouri, have competitive advantages/disadvantages
resulting from gaming regulations in their respective states. While Missouri
regulations do not require the vessels to actually cruise, simulated cruising
requirements are imposed which allow entry on a vessel for only a 45 minute
period every two hours. Those competitors having two casino vessels can
alternate hourly boarding times and provide virtually continuous boarding for
guests. Thus, they have a distinct competitive advantage over the Company,
which has only one vessel, the "Admiral." Illinois casino vessels are
required to cruise, thereby limiting ingress and egress to the casinos. In
addition, Missouri regulations limit the loss per cruise per passenger by
limiting the amount of chips or tokens a guest may purchase to $500 per two-
hour gaming session. The lack of a statutory loss limit on Illinois casinos
allows them to attract higher stake gamblers. Additionally, their guests are
not burdened with the administrative requirements related to the loss limits.
Any change in the legislation related to these requirements could have a
positive or negative impact on the competitive environment.

The Company has operated dinner cruise, excursion and sightseeing riverboats
on the Mississippi River at St. Louis since 1985. The Company currently owns
and operates two such vessels, each with a capacity of approximately 350
passengers.

Vessels Owned/Chartered

In addition to the vessels presently used in its gaming operations, the
Company owns the "President Casino New Yorker" (formerly the "Majestic Star").

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The "President Casino New Yorker" is a 308 foot long sea-worthy passenger boat
which the Company had intended to use in a Gary, Indiana gaming development
which was subsequently abandoned. On August 15, 1995, the Company entered
into a charter agreement with its former Indiana partner ("Barden") to lease
the "President Casino New Yorker," without gaming equipment, for a five-year
term (which term was cancelable at any time by Barden upon 180-day advance
written notice) at an annual rental fee of $1.5 million for the first two
years and for fair market value thereafter. The charter commenced in May 1996
and ended in February 1998. The Company is reviewing its options relating to
the redeployment of the vessel to a new gaming jurisdiction, or its lease or
sale. See "Potential Growth Opportunities-New York, New York."

The Company also owns the "President Casino-Mississippi", previously
utilized at the Company's Biloxi and Davenport operations. The "President
Casino-Mississippi" is 292-feet long and 65-feet wide, contains 22,000 square
feet of gaming space on three decks and will accommodate approximately 620
slot machines and 40 table games. Gaming can be conducted on all three of the
vessel's decks. The Company is currently seeking to sell or lease this
vessel.

Potential Growth Opportunities

The Company continues to selectively explore gaming developments in current
and emerging gaming markets. Pursuit of such opportunities by the Company is
dependant upon a number of economic and regulatory factors including the
Company's ability to secure required federal, state and local governmental
licenses and approvals and the availability of financing for such projects on
acceptable terms. In addition, the Company is subject to intense competition
for the development of new gaming opportunities from companies that have
significantly greater financial, marketing and other resources than the
Company. Accordingly, there can be no assurance that the Company will be able
to successfully pursue other gaming opportunities or recover its investment in
any such new opportunities.

Biloxi, Mississippi

As discussed in "Current Operations-Biloxi, Mississippi," the Company
purchased certain real estate and improvements in July 1997 for $40.5 million
in Biloxi. The property comprises approximately 260 acres and includes a
marina, two hotels and an adjacent 18-hole golf course. The marina is the
current site of the Company's Biloxi operations. The Company is currently
developing a master plan for this real estate. The master plan includes the
development of a full-scale luxury destination resort offering an array of
entertainment attractions in addition to gaming. Management believes with its
beachfront location and contiguous golf course, this is the best site for such
a development in the rapidly growing Gulf Coast market. It is also uniquely
qualified to be a multi-casino facility.

New York, New York

In January 1998 the Company submitted to the New York City Gambling Control

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Commission the appropriate applications to operate a "cruise-to-nowhere"
vessel from New York City.

The New York City Gambling Control Commission was established in 1997 to
regulate potential "cruise-to-nowhere" operations originating from New York
City. The Commission's regulatory authority encompasses the review of license
applications, performance of background checks and the issuance of licenses,
among other areas. It is not known at this time whether the Company will
receive a license and, if so, when it would be issued. The Company received
notification in April 1998 that the Commission was not prepared to issue a
provisional license.

With extensive gaming and marine experience through the Company's three
existing licensed riverboat and dockside casino operations, the Company
believes it is uniquely qualified to pursue this significant opportunity in
the New York City market.

The Company owns the 308-foot deep-water vessel, "President Casino New
Yorker," which would be available for redeployment in New York should the
Company receive a license. The Company believes that "President Casino New
Yorker" is one of the best vessels available for a "cruise-to-nowhere" casino
operation. The Company has committed approximately $4.0 million of capital
for additions to the vessel and gaming equipment and has spent $1.3 million
(of which $0.2 million was spent in fiscal 1998) on development costs relating
to the proposed New York operation.

While the Company continues to pursue a New York City license it also
continues to review alternate uses for the vessel, including the sale or lease
of the vessel.

Philadelphia, Pennsylvania

In December 1993, the Company entered into an agreement for the rights to
utilize an 18-acre river front site in Philadelphia, Pennsylvania (the
"Philadelphia Property") either through entering a long-term lease on the
property or, under certain conditions, purchasing the property at its
determined fair market value. The Company also acquired an option to lease a
city-owned pier which is located on property immediately contiguous to the
Philadelphia Property (the "Pier"). The Company believes that the
Philadelphia Property is a prime gaming site because it is readily accessible
from major highways and will permit adequate parking and room for additional
development. The Company entered into the option agreements in anticipation
of the legalization of gaming in Pennsylvania. The agreement prohibits the
Company from owning or managing any gaming facility in Philadelphia, other
than a facility to be located on the Philadelphia Property.

The lessor of the Philadelphia Property also assigned (the "Assignment") to
the Company all of the lessor's rights, title and interest under an option
agreement with the City of Philadelphia which provides that the lessor may
enter into a 99-year lease of the Pier.

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During fiscal 1996, based upon developments which indicated an uncertainty
as to the passage of riverboat gaming legislation in Pennsylvania prior to the
expiration of the initial option agreement, the Company wrote-off the
accumulated cost of the option of $11.0 million.

On May 7, 1996, the Company entered into a separate agreement to secure
additional lease rights with respect to the same property. As part of the
agreement, the Company paid $2.0 million to secure the right to purchase
additional options for five separate periods extending from January 1, 1997
through December 31, 1999. The first option period covered the twelve-month
period January 1 through December 31, 1997. The four remaining option periods
are for subsequent six-month intervals and requires the Company to pay $0.3
million per month through the option period. Upon the exercise of any option,
the Company would begin a ten-year lease with five (5), five (5) year
extensions available. If the Company exercises this option, the Company will
be obligated to pay annual rent based upon a combination of fixed minimum
payments or a percentage of the Company's "net gaming win" (as defined in the
lease agreement), but in no event will such minimum annual rent be less than
$3.5 million. During the option period and the lease period, the Company will
be obligated to pay all maintenance costs, taxes and insurance with respect to
the property.

In December 1996, the Company modified and exercised its option agreement to
secure the above lease rights for the period January 1, 1997 through December
31, 1997. Pursuant to the modified option agreement, the Company remitted
$1.2 million.

In September 1997, the Company further modified its lease and option
agreements. Pursuant to these modifications, the Company remitted $1.2
million for the second preliminary term extension for the period from January
1, 1998 through September 30,1998. This term extension may be extended at the
election of the Company through December 31, 1998 on a month to month basis
for $0.1 million per month beginning October 1998. The modified agreement
also calls for additional payments of up to $2.1 million if a new gaming
company is obtained for a second gaming site at the location. The Company
also extended its right to secure additional option periods through December
31, 2000. The remaining terms and conditions of the agreements were
substantially unchanged.

Massena, New York

In October 1993, the Company entered into a joint venture with an unrelated
third party to manage a casino to be owned by the Mohawk Indian Tribe on its
reservation near Massena, New York. The Company, through a wholly-owned
subsidiary, owned a 50% interest in the joint venture. During January 1998,
the Company sold its interest in the joint venture for $0.4 million and
certain contingent payments. Under the terms of the agreement, the Company
will receive an additional $0.6 million upon the opening of the proposed
casino and up to an additional $1.0 out of certain cash flows, if any, from
the casino. However, there can be no assurance that any casino will open or
such payments will be made.

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Marketing and Sales

The Company targets its marketing efforts at middle income recreational
gaming customers. The Company relies on a mix of billboards, television,
radio and print advertisements in both the local and regional markets to
attain a high recognition level. The Company also has the "Captain's Club"
preferred slot player program, together with electronic slot player tracking,
a table player tracking and rating system, hosts, gaming tournaments, special
events, direct mailing, telemarketing and other casino marketing techniques to
identify, recognize and cultivate frequent and better casino customers. This
effort is supported by direct marketing, a targeted trade advertising schedule
and attendance at industry trade shows and sales gatherings.

Regulatory Matters

Gaming Regulations

General. The ownership and operation of gaming facilities are subject to
extensive state and local regulation. The Company's Davenport gaming
operations are regulated by the Iowa Racing and Gaming Commission, the
Company's Biloxi gaming operations are regulated by the Mississippi Gaming
Commission and the Company's St. Louis gaming operations are regulated by the
Missouri Gaming Commission. As a condition to obtaining and maintaining a
gaming license, the Company must submit detailed financial, operating and
other reports to each such Commission, each of which has broad powers to
suspend or revoke licenses. In addition, substantially all of the Company's
material transactions are subject to review and/or approval by the various
regulatory bodies. Any person acquiring 5% or more of the Common Stock or of
the equity securities of any gaming entity must be found suitable by the
appropriate regulatory body.

Various license fees and taxes are payable to the jurisdictions in which the
Company conducts gaming operations. These taxes are calculated in various
ways, are generally payable either weekly, monthly, quarterly or annually and
may be based upon (i) a percentage of the gross gaming revenues received by
the casino operation, (ii) the number of slot machines operated by the casino,
(iii) the number of table games operated by the casino and/or (iv) passenger
counts. A casino entertainment tax is also paid by the licensee where
entertainment is furnished in connection with the selling of food or
refreshments. The Company estimates that state and local gaming taxes for the
Company's Biloxi operation approximate 12% of net gaming win. In addition,
certain other fees are imposed. Iowa has a graduated tax of approximately 20%
of net gaming win and the City of Davenport charges additional fees on a per
customer and per boat basis. The Company's Davenport casino operations is
required annually to pay the City of Davenport a base amount of $819 plus 82.2
cents per passenger over 1,117,579 passengers. Both the base amount and per
passenger charges related to the docking fees are subject to an annual 4%
escalator. The Missouri gaming legislation imposes a tax of 20% of adjusted
gross receipts from gaming activities and a $2.00 per passenger fee.

The Company, its employees and other individuals or entities having material

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relationships with the Company are required to obtain and hold various
licenses and approvals in Iowa, Mississippi and Missouri and will most likely
be required to do so in each other jurisdiction in which the Company may
conduct a gaming operation. If a gaming authority were to find a director,
officer or key employee unsuitable for licensing or unsuitable to
continue to have a relationship with the Company, the Company would have to
suspend or dismiss such person. The failure of the Company, or any of its key
personnel, to obtain or retain a license in any jurisdiction could have a
material adverse effect on the Company and its prospects or its ability to
obtain or retain licenses in other jurisdictions. Generally, regulatory
authorities have broad discretion in granting, renewing and revoking licenses.
Moreover, any jurisdiction into which the Company may seek to expand its
gaming operations may require the Company to apply for and obtain regulatory
approvals with respect to the construction, design and operational features of
the vessel it intends to utilize. Obtaining such licenses and approvals may
be costly, time consuming and cannot be assured. Riverboat as well as certain
dockside operations are also subject to stringent regulation by the U.S. Coast
Guard and to marine insurance requirements.

The Company may be subject to substantial fines for each violation of a
gaming law or regulation. In addition, a violation of a gaming law or
regulation may subject a license to suspension or revocation. Limitation,
conditioning or suspension of a gaming license could (and revocation of any
gaming license would) materially adversely affect the operations in that
jurisdiction.

In July 1996, a bill was passed by the U.S. Congress establishing a National
Gaming Impact and Policy Commission to conduct a comprehensive study of the
social and economic impacts of gambling in the United States and make
recommendations for changes to the policies governing gambling that the
Commission may deem appropriate. While it is not possible at this time to
predict the outcome of the Commission's deliberations, any further regulation
of gaming at the federal level would result in further regulation of the
Company's gaming operations which could have a material adverse impact on the
Company's future results of operations.

Mississippi Gaming Regulations. Gaming was authorized in Mississippi in
June 1990 but gaming operations did not commence until August 1992. The
ownership and operation of casino gaming facilities in Mississippi are subject
to extensive state and local regulation. The Company is registered as a
publicly traded holding company under the Mississippi Gaming Control Act and
its gaming operations are subject to the licensing and regulatory control of
the Mississippi Gaming Commission (the "Mississippi Commission") and various
local, city and county regulatory agencies.

Licenses to conduct gaming operations in the State of Mississippi are not
transferable and are required to be renewed on a periodic basis. Each issuing
agency may at any time revoke, suspend, condition, limit or restrict a license
or deny approval to own shares of stock in the Company or a gaming entity for
any cause deemed reasonable by such agency.

11
<PAGE> 13
The Mississippi Commission has the authority to require a finding of
suitability with respect to any stockholder regardless of such stockholder's
percentage of ownership. In this regard, the Company's Certificate of
Incorporation provides that the Company may redeem any shares of the Company's
capital stock held by any person or entity whose holding of shares may cause
the loss or non-reinstatement of a governmental license held by the Company.
Such redemption shall be at fair market value, as defined in the Company's
Certificate of Incorporation, regardless of the price the stockholder paid for
the shares. Mississippi law also contains a provision which requires the
Company to purchase for cash all shares of any stockholder found unsuitable by
the Mississippi Commission and requires such purchase to be made within ten
days of the finding of unsuitability. In either case, the stockholder is
required to pay all costs of investigation. In addition, any individual who
is found to have a material relationship to, or material involvement with, the
Company may be required to be investigated in order to be found suitable or to
be licensed as a business associate. Key employees, controlling persons or
others who exercise significant influence upon the management or affairs of
the Company may also be deemed to have such a relationship or involvement.

In connection with its license, the Company and President Mississippi are
required to submit detailed financial, operating and other reports to the
Mississippi Commission. Substantially all loans, leases, sales of securities
and similar financing transactions entered into by President Mississippi must
be reported to or approved by the Mississippi Commission. In addition, the
Mississippi Commission regulates the Company's ability to engage in certain
types of transactions. For example, a change in control of the Company or a
plan of reorganization (as defined in the regulations) by the Company may not
occur without the prior approval of the Mississippi Commission. Similarly,
Mississippi gaming legislation requires that each person employed by President
Mississippi as a gaming employee obtain a valid work permit issued by the
Mississippi Commission.

The Mississippi Commission has the authority to approve or disapprove the
Company's future operations outside of Mississippi. The Company's Davenport
operations were reviewed and approved during its Biloxi licensing process. On
May 24, 1993, the Company received all requisite approvals from the
Mississippi Commission to conduct gaming operations in the jurisdictions in
which it was then operating or proposing to operate without further action by
the Mississippi Commission. The Company's current non-Mississippi gaming
operations do not require re-approval by the Mississippi Commission except as
part of the Company's application for renewal of its license. The Mississippi
regulations require that the Company notify the Mississippi Commission prior
to conducting gaming operations in any additional jurisdictions and provide
certain documentation to the Mississippi Commission relating to proposed
gaming operations.

Iowa Gaming Regulations. In 1989, the State of Iowa enacted The Excursion
Gambling Act which legalized riverboat gaming on the Mississippi and Missouri
Rivers and certain other waterways located in Iowa. Pursuant to The Excursion
Gambling Act, the Iowa Racing and Gaming Commission (the "Iowa Commission")
was established with jurisdiction to regulate all gaming operations in Iowa.

12
<PAGE> 14
In May 1994, the Iowa gaming laws were amended to remove all per passenger
loss limitations, size of bet limitations and restrictions on the percentage
of space on a riverboat which may be utilized for gaming and authorized the
Iowa Commission to set cruising schedules for riverboats and to permit
dockside gaming throughout the year.

The ownership and operation of gaming facilities in Iowa are subject to
extensive state laws, regulations of the Iowa Commission and various county
and municipal ordinances concerning, among other things, the responsibility,
financial stability and character of gaming operators and persons financially
interested or involved in gaming operations. All gaming operators must be
approved and licensed by the Iowa Commission. Initial gaming licenses are
issued for not more than three years and are subject to annual renewals
thereafter. The Iowa Commission has broad discretion with respect to such
renewals. Licenses issued by the Iowa Commission may not be transferred to
another person or entity. The Company is required to submit detailed
financial and operating reports to the Iowa Commission. Contracts in excess
of $50,000 must be submitted to and approved by the Iowa Commission.

Gaming is permitted only on riverboats which recreate, as nearly as
practicable, Iowa's riverboat history and have a capacity for at least 250
persons. In addition, the licensee must utilize Iowa resources, goods and
services in the operation of the riverboat. An excursion gambling boat must
operate at least one excursion each day for 100 days during the excursion
season from April 1 through October 31. Excursions consist of a minimum of
two hours. While an excursion gaming boat is docked, passengers may embark or
disembark at any time.

Pursuant to its rule-making authority, the Iowa Commission requires
officers, directors and certain key employees of the Company to be licensed by
the Iowa Commission. In addition, anyone having a material relationship or
involvement with the Company may be required to be found suitable or to be
licensed. The Iowa Commission has jurisdiction to disapprove a change in
position by such officers or key employees and the power to require the
Company to suspend or dismiss officers, directors or key employees or sever
relationships with other persons who refuse to file appropriate applications
or whom the Iowa Commission finds unsuitable to act in such capacities.

The Iowa Commission may also require any individual who has a material
relationship with the Company to be investigated and licensed or found
suitable. Any person who acquires 5% or more of the Company's equity
securities must be approved by the Iowa Commission prior to such acquisition.
The applicant stockholder is required to pay all costs of such investigation.

Missouri Gaming Regulations. Gaming on the Missouri and Mississippi Rivers
in the State of Missouri was originally authorized pursuant to a statewide
referendum on November 3, 1992. On April 29, 1993, Missouri enacted revised
legislation (the "Missouri Gaming Law") which amended the existing
legislation. The Missouri Gaming Law also established the Missouri Gaming
Commission (the "Missouri Commission"), which is responsible for the licensing
and regulation of gaming in Missouri and has the discretion to approve license

13
<PAGE> 15
applications for both permanently moored ("dockside") riverboat casinos and
powered ("excursion") riverboat casinos.

On January 25, 1994, the Missouri Supreme Court held that games of chance,
including certain games authorized under the Missouri Gaming Law such as bingo
and keno, constituted "lotteries" and were therefore prohibited under the
Missouri Constitution. On April 5, 1994, Missouri voters defeated the
adoption of a constitutional amendment which would have exempted excursion
boats and floating facilities from such constitutional prohibition on
lotteries. In a statewide election on November 8, 1994, Missouri voters
approved the adoption of an amendment to the Missouri Constitution which
authorizes both games of skill and games of chance, a measure virtually
identical to the one which was defeated in April 1994.

Under the Missouri Gaming Law, the ownership and operation of riverboat
gaming facilities are subject to extensive state and local regulation. The
Missouri Commission has broad discretion to revoke or suspend gaming licenses
and impose other penalties for violation of the Missouri Gaming Law and the
rules and regulations promulgated thereunder. Licenses issued by the Missouri
Commission to conduct gaming operations are subject to periodic renewals and
may not be transferred or pledged as collateral. The Company, its
subsidiaries and certain of its officers and employees are subject to various
regulations. The Company is prohibited from making a public issuance of debt
or equity or engaging in various other financial transactions without first
notifying the Missouri Commission at least 60 days prior to consummation of
such a transaction. The Missouri Commission may disapprove such issuance or
require such issuance to be delayed pending further investigation.

The Missouri Gaming Law imposes operational requirements on riverboat
operators, including a charge of two dollars per gaming customer that
licensees must pay to the Missouri Commission, a minimum payout requirement of
80% for slot machines, prohibitions against providing credit to gaming
customers (except for the use of credit cards and checks) and a requirement
that each licensee reimburse the Missouri Commission for all costs of any
Missouri Commission staff necessary to protect the public on the licensee's
riverboat. Licensees must also submit audited quarterly financial reports to
the Missouri Commission and pay the associated auditing fees. The Missouri
Gaming Law provides for a loss limit of $500 per person per excursion.
Although the Missouri Gaming Law does not limit the amount of riverboat space
that may be used for gaming, the Missouri Commission is empowered to impose
such space limitations through the adoption of rules and regulations.

With respect to the availability of dockside gaming, which may be more
profitable than excursion gaming, the Missouri Commission is empowered to
determine on a site by site basis where such gaming is appropriate and shall
be permitted.

Nongaming Regulations

The Company is subject to certain federal, state and local safety and health
laws, regulations and ordinances that apply to non-gaming businesses

14
<PAGE> 16
generally, such as the Americans with Disabilities Act, the Clean Air Act,
Clean Water Act, Occupational Safety and Health Act, Resource and Conservation
Recovery Act and the Comprehensive Environmental Response, Compensation and
Liability Act. The Company has not made material expenditures with respect to
such laws and regulations. However, the coverage and attendant compliance
costs associated with such laws, regulations and ordinances may result in
future additional costs to the Company's operations. For example, in 1990 the
U.S. Congress enacted the Oil Pollution Act to consolidate and rationalize
mechanisms under various oil spill response laws. The Department of
Transportation has proposed regulations requiring owners and operators of
certain vessels to establish through the U.S. Coast Guard evidence of
financial responsibility in the amount of $5.5 million for clean-up of oil
pollution. This requirement would be satisfied by either proof of adequate
insurance (including self-insurance) or the posting of a surety bond or
guaranty.

Applicable provisions of the Local Option Alcoholic Beverage Control Law of
the State of Mississippi require that each employee of a licensed retailer who
handles alcoholic beverages obtain a valid permit issued by the Alcoholic
Beverage Control Division of the Mississippi State Tax Division. All
employees of President Mississippi who are required to obtain such permits
have either obtained such permits or have completed applications therefor and
are permitted to act in the positions for which they were hired pending
approval of such applications.

Additionally, the Environmental Protection Agency ("EPA") has requested
certain information regarding compliance by President Missouri with federal
environment laws in connection with the operation of the "Admiral" in St.
Louis. See "Legal Proceedings."

All vessels operated by the Company must comply with U.S. Coast Guard
requirements as to safety and must hold a Certificate of Inspection. These
requirements set limits on the operation of the vessels and require that each
vessel be operated by a minimum complement of licensed personnel. Loss of the
vessel's Certificate of Inspection would preclude its use as a riverboat.
Every five years, excursion vessels must be dry docked for an inspection of
the outside of the hull resulting in a loss of service which may have an
adverse effect on the Company. Less stringent rules apply to permanently
moored vessels.

Employees

As of February 28, 1998, the Company had approximately 2,800 employees.

Hotel Employees and Restaurant Employees Local 74 and Service Employees
International Union, AFL-CIO (the "Unions") have been engaged since July 1995
in an effort to organize certain service and maintenance employees of
President-Missouri. The Unions failed to receive a majority of the votes cast
in the first election, and ultimately withdrew the petition. Following a
second election, conducted in November 1996, both the Company and the Unions
filed objections to the election. The National Labor Relations Board (the

15
<PAGE> 17
"NLRB") ruled that the Unions interfered with the election and directed that a
third election be held. The third election was conducted on January 12, 1998,
at which time the Unions received a majority of the ballots cast. The Company
filed objections to certain conduct by the Unions associated with the
election; the Regional Director overruled those objections, and the Company
appealed to the NLRB. Both parties await rulings from the NLRB on these
issues. Also pending before the NLRB are certain charges filed by the Unions
alleging the Company interfered with employee rights under the National Labor
Relations Act. In addition, the Unions have filed certain other unfair labor
practice charges which are currently under investigation by the NLRB Regional
Director. One such charge includes a claim for back pay for an employee. The
NLRB has not yet determined whether to proceed with respect to such charges.

Item 3. Legal Proceedings.

On January 16, 1997 a case entitled "Whalen v. John E. Connelly, J. Edward
Connelly and Associates, Inc., President Casinos, Inc. and PRC-Iowa, Inc." was
filed in the Iowa District Court for Scott County by Michael L. Whalen
("Whalen"), who is a five percent limited partner in TCG. Whalen filed this
lawsuit after accepting from Della III, Inc., the former general partner,
shares of Common Stock and cash to which he was determined to be entitled
pursuant to a previous judgment. Whalen claims in this lawsuit that because
he asked for the stock and cash while he was appealing the judgment in a
previous lawsuit and was not given the stock or cash until after the judgment
was affirmed, the named defendants committed the tort of conversion. Whalen
seeks as damages the difference in the value of the stock on the date of its
"highest valuation" and the date he accepted the stock in 1996. The Company,
after consultation with legal counsel, believes this lawsuit is without merit
and intends to defend this action vigorously. The District Court dismissed
the claims against the Company and Mr. Connelly, and the case is set for trial
in December 1999. Although the results of litigation are inherently
uncertain, the Company does not believe this matter will have a material
adverse effect on the Company's financial condition or results of operations.

In 1994, William H. Poulos filed a class-action lawsuit in the United States
District Court for the Middle District of Florida against over thirty-eight
(38) casino operators, including the Company, and certain suppliers and
distributors of video poker and electronic slot machines. This lawsuit was
followed by several additional lawsuits of the same nature against the same,
as well as additional, defendants, all of which have now been consolidated
into a single class-action pending in the United States District Court for the
District of Nevada. Following a court order dismissing all pending pleadings
and allowing the plaintiffs to re-file a single complaint, a complaint has
been filed containing substantially the same claims, alleging that the
defendants fraudulently marketed and operated casino video poker machines and
electronic slot machines, and asserting common law fraud and deceit, unjust
enrichment and negligent misrepresentation. Various motions were filed by the
defendants seeking to have this new complaint dismissed or otherwise limited.
On December 19, 1997, the Court, in general, ruled on all motions in favor of
the plaintiffs. Discovery as to the appropriateness of the named plaintiffs

16
<PAGE> 18
as class representatives has commenced. Although the outcome of litigation is
inherently uncertain, management, after consultation with legal counsel,
believes the action is without merit and does not expect the lawsuit will have
a material adverse effect on the Company's financial position or results of
operations.

On April 11, 1997, an action captioned "American Gaming & Entertainment,
Ltd. v. President Mississippi Charter Corporation and President Riverboat
Casino-Mississippi, Inc." was filed in the Chancery Court of Harrison County,
Mississippi by American Gaming & Entertainment, Ltd. ("AGEL"). AGEL is the
subject of bankruptcy proceedings pending in the United States Bankruptcy
Court for the Southern District of Mississippi, (the "Bankruptcy Court") and
is the owner of the "Biloxi Barge" which is utilized in connection with the
Company's Biloxi operations pursuant to the Initial Charter Agreement between
AGEL and Charter Corp. The action filed by AGEL alleges that the President
Mississippi and Charter Corp. have not complied with their respective
obligations under the Initial Charter Agreement. The Company believes that
AGEL breached its obligations under the Initial Charter Agreement and, in
connection therewith, withheld a portion of the charter payments due to AGEL
under the Initial Charter Agreement. In October of 1997, Charter Corp. and
other entities claiming ownership interest in the "Biloxi Barge" entered into
an agreement in writing (the "Term Sheet") that stated, among other things,
the following: (a) that AGEL and Charter Corp. would dismiss all litigation
between them; (b) that Charter Corp. would make a lump sum payment of $1.5
million in satisfaction of AGEL's claims for unpaid rent under the Initial
Charter Agreement; and (c) that AGEL and Charter Corp. would amend the Initial
Charter Agreement to reduce Charter Corp.'s monthly rental to $215,000 (the
"Revised Charter Agreement"), effective December 1, 1997. The Term Sheet
provides that the foregoing will occur within ten days after the Bankruptcy
Court's approval of the Term Sheet becomes final (the "Closing Date"). Thus,
Charter Corp. and AGEL agreed that Charter Corp.'s payments would begin to
accrue again on December 1, 1997 at a monthly rate of $215,000 and that
Charter Corp. would not have to make the rental payments until the Closing
Date. On January 9, 1998, the Term Sheet was approved by the Bankruptcy Court
but, subsequently, appealed by one of the parties regarding the manner of
distribution which prevented finalization of this dispute and the Term Sheet.
There can be no assurance that the Term Sheet approved by the Bankruptcy Court
will become final or will not be appealed by an interested party. The
Company's management believes, based on advice from legal counsel, that the
Term Sheet is an enforceable contract which will become final.

17
<PAGE> 19
may be incurred in this matter. Based upon the Company's discussions with the
U.S. Attorney's Office and the results of the Company's internal investigation
of this matter, management does not believe that the investigation will result
in any further monetary or other penalties which would have a material adverse
effect on the Company's financial condition or results of operations, or which
would have any material adverse impact upon the gaming licenses of the Company
or its subsidiaries.

The Company serves alcoholic beverages at its gaming facilities and has from
time to time been the subject of claims related thereto. Although the Company
believes it maintains adequate insurance to cover these types of claims, it is
often difficult to predict the outcome of such litigation and the amount of
damages which may be awarded in these types of cases. The Company does not
believe that the outcome of any pending litigation related to the Company's
serving of alcoholic beverages will have a material adverse effect on its
financial position or results of operations.

The Company is also from time to time party to litigation, which may or may
not be covered by insurance, arising in the ordinary course of its business.
Based on the advise of legal counsel, the Company does not believe that the
outcome of such litigation will have a material adverse effect on the Company.

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

There were no matters submitted to a vote of security holders during the
fourth quarter of fiscal 1998.

Item A.

Executive Officers of the Company.

The executive officers of the Company, together with their respective ages
and positions with the Company, are set forth below.

Name Age Positions with the Company
---- --- --------------------------
John E. Connelly 72 Chairman of the Board and Chief
Executive Officer
John S. Aylsworth 47 President, Chief Operating
Officer and Director
Terrence L. Wirginis 46 Vice Chairman of the Board,
Vice President-Marine and
Development and Director
James A. Zweifel 52 Executive Vice President and
Chief Financial Officer
- ----------------

Mr. Connelly has served as Chairman and a director of the Company and its
predecessors since their inception. Mr. Connelly has also served as Chief
Executive Officer of the Company from its inception until March 1995 and since
July 1995. Mr. Connelly served as President from July 1995 until July 1997.

18
<PAGE> 20
Entities controlled by Mr. Connelly have owned and operated the Gateway
Clipper Fleet in Pittsburgh from its inception in 1958 through 1996, the
Station Square Sheraton Hotel in Pittsburgh from 1981 to 1998 and the
Broadwater Beach Resort from 1992 until such time as the purchase of the
property by a limited liability company in which the Company and Mr. Connelly
have interests. In 1984, Mr. Connelly founded World Yacht Enterprises, a
fleet of dinner cruise, sightseeing and excursion boats in New York City. In
1985, he started Gateway Riverboat Cruises in St. Louis, a predecessor to the
Company. Mr. Connelly is also the founder, owner and Chief Executive Officer
of J. Edward Connelly Associates, Inc., a marketing firm based in Pittsburgh,
Pennsylvania.

Mr. Aylsworth has been President and Chief Operating Officer since July
1997, Executive Vice President and Chief Operating Officer of the Company from
March 1995 until July 1997 and a director of the Company since July 1995.
Prior to joining the Company, Mr. Aylsworth served as an executive officer for
Davis Companies, located in Los Angeles, California. From January 1992
through October 1994, Mr. Aylsworth was Chief Executive Officer of The Sports
Club Company, a company which operates premier health and fitness facilities
in Los Angeles and Irvine, California. From February 1989 through December
1991, Mr. Aylsworth was Chief Financial Officer of SpectreVision Co., a
Dallas, Texas based supplier of in-room entertainment and interactive
information systems in the hotel industry.

Mr. Wirginis has served as Vice Chairman of the Board since July 1997. Mr.
Wirginis has served as Vice President, Marine and Development since August
1995 and as a director since the Company's inception. Mr. Wirginis provided
consulting services to the Company with respect to the Company's marine
operations and the development and improvement of the Company's facilities
since its inception until August 1995. The Company has been advised that Mr.
Wirginis devotes an insubstantial amount of his time to Gateway Clipper Fleet,
a company in which he has an ownership interest. Mr. Wirginis is the grandson
of Mr. Connelly.

Mr. Zweifel has been Executive Vice President and Chief Financial Officer of
the Company since July 1997. Mr. Zweifel served as Vice President and Chief
Financial Officer from November 1995 until July 1997. Prior to joining the
Company, Mr. Zweifel was Executive Director of FANS, Inc., the organization
formed to bring the Los Angeles Rams to St. Louis. From July 1992 to November
1994, Mr. Zweifel was Vice President and Controller of Clark Refining and
Marketing. From July 1988 to July 1992, Mr. Zweifel was Vice President, Chief
Financial Officer and Secretary for Engineered Support Systems, a manufacturer
of ground support systems.

PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.

The Company's Common Stock has been traded in the over-the-counter market
and listed on the Nasdaq National Market under the symbol "PREZ" since

19
<PAGE> 21
December 11, 1992. Prior thereto, there was no established public trading
market for the Common Stock. The following table sets forth, for the fiscal
quarters indicated, the high and low sale prices for the Common Stock, as
reported by the Nasdaq National Market:

High Low
------ -----
Fiscal 1998
First Quarter................ $ 4.8750 $ 3.0000
Second Quarter............... $ 5.6250 $ 2.0625
Third Quarter................ $ 7.0000 $ 2.8125
Fourth Quarter............... $ 4.7500 $ 2.8750

High Low
------ -----
Fiscal 1997
First Quarter................ $16.1250 $ 8.2500
Second Quarter............... $13.5000 $ 8.2500
Third Quarter................ $ 9.3750 $ 4.3125
Fourth Quarter............... $ 5.6250 $ 3.3750

On May 27, 1998, there were approximately 1,613 holders of record of the
Company's Common Stock.

The Company has never paid any dividends on its Common Stock. The Company
anticipates that for the foreseeable future all earnings, if any, will be
retained for the operation and expansion of its business. Accordingly, the
Company does not anticipate paying any cash dividends in the foreseeable
future. The payment of dividends by the Company is restricted under the terms
of the indenture governing the Company's Senior Exchange Notes due 2001. See
"Management's Discussion and Analysis of Financial Position and Results of
Operations-Liquidity and Capital Resources."

20
<PAGE> 22
Item 6. Selected Consolidated Financial Data.

The following selected financial data of the Company is qualified by
reference to and should be read in conjunction with the consolidated financial
statements and notes thereto included elsewhere herein. The selected
consolidated statement of operations and balance sheet data are derived from
the Company's consolidated financial statements certain of which are included
elsewhere herein.
<TABLE>
<CAPTION>
Years Ended February 28/29, (1)
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
(in thousands, except share data)
<S> <C> <C> <C> <C> <C>
Consolidated Statement of Operations Data:
Total operating revenues.................. $187,535 $187,027 $192,685 $160,350 $107,099

Operating income (loss)................... $ 2,827 $ 3,784 $(21,471) $(13,224) $ 11,593

Income (loss) before extraordinary item
and cumulative effect of a change
in accounting principle (2)............. $(15,037) $ (8,785) $(58,150) $(16,179) $ 10,089

Net income (loss)......................... $(15,037) $ (8,785) $(58,150) $(20,232) $ 10,691

Basic and dilutive income (loss)
per share............................... $ (2.99) $ (1.74) $(11.55) $ (4.02) $ 2.12

Consolidated Balance Sheet Data:
Total assets.............................. $187,256 $155,904 $168,024 $234,275 $258,615
Long-term liabilities..................... $136,084 $104,862 $106,082 $112,917 $ 67,822
Stockholders' equity...................... $ 8,684 $ 23,721 $ 32,506 $ 90,656 $108,924
</TABLE>

(1) Gaming operations commenced in Davenport, Iowa on April 1, 1991, in
Biloxi, Mississippi on August 13, 1992, in Tunica, Mississippi on December 6,
1993 and in St. Louis, Missouri on May 27, 1994. On July 8, 1994, the
Company's Tunica, Mississippi operations were terminated.

(2) During fiscal year 1995, the Company realized a $4,053 extraordinary loss
on the exchange of subordinated notes. During fiscal year 1994, the Company
recognized the cumulative effect of changing to a different method of
accounting for income taxes of $602.

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.

The following discussion, which covers fiscal years 1996 through 1998,
should be read in conjunction with the consolidated financial statements of
the Company and the separate financial statements of The Connelly Group, L.P.
and PRC Holdings Corporation and the notes thereto included elsewhere in the
report.

<PAGE> 23
Overview

The Company's operating results are affected by a number of factors,
including competitive pressures, changes in regulations governing the
Company's activities, the results of pursuing various development
opportunities and general weather conditions. Consequently, the Company's
operating results may fluctuate from period to period and the results for any
period may not be indicative of results for future periods.

--Competition

Intensified competition for patrons continues to occur at each of the
Company's properties.

Since gaming began in Biloxi in August 1992, steadily increasing competition
along the Mississippi Gulf Coast, including New Orleans and elsewhere in
Louisiana and Mississippi, has had an adverse effect on the results of
operations in Biloxi. Several large hotel/casino complexes have been built in
recent years and a new large project is under construction and is scheduled to
open in early 1999. There are currently twelve casinos operating in this area
and a thirteenth under construction. The replacement of the smaller
"President Casino-Mississippi" by the "Biloxi Barge," in July 1995, improved
the Company's presence in Biloxi. However, it is apparent that it will
continue to be more difficult to compete as larger casino complexes enter the
Biloxi market, many being built by competitors having substantially greater
name recognition and financial and marketing resources than the Company. See
"New Operation" for details regarding a destination resort the Company is
developing in Biloxi, Mississippi.

Within a 25-mile radius of the Quad Cities, the Company's Davenport
operation competes with three other casino operations. New casinos, expansion
and increased marketing by these competitors continues to escalate, resulting
in increased promotional and marketing costs.

--Regulatory Matters

Differences in gaming regulations in the St. Louis market between Illinois
and Missouri operators give competitive advantages/disadvantages to the
various operators. While Missouri regulations do not require the vessels to
actually cruise, simulated cruising requirements are imposed which restrict
entry to a vessel to a 45 minute period every two hours. Those competitors

<PAGE> 24
having two casino vessels can alternate hourly boarding times and provide
virtually continuous boarding for guests. Thus, they have a distinct
competitive advantage over the Company, which has only one vessel, "The
Admiral." Illinois casino vessels are required to cruise, thereby limiting
ingress and egress to the casinos. In addition, Missouri regulations limit
the loss per cruise per passenger by limiting the amount of chips or tokens a
guest may purchase during each two-hour gaming session to $500. The lack of a
statutory loss limit on Illinois casinos allows them to attract higher stake
gamblers; additionally, their guests are not burdened with the administrative
requirements related to the loss limits. Any change in the legislation
related to these requirements could have a positive or negative impact on the
competitive environment in the St. Louis market.

A recent ruling by the Missouri Supreme Court has brought into question the
legality of certain Missouri riverboat gaming operations. Several of the
Company's St. Louis competitors have developed their gaming facilities in
shallow basins filled with piped-in river water, commonly referred to as
"boats in moats." The recent ruling requires gaming boats to be "solely over
and in contact with the surface" of the rivers on which they operate. At this
time it is not evident what effect, if any, the ruling may have on competitors
of the Company located in Missouri. The Company's St. Louis operation on the
"Admiral" does meet the new standard, and its gaming license is not affected
by this ruling.

In Iowa, an excursion gambling boat must operate at least one excursion each
day for 100 days during the excursion season from April 1 through October 31.
Excursions consist of a minimum of two hours. While an excursion gaming boat
is docked, passengers may embark or disembark at any time. As stated above,
Illinois boats are required to cruise. Any change in the Illinois legislation
related to these requirements could have a negative impact on the competitive
environment in the Davenport market.

The Company temporarily removed its casino vessel, the "President," from
service in Davenport (from November 12, 1995 to April 3, 1996) for its Coast
Guard mandated five-year hull inspection and to make certain improvements to
the facility. During such period, the Company temporarily replaced the
"President" with a smaller vessel, "President Casino-Mississippi," thereby
reducing Davenport's gaming square footage from approximately 37,000 square
feet to 21,000 square feet.

--Weather Conditions

The Company's operating results are susceptible to the effects of floods and
adverse weather conditions. On various occasions, the Company has temporarily
suspended operations as a result of such adversities. The Davenport casino
operations were temporarily suspended for thirteen days during April 1997, as
a result of flooding on the Mississippi River. Also as a result of flood
conditions, the Company temporarily suspended operations aboard the "Admiral"
in St. Louis for three days in May and eight days in June of 1996. Although
the Company was not forced to suspend its St. Louis operations during fiscal
1998, high waters caused reduced parking and a general public perception of

<PAGE> 25
diminished access to the casino which combined to negatively impact revenue
during the period.

--New Operation

On July 24, 1997, the Company, through a newly created subsidiary, President
Broadwater Hotel, LLC ("PBLLC"), purchased for $40.5 million certain real
estate and improvements located on the Gulf Coast in Biloxi, Mississippi from
an entity which was wholly-owned by John E. Connelly, Chairman, Chief
Executive Officer and principal stockholder of the Company. The property
comprises approximately 260 acres and includes two hotels, a 138-slip marina
and the adjacent 18-hole Sun Golf Course (collectively, the "Broadwater
Property"). The marina is currently the site of the Company's casino
operations in Biloxi and had been leased by the Company under a long-term
lease agreement. The Company invested $5.0 million in PBLLC. PBLLC financed
the purchase with $30.0 million of outside financing and issued a $10.0
million membership interest to the seller. Such financing is non-recourse to
the Company.

The Company is currently developing a master plan for this real estate. The
master plan includes the development of a full-scale luxury destination resort
offering an array of entertainment attractions in addition to gaming and would
include the demolition of the existing hotels. Management believes with its
beachfront location and contiguous golf course, this is the best site for such
a development in the rapidly growing Gulf Coast market. It is also uniquely
qualified to be a multi-casino facility.

-- Impairments and Write-offs

In October 1993 the Company entered into a joint venture with an unrelated
third party to manage a land-based gaming casino to be owned by the St. Regis
Mohawk Indian Tribe (the "Tribe.") In fiscal year 1995, due to uncertainty
related to various matters, including the execution of a management agreement
with the Tribe, the Company wrote-off its $4.1 million investment in this
project. In January 1998, the Company sold its rights to the St. Regis
development project for $0.4 million and certain contingent payments if a
casino is opened. Under the terms of the agreement, the Company will receive
an additional $0.6 million upon the opening of a proposed casino on the
Tribe's reservation near Massena, New York and up to an additional $1.0
million out of certain cash flows, if any, from the casino.

In December 1994, the Company entered into a joint venture to develop a
riverboat casino operation in Gary, Indiana. As a result of a number of
events the Company reexamined its participation in this joint venture, and on
June 30, 1995, transferred its entire interest in the venture to its partner.
In fiscal 1996, as a result of the decision to withdraw from the Gary, Indiana
development, the Company wrote-off its $1.1 million investment (included in
"equity loss in unconsolidated entities") and reduced the carrying value of
its vessel, "President Casino New Yorker" (formerly known as "Majestic Star"),
by $7.0 million to its then estimated market value. Also during fiscal 1996,
the Company was in negotiation to sell "President Casino-IV," an un unused

<PAGE> 26
gaming vessel it owned, and based on such negotiations, the Company wrote down
its value by $4.0 million.

In December 1993, the Company entered into a lease/purchase option agreement
covering an 18-acre riverfront site and a city-owned pier located immediately
contiguous to this property in Philadelphia, Pennsylvania. This option
agreement expired December 31, 1996. In fiscal year 1996, the Company wrote-
off its $11.0 million investment in this option due to the uncertainty as to
the timely passage of Pennsylvania riverboat gaming legislation prior to the
expiration of the option.

In December 1996, the Company modified and exercised a new option agreement
to secure the above Pennsylvania lease rights for the period January 1, 1997
through December 31, 1997. Pursuant to the modified option agreement, the
Company remitted $1.2 million. During the option period and the lease period,
the Company will be obligated to pay all maintenance costs, taxes and
insurance with respect to the property.

In September 1997, the Company further modified its lease and option
agreements for its lease rights to 18 acres of river front property in the
Penn's Landing area of Philadelphia, Pennsylvania. Pursuant to the second
modification of the lease agreement, the Company remitted $1.2 million for the
second preliminary term extension for the period from January 1, 1998 through
September 30, 1998. This term extension may be extended at the election of
the Company through December 31, 1998 on a month to month basis for $0.1
million per month beginning in October 1998. The Company also extended its
right to secure additional option periods through December 31, 2000. The
modified agreement also calls for contingent payments, not to exceed $2.1
million if a third party is found for the second gaming site. The remaining
terms and conditions of the agreements were substantially unchanged.

Results of Operations

The results of operations for fiscal years 1996 through 1998 include the
gaming results for Davenport, Iowa, Biloxi, Mississippi and St. Louis,
Missouri, and of much lesser significance, the non-gaming operations for
Davenport (The Blackhawk Hotel) and St. Louis (Gateway Riverboat Cruises).
Beginning in July 1997, the results of operations include the results of the
Broadwater Property, which was purchased July 1997.

The following table highlights the results of operations for the Company's
gaming and non-gaming cruise operating subsidiaries. The table does not

<PAGE> 27
include results of operations for the Company's corporate subsidiaries, The
Blackhawk Hotel or the Broadwater Property.

Twelve Months Ended
February 28/29,
1998 1997 1996
------ ------ ------
Davenport, Iowa
Operating revenues $ 69.9 $ 65.1 $ 70.3
Operating income $ 10.6 $ 10.1 $ 15.8
EBITDA (a) $ 14.9 $ 14.1 $ 20.4
EBITDA margin 21.3% 21.7% 29.0%

Biloxi, Mississippi
Operating revenues $ 39.6 $ 43.8 $ 38.7
Operating loss $ (2.3) $ (2.9) $ (5.0)
EBITDA (a) $ 0.6 $ -- $ (2.0)
EBITDA margin (deficit) 1.5% N/A (5.2)%

St. Louis, Missouri
Operating revenues $ 67.9 $ 70.9 $ 76.8
Operating income $ 2.7 $ 2.0 $ 4.1
EBITDA (a) $ 7.9 $ 7.0 $ 9.4
EBITDA margin 11.6% 9.9% 12.2%

(a) "EBITDA" consists of earnings from operations before interest, income
taxes, depreciation and amortization for each of the operating subsidiaries.
However, it does not include corporate operating expenses. EBITDA should not
be construed as an alternative to operating income as an indicator of the
Company's operating performance, or as an alternative to cash flows from
operational activities as a measure of liquidity. The Company has presented
EBITDA solely as a supplemental disclosure to facilitate a more complete
analysis of the Company's financial position. The Company believes that this
disclosure enhances the understanding of the financial performance of a
company with substantial depreciation and amortization.

Fiscal 1998 Compared to Fiscal 1997

Operating revenues. The Company generated consolidated operating revenues
of $187.5 million during fiscal 1998 compared to $187.0 million during the
fiscal 1997, an increase of $0.5 million or 0.3%. While the Davenport casino
experienced a $4.8 million increase in revenues, the Biloxi and St. Louis
casinos experienced decreases of $4.2 million and $3.0 million, respectively,
as a result of continued competitive pressures. On a consolidated basis, the
three gaming properties experienced a decrease in revenue $2.4 million.
Additionally, a non-gaming subsidiary experienced a $2.4 million decrease in
charter revenues as a result of the sale of two of the Company's vessels that
in the prior year had been under charter. Such decrease was offset by $5.1
million of revenue contributed by the Broadwater Property.

Operating revenues from the Company's Davenport operations were positively

<PAGE> 28
affected by an increase in market share (excluding the period that operations
were suspended) for fiscal 1998 compared to fiscal 1997. This was offset, in
part, by flood conditions which caused the temporary suspension of operations
for thirteen days during April 1997. During fiscal 1997, the Davenport
operations were negatively affected by construction which adversely affected
parking and ingress to the casino (which construction was substantially
completed in fiscal 1997) and by the substitution of a smaller vessel for one
month of the first quarter.

The Company's revenues from food and beverage, hotel, retail, charter and
other non-gaming activities (net of promotional allowances) were $18.0 million
during fiscal 1998, compared to $16.1 million during fiscal 1997, an increase
of $2.1 million or 11.8%. The increase was largely attributable to $5.1
million in revenue contributed by the Broadwater Property, which was acquired
in July 1997, and $0.5 million of business interruption insurance proceeds
related to the temporary suspension of operations in St. Louis during the
prior year that was recognized in fiscal 1998. Such increase was partially
offset by a $2.4 million dollar decrease in charter revenues as a result of
the sale of the two vessels discussed above.

Operating costs and expenses. The Company's consolidated gaming and gaming
cruise operating costs and expenses were $99.8 million during fiscal 1998,
compared to $100.8 million during fiscal 1997, a decrease of $1.0 million or
1.0%. This decrease in gaming costs was primarily attributable to operating
efficiencies and those costs directly affected by the reduced revenue levels,
such as gaming and boarding taxes. As a percentage of gaming revenues, gaming
and gaming cruise costs remained at 59.0%

The Company's consolidated selling, general and administrative expenses were
$50.4 million during fiscal 1998, compared to $51.0 million during fiscal
1997, a decrease of $0.6 million or 1.2%. As a percentage of consolidated
revenues, selling, general and administrative expenses decreased to 26.9%
during fiscal 1998, from 27.3% during fiscal 1997. The decrease was primarily
attributable to the reduction of the property tax assessment for the St. Louis
property. Accordingly, the Company realized savings of $0.5 million for
fiscal 1997 and received a refund in fiscal 1998 of $0.7 million related to
the prior year's taxes. The addition of the costs from the newly acquired
Broadwater Property was partially offset by the elimination of the marina
lease costs.

During fiscal 1998, the Company recognized a net gain on the sale and
disposal of assets of $0.7 million. This gain was primarily related to the
sale of unused vessels. During fiscal 1997, the Company recognized a net gain
on the sale and disposal of assets of $1.5 million. This gain was primarily
related to the exercise of a purchase option by the charterer of one of the
Company's casino vessels.

Depreciation and amortization expenses were $14.4 million during fiscal
1998, compared to $15.3 million during fiscal 1997, a decrease of $0.9 million
or 5.9%. The decrease was primarily attributable to the sale of two vessels
in the prior year.

<PAGE> 29
The Company recognized an impairment of long-lived assets of $0.4 million
during fiscal 1998, compared to $0.7 million during fiscal 1997. The fiscal
1998 write-offs were primarily related to obsolete equipment, while the fiscal
1997 write-offs were primarily related to assets being refurbished for use
with the implementation of a proposed second vessel in St. Louis.

During fiscal 1998, the Company incurred development costs of $2.7 million
primarily related to the Company's lease option in Philadelphia, Pennsylvania
and other potential gaming jurisdictions. During fiscal 1997, the Company
incurred development costs of $1.1 million related primarily to the
Philadelphia project and the proposed implementation of a second vessel in St.
Louis.

Operating income. As a result of the items discussed above, the Company had
operating income of $2.8 million during fiscal 1998, compared to operating
income of $3.8 million during fiscal 1997.

Interest expense, net. The Company incurred net interest expense of $17.0
million during fiscal 1998, compared to $13.7 million during fiscal 1997, an
increase of $3.3 million or 24.1%. The increase was attributable to an
additional $30.0 million of debt incurred by the Company in conjunction with
the purchase of the Broadwater Property in July 1997.

Income taxes. During fiscal years 1998 and 1997, given the level of
operations, increased competition and the overall uncertainty as to the
Company's ability to return to profitability, the Company did not recognize
the tax benefit generated from operating losses. The Company did not satisfy
the recognition criteria established under generally accepted accounting
principals. During fiscal 1997, the Company recognized a $1.4 million tax
benefit as the result of a state income tax refund related to the prior year.

Minority interest expense. The Company incurred $0.9 million minority
interest expense for fiscal 1998, compared to $0.2 million for fiscal 1997.
The increase is primarily attributable to the acquisition of the Broadwater
Property in late July 1997.

Net loss. The Company incurred a net loss of $15.0 during fiscal 1998,
compared to a net loss of $8.8 million during fiscal 1997.

Fiscal 1997 Compared to Fiscal 1996

Operating revenues. The Company generated consolidated operating revenues
of $187.0 million during fiscal 1997 compared to $192.7 million in fiscal
1996, a decrease of $5.7 million or 3.0%. Operating revenue increases from
the Company's Biloxi property were offset by decreases at the Davenport and
St. Louis properties. The Davenport property experienced a decrease in
operating revenue primarily as the result of two factors. Steadily increasing
competition for patrons in the Davenport market began with the addition of a
third casino in April 1995. Additionally, construction activity during fiscal
1997 relating to road access and parking negatively impacted customer access
to the casino.

<PAGE> 30
The increase in revenues from the Biloxi property was primarily attributable
to a full year of gaming operations aboard the "Biloxi Barge," which was
placed in service on June 30, 1995. This barge has provided the Company with
increased casino square footage, more slot machines and more table games than
the previous facility. In addition, the "Biloxi Barge" features a full
service 250-seat dining facility, not available in the previous casino.

During both years, operating revenues from the Company's St. Louis
operations were adversely affected by high water and flooding conditions on
the Mississippi River. High water and flooding conditions adversely affected
parking availability for casino patrons and caused the Company to close its
gaming operations in both years. However, business interruption insurance
proceeds of $2.8 million were included in St. Louis's fiscal 1996 operating
revenues with no comparable proceeds in fiscal 1997.

The Company's revenues from food and beverage, hotel, retail and other
nongaming activities (net of promotional allowances) decreased to $16.1
million during fiscal 1997, from $18.1 million in fiscal 1996, a decrease of
$2.0 million or 11.0%. This decrease was primarily attributable to the
inclusion of $2.8 million of business interruption proceeds indicated above
and $0.5 million of other insurance proceeds during fiscal 1996 offset by an
increase of $0.6 million from the charter of certain vessels and an increase
in the Biloxi operation's food and beverage revenue as the result of a full
year of expanded food service discussed above.

Operating costs and expenses. The Company's consolidated gaming and gaming
cruise operating costs and expenses were $100.8 million during fiscal 1997,
compared to $100.9 million in fiscal 1996, a decrease of $0.1 million. As a
percentage of gaming revenues, gaming and gaming cruise costs increased to
59.0% during fiscal 1997 from 57.8% in fiscal 1996. This decrease in gaming
margin was attributable to the decrease in gaming revenues at the Davenport
and St. Louis operations and their related contributions towards the fixed
portion of gaming costs.

The Company's consolidated selling, general and administrative expenses were
$51.8 million during fiscal 1997, compared to $56.7 million in fiscal 1996, a
decrease of $4.9 million or 8.6%. Such decrease was primarily attributable to
a decrease in corporate overhead and development costs, offset by three and a
half months of additional lease payments during fiscal 1997 for the "Biloxi
Barge," which commenced in June 1995. As a percentage of consolidated
revenues, selling, general and administrative expenses decreased to 27.7%
during fiscal 1997 from 29.4% in fiscal 1996.

During fiscal 1997, the Company recognized a net gain on the sale and
disposal of assets of $1.5 million. This gain was primarily related to the
exercise of a purchase option by the charterer of one of the Company's casino
vessels. During fiscal 1996, the Company recognized a net loss on the
disposal of assets of $0.4 million, primarily due to the sale of non-income
producing gaming equipment.

During fiscal 1997, the Company recognized an impairment of long-lived

<PAGE> 31
assets of $0.7 million primarily related to assets being refurbished for use
with the implementation of a proposed second vessel in St. Louis.

The fiscal 1996 charge of $24.8 million for impairment of long-lived assets
included the following:

-An $11.0 million charge against earnings related to the write-down of two
vessels, specifically $7.0 million and $4.0 million on "President Casino New
Yorker" and "President Casino-IV," respectively.

-An $11.0 million charge against earnings in the fourth quarter to write-off
the accumulated costs incurred in connection with an agreement that provided
the Company the option to either enter into a long-term lease or purchase
certain property in Philadelphia, Pennsylvania. Management deemed the charge
appropriate based on the likelihood that the option would not be exercised
within the time period set forth in the option agreement or before the timely
passage of riverboat gaming legislation in Pennsylvania.

-A $2.8 million charge against earnings for various write-downs including
write-downs of other vessels, investments and various gaming and nongaming
equipment not in use.

Depreciation and amortization expenses were $15.3 million during fiscal
1997, compared to $16.5 million in fiscal 1996, a decrease of $1.2 million or
7.2%. This decrease was primarily attributable to the sale of various assets
partially offset by the additional depreciation expense related to placing the
"President Casino New Yorker" in service at the beginning of its charter in
May 1996.

The Company incurred a $1.2 million loss in unconsolidated entities during
fiscal 1996, primarily related to the write-off of the Company's Gary, Indiana
investment. There was no comparable expense in during fiscal 1997.

During fiscal 1997, the Company incurred development costs of $1.1 million
comprised of $0.8 million related to the Philadelphia project and $0.3 million
related to the application and proposed implementation of a second vessel in
St. Louis. During fiscal 1996, the Company incurred $0.4 million of
development costs related primarily to the Philadelphia project.

Operating income (loss). As a result of the items discussed above, the
Company had operating income of $3.8 during fiscal 1997, compared to an
operating loss of $21.5 million during fiscal 1996.

Interest expense, net. The Company incurred net interest expense of $13.7
million during fiscal 1997, compared to $14.7 million in fiscal 1996, a
decrease of $1.0 million or 6.8%. Such decrease was primarily attributable to
the early extinguishment of various debt instruments in fiscal 1996.

During fiscal 1997, the Company recognized a $1.4 million tax benefit as the
result of a state income tax refund. During fiscal 1996, the Company
recognized a $21.9 million tax charge to income as the result of the income

<PAGE> 32
tax valuation allowance discussed below.

Income Taxes

Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes," requires the recognition of deferred tax assets related to
certain temporary differences between the Company's tax and accounting records
and net operating loss carryforwards to the extent that realization of such
benefit is "more likely than not." In early fiscal 1996, the Company
continued its strategic focus on existing income-generating properties and in
connection with this strategy directed investments to existing properties
while pursuing efforts to find alternative uses for existing non-income
producing assets either through lease or sale. In furtherance of this
strategy, the Company decided not to pursue the joint venture in Gary,
Indiana. Efforts by the Company to return to profitability in 1996, though
enhanced by the aforementioned regulatory changes in Iowa and Missouri, were
hampered by flooding in Missouri and increased competition in all of the
Company's jurisdictions. Disruptions in Biloxi from the changes in completing
the switch to the "Biloxi Barge" (eventually fully completed in December) and
in Iowa for the mandatory Coast Guard hull inspection further impacted 1996
profitability. In the fourth quarter of 1996, additional write offs related
to the Company's lease option on property in Philadelphia and other vessels
and gaming equipment were incurred. Furthermore, the Company incurred further
losses in the fourth quarter from its core operations. Given the level of
operations, the increased competition and the overall uncertainty as to the
Company's ability to return to profitability, management believed that the
deferred tax benefits did not continue to satisfy the recognition requirements
of SFAS No. 109. Accordingly, based on the uncertainty regarding the
Company's ability to generate future taxable income, the Company established a
valuation allowance of $36.3 million for the deferred tax asset resulting in
net income tax expense of $21.9 million in fiscal year 1996.

Net loss. As a result of the items discussed above, the Company incurred a
net loss of $8.8 million during fiscal 1997, compared to a net loss of $58.2
million in fiscal 1996.

Liquidity and Capital Resources.

The Company meets its working capital requirements from a combination of
internally generated sources including cash from operations and the sale or
charter of assets no longer utilized in the Company's casino operations.

The Company requires approximately $9.0 million of cash in order to fund
daily operations. As of February 28, 1998, the Company had approximately
$12.9 million in non-restricted cash and short-term investments available in
excess of the approximately $9.0 million required to fund operations. The
Company is heavily dependant on cash generated from operations to continue to
operate as planned in its existing jurisdictions and to make major capital
expenditures. The Company anticipates that its existing available cash and
cash equivalents and its anticipated cash generated from operations will be
sufficient to fund all of its ongoing operations. To the extent cash

<PAGE> 33
generated from operations is less than anticipated, the Company may be
required to curtail certain planned expenditures or seek other sources of
financing. The Company may be limited in its ability to raise cash through
additional financing.

The Company's $4.4 million restricted cash relates to the Broadwater
Property. Pursuant to loan agreements pertinent to the Broadwater Property,
revenues are deposited to lockboxes that are controlled by the lender. Such
revenues include income from the operations of the hotels and golf course and
$3.3 million annually ($1.7 in fiscal 1998, since the date of acquisition) of
proceeds from rental of the Biloxi casino's mooring site. Expenditures from
the lockboxes are limited to the operating expenses, capital improvements and
debt service of the Broadwater Property as defined by such agreements.

The Company generated cash flow from operating activities of $6.2 million
during fiscal 1998, compared to $5.5 million in fiscal 1997.

Investing activities of the Company used $41.6 million of cash during fiscal
1998, compared to the $0.9 million provided by investing activities during
fiscal 1997. During fiscal 1998, the Company spent $35.4 million, primarily
on the acquisition of the Broadwater Property, and spent $1.3 million related
to certain lease options in Philadelphia, offset by the receipt of $1.6
million of proceeds primarily from the sale of vessels that the Company did
not intend to use in future operations. During fiscal 1997, $14.2 million of
proceeds from the sale of a vessel were partially offset by $8.5 million for
expenditures for property and equipment and $3.4 million related to the
purchase of certain lease options in Philadelphia.

The Company made $0.4 million of principal payments during both fiscal 1998
and 1997.

The indenture governing the Company's Senior Exchange Notes due 2001 (the
"Indenture"), restricts the ability of PCI, TCG and PCI's wholly-owned
subsidiaries which are guarantors of the Senior Exchange Notes due 2001
(collectively, the "Guarantors"), among other things, to dispose of or create
liens on certain assets, to make certain investments and to pay dividends.
Under the Indenture, the Guarantors have the ability to seek to borrow
additional funds of $15.0 million. The Indenture also provides that the
Guarantors must use cash proceeds from the sale of certain assets within 180
days to either (i) permanently reduce certain indebtedness or (ii) contract
with an unrelated third party to make investments or capital expenditures or
to acquire long-term tangible assets, in each case, in gaming and related
businesses (provided any such investment is substantially complete in 270
days). The Company intends to utilize all such proceeds in accordance with
the Indenture. In the event such proceeds are not so utilized, the Company
must make an offer to all holders of Senior Exchange Notes to repurchase at
par value an aggregate principal amount of Senior Exchange Notes equal to the
amount by which such proceeds exceeds $5.0 million. The Company does not
believe that the unutilized proceeds will exceed $5.0 million. Certain
provisions of the Indenture do not apply to the Company's consolidated
entities which do not guarantee the Senior Exchange Notes due 2001.

<PAGE> 34
The Company has a $3.8 million outstanding term note payable that is
collateralized by a boat and various equipment with a net book value of $8.5
million. The note contains a covenant whereby the Company must maintain a
minimum net worth of $40.0 million. The Company's net worth is currently
below $40.0 million. The Company received a waiver of the covenant through
April 1, 1999. Since the fair market value of the vessel is in excess of the
outstanding note balance, management believes that the Company will be able to
either renegotiate the terms, buy down a portion of the note or refinance the
loan at such time as the waiver terminates.

On April 4, 1998, the "Admiral" was struck by runaway river barges which
resulted in the severing of several of the vessel's mooring lines and boarding
ramps. The vessel sustained no hull or structural damage and minimal damage
to its bow apron. There were no reports of serious injuries to the
approximate 2,300 guests and employees aboard.

The "Admiral" was closed to the public for 26 days, reopening on April 30,
1998. The Company maintains adequate property, liability and business
interruption insurance to minimize the financial impact of the accident. The
maximum deductible that may be applied against these policies could reach $1.1
million. The Company will pursue the owners of the towboat that were involved
in the accident to recover any losses.

In January 1998, the Company submitted to the New York City Gambling Control
Commission the appropriate applications to operate a "cruise-to-nowhere"
vessel from New York City.

With its extensive gaming and marine experience through the Company's
existing licensed riverboat and dockside casino operations, the Company
believes it is uniquely qualified to pursue this significant opportunity in
the New York City market. Moreover, the Company believes that its 308-foot
deep-water vessel, "President Casino New Yorker," is one of the best vessels
available for a "cruise-to-nowhere" casino operation and is available for
redeployment in New York should the Company receive a license. The Company
has committed approximately $4.0 million of capital for additions to the
vessel and gaming equipment and spent $1.3 million (of which $0.2 million was
spent in fiscal 1998) on development costs relating to the proposed New York
operation.

It is not known at this time whether the Company will receive a license and,
if so, when it would be issued. The Company received notification in April
1998 that the Commission was not prepared to issue a provisional license.
While the Company continues to pursue a New York City license it also
continues to review alternative uses for the "President Casino New Yorker,"
including the sale or lease of the vessel.

<PAGE> 35
In the event the Company identifies a potential growth opportunity, project
financing will be required. Capital investments may include all or some of
the following: acquisition and development of land; acquisition of vessels and
lease options on land and other facilities; and construction of vessels and
other facilities in anticipation of the approval of gaming operations in
potential new jurisdictions. In connection with development activities
relating to potential jurisdictions, the Company also makes expenditures for
professional services which are expensed as incurred. The Company's financing
requirements would depend upon actual development costs, the amounts and
timing of such expenditures, the amount of available cash flow from operations
and the availability of other financing arrangements.

If the Company identifies a potential growth opportunity, the Company could
pursue a number of alternatives to avail itself of additional capital,
including borrowing additional funds either directly or on a stand-alone
project basis, financing through lease agreements, selling equity securities
and selling assets which are not currently generating revenues. The Company
may also consider strategic combinations or alliances. Although there can be
no assurance that the Company can effectuate any of the financing strategies
discussed above, the Company believes that if it determines to seek any
additional licenses to operate gaming in other potential jurisdictions it will
be able to raise sufficient capital to pursue its strategic plan.

Forward Looking Statements

The statements contained herein include forward-looking statements based on
management's current expectations of the Company's future performance.
Predictions relating to future performance are inherently uncertain and
subject to a number of risks. Consequently, the Company's actual results
could differ materially from the expectations expressed herein. Factors that
could cause the Company's actual results to differ materially from the
expected results include, among other things: the intensely competitive
nature of the riverboat and dockside casino gaming industry; increases in the
number of competitors in the markets in which the Company operates; the
seasonality of the riverboat and dockside casino gaming industry in certain
markets in which the Company operates; the susceptibility of the Company's
operating results to floods, adverse weather conditions and natural disasters;
the risk that jurisdictions in which the Company proposes to operate do not
enact legislation permitting riverboat or dockside casino gaming or do not
enact such legislation in a timely manner; changes in governmental regulations
governing the Company's activities and other risks detailed in the Company's
filings with the Securities and Exchange Commission.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 8. Financial Statements and Supplementary Data.

Reference is made to the Index to Financial Statements and Schedules on Page
F-1.

<PAGE> 36
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

Not applicable.

Part III

Item 10. Directors and Executive Officers Registrant

Information regarding the directors and executive officers of the Company is
contained in "Security Ownership of Certain Beneficial Owners and Management,"
"Election of Directors" and "Section 16(a) Beneficial Ownership Compliance"
included in the Company's Proxy Statement for the 1998 Annual Meeting of
Stockholders, which information is incorporated herein by reference.

Information regarding executive officers of the Company is contained in Part
I hereof under the caption "Executive Officers of the Company."

Item 11. Executive Compensation

Information regarding executive compensation is contained in "Compensation
of Executive Officers" included in the Company's Proxy Statement for the 1998
Annual Meeting of Stockholders, which information is incorporated herein by
reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

Information regarding security ownership of certain beneficial owners and
management is contained in "Security Ownership of Certain Beneficial Owners
and Management" included in the Company's Proxy Statement for the 1998 Annual
Meeting of Stockholders, which information is incorporated herein by
reference.

Item 13. Certain Relationships and Related Transactions

Information regarding certain relationships and related transactions is
contained in "Certain Transactions" included in the Company's Proxy Statement
for the 1998 Annual Meeting of Stockholders, which information is incorporated
herein by reference.

<PAGE> 37
PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a) 1. Financial Statements.

See the Index to Financial Statements and Schedules on page F-1.

2. Financial Statement Schedules.

See the Index to Financial Statements and Schedules on page F-1.

3. Exhibits.

See Exhibit Index on page F-62.

(b) Reports on Form 8-K.

None.

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.

PRESIDENT CASINOS, INC.

By: /s/ James A. Zweifel
---------------------------
Name: James A. Zweifel
Title: Executive Vice President
and Chief Financial Officer

Date: May 29, 1998

<PAGE> 38
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on this 29th day of May, 1998 by the following persons
on behalf of the registrant in the capacities indicated.

Signature Capacity
- --------- --------

/s/ John E. Connelly Chief Executive Officer, Chairman
- -------------------------- and Director
John E. Connelly

/s/ John S. Aylsworth President, Chief Operating Officer
- -------------------------- and Director
John S. Aylsworth

/s/ Karl G. Andren Director
- --------------------------
Karl G. Andren

/s/ Royal P. Walker, Jr. Director
- --------------------------
Royal P. Walker, Jr.

/s/ Terrence L. Wirginis Vice Chairman, Vice President and Director
- --------------------------
Terrence L. Wirginis

/s/ James A. Zweifel Executive Vice President and
- -------------------------- Chief Financial Officer
James A. Zweifel

37
<PAGE> 39
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

I. PRESIDENT CASINOS, INC.
Consolidated Financial Statements:
Independent Auditors' Report ......................................F-2
Consolidated Balance Sheets as of February 28, 1998 and 1997.......F-3
Consolidated Statements of Operations for the Years
Ended February 28/29, 1998, 1997 and 1996........................F-4
Consolidated Statements of Stockholders' Equity for the Years
Ended February 28/29, 1998, 1997 and 1996........................F-5
Consolidated Statements of Cash Flows for the Years
Ended February 28/29, 1998, 1997 and 1996........................F-6
Notes to Consolidated Financial Statements.........................F-7
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts................... F-40
All other schedules are omitted as the required information is
inapplicable or is presented in the Company's Consolidated
Financial Statements or Notes thereto.
II. THE CONNELLY GROUP, L.P.
Financial Statements:
Independent Auditors' Report.......................................F-41
Balance Sheets as of February 28, 1998 and 1997....................F-42
Statements of Operations for the Years
Ended February 28/29, 1998, 1997 and 1996........................F-43
Statements of Partners' Preferred Redeemable Capital and
General Capital for the Years
Ended February 28/29, 1998, 1997 and 1996........................F-44
Statements of Cash Flows for the Years
Ended February 28/29, 1998, 1997 and 1996........................F-45
Notes to Financial Statements......................................F-46
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts....................F-53
All other schedules are omitted as the required information is
inapplicable or is presented in the Company's Financial Statements
or Notes thereto.
III. PRC HOLDINGS CORPORATION
Financial Statements:
Independent Auditors' Report.......................................F-54
Balance Sheets as of February 28, 1998 and 1997....................F-55
Statements of Operations for the Years
Ended February 28/29, 1998, 1997 and 1996........................F-56
Statements of Stockholder's Equity for the Years
Ended February 28/29, 1998, 1997 and 1996........................F-57
Statements of Cash Flows for the Years
Ended February 28/29, 1998, 1997 and 1996........................F-58
Notes to Financial Statements......................................F-59
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts....................F-61
All other schedules are omitted as the required information is
inapplicable or is presented in the Company's Financial Statements
or Notes thereto.

F-1
<PAGE> 40

INDEPENDENT AUDITORS' REPORT

President Casinos, Inc.:

We have audited the accompanying consolidated balance sheets of President
Casinos, Inc. and affiliates as of February 28, 1998 and 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for each of the three years in the period ended February 28, 1998. Our audits
also include the financial statement schedule listed in the Index at Item
14(a)2. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedule
based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of President Casinos, Inc. and
affiliates as of February 28, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period
ended February 28, 1998, in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.

/s/ Deloitte & Touche LLP
- -------------------------

Saint Louis, Missouri
April 27, 1998

F-2

<PAGE> 41
<TABLE>
<CAPTION>
PRESIDENT CASINOS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
February 28,
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................. $ 19,278 $ 25,115
Restricted cash....................................................... 4,354 --
Short-term investments................................................ 2,622 600
Receivables, net of allowance for doubtful accounts of $369 and $393.. 1,664 982
Receivables from related parties...................................... -- 2,022
Inventories........................................................... 1,884 1,623
Prepaid expenses and other current assets............................. 4,024 2,915
--------- ---------
Total current assets.............................................. 33,826 33,257
--------- ---------
Property and Equipment, net............................................. 149,066 117,163
--------- ---------
Other Assets:
Deferred financing costs.............................................. 2,385 2,761
Lease options......................................................... 1,469 2,048
Other assets.......................................................... 510 675
--------- ---------
Total other assets................................................ 4,364 5,484
--------- ---------
$187,256 $155,904
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt.................................. $ 1,895 $ 1,772
Accounts payable...................................................... 3,807 2,414
Accrued payroll and benefits.......................................... 7,479 7,156
Other accrued expenses................................................ 18,329 15,664
Due to related parties................................................ -- 50
--------- ---------
Total current liabilities......................................... 31,510 27,056
--------- ---------
Long-Term Liabilities:
Notes payable and capital lease obligations........................... 134,784 104,862
Accrued loan fee...................................................... 1,300 --
--------- ---------
Total long-term liabilities....................................... 136,084 104,862
--------- ---------
Total liabilities.............................................. 167,594 131,918
--------- ---------
Commitments and Contingent Liabilities.................................. -- --
Minority Interest....................................................... 10,978 265
Stockholders' Equity:
Preferred Stock, $.01 par value per share; 10,000,000 shares
authorized; none issued and outstanding............................. -- --
Common Stock, $.06 par value per share; 100,000,000 shares
authorized; 5,032,926 shares issued and outstanding................. 302 302
Additional paid-in capital............................................ 101,729 101,729
Accumulated deficit................................................... (93,347) (78,310)
--------- ---------
Total stockholders' equity........................................ 8,684 23,721
--------- ---------
$187,256 $155,904
========= =========
See Notes to Consolidated Financial Statements.
</TABLE>
F-3
<PAGE> 42
<TABLE>
<CAPTION>
PRESIDENT CASINOS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except share data)

Years Ended February 28/29,
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
OPERATING REVENUES:
Gaming and gaming cruise................... $169,467 $170,910 $174,567
Food and beverage.......................... 20,677 19,691 17,217
Hotel...................................... 4,889 1,671 1,911
Retail and other........................... 6,176 7,126 9,246
Less promotional allowances................ (13,674) (12,371) (10,256)
--------- --------- ---------
Total operating revenues................. 187,535 187,027 192,685
--------- --------- ---------
OPERATING COSTS AND EXPENSES:
Gaming and gaming cruise................... 99,750 100,847 100,903
Food and beverage.......................... 13,994 13,194 11,830
Hotel...................................... 1,613 686 560
Retail and other........................... 2,299 1,797 1,651
Selling, general and administrative........ 50,355 51,030 55,933
Depreciation and amortization.............. 14,372 15,324 16,470
Development................................ 2,655 1,116 379
Impairment of long-lived assets............ 396 728 24,848
(Gain) loss on sale of
property and equipment.................. (726) (1,479) 408
--------- --------- ---------
Total operating costs and expenses....... 184,708 183,243 212,982
--------- --------- ---------
OPERATING INCOME (LOSS) BEFORE EQUITY
LOSS IN UNCONSOLIDATED ENTITIES.......... 2,827 3,784 (20,297)
Equity loss in unconsolidated entities..... -- -- 1,174
--------- --------- ---------
OPERATING INCOME (LOSS).................... 2,827 3,784 (21,471)
--------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income (related party interest
income of $103, $260 and $135)........... 1,050 1,159 1,170
Interest expense........................... (18,044) (14,863) (15,908)
--------- --------- ---------
Total other expense........................ (16,994) (13,704) (14,738)
--------- --------- ---------
LOSS BEFORE INCOME TAXES AND MINORITY
INTEREST................................. (14,167) (9,920) (36,209)
Income tax expense (benefit)............... -- (1,367) 21,908
Minority interest.......................... 870 232 33
--------- --------- ---------
NET LOSS................................... $(15,037) $ (8,785) $(58,150)
========= ========= =========

Basic and diluted net loss per share....... $ (2.99) $ (1.75) $(11.55)
======== ======== ========
Weighted average common and dilutive
potential common shares outstanding....... 5,033 5,033 5,033
======= ======= =======
See Notes to Consolidated Financial Statements.
</TABLE>
F-4

<PAGE> 43
<TABLE>
<CAPTION>
PRESIDENT CASINOS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)

Additional
Common Paid-In Accumulated
Stock Capital Deficit Total
----- ------- -------- -----
<S> <C> <C> <C> <C>
Years Ended February 28/29,
1996, 1997 and 1998:

Balance as of February 28, 1995... $ 302 $101,729 $(11,375) $ 90,656
Net loss.......................... -- -- (58,150) (58,150)
--------- --------- --------- ---------
Balance as of February 29, 1996... 302 101,729 (69,525) 32,506
Net loss.......................... -- -- (8,785) (8,785)
--------- --------- --------- ---------
Balance as of February 28, 1997... 302 101,729 (78,310) 23,721
Net loss.......................... -- -- (15,037) (15,037)
--------- --------- --------- ---------
Balance as of February 28, 1998... $ 302 $101,729 $(93,347) $ 8,684
========= ========= ========= =========

See Notes to Consolidated Financial Statements.
</TABLE>
F-5
<PAGE> 44
<TABLE>
<CAPTION>
PRESIDENT CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended February 28/29,
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss............................................ $(15,037) $ (8,785) $(58,150)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization................... 14,372 15,324 16,470
(Gain) loss on disposal of assets............... (726) (1,479) 408
Impairment of long-lived assets................. 396 728 24,848
Deferred income tax expense..................... -- -- 21,908
Amortization of deferred financing
costs and discount............................ 2,434 1,091 1,149
Amortization of lease options................... 1,917 320 --
Equity loss in unconsolidated entities.......... -- -- 1,174
Minority interest............................... 870 232 33
Net change in working capital accounts.......... 2,399 (1,667) (184)
Net change in long-term accounts................ (446) (217) (466)
--------- --------- ---------
Net cash provided by operating activities..... 6,179 5,547 7,190
--------- --------- ---------
Cash flows from investing activities:
Expenditures for property and equipment........... (35,374) (10,582) (16,810)
Proceeds from the sale of equipment............... 1,601 14,245 19,907
Changes in restricted cash........................ (4,354) -- --
Investment in/advances to
unconsolidated entities......................... -- -- (179)
Investment in lease options....................... (1,325) (3,368) (197)
Loan to related party............................. -- -- (1,000)
Purchase of short-term investments................ (2,022) -- (208)
Maturity of short-term investments................ -- 408 --
Minority interest................................. (104) -- --
Other............................................. (65) 231 --
--------- --------- ---------
Net cash provided by (used in)
investing activities....................... (41,643) 934 1,513
--------- --------- ---------
Cash flows from financing activities:
Proceeds from notes payable....................... 30,000 -- --
Proceeds from capital lease refund................ 108 -- --
Payments on notes payable......................... (400) (400) (12,476)
Payments on capital lease obligations............. (81) (722) (1,186)
--------- --------- ---------
Net cash provided by (used in)
financing activities........................ 29,627 (1,122) (13,662)
--------- --------- ---------
Net increase (decrease) in cash
and cash equivalents.............................. (5,837) 5,359 (4,959)

Cash and cash equivalents at beginning of year...... 25,115 19,756 24,715
--------- --------- ---------
Cash and cash equivalents at end of year............ $ 19,278 $ 25,115 $ 19,756
========= ========= =========
See Notes to Consolidated Financial Statements.
</TABLE>
F-6
<PAGE> 45
PRESIDENT CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data and unless otherwise stated)

1. BASIS OF PRESENTATION

The consolidated financial statements include the accounts and operations of
President Casinos, Inc., its wholly-owned subsidiaries, a 95% owned limited
partnership and a limited liability company in which the Chairman has a
$10,000 preferred interest (collectively, the "Company" or "PCI"). All
material intercompany balances and transactions have been eliminated.

PCI develops, owns and operates riverboat and/or dockside gaming casinos
through its subsidiaries. The Company conducts riverboat and/or dockside
gaming operations in Davenport, Iowa; in Biloxi, Mississippi through its
wholly-owned subsidiary The President Riverboat Casino-Mississippi, Inc.
("President Mississippi") and in St. Louis near the base of the Arch through
its wholly-owned subsidiary, President Riverboat Casino-Missouri, Inc.
("President Missouri"). The Davenport operations are managed by the Company's
wholly-owned subsidiary, President Riverboat Casino-Iowa, Inc. ("PRC Iowa"),
which is the general partner of the 95% Company-owned operating partnership,
The Connelly Group, L.P. ("TCG"). The Company also operates two nongaming
dinner cruise, excursion and sightseeing vessels on the Mississippi River in
St. Louis, Missouri. In addition, the Company owns and manages certain hotels
in Davenport, Iowa, Biloxi, Mississippi and other ancillary facilities
associated with its gaming operations.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents -- Cash and cash equivalents include highly liquid
investments with original maturities of ninety days or less.

Restricted Cash -- Pursuant to loan agreements pertinent to the Broadwater
Property (see Notes 3 and 6), revenues are deposited to lockboxes that are
controlled by the lender. Expenditures from the lockboxes are limited to the
operating expenses, capital improvements and debt service of the Broadwater
Property as defined by such agreements. Accordingly, the cash and cash
equivalents of the Broadwater Property have been classified as restricted
cash.

Short-term Investments -- The Company invests in certificates of deposit and
other short-term investments with original maturities greater than ninety
days. Short-term investments are stated at cost, which approximates market.

Inventories -- Inventories, consisting principally of food, beverage, retail
items and operating supplies, are stated at the lower of first-in, first-out
cost or market.

Property and Equipment -- Property and equipment are recorded at cost and
capitalized lease assets are recorded at their fair market value at the
inception of the lease. Repairs and maintenance are expensed as incurred.

F-7
<PAGE> 46
Improvements are capitalized. Depreciation and amortization are computed on a
straight-line basis over the following estimated useful lives:

Land and marine improvements 3-20 years
Buildings and improvements 10-40 years
Riverboats, barges and improvements 9-20 years
Leasehold improvements 3-20 years
Furnishings and equipment 5-10 years

Deferred Financing Costs -- Costs associated with the issuance of debt have
been deferred and are being amortized over the life of the related
indebtedness using the effective interest method.

Gaming Revenue -- In accordance with industry practice, the Company
recognizes gaming revenue as the net win from gaming activities, which is the
difference between gaming wins and losses.

Indirect Expenses -- Certain indirect expenses of operating departments such
as selling, general and administrative and depreciation and amortization are
shown separately in the accompanying statements of operations and are not
allocated to departmental operating costs and expenses.

Promotional Allowances -- Food, beverage, rooms and other items furnished
without charge to customers are included in gross revenues at a value which
approximates retail value and then deducted as complimentary services to
arrive at total operating revenues. The cost of such complimentary services
is charged to gaming and gaming cruise expense. Such estimated costs of
providing complimentary services for the years ended February 28/29, 1998,
1997 and 1996 are as follows:

1998 1997 1996
------ ------ ------
Food and beverage...... $ 5,078 $ 4,557 $ 3,574
Other.................. 505 194 270
-------- -------- --------
$ 5,583 $ 4,751 $ 3,844
======== ======== ========

Self-Insurance -- The Company is partially self-insured for both employee
and third party liability costs. The self-insurance claim liability is
determined based on claims filed and an estimate of claims incurred but not
reported.

Fair Value of Financial Instruments -- The Company calculates the fair value
of financial instruments and includes this additional information in the Notes
to the Consolidated Financial Statements when the fair value is different than
the book value of those financial instruments. When the fair value is equal
to the book value, no additional disclosure is made. The Company uses quoted
market prices whenever available to calculate these fair values. When quoted
market prices are not available, the Company uses valuation methodologies
which take into account the present value of estimated future cash flows to

F-8
<PAGE> 47
determine fair value.

Use of Management Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make certain 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 amounts of revenues and expenses
during the reporting period. Actual results may differ from those estimates.

Basic and Dilutive Loss Per Share Information -- Loss per share information
is computed using the weighted average number of shares of Common Stock
outstanding and common stock equivalent shares from dilutive stock options
from date of grant, using the treasury stock method, and the greater of the
closing stock price per share for the period or the average stock price per
share during the period. Basic and dilutive loss per common share assuming
full dilution is computed using the weighted average number of shares of
common stock outstanding and common stock equivalents from all dilutive stock
options from date of grant using the treasury stock method and the stock price
per share at period end. There is no difference between loss per share under
the basic and dilutive methods due to the antidilutive nature of the stock
options, since the Company has had losses in all periods presented.

Recoverability of Long-Lived Assets to be Held and Used in the Business --
The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset or a
group of assets may not be recoverable. The Company considers a history of
operating losses or a change in the Company's intended use of the asset to be
primary indicators of potential impairment. Assets are grouped and evaluated
for impairment at the lowest level for which there are identifiable cash flows
that are largely independent of the cash flows of other groups of assets (the
"Asset"). The Company deems the Asset to be impaired if a forecast of
undiscounted future operating cash flows directly related to the Asset,
including disposal value if any, is less than its carrying amount. If the
Asset is determined to be impaired, the loss is measured as the amount by
which the carrying amount of the Asset exceeds its fair value. Fair value is
based on quoted market prices in active markets, if available. If quoted
market prices are not available, an estimate of fair value is based on the
best information available, including prices for similar assets or the results
of valuation techniques such as discounting estimated future cash flows.
Considerable management judgment is necessary to estimate fair value.
Accordingly, actual results could vary significantly from such estimates.

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standard No. 131 ("SFAS No. 131"), Disclosures About Segments of an
Enterprise and Related Information, which establishes new standards for
determining a reportable segment and for disclosing information regarding each
such segment. A reportable segment is an operating segment: (a) that engages
in business activities from which it earns revenues and incurs expenses, (b)
whose operating results are regularly reviewed by the enterprise's chief
operating decision maker in deciding how to allocate resources and in
assessing performance, (c) for which discrete financial information is

F-9
<PAGE> 48
available, and (d) that exceeds specific quantitative thresholds. SFAS No.
131 will be effective for the Company beginning fiscal 1999. On adoption, and
to the extent practicable, segment information for earlier comparative years
will be restated. The Company anticipates, with the adoption of SFAS No. 131,
it will expand its segment disclosures relative to its Missouri, Mississippi
and Iowa operations. The Company believes the segment information required to
be disclosed under SFAS No. 131 will have no effect on the Company's
consolidated results of operations, financial position or cash flows, but will
be more comprehensive than previously provided, including expanded disclosure
of income statement and balance sheet items for each of its reportable
operating segments.

Reclassifications -- Certain amounts for fiscal 1997 and 1996 have been
reclassified to conform with fiscal 1998 financial statement presentations.

3. PROPERTY AND EQUIPMENT

Property and equipment as of February 28, 1998 and 1997, are summarized as
follows:
1998 1997
------ ------
Owned property:
Land.................................. $ 650 $ 650
Land and marina improvements.......... 6,543 --
Buildings and improvements............ 5,910 5,757
Riverboats, barges and improvements... 81,895 69,846
Leasehold improvements................ 9,733 11,555
Furnishings and equipment............. 43,286 44,200
Property leased to third parties...... -- 22,798
Property held for development or
sale, at net book value............. 49,185 2,696
Construction in progress.............. 2,451 2,645
--------- ---------
199,653 160,147
Accumulated depreciation
and amortization.................. (51,508) (44,597)
--------- ---------
148,145 115,550
--------- ---------
Property under capital leases.......... 2,908 2,867
Accumulated amortization............ (1,987) (1,254)
--------- ---------
921 1,613
--------- ---------
Property and equipment, net....... $149,066 $117,163
========= =========

On July 24, 1997, the Company acquired certain real estate and improvements
from a wholly-owned entity of John E. Connelly, Chairman, Chief Executive
Officer and principal stockholder of the Company located on the Gulf Coast in
Biloxi, Mississippi for $40,500 plus closing costs. The property comprises

F-10
<PAGE> 49
approximately 260 acres and includes a marina, two hotels and an adjacent 18-
hole golf course (collectively, the "Broadwater Property"). The purchase
price and related closing costs have been allocated principally to land as the
Company anticipates developing this real estate into a full-scale luxury
destination resort which would include the demolition of the existing hotels.
The following purchase price allocation was based upon a valuation of an
independent appraiser:

Land held for development................... $ 40,360
Furnishings and equipment................... 156
---------
$ 40,516
=========

The marina is currently the site of the Company's casino operations in
Biloxi that had previously been leased by the Company under a long-term lease
agreement.

During fiscal 1998, the Company recognized a net gain on the sale or
disposal of assets of $726 consisting primarily of (i) $555 for the sale of
three barges not utilized in the Company's operations and (ii) $375 for the
sale of the Company's interest in a joint venture (see Note 4).

During fiscal 1996, the Company entered into an agreement to charter
"Diamond Jo" to an unrelated third party for a two-year period beginning
September 1995. The Company received an initial non-refundable deposit of
$500 which was amortized over the term of the agreement. Charter revenue of
$1,730 and $1,949 for fiscal 1997 and 1996, respectively, is included in
"Operating Revenue-Retail and other". The terms of the agreement provided the
third party an option to purchase the vessel at any time throughout the
charter period. During July 1996, the Company sold the vessel under the terms
of the agreement and recognized a net gain of $999 on proceeds of $11,355.

During fiscal 1995, the Company leased a restaurant barge to an unrelated
third party for a two-year period commencing in October 1994. Charter revenue
of $900 and $1,342 for fiscal 1997 and 1996, respectively, is included in
"Operating Revenues-Retail and other". Upon expiration of the charter
agreement, the Company sold the barge and recognized a gain of $392 on
proceeds of $2,503.

During fiscal 1998, the Company recognized an impairment of long-lived
assets of $396 consisting of (i) $277 related to two barges based on current
market conditions and (ii) $119 related to obsolete computer hardware and
software.

During fiscal 1997, the Company recognized an impairment of long-lived
assets of $728 primarily related to assets being refurbished for use with the
implementation of a proposed second vessel in St. Louis. Based on regulatory
and economic factors, the Company subsequently determined a second vessel was
not justified in St. Louis at the time.

F-11

<PAGE> 50
During fiscal 1996, the Company wrote-down the carrying value of "President
Casino-IV" by $4,000 to its net realizable value. The vessel and certain
nongaming equipment were subsequently sold for an aggregate purchase price of
$18,000. No additional material gain or loss was recognized as a result of
the sale. Additionally, as a result of the Company's decision to withdraw
from Gary, Indiana and the resulting uncertainty regarding the future use of
"President Casino New Yorker" (formerly known as "Majestic Star") (see Note 4
and 17), the Company reduced the carrying value of "President Casino New
Yorker" by $7,000 to its then estimated fair value.

During fiscal 1996, the Company wrote-down long-lived assets of $2,490
exclusive of the $11,000 discussed above, consisting of the following: (i)
$1,496 for a nongaming cruise boat and barges based on market conditions and
the uncertainty of future use in operations; (ii) $713 of gaming equipment and
related accessories not utilized by the Company, based on market prices; (iii)
$199 of various computer software and hardware which was abandoned; and, (iv)
$82 for various other property.

4. INVESTMENT IN UNCONSOLIDATED ENTITIES

Gary Project

In December 1994, a joint venture (the "Gary Joint Venture") between a
wholly-owned subsidiary of the Company and Barden Development, Inc. ("Barden")
received one of two conditional certificates of suitability awarded by the
Indiana Gaming Commission. The certificate of suitability was conditioned
upon the joint venture's satisfaction of certain development and other
commitments to the City of Gary aggregating approximately $116,000. As a
result of the occurrence of a number of events, the Company re-examined its
participation in the Gary Joint Venture. On June 30, 1995, the Company
entered into a series of agreements with Barden pursuant to which the Company
transferred its interest, including all financial and other obligations
related thereto, in the Gary Joint Venture to Barden. The Indiana Gaming
Commission approved the transfer of the Company's interest in the Gary Joint
Venture at that time.

Pursuant to these agreements, on August 15, 1995, the Company entered into a
charter agreement with Barden to lease "President Casino New Yorker" for a
five-year term (which term was cancelable at any time by Barden upon 180 days
advance written notice) at an annual rental fee of $1,500 for the first two
years and for fair market value thereafter. The charter began in May 1996 and
ended in February 1998 (see Note 17).

As a result of the Company's decision to withdraw from Gary, Indiana, the
Company wrote-off its $1,145 investment in the Gary Joint Venture in fiscal
1996.

Massena, New York Project

The Company had entered into a joint venture with an unrelated third party
to manage a casino to be owned by the Mohawk Indian Tribe on its reservation

F-12
<PAGE> 51
near Massena, New York. The Company, through a wholly-owned subsidiary,
owned a 50% interest in the joint venture. During January 1998, the Company
sold its interest in the joint venture for $375 and certain contingent
payments. Under the terms of the agreement, the Company will receive an
additional $625 upon the opening of the proposed casino and up to an
additional $1,000 out of certain cash flows, if any, from the casino.

5. LEASE OPTIONS

During December 1993, the Company entered into an agreement for the rights
to utilize an 18-acre riverfront site in Philadelphia, Pennsylvania (the
"Philadelphia Property") either through entering a long-term lease on the
property or, under certain conditions, to purchase the property at its
determined fair market value. The Company also acquired an option to lease a
City-owned pier which is located on property immediately contiguous to the
Philadelphia Property (the "Pier"). The Company believes that the
Philadelphia Property is a prime gaming site because it is readily accessible
from major highways and will permit adequate parking and room for additional
development. The Company entered into the option agreements in anticipation
of the legalization of gaming in Pennsylvania. The agreements prohibit the
Company from owning or managing any gaming facility in Philadelphia, other
than a facility to be located on the Philadelphia Property.

During fiscal 1996, based upon developments which indicated an uncertainty
as to the passage of riverboat gaming legislation in Pennsylvania prior to the
expiration of the initial option agreement, the Company wrote-off the
accumulated cost of the option of $10,957.

On May 7, 1996, the Company entered into a separate agreement to secure
additional lease rights with respect to the same property. As part of the
agreement, the Company paid $2,000 to secure the right to purchase additional
options for five separate periods extending from January 1, 1997 through
December 31, 1999. The first option was purchased in fiscal 1997 and was for
a period of twelve months (beginning January 1, 1997). Each of the four
remaining option periods are for six-month intervals and require the Company
to pay $277 per month through each period. Upon the exercise of any option,
the Company would begin a ten-year lease with five (5), five (5) year
extensions available. If the Company exercises this option, the Company will
be obligated to pay annual rent based upon a combination of fixed minimum
payments or a percentage of the Company's "net gaming win" (as defined in the
lease agreement), but in no event will such minimum annual rent be less than
$3,500. During the option period and the lease period, the Company will be
obligated to pay all maintenance costs, taxes and insurance with respect to
the property.

In December 1996, the Company modified and exercised its May 1996 option

F-13
<PAGE> 52
agreement to secure the above lease rights for the period January 1, 1997
through December 31, 1997. Pursuant to the modified option agreement, the
Company remitted $1,200.

In September 1997, the Company further modified its lease and option
agreements. Pursuant to the second modification, the Company remitted $1,200
for the second preliminary term extension for the period from January 1, 1998
through September 30, 1998. This term extension may be extended at the
election of the Company through December 31, 1998 on a month-to-month basis
for $100 per month beginning October 1998. The Company also extended its
right to secure additional option periods through December 31, 2000. The
modified agreement also calls for contingent payments, not to exceed $2.1
million if a third party is found for the second gaming site. The remaining
terms and conditions of the agreements were substantially unchanged.

6. NOTES PAYABLE

Notes payable as of February 28, 1998 and 1997, are summarized as follows:

1998 1997
------ ------
Senior Exchange notes, 13%, principal payments
due annually of $25,000 beginning fiscal 2000
with a final principal payment of $50,000 in
fiscal 2002, net of discount of $879........... $ 99,121 $ 98,811
Term note payable, variable interest rate,
9.625% as of February 28, 1998, principal
payment due fiscal 2001........................ 30,000 --
Line of credit, prime plus 0.5%, combined
rate of 9.00% as of February 28, 1998.......... 2,251 2,251
Term note payable, variable interest rate,
8.97% as of February 28, 1998, principal
payments due quarterly of $100, with a final
payment of $2,000 in fiscal 2003............... 3,800 4,200
--------- ---------
Total notes payable.......................... 135,172 105,262
Less current maturities.................... (400) (400)
--------- ---------
Long-term notes payable................... $134,772 $104,862
========= =========

Senior Exchange Notes

During fiscal 1994, the Company completed a private placement of $100,000 of
11.75% (12% effective rate of interest) Senior Subordinated Notes Due 2001
(the "Senior Subordinated Notes") and warrants to purchase 150 thousand shares
of Common Stock.

During fiscal 1995, the Company exchanged $100,000 of a newly issued series
of the Company's 13% Senior Notes due 2001 (the "Senior Notes"), warrants to
purchase an aggregate of 147 thousand shares of the Company's Common Stock and

F-14
<PAGE> 53
an aggregate cash payment equal to $3,140 for all of its outstanding Senior
Subordinated Notes in order to be released from certain restrictive covenants.

On April 4, 1995, pursuant to a registration rights agreement governing the
Senior Notes, the Company exchanged all of the Senior Notes for an equal
principal amount of 13% Senior Exchange Notes due 2001 ("Senior Exchange
Notes") registered under the Securities Act of 1933, as amended. The Senior
Exchange Notes rank equal in right of payment to all present and future senior
debt (as defined in the indenture governing the Senior Exchange Notes (the
"Note Indenture")) of the Company and its subsidiaries and are payable as
follows: 25% of the outstanding principal amount on each of September 15,
1999 and September 15, 2000 and the remainder of the outstanding principal
amount on September 15, 2001. In addition, the Senior Exchange Notes are
unconditionally guaranteed, jointly and severally on a senior basis, by all of
the Company's then existing wholly-owned subsidiaries (the "Guarantors"), and,
under certain circumstances, the Company's future subsidiaries, although the
subsidiary guarantee from TCG is limited in amount. The Company has since
created two new wholly-owned subsidiaries and one 75%-owned limited liability
company which do not guarantee the Senior Exchange Notes (the "Non-
Guarantors")(see Note 19). As security for the obligations of the Company and
the Guarantors under the Senior Exchange Notes, the Company and the Guarantors
have pledged their equity interests in each Guarantor and all of their rights
in certain management agreements with, certain indebtedness from, and certain
investments in, certain gaming ventures. The Note Indenture contains certain
restrictive covenants which, among other things, limit the Company's
Guarantors' ability to pay dividends, incur additional indebtedness (exclusive
of $15,000 of senior debt), issue preferred stock, create liens on certain
assets, merge or consolidate with another company and sell or otherwise
dispose of a substantial portion of its properties or assets. Each warrant
entitles the holder thereof to purchase one share of the Company's Common
Stock at $47.55 per share and expires on September 30, 1999.

The Note Indenture governing the Company's Senior Exchange Notes is
substantially the same as the indenture on the Senior Notes, and provides that
the Company must use the cash proceeds from the sale of assets within 180 days
after receipt either (i) to permanently reduce certain indebtedness or (ii) to
contract with an unrelated third party to make investments or capital
expenditures or to acquire long-term tangible assets, in each case, in gaming
and related businesses (provided any such investment is substantially complete
within 270 days of such receipt). If such cash proceeds are not so utilized,
the Company must make an offer to all holders of Senior Notes to repurchase at
par an aggregate principal amount of Senior Notes equal to the amount by which
such cash proceeds exceed $5,000.

The market value of such notes on February 28, 1998 was $95,000 based on
quoted market prices.

The Indenture governing the Company's 13% Senior Exchange Notes due 2001
provides that the Company must use the cash proceeds from the sale of assets
within 180 days after receipt either (i) to permanently reduce certain
indebtedness or(ii) to contract with an unrelated third party to make

F-15
<PAGE> 54
investments or capital expenditures or to acquire long-term tangible assets,
in each case, in gaming and related businesses (provided any such investment
is substantially complete within 270 days of such receipt). If such cash
proceeds are not so utilized, the Company must make an offer to all holders of
Senior Notes to repurchase at par an aggregate principal amount of Senior
Notes equal to the amount by which such cash proceeds exceed $5,000. The
Company does not currently anticipate that unutilized proceeds will exceed
$5,000.

Term Note-9.625%

In conjunction with the purchase of the Broadwater Property discussed in
Notes 3 and 12, President Broadwater, L.L.C. ("PBLLC") borrowed the sum of
$30,000 from a third party lender, evidenced by a non-recourse promissory note
(the "Indebtedness"). Except as set forth in the promissory note and related
security documents, PBLLC's obligations under the Indebtedness are nonrecourse
and are secured by the Broadwater Property, its improvements and leases
thereon. The Indebtedness bears interest at a variable rate per annum equal
to the greater of (i) 8.75% or (ii) 4% plus the LIBOR 30-day rate.

PBLLC is obligated under the Indebtedness to make monthly payments of
interest accruing under the Indebtedness, and to repay the Indebtedness in
full on July 22, 2000. In addition, PBLLC is obligated to pay to the lender a
loan fee in the amount of $7,000 which will be fully earned and nonrefundable
when the Indebtedness is repaid; provided, however, that if the Indebtedness
is repaid in full on or before September 30, 1998, then the loan fee will be
reduced to $5,500. As of February 28, 1998, the accrued loan fee of $1,300 is
included in long-term liabilities.

Line of Credit

The bank line of credit is collateralized by a first mortgage on a boat and
first mortgages on real property with net book values of $7,883 and $3,710,
respectively, as of February 28, 1998, various personal property and an
assignment of various contracts. The real property consists of assets of The
Blackhawk Hotel which is a wholly-owned subsidiary of PCI. During March 1997,
the line of credit was increased to $4,500, of which $2,249 is available as of
February 28, 1998. The line of credit reduces by $900 each March 31 and
terminates in March 2001.

Term Note-8.97%

The 8.97% term note payable is collateralized by a boat and various
equipment with a net book value of $8,467 as of February 28, 1998, and is
personally guaranteed by Mr. Connelly. This note also contains certain
covenants which, among other things, require the Company to maintain a minimum
tangible net worth of $40,000. The Company received a waiver of the net worth
covenant through the period ended April 1, 1999, at which time the Company's
net worth requirement will return to $40,000.

The various agreements governing the notes described above generally limit

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<PAGE> 55
borrowings by the Company's affiliates without the respective lenders' prior
consent.

Principal maturities on long-term notes payable as of February 28, 1998, are
as follows:

Years ending February 28/29:
1999........................ $ 400
2000........................ 25,400
2001........................ 55,400
2002........................ 52,651
2003........................ 2,200
Thereafter.................. --
---------
136,051
Less discount on Senior
Exchange Notes.......... (879)
---------
Total maturities............ $135,172
=========

7. CAPITAL AND OPERATING LEASES

The Company had an operating lease with an affiliate of Mr. Connelly for its
Biloxi, Mississippi mooring site, parking facilities, offices and a warehouse.
The operating lease was for an initial term of three years and the Company had
nine renewal options of three years each. In fiscal 1996, the Company
exercised its option for the second three-year renewal term. In July 1997,
the Company purchased the Broadwater Property subject to the lease as
discussed in Notes 3 and 12.

The Company leases certain levee and other property in Davenport, Iowa,
certain docking locations on the St. Louis, Missouri riverfront and certain
other equipment under operating leases. The levee lease and its associated
parking lot lease in Davenport expire in 2017 and a second parking lot lease
in Davenport expires in 2002 with one fifteen-year renewal option.

The St. Louis riverfront leases are generally for ten-year periods with
multiple five-year renewal options and are subject to rate changes by the Port
Commission every five years. In addition, the St. Louis riverfront leases
provide for rental payments at 2% of adjusted gross receipts (gross receipts
net of winnings paid to wagerers). Although the "Admiral" is the only casino
in downtown St. Louis, this fee may be adjusted (higher or lower) to equal the
percentage of gaming revenues charged on any future properties in the central
riverfront area of St. Louis on which gaming is conducted.

In February 1995, a non-guarantor subsidiary of the Company ("Charter
Corp.") entered into a charter agreement (the "Initial Charter Agreement") to
charter a dockside casino and certain equipment to be utilized by the
Company's Biloxi, Mississippi gaming operations. The lease commenced June 15,
1995. Under the terms of the Initial Charter Agreement, rent was $3,945

F-17
<PAGE> 56
annually for a term of five years from the commencement date, renewable at the
option of the Company for two successive five year periods. Upon
commencement, Charter Corp. assumed certain indebtedness of the lessor for the
deferred purchase price of certain gaming equipment on the vessel in an amount
of $2,867. Charter Corp. has the option, subject to certain limitations, to
purchase the vessel and equipment at any time prior to six months from the
lease expiration date, including renewal periods, for the lower of the
appraised value or the amortized value (as such terms are defined by the
Initial Charter Agreement), and upon satisfaction of certain other terms of
the Initial Charter Agreement. Charter Corp. is required to pay for all
improvements and bear the cost of all taxes, insurance and repairs. The
lessor has filed an action against Charter Corp. and President Mississippi
with respect to certain disputed charter payments under the Initial Charter
Agreement. See Footnote 10.

Rental expense incurred under operating leases was $9,597, $12,847 and
$9,252 for the years ended February 28/29, 1998, 1997 and 1996, respectively.

Future minimum lease commitments under noncancellable long-term operating
leases and capital leases as of February 28, 1998, are as follows:

Non-cancelable
Operating Capital
Leases Leases
------------ ------------
Years ending February 28/29:
1999........................ $ 6,096 $ 1,587
2000........................ 2,188 7
2001........................ 1,179 5
2002........................ 768 1
2003........................ 433 --
Thereafter.................. 4,577 --
--------- ---------
15,241 1,600
Less interest amount...... -- (93)
--------- ---------
Lease obligations............ $ 15,241 1,507
=========
Less current maturities... (1,495)
---------
Long-term capital lease
obligations................ $ 12
=========

8. INCOME TAXES

The Company recognizes deferred tax assets, net of applicable reserves,
related to net operating loss carryforwards and certain temporary differences.
Recognition of future tax benefits is based on the extent the realization of
such benefit is "more likely than not." As such, the realization of the
deferred tax benefit is dependent on the Company's ability to generate future

F-18
<PAGE> 57
taxable income. Given the level of operations, the increased competition and
the overall uncertainty as to the Company's ability to return to
profitability, the Company determined that the tax benefit did not satisfy
the recognition criteria. Accordingly, a 100% valuation allowance is
maintained against the Company's deferred tax assets.

Income tax expense (benefit) attributable to loss before income taxes,
minority interest and extraordinary item for the years ended February 28/29,
1998, 1997 and 1996 is as follows:

1998 1997 1996
------ ------ ------
Current:
Federal................................ $ -- $ -- $ --
State.................................. -- (1,367) 1,360
-------- -------- --------
-- (1,367) 1,360
Deferred:
Federal................................ -- -- 15,659
State.................................. -- -- 4,889
-------- -------- --------
-- -- 20,548
-------- -------- --------
$ -- $(1,367) $21,908
======== ======== ========

The difference between the statutory federal tax rate and the effective tax
rate, expressed as a percentage of loss before income taxes, minority interest
and extraordinary item, for the years ended February 28/29, 1998, 1997 and
1996 is as follows:

1998 1997 1996
------ ------ ------

Statutory tax rate........................ (35.0%) (35.0%) (35.0%)
Increases (decreases) in tax
resulting from:
Establishment of a valuation
allowance........................... 34.9 29.5 91.0
Nondeductible lobbying expenses....... 0.1 0.3 0.0
Disallowed meal and
entertainment expenses.............. 0.0 0.2 0.1
State tax provision (benefit),
net of federal tax expense.......... 0.0 (8.8) 4.0
Other................................. 0.0 0.0 0.4
------- ------- -------
0.0 (13.8%) 60.5%
======== ======= =======

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<PAGE> 58
The components of the net deferred tax asset as of February 28, 1998 and
1997 are as follows:
1998 1997
------ ------
Deferred tax assets:
Net operating loss carryforward....... $ 45,295 $ 33,949
Pre-opening costs and intangible
assets.............................. 7,235 9,063
Accounting reserves................... 60 59
Tax credits........................... 280 280
Other................................. 1,909 2,269
--------- ---------
54,779 45,620
Less: Valuation allowance (44,447) (38,468)
--------- ---------
10,332 7,152
Deferred tax liabilities:
Property.............................. 10,332 7,152
--------- ---------
Net deferred tax asset............. $ -- $ --
========= =========

As of February 28, 1998, the Company had federal, Missouri and Mississippi
net operating loss carryforwards of $114,549, $104,048 and $28,181,
respectively. These tax benefits will expire between 2008 and 2013 unless
first offset against taxable income. The availability of the loss
carryforwards may be limited in the event of a significant change in ownership
of the company or its subsidiaries.

9. OTHER ACCRUED EXPENSES

The components of other accrued expenses as of February 28, 1998 and 1997,
are as follows:
1998 1997
------ ------

Interest........................ $ 6,343 $ 6,120
Taxes, other than income
and payroll taxes............. 2,862 1,984
Accrued lease payments.......... 3,321 822
Other........................... 5,803 6,738
--------- ---------
$ 18,329 $ 15,664
========= =========

10. COMMITMENTS AND CONTINGENT LIABILITIES

Litigation

On January 16, 1997 a case entitled "Whalen v. John E. Connelly, J. Edward
Connelly and Associates, Inc., President Casinos, Inc. and PRC-Iowa, Inc." was

F-20
<PAGE> 59
filed in the Iowa District Court for Scott County by Michael L. Whalen
("Whalen"), who is a five percent limited partner in TCG. Whalen filed this
lawsuit after accepting from Della III, Inc., the former general partner,
shares of Common Stock and cash to which he was determined to be entitled
pursuant to a previous judgment. Whalen claims in this lawsuit that because
he asked for the stock and cash while he was appealing the judgment in a
previous lawsuit and was not given the stock or cash until after the judgment
was affirmed, the named defendants committed the tort of conversion. Whalen
seeks as damages the difference in the value of the stock on the date of its
"highest valuation" and the date he accepted the stock in 1996. The Company,
after consultation with legal counsel, believes this lawsuit is without merit
and intends to defend this action vigorously. The District Court dismissed
the claims against the Company and Mr. Connelly, and the case is set for trial
in December 1999. Although the results of litigation are inherently
uncertain, the Company does not believe this matter will have a material
adverse effect on the Company's financial condition or results of operations.

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<PAGE> 60
connection therewith, withheld a portion of the charter payments due to AGEL
under the Initial Charter Agreement. In October of 1997, Charter Corp. and
other entities claiming ownership interest in the "Biloxi Barge" entered into
an agreement in writing (the "Term Sheet") that stated, among other things,
the following: (a) that AGEL and Charter Corp. would dismiss all litigation
between them; (b) that Charter Corp. would make a lump sum payment of $1.5
million in satisfaction of AGEL's claims for unpaid rent under the Initial
Charter Agreement; and (c) that AGEL and Charter Corp. would amend the Initial
Charter Agreement to reduce Charter Corp.'s monthly rental to $215 (the
"Revised Charter Agreement"), effective December 1, 1997. The Term Sheet
provides that the foregoing will occur within ten days after the Bankruptcy
Court's approval of the Term Sheet becomes final (the "Closing Date"). Thus,
Charter Corp. and AGEL agreed that Charter Corp.'s payments would begin to
accrue again on December 1, 1997 at a monthly rate of $215 and that Charter
Corp. would not have to make the rental payments until the Closing Date. On
January 9, 1998, the Term Sheet was approved by the Bankruptcy Court but,
subsequently, appealed by one of the parties regarding the manner of
distribution which prevented finalization of this dispute and the Term Sheet.
There can be no assurance that the Term Sheet approved by the Bankruptcy Court
will become final or will not be appealed by an interested party. The
Company's management believes, based on advice from legal counsel, that the
Term Sheet is an enforceable contract which will become final and, therefore,
is accounting for this transaction in accordance with the Term Sheet.

The Environmental Protection Agency ("EPA") and the U.S. Attorney's Office
for the Eastern District of Missouri are conducting a federal criminal
investigation with respect to compliance by President Missouri with federal
environmental laws in connection with the operation of the "Admiral" in St.
Louis. The Company is cooperating fully with the investigation and has
provided certain information regarding the operations of the "Admiral" to the
EPA and the U.S. Attorney's Office. In the event that the Company is charged
with violating federal environmental laws, the Company may be subject to
substantial civil and criminal penalties, including monetary fines. The
Company has established a reserve for any monetary fines or penalties which
may be incurred in this matter. Based upon the Company's discussions with the
U.S. Attorney's Office and the results of the Company's internal investigation
of this matter, management does not believe that the investigation will result
in any further monetary or other penalties which would have a material adverse
effect on the Company's financial condition or results of operations, or which
would have any material adverse impact upon the gaming licenses of the Company
or its subsidiaries.

F-22

<PAGE> 61
The Company is also from time to time party to litigation, which may or may
not be covered by insurance, arising in the ordinary course of its business.
Based on the advice of legal counsel, the Company does not believe that the
outcome of such litigation will have a material adverse effect on the Company.

Operator's Contract

TCG and the Riverboat Development Authority (the "Authority"), an Iowa non-
profit corporation, entered into an operator's contract on December 28, 1989,
which enables TCG to be the operator of an excursion gambling boat pursuant to
the rules and regulations of the Iowa Racing and Gaming Commission. This
contract was last amended on March 1, 1998. The contract, as amended,
requires TCG to make weekly payments of $28, an annual payment of 2% of
adjusted gross receipts in excess of $34 for each year commencing July 1,
1994, and an annual payment equal to one dollar and fifty cents for each
admission, either paid or complimentary, in excess of 1,117,579 admissions for
each contract year. The current contract expires February 28, 2002.

A proposition to extend the referendum approving riverboat gaming operations
in Scott County, Iowa, must be submitted to the county electorate at the
general election held in calendar 2002, and the general election held at each
subsequent eight-year interval.

Other

The ownership and operation of casino gaming facilities are subject to
extensive state and local regulation. As a condition to obtaining and
maintaining a gaming license, the Company must submit detailed financial,
operating and other reports to each such Commission, each of which has broad
powers to suspend or revoke licenses. In addition, substantially all of the
Company's material transactions are subject to review and/or approval by the
various regulatory bodies. Any person acquiring 5% or more of the Common
Stock or of the equity securities of any gaming entity must be found suitable
by the appropriate regulatory body. The Davenport license was last renewed in
April 1998 and expires April 1999. The Biloxi license was last renewed in
June of 1996 for a two-year period. The St. Louis license was last renewed in
May of 1998 and expires in May of 2000. The Company is in the process of
reapplying for the Mississippi license and has been given no indication that
it will be denied.

In March 1996, a bipartisan bill was passed by the U.S. House of
Representatives to establish a National Gaming Impact and Policy Commission
which would provide regulatory oversight of the gaming industry at the federal
level. The bill has been sent to the Senate for consideration. Although it
is not possible to predict if, when or in what form the proposed legislation
may be adopted, if adopted, such legislation may result in further regulation
of the Company's gaming operations which could have a material adverse impact
on the Company's future results of operations.

F-23
<PAGE> 62
11. DEVELOPMENT AGREEMENT WITH CITY OF DAVENPORT, IOWA

TCG and the City of Davenport (the "City") are parties to a development
agreement, which provides, among other things, for the following:

Development Agreement -- TCG was required to submit to the City plans for
the development of certain property in close proximity to "President". During
the year ended February 29, 1996, TCG and the City reached a mutually
acceptable development plan whereby, among other things, TCG was obligated to
expend certain amounts for leasehold improvements in exchange for certain
lease rights. As a result of this agreement, TCG was released from its $250
surety bond obligation upon completion of the project during fiscal 1998.

Fees -- TCG is required to pay certain boarding and docking fees and a
special payment in lieu of property taxes to the City. TCG is required
annually to pay the City of Davenport a base amount of $819 plus 82.2 cents
per passenger over 1,117,579 passengers. Both the base amount and per
passenger charges related to the docking fees are subject to an annual 4%
escalator.

Boat Operations -- TCG may not substitute another vessel to replace
"President" in Davenport, Iowa so long as an average of 2,250 passengers per
day during the cruise season is maintained. If such passenger count is not
maintained or if there is a material adverse change in the Iowa gaming law,
TCG will be permitted to substitute an 800-passenger boat. However, temporary
substitution during U.S. Coast Guard mandated hull inspections is permitted.

12. MINORITY INTEREST

To effectuate the acquisition of the Broadwater Property as discussed in
Note 3, the Company entered into a Redemption Agreement dated as of July 22,
1997 (the "Redemption Agreement") by and among J. Edward Connelly Associates,
Inc., a company controlled by Mr. Connelly ("JECA"), Broadwater Hotel, Inc., a
wholly-owned subsidiary of the Company ("BHI"), and President Broadwater
Hotel, L.L.C., a limited liability company formed by JECA and BHI for purposes
of the transaction ("PBLLC").

BH Acquisition Corporation ("BH"), a company wholly-owned by Mr. Connelly,
was the sole owner of the Broadwater Property. Prior to the closing of the
transactions, JECA, the successor by merger to BH became the sole owner of the
Broadwater Property. In connection with the formation of PBLLC, JECA
transferred its interest in the Broadwater Property to PBLLC as a capital
contribution in exchange for the sole outstanding membership interest in
PBLLC. Pursuant to the Redemption Agreement, BHI made a capital contribution
of $5,000 to PBLLC in exchange for the Class A Unit of PBLLC as described in
the Amended and Restated Limited Liability Company Operating Agreement of
PBLLC (the "Amended Operating Agreement"). The Class A Unit affords BHI
control of PBLLC. Simultaneously with BHI's acquisition of the Class A Unit,
PBLLC redeemed JECA's existing membership interest in PBLLC in exchange for
(i) the cash payment by PBLLC to JECA of $28,484, (ii) redemption of the
$2,016 debt owed by BH to the Company and (iii) the issuance by PBLLC to

F-24
<PAGE> 63
JECA of the Class B Unit of PBLLC as described in the Amended Operating
Agreement.

PBLLC is obligated to redeem the Class B Unit from JECA for a redemption
price of $10,000 (the "Redemption Price") on the date on which the
Indebtedness (as defined in Note 6) is fully and finally discharged and the
mortgage securing the Indebtedness is released. In addition, the Class B Unit
entitles JECA to a priority return based on a percentage per annum equal to
the greater of (i) 8.75% or (ii) 4.0% plus LIBOR, as defined by the Redemption
Agreement.

13. COMMON STOCK

On July 23, 1997, the shareholders of the Company approved a one-for-six
reverse stock split and an increase in the par value of the Company's Common
Stock from $0.01 to $0.06 per share. All references in these financial
statements to numbers of common shares, stock prices and earnings per share
amounts have been restated to give retroactive effect to the reverse stock
split and increase in par value of the Common Stock.

14. EMPLOYEE BENEFIT PLANS

Savings Plan

The Company maintains an employee savings plan which covers all full-time,
non-union employees. Pursuant to this savings plan, participating employees
may contribute (defer) a percentage of eligible compensation. Employee
contributions to the savings plan, up to certain limits, are partially matched
by the Company. The expense applicable for the Company's contribution to the
savings plan was $379, $451 and $433 for the years ended February 28/29, 1998,
1997 and 1996, respectively.

Stock Option Plan

The Company maintains a stock option plan which provides for the granting of
nonqualified and incentive stock options pursuant to the applicable provisions
of the Internal Revenue Code and regulations.

All directors, officers and other members of the management team who are in
positions in which their decisions, actions and counsel may significantly
impact the profitability and success of the Company are eligible to receive
options under the plan. In addition, the plan authorizes the issuance of
tandem stock appreciation rights in connection with the issuance of certain
options. Stock appreciation rights may only be issued in connection with a
nonqualified stock option. This right will entitle the holder to receive in
cash or stock an amount equal to the excess of the fair market value on the
date of exercise over the exercise price of the tandem stock option. The
maximum value of any stock appreciation right will be limited to the exercise
price of the tandem stock option. A stock appreciation right may be
exercisable only at the same time and to the same extent as the tandem stock
option.

F-25
<PAGE> 64
The plan is administered by the Compensation Committee of the Board of
Directors, whose members determine to whom options will be granted and the
terms of each option. The exercise price of stock options granted under the
plan is established by the Compensation Committee, but the exercise price may
not be less than the market price of the Company's Common Stock on the date
the option is granted. Each option granted is exercisable in full at any time
or from time to time as determined by the Compensation Committee and provided
in the option agreement, provided that no option may have a term exceeding ten
years. In December 1996, the plan was amended primarily to allow
transferability of options granted under certain circumstances and with the
consent of the Compensation Committee.

In July 1997, the stockholders of the Company approved the new President
Casinos, Inc. 1997 Stock Option Plan, which increased the number shares
available for grant by 500,000 shares.

On June 19, 1996 and August 22, 1997, the Compensation Committee of the
Board of Directors (the "Committee") approved amendments to certain of the
outstanding stock option agreements of each of the executive officers and
certain other employees of the Company. Pursuant to such amendments, options
to purchase an aggregate of 276,340 shares of Common Stock at exercise prices
ranging from $54.00 to $5.625, per share were repriced at an exercise price of
$11.625 and $2.625, respectively, per share, the market value of the Common
Stock on the date of the repricings. In addition, the trading price at which
certain options granted to an executive officer with respect to 16,667 shares
of Common Stock will vest was amended from $84.00 to $5.50 per share. Except
for such amendments, the other terms of the stock options repricing were not
changed.

The Committee believes that the modifications were necessary and appropriate
in light of competitive conditions in the gaming industry and in order to
provide a meaningful long-term incentive compensation opportunity in light of
recent trading prices of the Common Stock to the management team whose efforts
are essential to the Company's success.

In fiscal 1997, the Company adopted SFAS No. 123, "Accounting for Stock-
Based Compensation". SFAS No. 123 provides, among other things, that
companies may elect to account for employee stock options using a fair value-
based method or continue to apply the intrinsic value-based method prescribed
by Accounting Principles Board Opinion No. 25 ("APB No. 25"). As permitted,
the Company has elected to continue to apply the intrinsic value-based method
for stock options. Accordingly, no compensation cost has been recognized.

Under the Company's Plans, the Company is authorized to grant options up to
an aggregate of 1,025,000 shares, of which 100,000 have been exercised, to
management team members and directors. Options under the plan are generally
granted at market value at the date of the grant and expire 10 years from the
date of grant. The outstanding options that have been granted under the plan
generally vest either at (i) a rate of 20% each anniversary date or {ii} 20%
on date of grant and 20% on each anniversary date thereafter. The Company has

F-26
<PAGE> 65
also granted stock options to external board members under a non-qualified
plan. These options are generally granted at market value at the date of the
grant; vest at 50% on date of grant and 25% each anniversary date thereafter
or 20% at the date of grant, 20% on the first anniversary and 60% on the
second anniversary; and expire 10 years from date of grant.

Effective with options granted in 1996 and subsequently, the fair value of
each option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions used for
grants in 1998, 1997 and 1996, respectively: no dividend yield expected;
volatility of 87.6%, 97.0% and 62.8%; risk-free interest rates of 6.5%, 7.0%
and 7.3%; and expected lives of 9.7, 9.2 and 10 years.

The following table discloses the Company's pro forma net loss and loss per
share assuming compensation cost for stock options had been determined using
the fair value-based method prescribed by SFAS No. 123.

1998 1997 1996
------ ------ ------
Net loss:
As reported................ $(15,037) $ (8,785) $(58,150)
Pro forma.................. $(15,821) $ (9,357) $(58,481)
Loss per share:
As reported................ $ (2.99) $ (1.74) $(11.58)
Pro forma.................. $ (3.14) $ (1.86) $(11.64)

F-27
<PAGE> 66
The summary of the status of the Company's fixed stock option plans as of
February 28/29, 1998, 1997, and 1996, and changes during the years ending on
those dates is presented below:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------- ------------------------- --------------------------
Weighted-Average Weighted-Average Weighted-Average
Fixed Options Shares Exercise Price Shares Exercise Price Shares Exercise Price
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>

Outstanding at
beginning
of year 357,268 $25.84 374,151 $38.92 348,584 $40.48
- -------------------------------------------------------------------------------------------------
Granted 622,788 2.66 169,834 11.03 71,667 36.00
Forfeited (189,958) 14.45 (186,717) 38.58 (46,100) 46.24
Expired -- -- -- -- -- --
- -------------------------------------------------------------------------------------------------
Outstanding
at end
of year 790,098 10.31 357,268 25.84 374,151 38.92
- -------------------------------------------------------------------------------------------------
Options
exercisable
at year-end 378,609 269,450 285,583

Weighted-
average fair
value of options
granted during
the year $ 2.66 $ 9.78 $ 28.14
- -------------------------------------------------------------------------------------------------
</TABLE>
The following table summarizes information about fixed stock options
outstanding at February 28, 1998:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
------------------------------------------------ ----------------------------
Range of Number Weighted-Average Weighted- Number Weighted-
Exercise Outstanding Remaining Average Exercisable Average
Prices at 02/28/98 Contractual Life Exercise Price at 02/28/98 Exercise Price
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 2.00 - 2.99 596,506 6.91 years $ 2.6250 195,971 $ 2.6250
4.00 - 4.99 13,942 9.37 years 4.0000 2,988 4.0000
8.00 - 8.99 150 0.15 years 8.6250 150 8.6250
11.00 -11.99 4,500 0.18 years 11.6250 4,500 11.6250
37.00 -37.99 175,000 4.68 years 37.0000 175,000 37.0000
- -------------------------------------------------------------------------------------------------
Total 790,098 378,609
- -------------------------------------------------------------------------------------------------
</TABLE>
15. RELATED PARTY TRANSACTIONS

The Company is related to other entities through common ownership by its
principal owners or officers. The Company purchases legal, promotional,

F-28
<PAGE> 67
travel, personnel and various other services and products from such related
parties. The amounts charged are based on specific identification of the
products and services provided by such entities. The Company also leased its
Biloxi, Mississippi mooring site, parking facilities, offices and a warehouse
from a related party under operating leases, through July 23, 1997, at which
time the Company purchased the real estate and certain improvements (see Note
3). In management's opinion, such related party transactions are equivalent
to amounts which would have been charged by unrelated third parties.

Transactions with such related parties occurring during the years ended
February 28/29, 1998, 1997 and 1996 are summarized as follows:

Description 1998 1997 1996
------------- ------ ------ ------
Rent.......................... $ 1,322 $ 3,286 $ 3,228
Legal services................ -- -- 873
Other products and services... 196 1,503 1,335

The Company, Mr. Connelly and certain other parties were defendants in
litigation involving The Broadwater Hotel complex. During February 1995, the
Company, as well as the other parties to such litigation, entered into a
settlement agreement pursuant to which all claims in such litigation were
dismissed with prejudice. In connection with the settlement, on February 17,
1995, the Company entered into a loan agreement with BH for principal amount
of $1,000 (the "Existing Note") to fund the first of four payments for the
litigation settlement. On February 15, 1996, the Existing Note was amended
and restated (the "Amended and Restated Note") to extend the maturity date one
calendar year and the Company entered into a second loan agreement (the "New
Note") with BH for principal amount of $1,000 to fund the third installment of
the settlement. The Amended and Restated Note and the New Note (collectively,
the "Notes") bore interest at the rate of 13.0% per annum payable monthly.
Principal on the Amended and Restated Note was payable on the earlier of (i)
February 8, 1998 or (ii) the transfer by BH of its interest in any one or more
of the following assets: the Broadwater Hotel and Resort, the Broadwater Tower
or the Broadwater Inn. Principal on the New Note was payable August 17, 1997.
Mr. Connelly had personally guaranteed the repayment of the Notes to the
Company. Interest earned on such related party borrowings was $103, $260 and
$135 for the years ended February 28/29, 1998, 1997 and 1996, respectively.
In conjunction with the purchase of the Broadwater Property in July 1997, the
principal was redeemed (see Note 3).

Mr. Connelly has guaranteed debt of the Company totaling $3,800 as of
February 28, 1998.

F-29
<PAGE> 68
16. SUPPLEMENTAL CASH FLOW STATEMENT DISCLOSURES

The components of net change in working capital accounts and long-term
assets and liabilities for the years ended February 28/29, 1998, 1997 and
1996, are as follows:

1998 1997 1996
------ ------ ------
Changes in working capital accounts:
Receivables, net........................... $ (706) $ 961 $(1,421)
Receivables from related parties........... 6 9 (27)
Inventories................................ (261) (390) 240
Prepaid expenses and other current assets.. (935) 103 60
Accounts payable........................... 1,393 (1,567) (2,344)
Accrued payroll and benefits............... 287 807 (369)
Other accrued expenses..................... 2,665 (1,354) 5,480
Income taxes receivable/payable............ -- (183) (1,550)
Due to related parties..................... (50) (53) (253)
-------- -------- --------
Net change in working capital accounts... $ 2,399 $(1,667) $ (184)
======== ======== ========
Changes in long-term asset
and liability accounts:
Other non-current assets................... $ (446) $ 188 $ (439)
Other liabilities.......................... -- (405) (27)
-------- -------- --------
Net change in long-term asset
and liability accounts................. $ (446) $ (217) $ (466)
======== ======== ========

Supplemental schedule of noncash investing and financing activities:

Year Ended February 28, 1998

As discussed in Note 12, the Company issued $10,000 Class B Unit of PBLLC.
In conjunction the purchase of the Broadwater Property, the Company redeemed
$2,016 debt owed to the Company by Mr. Connelly and made a non-cash
reimbursement of $53 to Mr. Connelly in conjunction with the closing of the
transaction and minority interest amounts due.

The Company acquired $156 of assets under capital lease obligations.

Year Ended February 28, 1997

There were no material non-cash investing or financing activities in fiscal
1997.

Year Ended February 29, 1996

The Company acquired assets under capital lease agreements of $2,983.

F-30
<PAGE> 69
During fiscal years 1998 and 1997, the Company paid no income taxes. During
fiscal 1997, the Company received an income tax refund of $1,367. The Company
paid income taxes, net of amounts recovered, of $1,550 in fiscal 1996.
Interest paid by the Company, net of amounts capitalized, was $15,324, $13,768
and $14,006 for the years ended February 28/29, 1998, 1997 and 1996,
respectively.

17. SUBSEQUENT EVENTS

The "Admiral" was closed to the public for 26 days, reopening on April 30,
1998. The Company maintains adequate property, liability and business
interruption insurance to minimize the financial impact of the accident. The
maximum deductible that may be applied against these policies could reach
$1,100. The Company will be pursuing the owners of the towboat that was
involved in the accident to recover any losses.

In January 1998, the Company submitted to the New York City Gambling Control
Commission the appropriate applications to operate a "cruise-to-nowhere"
vessel from New York City.

The Company owns the 308-foot deep-water vessel, "President Casino New
Yorker," which would be available for redeployment in New York should the
Company receive a license. The Company believes that "President Casino New
Yorker" is one of the best vessels available for a "cruise-to-nowhere" casino
operation. The Company has committed approximately $4,000 of capital for
additions to the vessel and gaming equipment and has spent $1,300 (of which
$200 was spent in fiscal 1998) on development costs relating to the proposed
New York operation.

While the Company continues to pursue a New York City license it also
continues to review alternate uses for the vessel, including the sale or lease

F-31
<PAGE> 70
of the vessel.

18. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following table sets forth consolidated income statement data for the
periods indicated. The quarterly information is unaudited, but in
management's opinion reflects all adjustments necessary for a fair
presentation of the information for the periods presented.

Fiscal 1998 Quarters Ended
May 31 Aug. 31 Nov. 30 Feb. 28
-------- --------- --------- ---------

Net operating revenues........... $ 46,132 $ 48,996 $ 45,898 $ 46,509

Operating income (loss).......... 552 2,815 386 (926)
Loss before income tax
and minority interest.......... (2,861) (1,126) (4,369) (5,811)
Net loss......................... (2,879) (1,348) (4,683) (6,127)
========= ========= ========= =========
Basic and dilutive net
loss per share................. $ (0.57) $ (0.27) $ (0.93) $ (1.22)
======== ======== ======== ========

Fiscal 1997 Quarters Ended
May 31 Aug. 31 Nov. 30 Feb. 28
-------- --------- --------- ---------

Net operating revenues........... $ 49,593 $ 47,522 $ 46,528 $ 43,384

Operating income (loss).......... 3,004 2,044 1,547 (2,811)
Loss before income tax
and minority interest.......... (548) (1,410) (1,779) (6,183)
Income tax benefit..............1 -- -- (275) (1,092)
Net loss......................... (625) (1,495) (1,574) (5,091)
========= ========= ========= =========
Basic and dilutive net
loss per share.................. $ (0.12) $ (0.30) $ (0.31) $ (1.01)
======== ======== ======== ========

(1) The fourth quarter of fiscal 1997 includes an income tax benefit
adjustment of $240 related to a change in the effective income tax rate.

19. SUMMARIZED AND CONDENSED FINANCIAL INFORMATION OF THE COMPANY

The following summarized and condensed financial information presents the
separate financial information of the parent company, the combined financial
information of the Non-Guarantors and the combined financial information of
the Guarantors of the Company's Senior Exchange Notes as of the dates
presented (see Note 6).

F-32
<PAGE> 71
The Company has incorporated two wholly-owned subsidiaries which are Non-
Guarantors, Charter Corp. (see Note 7) and BHI (see Note 12), and has
purchased a 75% interest in a limited liability company which is a Non-
Guarantor, PBLLC (see Note 6).

All of the Guarantors (other than TCG) are wholly-owned subsidiaries of the
Company and are full joint and several guarantors of the Senior Exchange Notes
(limited only to the extent necessary to insure that it does not constitute a
fraudulent conveyance under applicable law). The guarantee of TCG, which is a
95%-owned partnership, is limited to the amount owed from time to time by TCG
to PRC Holdings ($0 and $4,376 as of February 28, 1998 and 1997,
respectively). As security for the obligations of the Company and the
Guarantors under the Senior Exchange Notes, the Company and the Guarantors
have pledged their equity interests in each Guarantor and all of their rights
in certain management agreements with, certain indebtedness from, and certain
investments in, certain gaming ventures. Separate financial information for
TCG and PRC Holdings are presented elsewhere herein.

F-33
<PAGE> 72
<TABLE>
<CAPTION>
SUMMARIZED AND CONDENSED CONSOLIDATING BALANCE SHEET
FEBRUARY 28, 1998
(in thousands)

President Non- Eliminating
Casinos, Inc. Guarantors Guarantors Entries Consolidated
--------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS

CURRENT ASSETS:
Cash and cash equivalents......... $ 1 $ 19,277 $ -- $ -- $ 19,278
Restricted cash................... -- -- 4,354 -- 4,354
Short-term investments............ -- 2,622 -- -- 2,622
Other current assets.............. 6,003 8,215 5,180 (11,826) 7,572
---------- ---------- ---------- ---------- ----------
Total current assets............ 6,004 30,114 9,534 (11,826) 33,826
---------- ---------- ---------- ---------- ----------

PROPERTY AND EQUIPMENT, NET......... -- 106,250 42,816 -- 149,066
---------- ---------- ---------- ---------- ----------
OTHER ASSETS:
Related party notes receivable.... 99,120 292,864 -- (391,984) --
Investments in subsidiaries....... 17,657 -- -- (17,657) --
Other assets...................... 2,019 2,001 344 -- 4,364
---------- ---------- ---------- ---------- ----------
Total other assets.............. 118,796 294,865 344 (409,641) 4,364
---------- ---------- ---------- ---------- ----------
$ 124,800 $ 431,229 $ 52,694 $(421,467) $ 187,256
========== ========== ========== ========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Current maturities of
long-term debt.................. $ -- $ 590 $ 1,495 $ (190) $ 1,895
Accounts payable.................. -- 2,796 1,011 -- 3,807
Other current liabilities......... 6,018 26,585 4,841 (11,636) 25,808
---------- ---------- ---------- ---------- ----------
Total current liabilities....... 6,018 29,971 7,347 (11,826) 31,510
---------- ---------- ---------- ---------- ----------

LONG-TERM LIABILITIES:
Notes payable and capital
lease obligations................ 99,120 390,886 36,762 (391,984) 134,784
Other long-term liabilities....... -- -- 1,300 -- 1,300
---------- ---------- ---------- ---------- ----------
Total liabilities............... 105,138 420,857 45,409 (403,810) 167,594
---------- ---------- ---------- ---------- ----------

MINORITY INTEREST................... 10,978 550 10,428 (10,978) 10,978

STOCKHOLDERS' EQUITY................ 8,684 9,822 (3,143) (6,679) 8,684
---------- ---------- ---------- ---------- ----------
$ 124,800 $ 431,229 $ 52,694 $(421,467) $ 187,256
========== ========== ========== ========== ==========
</TABLE>

F-34
<PAGE> 73
<TABLE>
<CAPTION>
SUMMARIZED AND CONDENSED CONSOLIDATING BALANCE SHEET
FEBRUARY 28, 1997
(in thousands)

President Non- Eliminating
Casinos, Inc. Guarantors Guarantor Entries Consolidated
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS

CURRENT ASSETS:
Cash and cash equivalents......... $ 1 $ 25,112 $ 2 $ -- $ 25,115
Short-term investments............ -- 600 -- -- 600
Other current assets.............. 6,003 14,019 1,546 (14,025) 7,543
---------- ---------- ---------- ---------- ----------
Total current assets............ 6,004 39,731 1,548 (14,025) 33,258
---------- ---------- ---------- ---------- ----------

PROPERTY AND EQUIPMENT, NET......... -- 115,550 1,613 -- 117,163
---------- ---------- ---------- ---------- ----------
OTHER ASSETS:
Related party notes receivable.... 98,811 250,141 -- (348,952) --
Investments in subsidiaries....... 21,574 -- -- (21,574) --
Other assets...................... 2,733 2,750 -- -- 5,483
---------- ---------- ---------- ---------- ----------
Total other assets.............. 123,118 252,891 -- (370,526) 5,483
---------- ---------- ---------- ---------- ----------
$ 129,122 $ 408,172 $ 3,161 $(384,551) $ 155,904
========== ========== ========== ========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Current maturities of
long-term debt.................. $ -- $ 4,524 $ 1,372 $ (4,124) $ 1,772
Accounts payable.................. -- 2,405 9 -- 2,414
Other current liabilities......... 6,325 25,562 884 (9,901) 22,870
---------- ---------- ---------- ---------- ----------
Total current liabilities....... 6,325 32,491 2,265 (14,025) 27,056
---------- ---------- ---------- ---------- ----------

LONG-TERM LIABILITIES:
Notes payable and capital
lease obligations................ 98,811 354,107 896 (348,952) 104,862
---------- ---------- ---------- ---------- ----------
Total liabilities............... 105,136 386,598 3,161 (362,977) 131,918
---------- ---------- ---------- ---------- ----------

MINORITY INTEREST................... 265 265 -- (265) 265

STOCKHOLDERS' EQUITY................ 23,721 21,309 -- (21,309) 23,721
---------- ---------- ---------- ---------- ----------
$ 129,122 $ 408,172 $ 3,161 $(384,551) $ 155,904
========== ========== ========== ========== ==========
</TABLE>
F-35
<PAGE> 74
<TABLE>
<CAPTION>
SUMMARIZED AND CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(in thousands)

President Non- Eliminating
Casinos, Inc. Guarantors Guarantors Entries Consolidated
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year Ended February 28, 1998:
Operating revenues................. $ -- $ 182,475 $ 10,435 $ (15,375) $ 187,535
Operating costs and expenses....... 95 180,668 9,320 (15,375) 184,708
---------- ---------- ---------- ---------- ----------
Operating income (loss).......... (95) 1,807 1,115 -- 2,827
Equity income (loss) in
consolidated subsidiaries........ (14,072) 7,527 (1,405) 7,950 --
Interest expense, net.............. -- (13,321) (3,673) -- (16,994)
---------- ---------- ---------- ---------- ----------
Loss before minority interest.... (14,167) (3,987) (3,963) 7,950 (14,167)
Minority interest.................. (870) (285) (585) 870 (870)
---------- ---------- ---------- ---------- ----------
Net loss....................... $ (15,037) $ (4,272) $ (4,548) $ 8,820 $ (15,037)
========== ========== ========== ========== ==========
Year Ended February 28, 1997:
Operating revenues................. $ -- $ 187,027 $ 5,404 $ (5,404) $ 187,027
Operating costs and expenses....... 101 183,355 5,191 (5,404) 183,243
---------- ---------- ---------- ---------- ----------
Operating income (loss).......... (101) 3,672 213 -- 3,784
Equity income (loss) in
consolidated subsidiaries........ (9,819) 6,502 -- 3,317 --
Interest expense, net.............. -- (13,491) (213) -- (13,704)
---------- ---------- ---------- ---------- ----------
Loss before income taxes and
minority interest.............. (9,920) (3,317) -- 3,317 (9,920)
Income tax benefit................. 1,367 -- -- -- 1,367
Minority interest.................. (232) (232) -- 232 (232)
---------- ---------- ---------- ---------- ----------
Net loss....................... $ (8,785) $ (3,549) $ -- $ 3,549 $ (8,785)
========== ========== ========== ========== ==========
Year Ended February 29, 1996:
Operating revenues................. $ -- $ 192,685 $ 3,692 $ (3,692) $ 192,685
Operating costs and expenses....... 141 213,020 3,513 (3,692) 212,982
---------- ---------- ---------- ---------- ----------
Operating income (loss).......... (141) (20,335) 179 -- (20,297)
Equity loss in unconsolidated
entities......................... -- (1,174) -- -- (1,174)
Equity income (loss) in
consolidated subsidiaries........ (36,068) 11,055 -- 25,013 --
Interest expense, net.............. -- (14,559) (179) -- (14,738)
---------- ---------- ---------- ---------- ----------
Loss before income taxes and
minority interest.............. (36,209) (25,013) -- 25,013 (36,209)
Income tax expense................. (21,908) -- -- -- (21,908)
Minority interest.................. (33) (33) -- 33 (33)
---------- ---------- ---------- ---------- ----------
Net loss....................... $ (58,150) $ (25,046) $ -- $ 25,046 $ (58,150)
========== ========== ========== ========== ==========
</TABLE>

F-36
<PAGE> 75
<TABLE>
<CAPTION>
SUMMARIZED AND CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED FEBRUARY 28, 1998
(in thousands)
President Non- Eliminating
Casinos, Inc. Guarantors Guarantors Entries Consolidated
--------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................. $(15,037) $ (4,272) $ (4,548) $ 8,820 $(15,037)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization...... -- 13,569 803 -- 14,372
Gain on sale of fixed assets....... -- (722) (4) -- (726)
Impairment of long-lived assets.... -- 396 -- -- 396
Lease amortization................. -- 1,917 -- -- 1,917
Equity (income) loss in
consolidated subsidiaries........ 14,072 (7,527) 1,405 (7,950) --
Minority interest.................. 870 285 585 (870) 870
Amortization of deferred
financing fees and discount...... 1,039 9 1,386 -- 2,434

Changes in assets and liabilities.. (321) 2,308 (34) -- 1,953
--------- --------- --------- --------- ---------
Net cash provided by (used in)
operating activities........... 623 5,963 (407) -- 6,179
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property
and equipment..................... -- (5,479) (29,895) -- (35,374)
Proceeds from the sale of property. -- 1,520 81 -- 1,601
Change in restricted cash.......... -- -- (4,354) -- (4,354)
Purchase of lease options.......... -- (1,325) -- -- (1,325)
Purchase of short-term investments. -- (2,022) -- -- (2,022)
Investment in subsidiaries......... (519) (104) -- 623 --
Minority interest.................. (104) -- (208) 208 (104)
Other.............................. -- (78) 13 -- (65)
--------- --------- --------- --------- ---------
Net cash used in
investing activities........... (623) (7,488) (34,363) 831 (41,643)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable........ -- -- 30,000 -- 30,000
Repayment of notes payable......... -- (400) -- -- (400)
Proceeds from capital lease refund. -- -- 108 -- 108
Payments on capital
lease obligations................ -- -- (81) -- (81)
Change in intercompany accounts.... -- (4,431) 4,639 (208) --
Capital contributions.............. -- 519 104 (623) --
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities........... -- (4,312) 34,770 (831) 29,627
--------- --------- --------- --------- ---------
NET DECREASE IN CASH
AND CASH EQUIVALENTS............... -- (5,837) -- -- (5,837)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR............... 1 25,114 -- -- 25,115
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS
AT END OF YEAR..................... $ 1 $ 19,277 $ -- $ -- $ 19,278
========= ========= ========= ========= =========
</TABLE>
F-37
<PAGE> 76
<TABLE>
<CAPTION>
SUMMARIZED AND CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED FEBRUARY 28, 1997
(in thousands)

President Non- Eliminating
Casinos, Inc. Guarantors Guarantor Entries Consolidated
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................. $ (8,785) $ (3,549) $ -- $ 3,549 $ (8,785)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization...... -- 14,604 720 -- 15,324
Impairment of long-lived assets.... -- 728 -- -- 728
Equity (income) loss in
consolidated subsidiaries........ 9,819 (6,502) -- (3,317) --
Other.............................. 1,289 (893) -- (232) 164
Changes in assets and liabilities.. (497) (2,253) 866 -- (1,884)
--------- --------- --------- --------- ---------
Net cash provided by
operating activities........... 1,826 2,135 1,586 -- 5,547
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property
and equipment..................... -- (10,582) -- -- (10,582)
Proceeds from the sale of property. -- 14,245 -- -- 14,245
Purchase of lease options.......... -- (3,368) -- -- (3,368)
Investment in subsidiaries......... (1,826) -- -- 1,826 --
Other.............................. -- 556 83 -- 639
--------- --------- --------- --------- ---------
Net cash provided by (used in)
investing activities........... (1,826) 851 83 1,826 934
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable......... -- (400) -- -- (400)
Payments on capital
lease obligations................ -- (10) (712) -- (722)
Net change in intercompany accounts -- 965 (965) -- --
Capital contributions.............. -- 1,826 -- (1,826) --
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities........... -- 2,381 (1,677) (1,826) (1,122)
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............... -- 5,367 (8) -- 5,359

CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR............... 1 19,745 10 -- 19,756
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS
AT END OF YEAR..................... $ 1 $ 25,112 $ 2 $ -- $ 25,115
========= ========= ========= ========= =========
</TABLE>
F-38
<PAGE> 77
<TABLE>
<CAPTION>
SUMMARIZED AND CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED FEBRUARY 29 1996
(in thousands)

President Non- Eliminating
Casinos, Inc. Guarantors Guarantor Entries Consolidated
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................. $(58,150) $(25,046) $ -- $ 25,046 $(58,150)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization...... -- 15,904 566 -- 16,470
Deferred income tax expense........ 21,908 -- -- -- 21,908
Equity loss in unconsolidated
entities......................... -- 1,174 -- -- 1,174
Impairment of long-lived assets.... -- 24,848 -- -- 24,848
Equity (income) loss in
consolidated subsidiaries........ 36,068 (11,055) -- (25,013) --
Other.............................. 1,105 518 -- (33) 1,590
Changes in assets and liabilities.. (99) (894) 343 -- (650)
--------- --------- --------- --------- ---------
Net cash provided by
operating activities........... 832 5,449 909 -- 7,190
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property
and equipment..................... -- (16,810) -- -- (16,810)
Proceeds from the sale of property. -- 19,907 -- -- 19,907
Investment in unconsolidated
entities......................... -- (179) -- -- (179)
Investment in subsidiaries......... (831) -- -- 831 --
Other.............................. -- (1,405) -- -- (1,405)
--------- --------- --------- --------- ---------
Net cash provided by (used in)
investing activities........... (831) 1,513 -- 831 1,513
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable......... -- (12,476) -- -- (12,476)
Payments on capital
lease obligations................ -- (287) (899) -- (1,186)
Capital contributions.............. -- 831 -- (831) --
--------- --------- --------- --------- ---------
Net cash used in
financing activities........... -- (11,932) (899) (831) (13,662)
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............... 1 (4,970) 10 -- (4,959)

CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR............... -- 24,715 -- -- 24,715
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS
AT END OF YEAR..................... $ 1 $ 19,745 $ 10 $ -- $ 19,756
========= ========= ========= ========= =========
</TABLE>

F-39
<PAGE> 78
<TABLE>
<CAPTION>
PRESIDENT CASINOS, INC.
SCHEDULE II --VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended February 28/29, 1998, 1997 and 1996
(in thousands)

Additions
Balance at Charged to
Beginning Costs and Balance at
Description of Year Expenses Deductions End of Year
----------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts Receivable:

Year ended February 28, 1998............... $ 393 $ 255 $ (279)(a) $ 369

Year ended February 28, 1997............... 423 271 (302)(a) 393

Year ended February 29, 1996............... 199 536 (312)(a) 423

Allowance for Deferred Income Tax
Asset Valuation:

Year ended February 28, 1998............... 38,468 5,979 (b) -- 44,447

Year ended February 28, 1997............... 36,287 2,181 (b) -- 38,468

Year ended February 29, 1996............... -- 36,287 (b) -- 36,287

</TABLE>

(a) Write-offs of uncollectible accounts receivable, net of recoveries.

(b) Recognition criteria under SFAS No. 109 not satisfied.

F-40
<PAGE> 79

INDEPENDENT AUDITORS' REPORT

To the Partners
The Connelly Group, L.P.:

We have audited the accompanying balance sheets of The Connelly Group, L.P., a
limited partnership, (the "Partnership") (an affiliate of President Casinos,
Inc., see Note 1) as of February 28, 1998 and 1997, and the related statements
of operations, partners' preferred redeemable capital and general capital, and
cash flows for each of the three years in the period ended February 28, 1998.
Our audits also included the financial statement schedule listed in the Index
at Item 14(a)2. These financial statements and financial statement schedule
are the responsibility of the Partnership's management. Our responsibility is
to express an opinion on these financial statements and financial statement
schedule based on our audits.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Partnership as of February 28, 1998
and 1997, and the results of its operations and its cash flows for each of the
three years in the period ended February 28, 1998, in conformity with
generally accepted accounting principles. Also, in our opinion, such
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.

/s/ Deloitte & Touche LLP
- -------------------------

Davenport, Iowa
April 27, 1998

F-41
<PAGE> 80
<TABLE>
<CAPTION>
THE CONNELLY GROUP, L.P.
BALANCE SHEETS
(in thousands)

Feb. 28, Feb. 28,
1998 1997
------ ------
<S> <C> <C>
ASSETS

CURRENT ASSETS
Cash and cash equivalents...................... $ 7,850 $ 8,497
Receivables (net of allowance for doubtful
accounts of $119 and $195)................... 255 209
Receivables from related parties............... 450 8
Inventories.................................... 628 502
Prepaid expenses and other current assets...... 287 351
--------- ---------
Total current assets......................... 9,470 9,567
--------- ---------
PROPERTY AND EQUIPMENT, NET...................... 22,758 24,540
--------- ---------
OTHER ASSETS..................................... 433 573
--------- ---------
$ 32,661 $ 34,680
========= =========
LIABILITIES, PARTNERS' PREFERRED REDEEMABLE
CAPITAL AND GENERAL CAPITAL

CURRENT LIABILITIES:
Current maturities of long-term
debt to related parties...................... $ -- $ 3,420
Accounts payable............................... 688 558
Accrued payroll and benefits................... 1,815 1,670
Other accrued expenses......................... 2,652 3,045
Due to related parties......................... 365 2,149
--------- ---------
Total current liabilities.................... 5,520 10,842
--------- ---------
LONG-TERM DEBT:
Notes payable.................................. 2,251 2,251
Subordinated debt due to related party......... -- 909
--------- ---------
Total long-term debt......................... 2,251 3,160
--------- ---------
Total liabilities.......................... 7,771 14,002
--------- ---------
COMMITMENTS AND CONTINGENT LIABILITIES........... -- --
--------- ---------
PARTNER'S PREFERRED REDEEMABLE CAPITAL
(redeemable at book value)..................... 13,000 14,494
--------- ---------
PARTNERS' GENERAL CAPITAL........................ 11,890 6,184
--------- ---------
$ 32,661 $ 34,680
========= =========
See Notes to Financial Statements.
</TABLE>

F-42
<PAGE> 81
<TABLE>
<CAPTION>
THE CONNELLY GROUP, L.P.
STATEMENTS OF OPERATIONS
(in thousands)

Years Ended February 28/29,
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
OPERATING REVENUES:
Gaming................................. $ 67,210 $ 62,456 $ 67,715
Food and beverage...................... 5,416 5,467 4,681
Retail and other....................... 721 684 582
Less promotional allowances............ (3,481) (3,461) (2,679)
--------- --------- ---------
Total operating revenues............. 69,866 65,146 70,299
--------- --------- ---------
OPERATING COSTS AND EXPENSES:
Gaming................................. 38,980 36,202 35,778
Food and beverage...................... 3,019 3,172 3,026
Retail and other....................... 438 340 335
Selling, general and administrative.... 12,580 11,345 10,564
Depreciation and amortization.......... 4,267 3,970 4,518
Impairment of long-lived assets........ -- -- 232
Charter fees to related parties........ -- 350 1,260
Management fees to related parties..... 2,814 2,619 2,796
--------- --------- ---------
Total operating costs and expenses... 62,098 57,998 58,509
--------- --------- ---------

OPERATING INCOME....................... 7,768 7,148 11,790
--------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income........................ 135 155 192
Interest expense (related party
interest expense of $62, $579 and
$646)................................ (376) (802) (926)
--------- --------- ---------
Total other expense.................. (241) (647) (734)
--------- --------- ---------
NET INCOME............... ............. $ 7,527 $ 6,501 $ 11,056
========= ========= =========
See Notes to Financial Statements.
</TABLE>
F-43
<PAGE> 82
<TABLE>
<CAPTION>
THE CONNELLY GROUP, L.P.
STATEMENTS OF PARTNERS' PREFERRED REDEEMABLE CAPITAL
AND GENERAL CAPITAL
(in thousands)

Partners' General Capital
---------------------------------------
Partner's Limited General Total
Preferred Partner's Partner's Partners'
Redeemable General General General
Capital Capital Capital Capital
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Years Ended February 28/29, 1996,
1997 and 1998:

Balance as of February 28, 1995....... $ 12,391 $ -- $ -- $ --

Capital distributions................. (7,386) -- -- --
Net income allocated.................. 9,489 33 1,534 1,567
--------- --------- --------- ---------
Balance as of February 29, 1996....... 14,494 33 1,534 1,567
Capital distributions................. (1,884) -- -- --
Net income allocated.................. 1,884 232 4,385 4,617
--------- --------- --------- ---------
Balance as of February 28, 1997....... 14,494 265 5,919 6,184

Capital distributions................. (3,315) -- -- --
Net income allocated.................. 1,821 285 5,421 5,706
--------- --------- --------- ---------
Balance as of February 28, 1998....... $ 13,000 $ 550 $ 11,340 $ 11,890
========= ========= ========= =========

See Notes to Financial Statements.
</TABLE>

F-44
<PAGE> 83
<TABLE>
<CAPTION>
THE CONNELLY GROUP, L.P.
STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended February 28/29,
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .............................. $ 7,527 $ 6,501 $ 11,056
Adjustments to reconcile net income to
net cash provided by
operating activities:
Depreciation and amortization........ 4,267 3,970 4,518
Impairment of long-lived assets...... -- -- 232
Amortization of deferred
financing costs.................... -- 26 26
(Gain) loss on disposal of
property and equipment............. 35 (4) (254)
Changes in assets and liabilities:
Receivables, net................... (46) 22 28
Receivables from related parties... (442) (8) 38
Inventories........................ (126) (103) 56
Prepaid expenses................... 64 (54) 71
Other non-current assets........... 140 (179) (394)
Accounts payable................... 130 (362) 460
Accrued payroll and benefits....... 145 256 (68)
Other accrued expenses............. (393) 185 506
Due to related parties............. (28) 9 (204)
--------- --------- ---------
Net cash provided by operating activities 11,273 10,259 16,071
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and
equipment ($68, $120 and $237 to
related parties)...................... (2,525) (4,388) (8,479)
Proceeds from sales of property and
equipment............................. 5 21 1,014
--------- --------- ---------
Net cash used in investing activities..... (2,520) (4,367) (7,465)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital distributions to
related parties....................... (5,071) (150) (7,386)
Repayment of notes payable.............. -- -- (900)
Proceeds from advances from
related parties....................... -- -- 254
Repayment of advances and subordinated
debt from related parties.............. (4,329) (254) (4,159)
Payments on capital lease obligations... -- -- (234)
--------- --------- ---------
Net cash used in financing activities..... (9,400) (404) (12,425)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS........................ (647) 5,488 (3,819)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR...................... 8,497 3,009 6,828
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR.. $ 7,850 $ 8,497 $ 3,009
========= ========= =========
See Notes to Financial Statements.
</TABLE>
F-45
<PAGE> 84
THE CONNELLY GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands unless otherwise stated)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation -- The Connelly Group, L.P. ( the "Partnership") is a
Delaware limited partnership which was organized in January 1990. The
Partnership was formed to own, manage and operate the President Riverboat
Casino, a riverboat gaming operation, and ancillary facilities in Davenport,
Iowa.

In December 1992, all preferred and general capital interests, except a
limited partner's general capital interest of 5%, were contributed by the
general partners to a newly formed corporation, President Casinos, Inc.
("PCI") in exchange for common stock. PCI subsequently transferred its
ownership interest in the Partnership to a wholly-owned subsidiary, President
Riverboat Casino Iowa, Inc. ("PRC-Iowa"). PCI and its affiliates are engaged
in the business of owning, operating, managing and developing entertainment
oriented operations with its primary focus on riverboat gaming. Prior to
December 1992, the affiliates were under the common control of the general
partners.

The financial statements include only those assets, liabilities, revenues
and expenses which relate to the Partnership.

Cash and Cash Equivalents -- Cash and cash equivalents include interest
earning deposits with original maturities of ninety days or less.

Inventories -- Inventories, consisting principally of food, beverage, retail
items and operating supplies, are stated at the lower of first-in, first-out
(FIFO) cost or market.

Property and Equipment -- Property and equipment are recorded at cost.
Repairs and maintenance are charged to expense as incurred. Improvements are
capitalized. Depreciation and amortization are computed on a straight-line
basis over the following estimated useful lives:

Riverboat, barges and improvements. 9 - 15 years
Leasehold improvements............. 4 - 9 years
Furnishings and equipment.......... 5 - 10 years

Gaming Revenue -- In accordance with industry practice, the Partnership
recognizes as gaming revenue the net win from gaming activities, which is the
difference between gaming wins and losses.

Promotional Allowances -- Food, beverage, retail and other items furnished
without charge to customers are included in gross revenues at a value which
approximates retail value and then deducted as complimentary services to
arrive at net revenues. The cost of such complimentary services is charged to
gaming expense. Such estimated costs of providing complimentary services for

F-46
<PAGE> 85
the years ended February 28/29, 1998, 1997 and 1996, are as follows:

1998 1997 1996
------ ------ ------
Food and beverage......... $ 1,630 $ 1,510 $ 1,127
Other..................... 55 142 114

Indirect Expenses -- Certain indirect expenses of operating departments such
as selling, general and administrative, depreciation and amortization and
management fees are shown separately in the accompanying statements of
operations and are not allocated to departmental operating costs and expenses.

Income Taxes -- The Partnership is not subject to federal and state income
taxes. Taxable income and losses of the Partnership are reportable on the
income tax returns of the respective partners.

Self-Insurance -- The Partnership is partially self-insured for both
employee liability and third party liability costs. The self-insurance claim
liability is determined based on claims filed and an estimate of claims
incurred but not reported.

Reclassifications -- Certain amounts for fiscal 1997 and 1996 have been
reclassified to conform with fiscal 1998 financial statement presentations.

F-47
<PAGE> 86
2. PROPERTY AND EQUIPMENT

Property and equipment as of February 28, 1998 and 1997, are summarized as
follows:
1998 1997
------ ------
Riverboat, barges and improvements... $ 19,314 $ 19,147
Leasehold improvements............... 7,586 5,628
Furnishings and equipment............ 15,294 14,196
Construction in progress............. 273 1,172
--------- ---------
42,467 40,143
Accumulated depreciation
and amortization................. (19,709) (15,603)
--------- ---------
Property and equipment, net ......... $ 22,758 $ 24,540
========= =========

The Partnership continues to evaluate the estimated net realizable value of
its long-lived assets based on current regulatory, political and market
conditions. As a result of such evaluations, during fiscal 1996, the
Partnership wrote-down the net book value of gaming equipment and related
accessories to estimated net realizable value which resulted in an impairment
of $232.

3. NOTES PAYABLE

Notes payable as of February 28, 1998 and 1997, consists of a bank line of
credit, prime plus 0.5% (combined rate of 9.0% as of February 28, 1998.)

The bank line of credit is collateralized by a first mortgage on a boat and
first mortgages on real property with net book values of $7,883 and $3,710,
respectively, as of February 28, 1998, various personal property and an
assignment of various contracts. The real property consists of assets of The
Blackhawk Hotel which is a subsidiary of PCI. During March 1997, the line of
credit was increased to $4,500, of which $2,249 is available as of February
28, 1998. The line of credit reduces by $900 each March 31 and terminates in
March 2001. The line of credit also limits additional borrowings without the
lender's prior consent.

4. OPERATING LEASES

The Partnership leases various office facilities, parking lots, equipment
and levee property. The levee lease and its associated parking lot lease
expire in 2017 and a second parking lot lease expires in 2002 with a fifteen-
year renewal option. The various other leases are for periods of 24 to 60
months. Future minimum lease commitments under these noncancellable long-term

F-48
<PAGE> 87
operating leases as of February 28, 1998, are as follows:

Years Ending February 28/29:
1999....................... $ 766
2000....................... 536
2001....................... 299
2002....................... 257
2003....................... 232
Thereafter................. 4,431
---------
Total.................... $ 6,521
=========

Rental expense incurred under operating leases was $1,440, $1,579 and $2,287
for the years ended February 28/29, 1998, 1997 and 1996, respectively. Rent
expense during fiscal 1997 and 1996 includes the charter of a riverboat from a
related party (see Note 10).

5. SUBORDINATED DEBT TO RELATED PARTY

During fiscal 1998, the Partnership paid the outstanding balance of the
subordinated debt, which bore interest of 13%.

6. EMPLOYEE BENEFIT PLAN

The Partnership participates in an employee savings plan sponsored by PCI,
which covers all full-time employees. Pursuant to this savings plan,
participating employees may contribute (defer) a percentage of eligible
compensation. Employee contributions to the savings plan, up to certain
limits, are partially matched by the Partnership. The expense applicable for
the Partnership's contribution to the savings plan was $141, $144 and $138 for
the years ended February 28/29, 1998, 1997 and 1996, respectively.

7. PARTNER'S PREFERRED REDEEMABLE CAPITAL

The preferred capital has cumulative distribution rights of 13% on the
stated value which have been accrued as of February 28/29, 1998, 1997 and
1996. The preferred capital is redeemable out of future cash flows of the
Partnership, to the extent available as defined in the partnership agreement.

The preferred capital was originally recorded at the historical cost of
assets and advances contributed by the partners which were entities under
common control and such carrying value was less than the stated value of the
preferred capital as set forth in the partnership agreement. The Partnership
accrues the difference between the recorded value and stated value each year
to the extent of available net income. No amount was accrued for the years
ended February 28, 1998 and 1997, as the difference was fully accrued as of
February 28, 1996. During the year ended February 29, 1996, $7,380 was
accrued related to the difference between the carrying value and the stated
value. The preferred capital has certain preferences in liquidation over the
interests of the general capital accounts.

F-49
<PAGE> 88
8. PARTNERS' GENERAL CAPITAL

The partnership agreement provides for the allocation of income (losses)
between the general partner and limited partner at 95% and 5%, respectively,
after preferred capital accounts are allocated their cumulative preferred
return and any difference between the carrying value and stated value of
preferred capital is accrued. The limited partner's capital account cannot be
reduced below zero.

9. DEVELOPMENT AGREEMENT

The Partnership and the City of Davenport (the "City") are parties to a
development agreement, which provides, among other things, for the following:

Additional Development -- The Partnership was required to submit to the City
plans for the development of certain property in close proximity to the
"President". During the year ended February 29, 1996, the Partnership and the
City reached a mutually acceptable development plan whereby, among other
things, the Partnership was obligated to expend certain amounts for leasehold
improvements in exchange for certain lease rights. As a result of this
agreement, the Partnership was released from its $250 surety bond obligation
upon completion of the project during fiscal 1998.

Boarding Fees -- The Partnership, pursuant to Chapter 99F of the Iowa Code
and an ordinance enacted by the City, is required to pay the City an annual
minimum fee equal to the greater of $559 or 50 cents per passenger boarding
the "President".

Docking Fees -- The Partnership is required to make docking fee payments to
the City. The Partnership has guaranteed the City an annual lump sum payment
of a base amount plus a per passenger payment for each passenger in excess of
1,117,579 passengers during the period April 1 to March 31. Such base and per
passenger amounts for the periods ended March 31, 1998, 1997 and 1996 were
$136, $131 and $126, and 12.2 cents, 11.7 cents and 11.2 cents, respectively.
Both base and per passenger amounts are subject to an annual increase of 4.0%.
Each payment prepays the docking fees for the following twelve month period.

Special Payments in Lieu of Property Taxes -- The Partnership is required to
make a special payment in lieu of property taxes on the "Guest Service
Center". The Partnership has guaranteed the City an annual lump sum payment
of $124 plus 20.0 cents per passenger for each passenger in excess of
1,117,579 during each period from January 1 to December 31, commencing January
1, 1995.

Exclusive Agreement -- The Partnership will not pursue a gaming license in
any other Iowa city or in Rock Island County, Illinois.

Boat Operations -- The Partnership may not substitute another vessel to
replace the "President" in Davenport, Iowa so long as an average of 2,250
passengers per day during the cruise season is maintained. If such passenger
count is not maintained or if there is a material adverse change in the Iowa

F-50
<PAGE> 89
gaming law, the Partnership will be permitted to substitute an 800 passenger
boat. However, temporary substitution during U.S. Coast Guard mandated hull
inspections is permitted.

10. RELATED PARTY TRANSACTIONS

The Partnership is related to other entities through common ownership by its
partners or principal officers. The Partnership purchased various services
and purchased or leased property and equipment from such related parties. The
amounts charged were based on specific identification of the products or
services provided. In addition, the Partnership entered into management
advisory agreements with the general partner(s) for advisory services related
to gaming and riverboat operations. The agreements provide for management
fees based on a percentage of revenues. Transactions with such related
parties occurring during the years ended February 28/29, 1998, 1997 and 1996,
are summarized as follows:

1998 1997 1996
------ ------ ------
Management fees............ $ 2,814 $ 2,619 $ 2,796
Riverboat charter.......... -- 350 1,260
Property and equipment..... 68 120 237
Hotel, retail and other.... 456 262 250
Interest................... 62 579 646
Miscellaneous services..... -- 23 36

11. COMMITMENTS AND CONTINGENT LIABILITIES

The Partnership is a party to legal proceedings arising in the normal
conduct of business. Based on advice of legal counsel, management believes
that the final outcome of these matters will not have a material adverse
effect upon the Partnership's financial position or results of operations.

Operator's Contract

The Partnership and the Riverboat Development Authority (the "Authority"),
an Iowa non-profit corporation, entered into an operator's contract on
December 28, 1989, which enables the Partnership to be the operator of an
excursion gambling boat pursuant to the rules and regulations of the Iowa
Racing and Gaming Commission. This contract was last amended on March 1,
1998. The contract, as amended, requires the Partnership to make payments of
$28 weekly and an amount equal to one dollar and fifty cents for each
admission in excess of 1,117,579 admissions for the period April 1 through
March 31 of each year. The Partnership is also required to pay an annual
payment of 2% of adjusted gaming receipts in excess of $34,000 for each of the
Authority's fiscal years commencing July 1, 1994. The current contract
expires February 28, 2002.

Gaming Referendum

A proposition to extend the referendum approving riverboat gaming operations

F-51
<PAGE> 90
in Scott County, Iowa, must be submitted to the county electorate at the
general election held in calendar 2002, and the general election held at each
subsequent eight-year interval.

Guarantee of Indebtedness

The Partnership, along with certain wholly owned subsidiaries of PCI, has
guaranteed on a senior subordinated basis certain debt of PCI. The
Partnership's guarantee is limited to the amount owed from time to time by the
Partnership to a subsidiary of PCI ($0 and $4,376 as of February 28, 1998 and
1997, respectively).

12. SUPPLEMENTAL STATEMENT OF CASH FLOWS DISCLOSURES

Supplemental schedule of noncash investing and financing activities:

Years ended February 28/29, 1998 and 1996 -- No material noncash investing
and financing activities occurred. In the year ended February 28, 1997, a
noncash capital distribution to related parties of $1,734 was recorded.

Interest paid by the Partnership was $420, $803 and $931 for the years ended
February 28/29, 1998, 1997 and 1996, respectively.

13. RECONCILIATION OF GAMING REVENUE REPORTED ON THE STATEMENTS OF OPERATIONS
TO NET WIN REPORTED TO THE IOWA RACING AND GAMING COMMISSION ("IRGC")

1998 1997 1996
------ ------ ------
Gaming revenue reported on
the Statements of Operations..... $ 67,210 $ 62,456 $ 67,715
Change in progressive
liability (1).................... (528) (22) 300
Change in slot hopper
inventory (2).................... (55) 55 --
--------- --------- ---------
Net win reported to IRGC....... $ 66,627 $ 62,489 $ 68,015
========= ========= =========

(1) In accordance with industry practice, the Partnership accrues a liability
for progressive jackpots and reduces gaming revenue by an equal amount.
This adjustment is necessary to reconcile gaming revenue reported on an
accrual basis on the Statements of Operations to net win reported on a
cash basis to the IRGC.

(2) In accordance with IRGC regulations, the total slot machine hopper
inventory level was determined by actual counts performed on a test basis.
The estimated change from the initial inventory level has been accrued as
a reduction of gaming revenue. The reduction has not yet been reported to
the IRGC as an adjustment to adjusted gross revenue.

F-52
<PAGE> 91
<TABLE>
<CAPTION>
THE CONNELLY GROUP, L.P.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended February 28/29, 1998, 1997 and 1996
(in thousands)

Additions
Balance at Charged to
Beginning Costs and Balance at
Description of Year Expenses Deductions End of Year
----------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts Receivable:

Year ended February 28, 1998............... $ 195 $ 67 $ (143)(a) $ 119

Year ended February 28, 1997............... 166 79 (50)(a) 195

Year ended February 29, 1996............... 73 153 (60)(a) 166

</TABLE>
(a) Write-offs of uncollectible accounts receivable, net of recoveries.

F-53
<PAGE> 92

INDEPENDENT AUDITORS' REPORT

To the Members of the Board of Directors of
PRC Holdings Corporation:

We have audited the accompanying balance sheets of PRC Holdings Corporation (a
wholly-owned subsidiary of President Casinos, Inc.) (the "Company"), as of
February 28, 1998 and 1997, and the related statements of operations,
stockholder's equity, and cash flows for each of the three years in the period
ended February 28, 1998. Our audits also included the financial statement
schedule listed in the Index as Item 14(a)2. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of PRC Holdings Corporation as of February
28, 1998 and 1997, and the results of its operations and its cash flows for
each of the three years in the period ended February 28, 1998 in conformity
with generally accepted accounting principles. Also, in our opinion, such
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

/s/ Deloitte & Touche LLP
- -------------------------

Saint Louis, Missouri
April 27, 1998

F-54
<PAGE> 93
<TABLE>
<CAPTION>
PRC HOLDINGS CORPORATION
BALANCE SHEETS
(in thousands except share data)

February 28,
1998 1997
------ ------
<S> <C> <C>
ASSETS

Non-Current Assets:
Due from related parties (net of
allowance for doubtful accounts
of $161,705 and $117,089)................. $ 126,168 $ 128,526
========== ==========

LIABILITIES AND STOCKHOLDER'S EQUITY

Non-Current Liabilities:
Due to related parties...................... $ 117,484 $ 104,805

Commitments and Contingent Liabilities...... -- --

Stockholder's Equity:
Common Stock, $1 par value per share;
1,000 shares authorized, 100 shares
issued and outstanding.................... 1 1
Additional paid-in capital.................. 103,030 96,218
Accumulated deficit......................... (87,159) (65,310)
Less due from related party................. (7,188) (7,188)
---------- ----------
Total stockholder's equity................ 8,684 23,721
---------- ----------
$ 126,168 $ 128,526
========== ==========

See Notes to Financial Statements.
</TABLE>
F-55
<PAGE> 94
<TABLE>
<CAPTION>
PRC HOLDINGS CORPORATION
STATEMENTS OF OPERATIONS
(in thousands)

Years Ended February 28/29,
Notes 1998 1997 1996
------- ------ ------ ------
<S> <C> <C> <C>
INTEREST INCOME:
Related party interest income..... $ 36,806 $ 33,000 $ 30,761
--------- --------- ---------
EXPENSE:
Provision for doubtful accounts-
related party................... 44,616 27,379 89,710
Related party interest expense.... 14,039 14,058 14,072
--------- --------- ---------
Total expense................... 58,655 41,437 103,782
--------- --------- ---------
NET LOSS.......................... $(21,849) $ (8,437) $(73,021)
========= ========= =========

See Notes to Financial Statements.
</TABLE>
F-56
<PAGE> 95
<TABLE>
<CAPTION>
PRC HOLDINGS CORPORATION
STATEMENT OF STOCKHOLDER'S EQUITY
(in thousands)

Retained
Additional Earnings Due from
Common Paid-In (Accumulated Related
Stock Capital Deficit) Party Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Years Ended February 28/29,
1996, 1997 and 1998:

Balance at February 28, 1995....... $ 1 $ 97,936 $ 16,148 $ (7,188) $106,897

Capital contributions.............. -- 6,514 -- -- 6,514
Capital distributions.............. -- (7,884) -- -- (7,884)
Net loss........................... -- -- (73,021) -- (73,021)
--------- --------- --------- --------- ---------
Balance at February 29, 1996....... 1 96,566 (56,873) (7,188) 32,506

Capital contributions.............. -- 1,347 -- -- 1,347
Capital distributions.............. -- (1,695) -- -- (1,695)
Net loss........................... -- -- (8,437) -- (8,437)
--------- --------- ---------- --------- ---------
Balance as of February 28, 1997.... 1 96,218 (65,310) (7,188) 23,721

Capital contributions.............. -- 7,368 -- -- 7,368
Capital distributions.............. -- (556) -- -- (556)
Net loss........................... -- -- (21,849) -- (21,849)
--------- --------- ---------- --------- ---------
Balance as of February 28, 1998.... $ 1 $103,030 $ (87,159) $ (7,188) $ 8,684
========= ========= ========== ========= =========

See Notes to Financial Statements.
</TABLE>
F-57
<PAGE> 96
<TABLE>
<CAPTION>
PRC HOLDINGS CORPORATION
STATEMENTS OF CASH FLOWS
(in thousands)

Years Ended February 28/29,
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................ $(21,849) $ (8,437) $(73,021)

Non-cash items included in losses:
Provision for doubtful accounts... 44,616 27,379 89,710
--------- --------- ---------
Net cash provided by
operating activities.......... 22,767 18,942 16,689
--------- --------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Advances to related parties, net.. (42,258) (18,904) (12,943)
--------- --------- ---------
Net cash used in investing
activities....................... (42,258) (18,904) (12,943)
--------- --------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from related parties, net 12,679 310 (2,376)
Capital distributions............. (556) (1,695) (7,884)
Capital contributions............. 7,368 1,347 6,514
--------- --------- ---------
Net cash provided by (used in)
financing activities.......... 19,491 (38) (3,746)
--------- --------- ---------
NET CHANGE IN CASH AND
CASH EQUIVALENTS.................. -- -- --

CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR.............. -- -- --
--------- --------- ---------
CASH AND CASH EQUIVALENTS
AT END OF YEAR................. $ -- $ -- $ --
========= ========= =========

See Notes to Financial Statements.
</TABLE>
F-58
<PAGE> 97
PRC HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING PROCEDURES

Basis of Presentation -- PRC Holdings Corporation (the "Company"), a
Delaware corporation, is a wholly-owned subsidiary of President Casinos, Inc.
("PCI"). The Company has no operations and acts as a conduit for intercompany
accounts between PCI and its other subsidiaries and affiliates.

Due to/from Related Parties -- Due from related parties primarily represents
cash advances made to various other subsidiaries and affiliates of PCI or
original intercompany receivable balances recorded in the recapitalization of
PCI after the initial public offering. To the extent intercompany receivables
at the time of the initial public offering related to the excess of the fair
market value of assets contributed by a related party over their historical
cost basis, such receivables are reflected as a reduction of stockholder's
equity. Due to related parties primarily represents cash advanced to the
Company by PCI after a private placement of notes in September 1993 and
intercompany tax payable amounts. Related party interest income is recorded
on intercompany receivables based on the effective rate incurred by PCI (14%
as of February 28/29, 1998, 1997 and 1996). Related party interest expense is
set equal to interest expense incurred by PCI on the notes discussed above.

Allowance for Doubtful Accounts -- As a result of the nature of the
intercompany transactions discussed above and in Note 3, the Company's "stand
alone basis" equity may exceed that of PCI's equity. Such equity of the
Company eliminates 100% in consolidation. During the year ended February 29,
1996, significant losses were incurred by the affiliates of the Company and
their ability to repay amounts owed to the Company will be somewhat limited by
their operations and by the overall capitalization of the consolidated group.
Accordingly, due to the uncertainty surrounding these entities' ability to
repay the Company, the Company has provided an allowance for doubtful accounts
to the extent the Company's net worth exceeds that of the consolidated group.

Income Taxes -- The Company files as part of the consolidated income tax
return with its parent, PCI. Income tax expense represents an intercompany
allocation based on a rate applicable as if the Company filed on a separate
company basis.

2. COMMITMENTS AND CONTINGENT LIABILITIES

PCI and certain of its subsidiaries and affiliates are defendants in various
lawsuits related to their gaming operations in various jurisdictions. Given

F-59
<PAGE> 98
the nature of the Company's relationship as a wholly-owned subsidiary of PCI
and the intercompany nature of substantially all of its activities, any
material adverse determination regarding litigation experienced by the parent
could materially adversely effect the Company. Though the outcome of
litigation is difficult to predict with certainty, management, after
consultation with legal counsel, believes the ultimate resolution of all such
litigation will not have a material adverse effect on the operations or
financial condition of the Company.

3. SUPPLEMENTAL CASH FLOW DISCLOSURES

The Company has advanced all of its cash balances to another subsidiary of
PCI. Such subsidiary is responsible for advancing cash to the other
subsidiaries of PCI for short-term working capital requirements and the
Company is responsible for long-term advances and interest thereon. As a
result of this transaction, all changes in due to/due from related parties
represent a pass through of cash from one subsidiary of PCI to another,
intercompany allocations of income tax assets and liabilities based on the
intercompany tax allocation agreement, compounding of interest accruals and
short-term advances transferred to the Company as they mature to long-term.

F-60
<PAGE> 99
<TABLE>
<CAPTION>
PRC HOLDINGS CORPORATION
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended February 28/29, 1998, 1997 and 1996
(in thousands)

Year ended February 28, 1998............... $117,089 $ 44,616 $ -- $161,705

Year ended February 28, 1997............... 89,710 27,379 -- 117,089

Year ended February 29, 1996............... -- 89,710 -- 89,710
</TABLE>

F-61
<PAGE> 100
PRESIDENT CASINOS, INC.
EXHIBIT INDEX

Exhibits
3.1 Articles of Incorporation of the Company, as amended. (21)
3.2 By-Laws of the Company, as amended. (19)
4.1 Indenture dated as of August 26, 1994, by and among the Company,
the Guarantors and United States Trust Company of New York ("U.S.
Trust"). (6)
4.1.1 Registration Rights Agreement dated August 26, 1994, by and among
the Company, the Guarantors and Holders listed on Schedule A
thereto. (6)
4.1.2 Form of Senior Exchange Note issued pursuant to Indenture. (5)
4.1.3 Warrant Agreement dated as of September 23, 1993, by and between
the Company and U.S. Trust, as Warrant agent. (4)
4.1.4 Warrant Agreement dated as of August 26, 1994, by and between the
Company and U.S. Trust. (6)
4.1.5 Subsidiary Stock Pledge and Collateral Assignment Agreement dated
as of August 26, 1994, by the Company and Subsidiary Pledgors in
favor of U.S. Trust, as collateral agent. (6)
4.2 Rights Agreement, dated as of November 20, 1997, between the
Company and ChaseMellon Shareholder Services, LLC. (22)
10.1 Amended and Restated Agreement of Limited Partnership of The
Connelly Group, L.P. ("TCG"). (1)
10.2 Agreement between the Company and John E. Connelly. (2)
10.3 Employment Agreement dated November 4, 1992, between the Company
and Mr. Connelly. (2)
10.3.1 Amendment No. 1 to Employment Agreement dated December 15, 1994,
between the Company and Mr. Connelly. (9)
10.4 Employment Agreement dated November 4, 1992, between the Company
and Edward S. Ellers. (2)
10.4.1 Amendment No. 1 to Employment Agreement dated March 13, 1995,
between the Company and Mr. Ellers. (9)
10.4.2 Employment Separation and Consulting Agreement dated July 10,
1995, by and between Mr. Ellers and the Company. (10)
10.5 Mutual General Release and Non-Disparagement Agreement dated May
29, 1995, between the Company and Gary Selesner. (12)
* 10.6 The Company's 1992 Stock Option Plan, as amended. (5)
* 10.6.1 The Company's 1996 Amended and Restated Stock Option Plan. (16)
* 10.6.2 The Company's 1997 Stock Option Plan. (20)
10.7 Amended and Restated Davenport-Connelly Development Agreement
dated November 29, 1990, between TCG and the City of Davenport,
Iowa (the "Development Agreement"). (1)
10.7.1 First Amendment to the Development Agreement dated August 21,
1991.(1)
10.7.2 Second Amendment to the Development Agreement dated April 10,
1992.(1)
10.7.3 Amendment to the Development Agreement dated March 1, 1998.
10.8 Operator's Contract dated December 28, 1989, between the Riverboat
Development Authority and TCG. (1)
10.8.1 Amendment to Operator's Contract, dated December 29, 1993, between

F-62
<PAGE> 101
the Riverboat Development Authority and TCG. (5)
10.9 Lease dated November 29, 1990, between the City of Davenport, Iowa
and TCG. (1)
10.10 Management Advisory Agreement for TCG. (1)
10.11 Credit Agreement dated as of March 11, 1991, among TCG,
TCG/Blackhawk ("Blackhawk") and Firstar Bank Davenport, N.A.
("Firstar"). (1)
10.11.1 Note dated March 11, 1991, from TCG and Blackhawk to Firstar. (1)
10.11.2 Security Agreement dated March 11, 1991 between TCG and Firstar.
(1)
10.11.3 First Preferred Fleet Mortgage dated March 11, 1991, from TCG to
Firstar. (1)
10.11.4 Mortgage, Security Agreement, Fixture Financing Statement and
Assignment of Leases and Rents, dated March 11, 1991, by TCG to
Firstar on the Landing Promenade Property. A similar mortgage has
been given to Firstar by Blackhawk on the Blackhawk Hotel. (1)
10.11.5 Amendment to Note dated March 16, 1993, from TCG and Blackhawk
to Firstar. (2)
10.11.6 Second Amendment to Note dated March 31, 1997, from TCG and
Blackhawk to Firstar. (17)
10.12 Lease Agreement dated January 16, 1985, between the City of St.
Louis and St. Louis River Cruise Lines, Inc. (the "Former
'President' Lease"). (1)
10.12.1 Amended Lease Agreement dated July 16, 1990, amending the Former
"President" Lease. (1)
10.12.2 Second Amendment to Lease Agreement, effective June 19, 1992,
amending the Former "President" Lease. (1)
10.13 Lease Agreement dated August 7, 1986, between the City of St.
Louis and St. Louis River Cruise Lines, Inc. (the "'Belle of St.
Louis' Lease"). (1)
10.13.1 Amended Lease Agreement dated July 16, 1990, amending the "Belle
of St. Louis" Lease. (1)
10.13.2 Second Amendment to Lease Agreement, effective June 19, 1992,
amending the "Belle of St. Louis" Lease. (1)
10.14 Lease Agreement dated November 30, 1988 between the City of St.
Louis and J. Edward Connelly Associates, Inc ("JECA") (the "'Becky
Thatcher' Lease"). (1)
10.14.1 Amended Lease Agreement dated July 16, 1990, amending the "Becky
Thatcher" Lease. (1)
10.14.2 Second Amendment to Lease Agreement effective June 19, 1992,
amending the "Becky Thatcher" Lease. (1)
10.15 Lease Agreement dated June 16, 1988, between the City of St. Louis
and JECA (the "Office Barge Lease"). (1)
10.15.1 Amended Lease Agreement dated July 16, 1990, amending the Office
Barge Lease. (1)
10.15.2 Second Amendment to Lease Agreement effective June 19, 1992,
amending the Office Barge Lease. (1)
10.16 Lease Agreement dated December 20, 1983 between the City of St.
Louis and S.S. Admiral Partners (the "'Admiral' Lease"). (1)
10.16.1 Amendment and Assignment of Mooring Lease dated December 12, 1990,
amending the "Admiral" Lease. (1)

F-63
<PAGE> 102
10.16.2 Second Amendment to Lease Agreement effective June 19, 1992,
amending the "Admiral" Lease. (1)
10.17 Promissory Note (Vessel-Term) dated July 8, 1992, from The
President Riverboat Casino-Mississippi, Inc. ("President
Mississippi") to Caterpillar. (3)
10.17.1 Loan Agreement dated July 31, 1992, between President Mississippi
and Caterpillar. (1)
10.17.2 Preferred Fleet Mortgage dated July 8, 1992, between President
Mississippi and Caterpillar. (1)
10.18 Form of Indemnification Agreement for Directors and Officers. (1)
10.19 Letter Agreement dated as of March 1, 1992, between Mr.
Connelly, Della III, Inc. and Mr. Ellers. (2)
10.20 Agreement among the Company, Mr. Connelly, Mr. Ellers, TCG, Della
III, Inc. and Klehr, Harrison, Harvey, Branzburg & Ellers. (3)
10.21 General Partnership Agreement of President R.C.-St. Regis
Management Company dated as of August 9, 1993. (4)
10.21.1 Management Agreement dated October 26, 1993, between The St. Regis
Mohawk Tribe and President R.C.-St. Regis Management Company
("President R.C.-St. Regis"). (4)
10.21.2 Amended and Restated Management Agreement between the St. Regis
Mohawk Tribe and President R.C.-St. Regis. (7)
10.21.3 Second Amended and Restated Management Agreement dated December 1,
1995, between The St. Regis Mohawk Tribe and President R.C.-St.
Regis. (11)
10.21.4 Third Amended and Restated Management Agreement dated April 18,
1996, by and between the St. Regis Mohawk Tribe and President
R.C.-St. Regis. (13)
10.21.5 Agreement for Purchase of Partnership Interest dated September 24,
1997, by and among Massena Management Corp., Gary A. Melius,
Native American Management Corp., PRC-St. Regis, Inc. and Naussau
County Native American, Inc.
10.21.6 Agreement dated September 24, 1997, by and among Massena
Management LLC, Native American Management Corp., Gary A. Melius,
PRC-St. Regis, Inc. and Massena Management Corp.
10.22 Lease Agreement, dated as of December 14, 1993, by and between
Liberty Landing Associates ("Liberty Landing") and President
Riverboat Casino-Philadelphia, Inc. ("President Philadelphia").
(4)
10.22.1 First Amendment to Lease Agreement, dated July 31, 1996, by and
between President Philadelphia and Liberty Landing. (15)
10.22.2 Second Amendment to Lease Agreement, dated July 31, 1996, by and
between Liberty Landing and President Philadelphia. (15)
10.22.3 Modification to First Amendment to Lease Agreement, dated
September 12, 1997, by and between Liberty Landing and President
Philadelphia. (19)
10.22.4 Assignment, dated as of December 14, 1993, pursuant to which
Liberty Landing assigns, transfers and sets over unto President
Philadelphia all of the rights, title and interest of Liberty
Landing in, to and under that certain Master Agreement to Lease,
dated September 25, 1989, by and between Philadelphia Port
Corporation and Liberty Landing, as amended. (4)

F-64
<PAGE> 103
10.22.5 Letter Agreement dated May 7, 1996, by and between President
Philadelphia, Liberty Landing, The Sheet Metal Workers'
International Association Local Union #19, Delaware Avenue
Development Corp. and Delaware-Washington Corp. (13)
10.23 Option Agreement dated July 31, 1996, by and between Liberty
Landing and President Philadelphia. (15)
10.23.1 Modification to Option Agreement dated December 12, 1996, by and
between Liberty Landing and President Philadelphia. (16)
10.23.2 Second Modification to Option Agreement, dated September 12,
1997, by and between Liberty Landing and President Philadelphia
(19)
10.23.3 First Amendment to Corporate Guaranty dated July 31, 1996, by
The Company. (15)
10.24 Charter Agreement dated February 17, 1995, by and between American
Gaming & Entertainment, Ltd.("AGE") and the President Mississippi
Charter Corporation ("Charter Corp."). (8)
10.24.1 Subcharter Agreement dated February 17, 1995, by and between
Charter Corp. and President Mississippi. (8)
10.24.2 Collateral Assignment Agreement dated February 17, 1995, by
Charter Corp. to AGE. (8)
10.25 Employment Agreement dated March 13, 1995, by and between the
Company and John S. Aylsworth. (9)
10.25.1 Option Agreement dated March 13, 1995, by and between John S.
Aylsworth and the Company. (12)
10.26 Promissory Note dated February 17, 1995, from BH Acquisition Corp.
("BH") to PRC Management, Inc. ("PRC Management"). (12)
10.26.1 Surety Agreement dated February 13, 1995, between John E. Connelly
and PRC Management. (12)
10.26.2 Amended and Restated Promissory Note dated February 15, 1996, from
BH to PRC Management. (13)
10.26.3 Promissory Note dated February 15, 1996, from BH to PRC
Management. (13)
10.26.4 Amended and Restated Surety Agreement dated February 15, 1996,
between John E. Connelly and PRC Management. (13)
10.26.5 Collateral Pledge Agreement dated February 15, 1996, between
Connelly Hotel Associates, Inc. and PRC Management. (13)
10.27 Charter Agreement dated October 27, 1994, by and between President
Riverboat Casino-New York, Inc. ("President New York") and
Missouri Gaming Company. (12)
10.28 Charter Agreement dated August 17, 1995, by and among New Yorker
Acquisition Corporation, Barden-Davis Casino, LLC and the
Company. (11)
10.29 Charter Agreement dated August 18, 1995, by and between President
New York and Greater Dubuque Riverboat Entertainment Company, L.C.
("GDRE"). (11)
10.29.1 Amendment to Charter Agreement dated August 18, 1995, by and
between President New York and GDRE. (11)
10.29.2 Asset Acquisition Agreement dated July 30, 1996, by and between
President New York and GDRE. (15)
10.30 Employment Agreement dated November 1, 1995, by and between the
Company and James A. Zweifel. (11)

F-65
<PAGE> 104
10.31 Mutual Release and Non-Disparagement Agreement dated November 14,
1995, by and between David Friedman and the Company, Mr. Connelly,
Mr. Aylsworth, Floyd R. Ganassi, William C. Nelson, Russell L.
Ray, Terrence L. Wirginis and Karl G. Andren. (11)
10.32 "Natatorium Site" Lease Agreement dated July 20, 1995, by and
between the City of Davenport, Iowa and TCG through the President
Riverboat Casino-Iowa, Inc. (the "Natatorium Site Lease"). (11)
10.33 Independent Contractor Consulting Agreement dated May 15, 1996, by
and between the Company and Terrence Wirginis. (13)
10.33.1 Employment Agreement dated May 1, 1996, by and between the Company
and Mr. Wirginis. (13)
10.34 Letter of Intent Agreement, dated as of July 17, 1996, by and
between President Mississippi and Primadonna Resorts, Inc. (14)
10.34.1 Letter of Intent Agreement, dated as of July 17, 1996, by and
between BH and Primadonna Resorts, Inc. (14)
10.35 Asset Purchase Agreement dated October 14, 1996, by and between
President New York and Southern Illinois Riverboat/Casino Cruises,
Inc. (16)
* 10.36 1998 Fiscal Year Management Incentive Plan Participant Form. (17)
10.37 Promissory Note dated July 22, 1997, by and between President
Broadwater Hotel, L.L.C. (Broadwater LLC) and Lehman Brothers
Holdings Inc. ("Lehman"). (18)
10.37.1 Redemption Agreement dated July 22, 1997, by and among JECA and
Broadwater LLC and Broadwater Hotel, Inc. (18)
10.37.2 Indemnity Agreement dated July 22, 1997, by Broadwater LLC, the
Company and President Mississippi, jointly and severally, in favor
of Lehman. (18)
10.37.3 Indemnity and Guaranty Agreement dated July 22, 1997, by the
Company and President Mississippi in favor of Lehman. (18)
10.37.4 Unconditional Guaranty of Lease Obligations dated July 22, 1997,
by the Company. (18)
10.37.5 Amended and Restated Limited Liability Company Operating
Agreement, dated as of July 22, 1997, by and between JECA and
Broadwater Hotel, Inc. (18)
21 Schedule of subsidiaries of the Company.
23.1 Consent of Deloitte & Touche, L.L.P. with respect to the Company's
Registration Statements on Form S-8, as filed on June 8, 1994 and
January 8, 1998.
27 Financial Data Schedule as required under EDGAR.
__________________

(1) Incorporated by reference from the Company's Registration Statement on
Form S-1 (File No. 33-48446) filed on June 5, 1992.
(2) Incorporated by reference from the Company's Registration Statement on
Form S-1 (Registration No. 33-63174), filed on May 21, 1993.
(3) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year Ended February 28, 1993 filed on June 1, 1993.
(4) Incorporated by reference from the Company's Registration Statement on
Form S-4 (File No. 33-71332) filed November 5, 1993.
(5) Incorporated by reference from the Company's Registration Statement on
Form S-8 dated June 8, 1994.
(6) Incorporated by reference from the Company's Registration Statement on

F-66
<PAGE> 105
Form S-4 (File No. 33-86386) filed November 15, 1994.
(7) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended May 31, 1994 filed July 14, 1994.
(8) Incorporated by reference from the Company's Report on Form 8-K dated
February 7, 1995.
(9) Incorporated by reference from the Company's Report on Form 8-K dated
March 16, 1995.
(10) Incorporated by reference from the Company's Report on Form 8-K dated
July 10, 1995.
(11) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended November 30, 1995 filed January 12,
1996.
(12) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year Ended February 28, 1995 filed on May 30, 1995.
(13) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year Ended February 29, 1996 filed on May 30, 1996.
(14) Incorporated by reference from the Company's Report on Form 8-K
dated July 30, 1996.
(15) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended August 31, 1996 filed October 15,
1996.
(16) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended November 30, 1996 filed January 14,
1997.
(17) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year Ended February 28, 1997 filed on May 30, 1997.
(18) Incorporated by reference from the Company's Report on Form 8-K dated
July 24, 1997.
(19) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended August 31, 1997 filed October 10,
1997.
(20) Incorporated by reference from the Company's Definitive Proxy Statement
for the 1997 Annual Meeting of Stockholders.
(21) Incorporated by reference from the Company's Registration Statement on
Form S-8 dated January 8, 1998.
(22) Incorporated by reference from the Company's Registration Statement on
Form 8-A dated December 5, 1997.
* Compensatory plan filed as an exhibit pursuant to Item 14(c) of this
report.
F-67

EXHIBIT 10.7.2
AMENDMENT TO OPERATOR'S AGREEMENT

WHEREAS, the Riverboat Development Authority and the Connelly Group,
L.P., originally entered into an Operator's Agreement dated December 28, 1989;
and

WHEREAS, the contract has from time to time bee amended; and

WHEREAS, it is the intentions of the parties to amend said contact to
provide for its extension up to and including February 28, 2002.

NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained, it is agreed as follows:

1. The original Operator's Agreement between the Riverboat
Development Authority and the Connelly Group, L.P., dated December 28, 1989,
is hereby extended up and to February 28, 2002.

2. In all other respects, the original agreement and all amendments
executed thereto, are hereby ratified and confirmed.

Dated this 1st day of March , 1998.

RIVERBOAT DEVELOPMENT AUTHORITY

By /s/ Mary Ellen Chamberlin
---------------------------
Mary Ellen Chamberlin, President

By /s/ Robert H. Gallagher
---------------------------
Robert H. Gallagher, Secretary

THE CONNELLY GROUP, L.P. BY
PRESIDENT RIVERBOAT CASINO IOWA, INC.
ITS GENERAL PARTNER

By /s/ Mark D. Lohman
----------------------------
Vice President

EXHIBIT 10.21.5
AGREEMENT FOR PURCHASE OF
PARTNERSHIP INTEREST

THIS AGREEMENT made as of September 24, 1997, by and among Massena
Management Corp., a New York corporation, 333 Earle Ovington Boulevard,
Uniondale, New York (herein called "Buyer"), Gary A. Melius, One Old Country
Road, Carle Place, New York (herein called "Shareholder" or "Melius"), Native
American Management Corp., a New York corporation, One Old Country Road, Carle
Place, New York (herein called "Seller" or "NAMC"), PRC-St. Regis Inc., a
Delaware corporation, 802 North First Street, St. Louis, Missouri (herein
called "PRC-St. Regis") and Nassau County Native American, Inc., a New York
corporation, One Old Country Road, Carle Place, New York (herein called
"NCNA"), which is joined for the sole purpose of waiving any claim it may have
to reimbursement for Development Expenses under the Management Agreement
(hereinbelow defined).

W I T N E S S E T H :

WHEREAS, the Shareholder owns all of the issued and outstanding shares of
all classes of capital stock of the Seller; and

WHEREAS, the Seller provides services relating to gaming facilities on
Indian reservations in the State of New York; and

WHEREAS, the Seller is one of two general partners of President R.C.-St.
Regis Management Company, a New York general partnership (herein called the
"Partnership"), having a fifty (50%) percent interest in the Partnership
(herein called the "Partnership Interest"); and

WHEREAS, PRC-St. Regis is the managing general partner of the Partnership,
having a fifty (50%) percent interest in the Partnership; and

WHEREAS, the terms of the relationship among the Seller, the Shareholder and
PRC-St. Regis are set forth in that certain General Partnership Agreement of
President R.C.-St. Regis Management Company made as of August 9, 1993, as
amended, (herein called the "Partnership Agreement"); and

WHEREAS, the Partnership entered into that certain Third Amended and
Restated Management Agreement with the St. Regis Mohawk Tribe, dated April 18,
1996 (herein called the "Management Agreement"); and

WHEREAS, the Buyer desires to purchase the Partnership Interest and the
Seller desires to sell the Partnership Interest to the Buyer; and

WHEREAS, NCNA is an affiliate of the Seller; and

WHEREAS, PRC-St. Regis is a party to this Agreement solely for the purpose

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of consenting to the transfer of the Partnership Interest to Buyer, consenting
to Buyer becoming a partner in the Partnership, and entering into the
indemnification in Paragraph 7 below and the mutual release in Paragraph 20
below.

NOW, THEREFORE, in consideration of the mutual promises, covenants, and
warranties herein contained, and subject to the terms and conditions hereof,
the parties agree as follows:

1. Definitions. Capitalized terms used but not defined in this Agreement
shall have the meaning given in Management Agreement.

2. Sale of the Partnership Interest. Subject to the terms and conditions
hereof, Seller hereby agrees to sell and Buyer hereby agrees to buy the
Partnership Interest, including, but not limited to, Seller's right, title and
interest under the Partnership Agreement and the Management Agreement, and
PRC-St. Regis hereby consents to such sale and purchase.

3. Closing. Closing shall occur on the Effective Date of the Management
Agreement, or such earlier date as may be mutually agreed upon in writing by
the parties hereto (the "Closing Date"). The parties hereto agree that closing
shall take place at the offices of the NIGC, 1441 L Street NW, Washington,
D.C., and that closing shall occur at such time as the NIGC sets for the
granting of its approval of the Management Agreement.

4. Purchase Price. The purchase price of the Partnership Interest shall
be Four Million Nine Hundred Ninety Thousand ($4,990,000) Dollars to be paid
without interest as follows: Two Hundred Fifty Thousand ($250,000) Dollars to
be paid upon the signing of this Agreement; Five Hundred Thousand ($500,000)
Dollars to be paid upon the Closing Date; Two Hundred and Forty Thousand
($240,000) Dollars to be paid in installments of Twenty Thousand ($20,000)
Dollars per month for the twelve consecutive months commencing from the
opening of the Tribal Gaming Operation; and thereafter for a period of four
consecutive years, One Million ($1,000,000) Dollars per year to be paid
quarterly in the amount of Two Hundred Fifty Thousand ($250,000) Dollars each
quarter.

5. Failure of Approval. The parties hereto acknowledge that this
Agreement is being made in part for the purpose of obtaining National Indian
Gaming Commission (herein the "NIGC") approval of the Management Agreement.
In the event that PRC-St. Regis exercises its option to terminate the
Agreement of even date herewith by and among Massena Management, LLC, Massena
Management Corp., NAMC, Melius and PRC-St. Regis, this Agreement may be
terminated in its entirety at the sole option of the Buyer. In the event of
such termination the Partnership Interest will be reconveyed to the Seller,
all monies theretofore paid by the Buyer shall be immediately returned and the
terms of this Agreement, along with any amendments to the Partnership
Agreement made pursuant to this Agreement, shall be rendered null and void.
As a result of such termination Buyer will have no further rights or
obligations under this Agreement, the Partnership Agreement or the Management
Agreement, and Seller, Shareholder and PRC-St. Regis shall have the rights and

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obligations under such agreements that existed prior to the execution of this
Agreement. This provision shall survive the termination of this Agreement
under this Paragraph 5.

6. Instruments of Conveyance. At the closing or thereafter, if required,
Seller shall deliver to Buyer a bill of sale or other transfer documents
conveying the Partnership Interest.

7. Indemnification. (a) Seller and Shareholder shall indemnify and hold
harmless the Buyer and PRC-St. Regis, at all times after the Closing Date,
against and in respect of: (i) any losses incurred as a result of any default
by the Seller under, or breach by it of, any of the terms, conditions,
representations or warranties of this Agreement; (ii) all liabilities incurred
by the Seller or the Shareholder of any nature, including, but not limited to,
any brokerage or finder's fees or other commissions relative to this Agreement
or the Management Agreement, whether accrued, absolute, contingent, joint,
several, matured, unmatured or otherwise existing on the Closing Date; and
(iii) all liabilities of, or claims against, the Seller arising out of the
conduct of the Seller's business at any time prior to the Closing Date,
otherwise than in the ordinary course of business.

(b) PRC-St. Regis shall indemnify and hold the Buyer and Seller and
Shareholder harmless, after the Closing Date, against and in respect of: (i)
any losses incurred as a result of any default by PRC-St. Regis under, or
breach by it of, any of the terms, conditions, representations or warranties
of this Agreement; (ii) all liabilities of PRC-St. Regis of any nature,
including, but not limited to, any brokerage fees or other commissions
relative to this Agreement, whether accrued, absolute or contingent, joint,
several, matured, unmatured or otherwise existing on the Closing Date; and
(iii) all liabilities of, or claims against, PRC-St. Regis arising out of the
conduct of PRC-St. Regis' business at any time prior to the Closing Date,
otherwise than in the ordinary course of business.

The indemnifications set forth herein shall survive the Closing Date.

8. Conditions of Closing. The obligation of the Buyer to purchase the
Partnership Interest shall be subject to the following conditions:

(a) there shall have been no material change in the Seller or the
Partnership adverse to the Buyer;

(b) all required regulatory approvals of and Partnership consents to
this Agreement shall have been obtained;

(d) the Seller, Shareholder and PRC-St. Regis shall have taken all
steps necessary with regard to the Partnership Agreement to allow and provide
for the sale of the Partnership Interest in accordance with, and for the

<PAGE> 110
implementation of, the terms of this Agreement.

9. Representations and Warranties of Seller and Shareholder. The Seller
and Shareholder, as sole officer of the Seller, make the following
representations and warranties, which Seller and Shareholder, as sole officer
of the Seller, agree are true now, shall be true on the Closing Date as if
made as of that date, and which shall survive the closing and the delivery of
all instruments and documents contemplated herein and any investigation made
at any time, for the benefit of the Buyer.

(a) Organization; good standing. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of New York.

(b) Company assets. The consideration given for the above-mentioned
purchase price shall include all of Seller's right, title and interest to and
in the Partnership Interest and the Seller's rights and obligations under the
Partnership Agreement.

(c) Title to Partnership Interest. At closing, the Seller shall have
authority and ability to convey to the Buyer and shall have taken all
necessary corporate action to convey good and indefeasible title to the
Partnership Interest, free and clear of all covenants, restrictions,
reversions, remainders, or interests of others, and all liens, pledges,
charges or encumbrances of any nature whatsoever.

(d) Tax returns and payments. The Seller has filed all federal, state
and local tax returns and reports required to be filed and has paid or
established adequate reserves for the proper payment of all taxes and other
governmental charges upon it or its properties, assets, income, licenses, or
sales.

(e) Financial statements. Seller shall deliver its financial
statement for the year ending December 31, 1996. A nine month balance sheet
and income statement for the Seller shall be prepared in accordance with
generally accepted accounting principles for the three month period ending
March 31, 1997, and shall be delivered at closing to the Buyer. Said year-end
statements shall be prepared, without audit, by L. H. Rosoff & Company,
independent certified public accountants for the Seller. Seller represents
and warrants that said financial statements fairly present the financial
condition of the Seller as of the above dates and the results of operations
for the fiscal period ended on such dates and since such dates there has been
no material increase in the liabilities of the Seller and no material adverse
change in the financial condition or operations of the Seller.

(f) Litigation, etc. There is no suit, action or litigation,
administrative arbitration, or other proceeding, or governmental investigation
or inquiry of any kind regarding the Seller or the Partnership, or other
proceeding, or governmental investigation or inquiry threatened that might,
severally or in the aggregate, materially and adversely affect the financial
condition, business, property, assets, or prospects of the Seller or impair

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the Seller's ability to sell its Partnership Interest. To the best of
Seller's knowledge and belief, the Seller and Partnership have materially
complied with and are not in default in any material respect with any law,
ordinance, requirement, regulation, or order applicable to their business and
properties, and the Seller has not received notice of any claimed default with
respect to any of the foregoing.

(g) Adverse agreements. Neither the Seller nor the Partnership is a
party to any agreement or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree, rule
or regulation that materially and adversely affects or, as far as the Seller
can now foresee, may in the future materially and adversely affect the
business operations, prospects, properties, assets, or financial condition of
the Seller or the Partnership or impair the Seller's ability to sell its
Partnership Interest.

(h) 100 Lindbergh Boulevard Corp. Shareholder is the sole shareholder
of 100 Lindbergh Boulevard Corp., the record title owner of that certain
property referred to as the Route 37 Access Property in the Management
Agreement.

(i) Reconciliation of Development Expenses. Seller and Shareholder
have reconciled with PRC-St. Regis sums expended through the date of this
Agreement that are properly includable as Development Expenses, as to which
Seller and Shareholder believe the Partnership is entitled to be reimbursed by
the Tribe in accordance with Section 8.10 of the Management Agreement. As
evidenced by the attached Exhibit A, the total amount of such Development
Expenses is Four Million One Hundred Forty-Six Thousand Three Hundred One and
12/100 ($4,146,301.12) Dollars. Solely to the extent that Development
Expenses are reimbursed by the Tribe to the Partnership in accordance with
Section 8.10 of the Management Agreement, Buyer shall be entitled to recover
NAMC's share of the Development Expenses. Seller's share of the Development
Expenses is Nine Hundred Seven Thousand Nine Hundred Eighty-Nine and 00/100
($907,989.00) Dollars. NAMC shall not be liable for any reimbursement of
Development Expenses to the Partnership or Buyer, and the Partnership's and
Buyer's right to recovery of Development Expenses is limited to amounts
reimbursed by the Tribe.

(j) Compliance with terms of Management Agreement. Neither Seller nor
Shareholder as sole officer of Seller is aware of any defaults on the part of
the Partnership under the terms of the Management Agreement.

10. Covenants of Seller. The Seller agrees that prior to the Closing Date
and upon execution hereof:

(a) Cooperation. The Seller shall use its best reasonable efforts to
cause the sale contemplated by this Agreement to be consummated. The Seller
will use its best efforts to preserve the Seller's business intact and to
preserve business relations and to cause the Seller's business to be conducted
so that the covenants, representations, warranties, and provisions hereof are
true at closing.

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(b) Transaction out of ordinary course of business. Except, with the
prior written consent of the Buyer, the Seller will not enter into any
transaction out of the ordinary course of business from the date hereof to the
Closing Date.

(c) Access to properties, etc. The Seller will give to the Buyer and
to Buyer's counsel, accountants, investment advisers, and other
representatives full access during normal business hours to all of the
properties, books, tax records, contracts, commitments, and records of the
Seller and the Partnership and will furnish to the Buyer all such documents
and information with respect to the Seller's and the Partnership's affairs as
the Buyer may from time to time reasonably request up to the closing of this
transaction.

(d) Maintenance of books, etc. The Seller will maintain its books,
accounts, and records in the usual manner on a basis consistent with prior
years. The Seller will duly comply in all material respects with all laws and
decrees applicable to the Seller and to the conduct of its business.

(e) Certain prohibited transactions. Except with the prior written
consent of the Buyer, neither the Seller nor the Shareholder, as officer of
the Seller, shall enter into any contract to cause the Seller to merge or
consolidate with or sell its assets, including but without limitation the
Partnership Interest, or change the nature or character of its business, or
amend its charter or bylaws or enter into any employment agreement, lease, or
other agreements not approved by Buyer in writing, nor shall Seller grant any
stock option, pledge, gift, sell, or otherwise encumber or dispose of any of
its shares of stock.

(f) Partnership Amendment. Seller agrees to enter into any amendment
to the Partnership Agreement that may be necessary or appropriate to allow and
provide for the sale of its Partnership Interest as contemplated by this
Agreement.

11. Shareholder's Covenant. Shareholder covenants that within fifteen days
after the date of this Agreement, he will cause 100 Lindbergh Boulevard Corp.
to deliver to Buyer a deed of the Route 37 Access Property to the Tribe in
conformity with Section 6.1(C) of the Management Agreement. Such deed shall
be held in escrow by the Buyer pending the Effective Date of the Management
Agreement and the compliance by the Tribe with the Terms of Sale set forth in
said Section 6.1(C).

12. Representations and Warranties of the Buyer. Buyer makes the following
representations and warranties, which are true now, shall be true on the
Closing Date as if made as of that date, and which shall survive the closing
and delivery of all instruments and documents contemplated herein:

(a) Organization; Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State
of New York.

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(b) Tax Returns and Payments. Buyer has filed all federal, state and
local tax returns and reports required to be filed and has paid or established
adequate reserves for the proper payment of all taxes and other governmental
charges upon it or its properties, assets, income, licenses or sales.

(c) Litigation, Etc. Buyer has no knowledge of any suit, action or
litigation, arbitration, administrative proceeding or other proceeding, or
governmental investigation or inquiry of any kind regarding the Buyer, or
other proceeding, governmental investigation or inquiry threatened, that
might, severally or in the aggregate, materially and adversely affect the
financial condition, business property, assets or prospects of Buyer or impair
Buyer's ability to purchase the Partnership Interest. To the best of Buyer's
knowledge and belief, Buyer has materially complied with and is not in default
in any material respect with any law, ordinance, requirement, regulation or
order applicable to its business and properties, and Buyer has not received
notice of any claimed default with respect to any of the foregoing.

(d) Adverse Agreements. Buyer is not a party to any agreement or
instrument, or subject to any charter or any other corporate restriction or
any judgment, order, writ, injunction, decree, rule or regulation that
materially and adversely affects or may in the future materially and adversely
affect, the business operations, prospects, properties, assets or financial
condition of Buyer or impair Buyer's ability to purchase the Partnership
Interest.

(e) Cooperation. Buyer shall use its best reasonable efforts to cause
the sale contemplated by this Agreement to be consummated. Buyer will use its
best reasonable efforts to preserve Buyer's business intact and to preserve
business relations and to cause Buyer's business to be conducted so that the
covenants, representations and warranties and provisions hereof are true at
closing.

(f) Partnership Amendment. Buyer agrees to enter into any amendment
of the Partnership Agreement as may be necessary or appropriate to allow and
provide for the purchase and sale contemplated by this Agreement.

13. Performance of Obligations and Agreements. The Shareholder, acting as
sole stockholder and officer of the Seller, shall cause the Seller to perform
all obligations, agreements, covenants, and conditions contained in this
Agreement that require action of the Seller.

14. Waivers and Notices. Any failure by any party to this Agreement to
comply with any of its obligations, agreements or covenants hereunder may be
waived in writing by the non-defaulting party or parties hereto.

15. Miscellaneous. This Agreement may not be modified or amended other
than by an agreement in writing signed by all the parties hereto.

16. Survival. The representations, warranties, promises, covenants,
agreements, indemnities and undertakings of the parties contained in this

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Agreement shall survive the closing and delivery of documents hereunder.

17. Litigation Costs. If any legal proceeding is brought to enforce this
Agreement, or any provision hereof, or because of a default in any
representation, warranty, covenant, or other provision hereof, the successful
or prevailing party or parties shall be paid all reasonable costs, including
reasonable attorney's fees, by the non-prevailing parties involved in the
litigation through all proceedings, trials, or appeals.

18. Cooperation in Lawsuits. The Seller agrees that from and after the
Closing Date, it will cooperate with the Buyer, and each person who is an
officer or director of the Buyer, in regard to any lawsuits against the Seller
that are pending at the time of this Agreement, and to facilitate and assist
the Seller and/or the Buyer and their insurance agents in the settlement and
satisfactory resolution of such lawsuits, including, but not limited to, the
giving of depositions, testimony, production of books and records, and other
such matters that may be required.

19. Limitation and Waiver. The Seller and Shareholder hereby irrevocably
waive their right to assert any right or claim, including without limitation
any judgment enforcement right, against the Tribe, the Management Agreement or
the Partnership Interest that may be based on a breach by the Buyer of any of
the terms of this Agreement.

20. Mutual Releases. As of the Closing Date, except as expressly set forth
in this Agreement and the agreement of even date herewith by and among Massena
Management, LLC, Massena Management Corp., NAMC, Melius and PRC-St. Regis, as
of the Closing Date, Buyer, Melius and NAMC jointly and severally release and
forever discharge PRC-St. Regis and President Casinos, Inc. and its other
affiliates and subsidiaries, and all of their officers, directors, agents,
attorneys and any other representatives, and PRC-St. Regis releases and
forever discharges NAMC and Melius, and their affiliates, officers, directors,
agents, attorneys and any other representatives, from all duties, demands,
claims, judgments, liabilities and any other obligations of any nature
whatsoever under or related to the Partnership Agreement (including without
limitation the obligation of Melius under Section 4.01(c) (ii) thereof and the
obligation of PRC-St. Regis under Section 4.01(c) (iii) thereof and any and
all financing obligations of PRC St. Regis thereunder), the Management
Agreement, the December 30, 1993 Option Agreement between PRC-St. Regis and
100 Lindbergh Boulevard Corp. and the December 30, 1993 Easement Agreement
between PRC-St. Regis and 100 Lindbergh Boulevard Corp., and as of the Closing
Date, Buyer acquires all of NAMC's right, title and interest in (including
without limitation the financial benefits that may be realized under any such
agreements) and assumes all of NAMC's duties, obligations and liabilities
under the Partnership Agreement and the Management Agreement.

22. Waiver of General Contractor Designation. Seller and Shareholder
hereby waive and release any claim that either may have on behalf of
themselves or any Affiliates to be selected and designated as the general
contractor for the construction of the Project as set forth in Section 10.14
of the Partnership Agreement.

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23. Counterparts. This Agreement may be executed in any number of
counterparts and each counterpart shall constitute an original instrument, but
all such separate counterparts shall constitute only one and the same
instrument.

24. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

Massena Management Corp., BUYER Native American Management Corp., SELLER

By: /s/ Ivan Kaufman By: /s/Gary A. Melius
------------------------------ -----------------------------------
Ivan Kaufman, President Gary A. Melius, President

/s/ Gary A. Melius SHAREHOLDER
----------------------------
Gary A. Melius

PRC-St. Regis, Inc. Nassau County Native American, Inc.

By: /s/ John Aylsworth By: /s/ Gary A. Melius
----------------------------- -----------------------------------
John Aylsworth, President Gary A. Melius, President

EXHIBIT 10.21.6
AGREEMENT

THIS AGREEMENT made this 24th day of September, 1997, by and among MASSENA
MANAGEMENT, LLC, a New York limited liability company with a principal place
of business at 333 Earle Ovington Boulevard, Uniondale, New York (herein
called "Buyer"), NATIVE AMERICAN MANAGEMENT CORP., a New York corporation with
a principal place of business at One Old Country Road, Carle Place, New York
(herein called "NAMC"), GARY A. MELIUS, the sole shareholder of NAMC
("Melius"), PRC-ST. REGIS, INC., a Delaware corporation with a principal place
of business at 802 North First Street, St. Louis, Missouri (herein called
"PRC-St. Regis") and Massena Management Corp., a New York corporation with a
principal place of business at 333 Earle Ovington Boulevard, Uniondale, New
York (herein called "Massena Corp."), which joins for the purposes of its
agreements and consents specifically set forth herein.

W I T N E S S E T H :

WHEREAS, PRC-St. Regis is one of two general partners of President R.C.-St.
Regis Management Company, a New York general partnership (herein called the
"Partnership"), having a fifty (50%) percent interest in the Partnership
(herein called the "Partnership Interest"); and

WHEREAS, NAMC is the other general partner of the Partnership, also having a
fifty (50%) percent interest in the Partnership; and

WHEREAS, the terms of the relationship between NAMC and PRC-St. Regis are
set forth in that certain General Partnership Agreement of President R.C.-St.
Regis Management Company made as of August 9, 1993, as amended, (herein called
the "Partnership Agreement"); and

WHEREAS, Massena Corp. has purchased, contemporaneously with this Agreement,
all of NAMC's right, title and interest in the Partnership; and

WHEREAS, the Buyer desires to purchase the Partnership Interest and all
other right, title and interest of PRC-St. Regis related thereto, and PRC-St.
Regis desires to sell its Partnership Interest and all right, title and
interest related thereto to the Buyer; and

WHEREAS, NAMC and Melius are parties to this Agreement solely for the
purpose of consenting to the transfer of the Partnership Interest to Buyer,
consenting to Buyer becoming a partner in the Partnership, as required by
Section 7.02 of the Partnership Agreement, consenting to the grant of a
security interest in the partnership distributions of the Buyer and providing
the release in Paragraph 3 below and the indemnification in Paragraph 9 below.

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NOW, THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, and in consideration of the mutual promises,
covenants, and warranties herein contained, and subject to the terms and
conditions hereof, the parties agree as follows:
1. Definitions. Capitalized terms used but not defined in this Agreement
shall have the meaning given in the Management Agreement.

2. Transfer of Rights and Obligations. Subject to the terms and
conditions hereof, PRC-St. Regis hereby agrees to sell and Buyer hereby agrees
to buy the Partnership Interest and all of PRC-St. Regis' right, title and
interest under the following documents:

(a) the Partnership Agreement;

(b) the Management Agreement;

(c) the December 30, 1993 Option to Purchase Agreement between PRC-St.
Regis and 100 Lindbergh Boulevard Corp. ("Option Agreement"); and

(d) the December 30, 1993 Easement Agreement between PRC-St. Regis and
100 Lindbergh Boulevard Corp. ("Easement Agreement").

NAMC hereby consents to the sale and purchase of the Partnership
Interest.

3. Mutual Releases. Except as expressly set forth in this Agreement and
the agreement of even date herewith by and among Massena Management Corp.,
Melius, NAMC, PRC-St. Regis and Nassau County Native American, as of the
Closing Date as defined in Paragraph 4 below, Buyer, Gary A. Melius and NAMC
jointly and severally release and forever discharge PRC-St. Regis and
President Casinos, Inc. and its other affiliates and subsidiaries, and all of
their officers, directors, agents, attorneys and any other representatives,
and PRC-St. Regis releases and forever discharges NAMC and Gary A. Melius, and
their affiliates, officers, directors, agents, attorneys and any other
representatives, from all duties, demands, claims, judgments, liabilities and
any other obligations of any nature whatsoever under or related to the
Partnership Agreement (including without limitation the obligation of Gary A.
Melius under Section 4.01(c)(ii) thereof and the obligation of PRC-St. Regis
under Section 4.01 (c) (iii) thereof and any and all financing obligations of
PRC St. Regis thereunder), the Management Agreement, the Option Agreement and
the Easement Agreement, and as of the Closing Date, Buyer acquires all of PRC-
St. Regis' right, title and interest in (including without limitation the
financial benefits that may be realized under any such agreements) and assumes
all of PRC-St. Regis' duties, obligations and liabilities under the
Partnership Agreement, the Management Agreement, the Option Agreement and the
Easement Agreement (including without limitation all financing obligations).

4. Closing. Closing is conditioned on Paragraph 5(a) below, and shall
occur on the Effective Date of the Management Agreement, or such earlier date
as may be mutually agreed upon in writing by the parties hereto (the "Closing
Date"). The parties hereto agree that closing shall take place at the offices

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of the NIGC, 1441 L Street NW, Washington, D.C., and that closing shall occur
at such time as the NIGC sets for the granting of its approval of the
Management Agreement.

5. Purchase Price. The purchase price for the transfers specified herein
shall be Two Million ($2,000,000) Dollars ("Purchase Price") payable by Buyer
to PRC-St. Regis in accordance with the following installment schedule:

(a) Three Hundred Seventy-Five Thousand ($375,000) Dollars to be paid
on the Closing Date;

(b) Six Hundred Twenty-Five Thousand ($625,000) Dollars upon the date
of the opening to the public of the Tribal Gaming Operation ("Opening Date");
and

(c) One Million ($1,000,000) Dollars to be paid in monthly
installments in the amount equal to ten (10%) percent of the sum of (i) the
Management Fee paid to the Manager under Section 8.10(D) of the Management
Agreement, plus (ii) the total amount of all reimbursements to the Manager
under Section 8.10(C) of the Management Agreement of Development Expenses,
plus interest paid thereon (said ten (10%) percent of (i) and (ii) being
hereinafter called the "Purchase Price Portion"). Such monthly payment of the
Purchase Price Portion shall be made within two business days of the receipt
by the Manager of its monthly payment as set forth in Section 8.10(A) of the
Management Agreement. The exclusive source of the payment of the sum due under
this sub-paragraph 5(c) shall be the monthly Purchase Price Portion actually
received by the Manager. Buyer may prepay the sum due under this sub-
paragraph 5(c) in part or in whole at any time at its sole option.
Notwithstanding the foregoing, in the event the Tribe exercises its Tribal
Buyout Option as set forth in Paragraph 4.2 of the Management Agreement, or in
the event that the Buyer or Massena Corp or both or their successors or
assigns shall sell their right, title and interest in the Manager to any other
person or entity, whether through an asset sale or a sale of equity or by any
other means, any outstanding balance remaining due and owing under this
Paragraph 5 shall be paid from the Buyout Price when received from the Tribe,
or shall be paid from the purchase price paid by such other person or entity
when received. Buyer shall not cause or permit any delay or deferment of the
payment of any installment of the Purchase Price or the monthly payment of the
Purchase Price Portion.

All such sums to be paid to PRC-St. Regis under this Agreement shall be
payable in guaranteed funds or by wire transfer, at the election of PRC-St.
Regis. In the event the aforementioned payments are timely made, they shall
bear no interest; however, in the event such payments are not timely made,
they shall bear interest at the floating rate of prime, as determined by Chase
Manhattan Bank, plus four (4%) percent, payable monthly until such default is
cured.

6. Guaranty of Purchase Price by Massena Corp. (a) Massena Corp.
acknowledges that, as an affiliate of Buyer, it shall benefit from the
transfers to Buyer contemplated by Paragraph 2 hereof; therefore, as

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additional consideration for such transfers, and induce PRC-St. Regis to make
such transfers, which transfers PRC-St. Regis would not make without the
guaranty of Massena Corp. provided hereby, and intending to be legally bound
hereby, Massena Corp. hereby irrevocably, unconditionally and absolutely
guarantees:

(i) Buyer's payment to PRC-St. Regis of Six Hundred Twenty-Five
Thousand ($625,00) Dollars upon the Opening Date, as stated in Paragraph 5 (b)
above (it being acknowledged by PRC-St. Regis that such sum will not be due
from Buyer if the Tribal Gaming Operation does not open to the public in spite
of Buyer's best reasonable efforts to cause such opening to occur, and
acknowledged by Buyer that Buyer shall use it's best reasonable efforts to
expedite and cause the opening of the Tribal Gaming Operations to the public),
and (ii) Buyer's payments to PRC-St. Regis of 20% of Buyer's share of the
Purchase Price Portion actually received by the Manager, promptly when due, up
to the total amount of One Million Dollars, as stated in Paragraph 5 (c)
above, (it being acknowledged by PRC-St. Regis that such sum will be due from
Buyer only to the extent that the Purchase Price Portion is received by the
Manager),along with any interest coming due on untimely payments of the
foregoing, as stated in Paragraph 5 above ("Guaranteed Payments"). Massena
Corp. irrevocably, unconditionally and absolutely covenants to PRC-St. Regis
that, if Buyer at any time defaults in the payment of any of the Guaranteed
Payments, Massena Corp. shall pay to PRC-St. Regis all amounts of the
Guaranteed Payments due to PRC-St. Regis. Massena Corp, shall also pay to
PRC-St. Regis, on demand, all reasonable attorneys' fees and costs relating to
the enforcement of this guaranty.

(b) Massena Corp. hereby expressly waives and releases:

(i) notice of any default on the part of Buyer;

(ii) right to interpose any and all procedural defenses, at law
or in equity, to the enforcement of this guaranty, except the defense of prior
payment of the Guaranteed Payments that Massena Corp. is called upon to pay
(in connection with this waiver, Massena Corp. warrants that it has no
substantive defenses as of the date of this guaranty);

(iii) all rights and remedies accorded by applicable law to
guarantors or sureties, including, without limitation, the right of discharge
upon modification of the primary obligation or any extension of time conferred
by any law now or hereafter in effect;

(iv) any right or claim of right to cause a marshalling of
Buyer's assets or to cause PRC-St. Regis to proceed against Buyer or any
collateral held by Buyer, before proceeding against Massena Corp. Any failure
to enforce or delay in enforcement of any of the terms of this guaranty on the
part of PRC-St. Regis shall not waive or impair any of the terms of this
guaranty.

(c) Upon any default by Buyer in the payment of any amount of the
Guaranteed Payments set forth above, PRC-St. Regis shall have the right to

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enforce this guaranty against Massena Corp, without pursuing any rights or
remedies against Buyer or any other person or entity, or against any security
PRC-St. Regis may hold, it being intended that immediately upon any breach or
default by Buyer in any payment of any amount of the Guaranteed Payments when
due, PRC-St. Regis may enforce its rights directly against Massena Corp.
without first proceeding against Buyer. PRC-St. Regis may commence any action
or proceeding based upon this guaranty directly against Massena Corp. for
payment of any amount of the Guaranteed Payments when due, without making
Buyer or any other person or entity a party defendant in such action or
proceeding. Any one or more successive or concurrent actions may be brought
on this guaranty against Massena Corp., either by the same action, if any,
brought against Buyer and/or any other party, or in separate actions, as often
as PRC-St. Regis, in its sole discretion. may deem necessary or appropriate.

(d) The liability of Massena Corp. under this guaranty and the terms
and conditions of this guaranty shall not be impaired, released, terminated or
discharged, in an way or under any circumstances, except as may be mutually
agreed in writing between PRC-St. Regis and Massena Corp.

7. Security Agreements. As further consideration for the transfers
contemplated by Paragraph 2 hereof, and to further induce PRC-St. Regis to
make such transfers, Buyer and Massena Corp. grant the following security to
PRC-St. Regis, without which security interests PRC-St. Regis would not make
the transfers contemplated in Paragraph 2 hereof:

(a) In order to secure payment of the Purchase Price due PRC-St. Regis
under Paragraph 5 above, and any interest coming due on untimely payments
thereof, Buyer grants a security interest to PRC-St. Regis, until the Purchase
Price and any interest thereon is fully paid, in and to the following
collateral:

(i) Twenty (20%) percent of Buyer's right to distributions as
Managing Partner under Sections 4 and 5 of the Partnership Agreement, and all
proceeds thereof;

(ii) Buyer's right to the "withdrawal payment" under Section 4.01
(a) of the Partnership Agreement, and all proceeds thereof;

(iii) Buyer's right to the "Redemption Price" under the Section
7.03 of the Partnership Agreement, and all proceeds thereof;

(iv) Buyer's right to payment under any existing or future
contract for the sale to any equity interest in Buyer, and all proceeds
thereof;

(v) Buyer's right to payment under any existing or future
contract for the sale of all or any portion of Buyer's Partnership Interest in
the Partnership, and all proceeds thereof;

(vi) Buyer's right under the Partnership Agreement to the
distribution of any Buyout Price received by the Partnership from the Tribe

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under Section 4.2 of the Management Agreement, and all proceeds thereof.

The assets listed in Paragraph 7 (a)(i) through (vi) above, in which PRC-St.
Regis has a security interest, are defined as the "LLC Collateral".

(b) In order to secure Massena Corp.'s guaranty of the Purchase Price
provided in Paragraph 6 above, Massena Corp. grants a security interest to
PRC- St. Regis, until the Purchase Price and any interest thereon is fully
paid, in and to the following collateral:

(i) Massena Corp.'s right to the "Redemption Price" under
Section 7.03 of the Partnership Agreement, and all proceeds thereof;

(ii) Massena Corp.'s right to payment under any existing or
future contract for the sale of all or any portion of Massena Corp.'s
partnership interest in the Partnership, and all thereof; and

(iii) Massena Corp.'s right under the Partnership Agreement to the
distribution of any Buyout Price received by the Partnership from the Tribe
under Section 4.2 of the Management Agreement, and all proceeds thereof.

The assets listed in Paragraph 7(b)(i) through (iii) above, in which PRC-St.
Regis has a security interest, are defined as the "Corp. Collateral".

(c) Contemporaneously with the signing hereof, Buyer and Massena Corp.
shall deliver to PRC-St. Regis duly executed UCC-1 financing statements
satisfactory to PRC-St. Regis, for the perfection PRC-St. Regis' security
interests in the LLC Collateral and the Corp. Collateral, on the official
forms prescribed by the New York Department of State and by the filing officer
of Nassau County, New York. This Paragraph 7 shall constitute a written
security agreement under the Uniform Commercial Code, which is intended to
grant security interests to PRC-St. Regis in all of the aforesaid collateral,
and which is executed by Buyer and Massena Corp. below.

8. Failure of NIGC Approval. Buyer shall use its best reasonable efforts
to obtain NIGC approval of the Management Agreement and, if necessary, this
Agreement, and Buyer and PRC-St. Regis shall cooperate in all respects with
each other in obtaining such approvals and implementing the terms of this
Agreement. In the event that the Management Agreement and, if necessary, this
Agreement are not approved for any reason by the Chairman of the NIGC or the
Secretary of the Interior or their designees prior to or within six (6) months
from the date of this Agreement, this Agreement may be terminated in its
entirety at the sole option of the PRC-St. Regis, with Buyer to have a ninety
(90) day extension to be exercised in writing at its sole option. In the
event of such termination, neither Buyer nor PRC-St. Regis will have any
further rights or obligations under this Agreement, and all parties hereto
shall have their rights and obligations as such existed prior to the execution
of this Agreement. The parties hereto agree to promptly execute any
documentation necessary or appropriate to effectuate the reversion of such
rights and obligations in the event of such termination of this Agreement.
This provision shall survive the termination of this Agreement.

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9. Instruments of Conveyance. On the Closing Date or thereafter, if
required, PRC- St. Regis shall deliver to Buyer a bill of sale or other
transfer documents reasonably acceptable to the Buyer memorializing the
transfers contemplated hereunder.

10. Indemnification. (a) Buyer shall indemnify and hold PRC-St. Regis
harmless, and defend PRC-St. Regis at all times after the Closing Date,
against and in respect of: (i) any losses incurred as a result of any default
by the Buyer under, or breach by it of, any of the terms, conditions,
representations or warranties of this Agreement and (ii) all liabilities of
any nature of the Partnership (except to the extent that such liabilities are
caused by acts or omissions on the part of PRC-St. Regis), the Buyer, or their
successors or assigns including, but not limited to, any claims asserted by
the Tribe, any claims asserted by any person or entity for any brokerage fees
or commissions or for any other reason, whether accrued, absolute, contingent,
joint, several, matured, unmatured or otherwise existing on or after the
Closing Date; (b) PRC-St. Regis shall indemnify and hold the Buyer and NAMC
harmless, after the Closing Date, against and in respect of: (i) any losses
incurred as a result of any default by PRC-St. Regis under, or breach by it
of, any of the terms, conditions, representations or warranties of this
Agreement and (ii) all liabilities of, or claims against, PRC-St. Regis
arising out of the conduct of PRC-St. Regis' business at any time prior to the
Closing Date, otherwise than in the ordinary course of business; (c) NAMC
shall indemnify and hold PRC-St. Regis harmless, and defend PRC-St. Regis at
all times after the Closing Date, against and in respect of: (i) any losses
incurred as a result of any default by NAMC under, or breach by it of any of
the terms, conditions, representations or warranties of this Agreement and
(ii) all liabilities of any nature of the Partnership (except to the extent
that such liabilities are caused by acts or omissions on the part of PRC-St.
Regis), NAMC or their successors or assigns, including, but not limited to,
any claims asserted by the Tribe, any claims asserted by any person or entity
for any brokerage fees or commissions or for any reason, whether such claims
or liabilities are accrued, absolute, contingent, joint, several, matured,
unmatured or otherwise existing on the Closing Date.

The indemnifications set forth herein shall survive the Closing Date.

11. Conditions of Closing. The obligation of the Buyer to purchase PRC-St.
Regis' rights, title and interests hereunder shall be subject to the following
conditions:

(a) There shall have been no material change in PRC-St. Regis or in
the Partnership adverse to the Buyer (and the parties agree that any purchase
by Buyer or its affiliate of NAMC's partnership interest in the Partnership
shall not be considered a "material adverse change");

(b) All required regulatory approvals of this Agreement, if any, shall
have been obtained;

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(d) NAMC and PRC-St. Regis shall have taken all steps necessary, if
any, with regard to the Partnership Agreement to allow and provide for the
sale of the Partnership Interest in accordance with, and for the
implementation of, the terms of this Agreement.

12. Representations and Warranties of PRC-St. Regis. PRC-St. Regis makes
the following representations and warranties, which PRC-St. Regis believes are
true now, shall be true on the Closing Date as if made as of that date, and
which shall survive the closing and the delivery of all instruments and
documents contemplated herein:

(a) Organization; Good Standing. PRC-St. Regis is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Delaware.

(b) Company assets. The consideration given for the above-mentioned
purchase price shall include all of PRC-St. Regis' right, title and interest
to and in the Partnership Interest and PRC-St. Regis' rights and obligations
under the Partnership Agreement.

(c) Title to Partnership Interest. At closing, PRC-St. Regis shall
have authority and ability to convey to the Buyer and shall have taken all
necessary corporate action to convey good and indefeasible title to the
Partnership Interest, free and clear of all covenants, restrictions,
reversions, remainders, or interests of others, and all liens, pledges,
charges or encumbrances of any nature whatsoever, including, but without
limitation, the pledge of PRC-St. Regis' interest in the Partnership as
security for PRC-St. Regis' and/or President Riverboat Casino, Inc.'s (or its
successors' or assigns') obligations under the $100,000,000 in principal
amount of 13% Senior Notes due 2001 issued by President Riverboat Casino, Inc.
to United States Trust Company of New York, as collateral agent, for the
ratable benefit of the holders of the Senior Notes.

(d) Tax returns and payments. PRC-St. Regis has filed all federal,
state and local tax returns and reports required to be filed and has paid or
established adequate reserves for the proper payment of all taxes and other
governmental charges upon it or its properties, assets, income, licenses, or
sales.

(e) Financial statements. PRC-St. Regis shall deliver to Buyer its
financial statement for its fiscal year ending February 28, 1997. A three
month balance sheet and income statement for PRC St. Regis shall be prepared
in accordance with generally accepted accounting principles for the three
month period ending May 31, 1997, and shall be delivered at closing to the
Buyer. PRC-St. Regis represents and warrants that said financial statements
fairly represent the financial condition of PRC-St. Regis and the results of
operations for the fiscal period ended on the date of the financial statements
and since such date there has been no material increase in the liabilities of
PRC-St. Regis adverse to the Buyer and no material adverse change in the
financial condition or operations of PRC-St. Regis adverse to the Buyer.

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(f) Litigation, etc. PRC-St. Regis has no knowledge of any suit,
action or litigation, arbitration, administrative proceeding, or other
proceeding, or governmental investigation or inquiry of any kind regarding
PRC-St. Regis or the Partnership, or other proceeding, or governmental
investigation or inquiry threatened that might, severally or in the aggregate,
materially and adversely affect the financial condition, business, property,
assets, or prospects of PRC-St. Regis or impair PRC-St. Regis' ability to sell
its Partnership Interest. To the best of PRC-St. Regis' knowledge and belief,
PRC-St. Regis and Partnership have materially complied with and are not in
default in any material respect with any law, ordinance, requirement,
regulation, or order applicable to their business and properties, and PRC-St.
Regis has not received notice of any claimed default with respect to any of
the foregoing.

(g) Adverse agreements. Neither PRC-St. Regis nor the Partnership is
a party to any agreement or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree, rule
or regulation that materially and adversely affects or, as far as PRC-St.
Regis can now foresee, may in the future materially and adversely affect the
business operations, prospects, properties, assets, or financial condition of
PRC-St. Regis or the Partnership or impair PRC-St. Regis' ability to sell its
Partnership Interest.

(h) Reconciliation of Development Expenses. NAMC and PRC-St. Regis
have reconciled sums expended through the date of this Agreement that PRC-St.
Regis believes are properly includable as Development Expenses, and as to
which PRC-St. Regis believes the Partnership is entitled to be reimbursed by
the Tribe in accordance with Section 8.10 of the Management Agreement. Solely
to the extent that Development Expenses are reimbursed by the Tribe to the
Partnership in accordance with Section 8.10 of the Management Agreement, Buyer
shall be entitled to recover PRC-St. Regis' share of the Development Expenses.
PRC-St. Regis' share of the Development Expenses is calculated to be Three
Million Two Hundred Thirty-Eight Thousand Three Hundred Twelve and 12/100
($3,238,312.12) Dollars. PRC-St. Regis shall not be liable for any
reimbursement of Development Expenses to the Partnership or Buyer, and the
Partnership's and Buyer's right to recovery of Development Expenses is limited
to amounts reimbursed by the Tribe.

(i) Compliance with Terms of the Management Agreement. PRC-St. Regis
is not aware of any defaults on the part of the Partnership under the terms of
the Management Agreement.

13. Covenants of PRC-St Regis. PRC-St. Regis agrees that, upon the
execution hereof until the Closing Date:

(a) Cooperation. PRC-St. Regis shall use its best reasonable efforts
to cause the sale contemplated by this Agreement to be consummated. PRC-St.
Regis will use its best reasonable efforts to preserve PRC-St. Regis' business
intact and to preserve business relations and to cause PRC-St. Regis' business
to be conducted so that the covenants, representations, warranties, and
provisions hereof are true at closing.

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(b) Transaction Out of Ordinary Course of Business. Except with the
prior written consent of the Buyer, which shall not be unreasonably withheld,
PRC-St. Regis will not enter into any transaction out of the ordinary course
of business from the date hereof to the Closing Date.

(c) Access to properties, etc. PRC-St. Regis will provide to the
Buyer and to Buyer's counsel, accountants, investment advisers, and other
representatives full access during normal business hours to all of the
properties, books, tax records, contracts, commitments, and records of PRC-St.
Regis and the Partnership and will furnish to the Buyer all such documents and
information with respect to PRC-St. Regis' and the Partnership's affairs as
the Buyer may from time to time reasonably request up to the closing of this
transaction.

(d) Maintenance of Books, etc. PRC-St. Regis will maintain its books,
accounts, records in the usual manner on a basis consistent with prior years.
PRC-St. Regis will duly comply in all material respects with all laws and
decrees applicable to PRC-St. Regis and to the conduct of its business.

(e) Certain Prohibited Transactions. Except with the prior written
consent of the Buyer, which shall not be unreasonably withheld, PRC-St. Regis
shall not enter into any contract to cause PRC-St. Regis to merge or
consolidate with or sell its assets, including but without limitation the
Partnership Interest, or change the nature or character of its business, or
amend its charter or bylaws or enter into any employment agreement, lease, or
other agreements not approved by Buyer in writing, nor shall PRC-St. Regis
grant any stock option, pledge, gift, sell, or otherwise encumber or dispose
of any of its shares of stock.

(f) Partnership Amendment. PRC-St. Regis agrees to enter into any
amendment of the Partnership as may be necessary or appropriate to allow and
provide for the sale contemplated by this Agreement.

(g) Tax Returns. Within Fifteen (15) days of the date of this
Agreement, PRC-St. Regis shall supply to Buyer copies of all tax returns,
federal and state, filed on behalf of the Partnership.

14. Representations, Warranties and Covenants of Buyer. Buyer makes the
following covenants, representations and warranties, which are true now, shall
be true on the Closing Date a if made as of that date, and which shall survive
the closing and the delivery of all instruments and documents contemplated
herein:

(a) Organization; Good Standing. Buyer is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of New York.

(b) Tax Returns and Payments. Buyer has filed all federal, state and
local tax returns and reports required to be filed and has paid or established
adequate reserves for the proper payment of all taxes and other governmental
charges upon it or its properties, assets, income, licenses or sales.

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(c) Access to Records, Etc. Buyer will provide to PRC-St. Regis and
to PRC-St. Regis' counsel, accountants, investment advisors or other
representatives, full access during normal business hours to all of the
properties, books, tax records, contracts, commitments, financial statements
and other records of Buyer, and will furnish to PRC-St. Regis copies of all
such documents and information with respect to Buyer's affairs, as PRC-St.
Regis may from time to time reasonably request after the date of this
Agreement.

(d) Litigation, Etc. Buyer has no knowledge of any suit, action or
litigation, arbitration, administrative proceeding or other proceeding, or
governmental investigation or inquiry of any kind regarding Buyer, or other
proceeding, governmental investigation or inquiry threatened, that might,
severally or in the aggregate, materially and adversely affect the financial
condition, business property, assets or prospects of Buyer or impair Buyer's
ability to purchase the Partnership Interest. To the best of Buyer's
knowledge and belief, Buyer has materially complied with and is not in default
in any material respect with any law, ordinance, requirement, regulation or
order applicable to its business and properties, and Buyer has not received
notice of any claimed default with respect to any of the foregoing.

(e) Adverse Agreements. Buyer is not a party to any agreement or
instrument, or subject to any charter or any other corporate restriction or
any judgment, order, writ, injunction, decree, rule or regulation that
materially and adversely affects or may in the future materially and adversely
affect, the business operations, prospects, properties, assets or financial
condition of Buyer or impair Buyer's ability to purchase the Partnership
Interest.

(f) Cooperation. Buyer shall use its best reasonable efforts to cause
the sale contemplated by this Agreement to be consummated. Buyer will use its
best reasonable efforts to preserve Buyer's business intact and to preserve
business relations and to cause Buyer's business to be conducted so that the
covenants, representations, warranties and provisions hereof are true at
closing.

(g) Transaction Out of Ordinary Course of Business. Except with the
prior written consent of PRC-St. Regis, which shall not be unreasonably
withheld, Buyer will not enter into any transaction out of the ordinary course
of business from the date hereof to the Closing Date.

(h) Maintenance of Books, Etc. Buyer will maintain its books,
accounts and records in the usual manner in accordance with Generally Accepted
Accounting Principles. Buyer will duly comply in all material respects with
all laws, regulations, ordinances and decrees applicable to Buyer and to the
conduct of its business.

(i) Partnership Amendment. Buyer agrees to enter into any amendment
of the Partnership Agreement as may be necessary or appropriate to allow and
provide for the purchase contemplated by this Agreement.

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(j) Capitalization. Buyer is solvent, and on the Opening Date Buyer
shall have capital and reserves sufficient to pay to PRC St. Regis the sum due
under Paragraph 5 (b) above.

(k) Monthly Report. By the fifteenth day following the end of the
previous calendar month of operation under the Management Agreement, Buyer
shall provide to PRC-St. Regis a copy of the monthly financial report required
by Section 8.9 of the Management Agreement, until the Purchase Price is paid
in full.

(l) Notice to Seller. Buyer shall promptly give written notice to
PRC-St. Regis of its entry into any contract to merge or consolidate with
another entity, or to sell its assets, or to enter into any other transaction
outside the ordinary course of its business, or of any contract regarding the
sale of its equity, or of any material change in the nature or character of
its business, or any material amendment to its Charter or Bylaws.

(m) Opening Date. Buyer shall use its best reasonable efforts to
expedite the development and construction of the Facility and the Opening
Date.

(n) Partnership Distributions. Buyer, as managing general partner of
the Partnership, agrees that until the sums due and payable to PRC-St. Regis
under Paragraphs 4 and 5 of this Agreement are paid in full:

1. Buyer shall cause the cash flow of the Partnership to be
distributed to the Buyer and Massena Corp. on a monthly basis according to
their respective entitlements to distributions under Sections 4 and 5 of the
Partnership Agreements, and shall not withhold the distribution of any portion
thereof;

2. Buyer shall not, and shall not allow the Partnership to
assign, transfer, encumber, pledge or otherwise grant a security interest in
twenty (20%) percent of Buyer's right to distributions under the Partnership
Agreement; and

3. Buyer shall not consent to or allow its Partnership Interest
to be reduced to less than a fifty (50%) percent partnership interest.

(o) Partnership Agreement. The Partnership Agreement is binding on
the Buyer and has not been changed, modified or amended in any way, and there
exist no other agreements or understandings between the Buyer and Massena
Corp. relating to the Partnership Agreement or the rights and obligations of
the parties thereunder; and, to the knowledge of Buyer, there exist no events
that now, or upon the lapse of time or giving of notice, or both, constitute
an event of dissolution under the terms of the Partnership Agreement.

(p) Title to Collateral; Authority to Assign. Buyer is the owner of
the LLC Collateral free of all liens and encumbrances, and has full right and
authority to assign the same in accordance with the terms of this Agreement.

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(q) Partnership Agreement; Further Transfers. Buyer will not, without
PRC-St. Regis' prior written consent, change modify or amend the Partnership
Agreement in any material way and any such attempted change, modification or
amendment without PRC-St. Regis' consent shall be void. Buyer will not permit
to accrue to Manager any right to set-off or defense to payment of any
distributions, returns of capital, or other payments to Buyer under the
Partnership Agreement. Buyer will not further assign, transfer, sell,
encumber, or otherwise dispose of the LLC Collateral, in whole or in part,
without the prior written consent of PRC-St. Regis.

(r) Dissolution; Sale of Partnership Property. Buyer will not
dissolve or consent to the dissolution of Manager or consent to the sale of
Manager's property without the prior written consent of PRC-St. Regis, which
consent shall not be unreasonably withheld.

(s) Further Agreements. In addition to the financing statements that
Buyer is required to deliver to PRC-St. Regis under Paragraph 7(c) above,
Buyer agrees to execute and deliver or cause to be executed and delivered to
PRC-St. Regis, upon PRC-St. Regis' requests, any additional financing
statements, as well as extensions, renewals, and amendments thereof, and any
other notices, instruments, or agreements PRC-St. Regis may reasonably
require, to perfect PRC-St. Regis' interest in the LLC Collateral or to carry
out the agreements of the parties herein contained. Buyer agrees to pay all
costs and expenses of filing or recording any such financing statements or
other notices, instruments, or agreements.

15. Assignment of Partnership Distributions. In the event Buyer defaults
in payment to PRC-St. Regis of all or any portion of the Purchase Price, Buyer
hereby irrevocably assigns to PRC-St. Regis, until payment in full of the sums
due under this Agreement is made to PRC-St. Regis, all of Buyer's right, title
and interest in and to twenty (20%) percent of the distribution to which Buyer
is entitled under Sections 4 and 5 of the Partnership Agreement, and Massena
Corp. irrevocably and unconditionally consents to such assignment.

16. Unreimbursed Development Expenses. Notwithstanding the last sentence
of Section 4.02 (b) of the Partnership Agreement and anything contained in
this Agreement, Buyer and PRC-St. Regis acknowledge that the Manager shall not
be required to make a distribution to the Buyer of any scheduled Development
Expenses that are not reimbursed to the Manager by the Tribe.

17. Time of the Essence. Time shall be of the essence with respect to all
terms of this Agreement.

18. Waivers. Any failure by any party to this Agreement to comply with any
of its obligations, agreements or covenants hereunder may be waived in writing
by the non-defaulting party or parties.

19. Amendment. This Agreement may not be modified or amended other than by
an agreement in writing signed by all the parties hereto.

20. Survival. The representations, warranties, promises, covenants,

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agreements, indemnities and undertakings of the parties contained in this
Agreement shall survive the closing and delivery of documents hereunder.

21. Litigation Costs. If any legal proceeding is brought to enforce this
Agreement, or any provision hereof, or because of a default in any
representation, warranty, covenant, or other provision hereof, the successful
or prevailing party or parties shall be paid by the non-prevailing party or
parties involved in the litigation all reasonable costs, including reasonable
attorney's fees, through all proceedings, trials or appeals.

22. Counterparts. This Agreement may be executed in any number of
counterparts and each counterpart shall constitute an original instrument, but
all such separate counterparts shall constitute only one and the same
instrument.

23. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.

IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
have executed this Agreement as of the date first above written.

PRC-St. Regis, Inc.

By: /s/ John Aylsworth
-----------------------------
John Aylsworth, President

Massena Management, LLC

By: /s/ Ivan Kaufman
-----------------------------
Ivan Kaufman, President

Massena Management Corp.

By: /s/ Ivan Kaufman
-----------------------------
Ivan Kaufman, President

Native American Management Corp.

By: /s/ Gary A. Melius
-----------------------------
Gary A. Melius, President

By: /s/ Gary A. Melius
---------------------------
Gary A. Melius

EXHIBIT 21
PRESIDENT CASINOS, INC.
SCHEDULE OF SUBSIDIARIES

State or Jurisdiction
Name of Incorporation or Organization

The Connelly Group, L.P. Delaware

President Riverboat Casino-Missouri, Inc. Missouri

The President Riverboat Casino-Mississippi, Inc. Mississippi

President Riverboat Casino-Iowa, Inc. Iowa

TCG/Blackhawk, Inc. Iowa

PRC Holdings Corporation Delaware

PRC Management, Inc. Pennsylvania

President Riverboat Casino-Philadelphia, Inc. Pennsylvania

PRC Louisiana, Inc. Louisiana

President Riverboat Casino-New York, Inc. Delaware

President Mississippi Charter Corporation Mississippi

PRCX Corporation Delaware

Broadwater Hotel, Inc. Mississippi

President Broadwater, LLC Mississippi

Vegas Vegas, Inc. Mississippi

EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT

President Casinos, Inc.:

We consent to the incorporation by reference in the Registration Statements of
President Casinos, Inc.'s "1992 Stock Option Plan" as amended and "1997 Stock
Option Plan" of President Casinos, Inc. (the "Company") on Form S-8 of our
report dated April 27, 1998, appearing in this Annual Report on Form 10-K of
the Company for the year ended February 28, 1998.

/s/ Deloitte & Touche LLP
- -------------------------

Saint Louis, Missouri

<S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME OF
PRESIDENT CASINOS INC. FILED AS A PART OF THE ANNUAL REPORT ON FORM 10-K AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ANNUAL REPORT ON FORM 10-K.
</LEGEND>
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> FEB-28-1998
<CASH> 23632
<SECURITIES> 2622
<RECEIVABLES> 2060
<ALLOWANCES> 396
<INVENTORY> 1884
<CURRENT-ASSETS> 33826
<PP&E> 202561
<DEPRECIATION> 53495
<TOTAL-ASSETS> 187256
<CURRENT-LIABILITIES> 31510
<BONDS> 99120
0
0
<COMMON> 302
<OTHER-SE> 8382
<TOTAL-LIABILITY-AND-EQUITY> 187256
<SALES> 0
<TOTAL-REVENUES> 187535
<CGS> 0
<TOTAL-COSTS> 184708
<OTHER-EXPENSES> 870
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16994
<INCOME-PRETAX> (15037)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15037)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15037)
<EPS-PRIMARY> (2.99)
<EPS-DILUTED> (2.99)

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