COLORADO GAMING & ENTERTAINMENT CO, S-1/A, 1996-10-22

COLORADO GAMING & ENTERTAINMENT CO
S-1/A, 1996-10-22
MISCELLANEOUS AMUSEMENT & RECREATION

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As filed with the Securities and Exchange Commission on October 22, 1996

Registration No. 333-12999
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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Amendment No. 1 to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

COLORADO GAMING &
ENTERTAINMENT CO. DELAWARE 84-1242693
BWBH, INC. DELAWARE 84-1242691
BWCC, INC. DELAWARE 84-1243506
MILLSITE 27, INC. DELAWARE 84-1242692
SILVER HAWK CASINO, INC. DELAWARE 84-1339843
(EXACT NAME OF EACH REGISTRANT AS (STATE OR OTHER (I.R.S. EMPLOYER
AS SPECIFIED IN ITS CHARTER) JURISDICTION OF IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)

1700 LINCOLN STREET, 49TH FLOOR
DENVER, CO 80203
(303) 863-2400
(Address, including zip code, and telephone number,
including area code, of Registrants' principal offices)

STEPHEN J. SZAPOR, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
COLORADO GAMING & ENTERTAINMENT CO.
1700 LINCOLN STREET, 49TH FLOOR
DENVER, CO 80203
(303) 863-2400
(Name, address, including zip code, and telephone number,
including area code, of agents for service)

COPIES OF ALL COMMUNICATIONS, INCLUDING ALL COMMUNICATIONS SENT TO THE
AGENT FOR SERVICE, SHOULD BE SENT TO:

THOMAS J. MOORE, ESQ. ALAN L. MAYER, ESQ.
LEBOEUF, LAMB, GREENE & MACRAE, L.L.P. SENIOR VICE PRESIDENT,
633 SEVENTEENTH STREET, SUITE 2800 CHIEF LEGAL OFFICER AND SECRETARY
DENVER, COLORADO 80202 COLORADO GAMING & ENTERTAINMENT CO.
(303) 291-2600 1700 LINCOLN STREET, 49TH FLOOR
DENVER, COLORADO 80203
(303) 863-2400

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

AMENDING THE PROSPECTUS, PART II, AND THE EXHIBIT INDEX.

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

COLORADO GAMING AND ENTERTAINMENT CO.

CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B)
OF REGULATION S-K

REGISTRATION STATEMENT ITEM
LOCATION IN THE PROSPECTUS
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus...........Cover Page of Registration Statement;
Outside Front Cover Page

2. Inside Front and Outside Back
Cover Pages of Prospectus.........Inside Front and Outside Back Cover Pages

3. Summary Information, Risk
Factors and Ratio of
Earnings to Fixed Charges........ Prospectus Summary; Risk Factors

4. Use of Proceeds....................Not Applicable

5. Determination of Offering Price....Cover Page of Prospectus; Plan of
Distribution

6. Dilution...........................Not Applicable

7. Selling Security Holders...........Front Cover Page; Prospectus Summary;
Principal and Selling Securityholders

8. Plan of Distribution...............Front Cover Page; Plan of Distribution

9. Description of Securities To Be
Registered.........................Description of Capital Stock

10. Interests of Named Experts and
Counsel............................Not Applicable

11. Information with Respect to the
Registrant.........................Prospectus Summary; Risk Factors;
Selected Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Certain
Transactions; Principal and Selling
Securityholders; Description of Capital
Stock; Consolidated Financial Statements

12. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities....................Not Applicable

PROSPECTUS

COLORADO GAMING & ENTERTAINMENT CO.

5,138,888 SHARES OF COMMON STOCK

$55,883,000 PRINCIPAL AMOUNT OF
12% SENIOR SECURED PAY-IN-KIND NOTES
DUE 2003

BWBH, INC.
BWCC, INC.
MILLSITE 27, INC.
SILVER HAWK CASINO, INC.

GUARANTEES OF 12% SENIOR SECURED PAY-IN-KIND NOTES
DUE 2003
-------------------------------

All of the 5,138,888 shares (the "Shares") of common stock, par value $.01
per share (the "Common Stock"), of Colorado Gaming & Entertainment Co. (formerly
known as Hemmeter Enterprises, Inc.), a Delaware corporation ("the Company"),
and $50,000,000 principal amount of 12% Senior Secured Pay-In-Kind Notes due
2003 (the "Notes") offered hereby are being sold by certain securityholders of
the Company named or to be named herein (the "Selling Securityholders"). The
remaining $5,883,000 in principal amount of Notes are being registered hereunder
by the Company and may be issued directly by the Company to the holders of the
Notes as payment of certain accrued interest when due, in lieu of cash, pursuant
to the terms of the Notes. Such Notes, if issued, may be subsequently resold by
the Selling Securityholders pursuant to this Prospectus or otherwise. See
"Principal and Selling Securityholders," "Plan of Distribution" and "Description
of Capital Stock-Description of Notes." THE COMPANY WILL NOT RECEIVE ANY
PROCEEDS FROM THE SALE OF SHARES AND THE NOTES BY THE SELLING SECURITYHOLDERS.

The Notes are guaranteed (the "Guarantees") by the Company's wholly-owned
subsidiaries: BWBH, Inc., ("BWBH"), BWCC, Inc., ("BWCC"), Millsite 27, Inc.,
("Millsite") and Silver Hawk Casino, Inc., ("Silver Hawk"), all of which are
Delaware corporations (collectively, the "Guarantors"). Interest on the Notes
accrues at the rate of 12% per annum, computed on the basis of a 360-day year
comprised of twelve 30-day months. Interest is payable commencing December 1,
1996 and semiannually thereafter on June 1 and December 1 of each year, to the
holders of record of the Notes at the close of business on the May 15 and
November 15 immediately preceding such interest payment date. The Notes are
secured by a perfected lien of certain collateral of the Company and the
Guarantors, including all of the capital stock of the Guarantors owned by the
Company and substantially all the real and personal property owned or leased by
the Company and the Guarantors. See "Description of Capital Stock-Description of
the Notes."

Any or all of the Selling Securityholders' Shares or the Notes may be sold,
from time to time, in privately negotiated transactions, in the over-the-counter
market, or otherwise, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at such other prices as may be
negotiated among the parties. A Selling Securityholder may engage one or more
brokers or dealers to act as principal or agent in making sales. Such brokers or
dealers may receive discounts, commissions or other compensation from such
Selling Securityholder and any such brokers or dealers may be deemed
"underwriters" under the Securities Act of 1933, as amended (the "Securities
Act"), of the Shares and Notes sold. Colorado law and the Company's Restated
Certificate of Incorporation (the "Certificate of Incorporation"), and the
Indenture governing the Notes (the "Indenture") contain certain restrictions on
ownership of the Common Stock and Notes, respectively. The Company will pay all
expenses of filing the Registration Statement and preparing and reproducing this
Prospectus, which the Company estimates to be $95,000. The Selling
Securityholders will pay any selling expenses, including brokerage commissions,
incurred in connection with their sale of any Shares and Notes covered by this
Prospectus. See "Risk Factors -Colorado Regulatory Matters - Restrictions on
Holders of Common Stock," "- Mandatory Offer to Purchase Notes Upon Change of
Control," "Plan of Distribution," and "Description of Capital Stock."

Neither the Common Stock nor the Notes are listed on any national
securities exchange or a Nasdaq Stock Market. The Company understands that the
Common Stock and the Notes trade sporadically in the "pink sheets" on the
over-the-counter market. The Company understands that the average of the bid and
asked prices for the Common Stock and the Notes in the pink sheets on October 3,
1996 was $4.25 and 97.5% of principal, respectively.

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES
OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO ANY
PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE UNLAWFUL. THE DELIVERY OF
THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO ITS DATE.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

THE COLORADO LIMITED GAMING CONTROL COMMISSION HAS NOT PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.

THE DATE OF THIS PROSPECTUS IS OCTOBER 22, 1996.

ADDITIONAL INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and at the following regional
offices of the Commission: 7 World Trade Center, Suite 1300, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials may be obtained at prescribed rates
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549.

The Company, BWBH, BWCC, Millsite and Silver Hawk (collectively, the
"Registrants") have filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), a registration statement (the "Registration Statement") of which this
Prospectus (this "Prospectus") is a part with respect to the Common Stock and
Notes offered hereby. This Prospectus does not contain all the information set
forth in or annexed as an exhibit to the Registration Statement. Such additional
information, and other information filed by the Registrants may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. Copies of such material can be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the regional offices of the Commission
maintained at Suite 1300, 7 World Trade Center, New York, New York 10048 and
Northwestern Atrium Center, Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661-2511 at prescribed rates. Statements contained in this Prospectus
as to the contents of any contract or other document referred to herein are not
necessarily complete, and in each instance reference is hereby made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by and should be read in
conjunction with the detailed information and financial statements and related
notes appearing elsewhere in this Prospectus. Unless the context otherwise
requires, references in this Prospectus to the Company includes BWBH, BWCC,
Silver Hawk, Millsite and the Company's other consolidated subsidiaries.

THE COMPANY

The Company develops, owns and operates gaming and related entertainment
facilities. The Company owns and operates, through subsidiaries, two of the
largest casinos in terms of number of slot machines in the historic mining towns
of Black Hawk and Central City, Colorado, under the "Bullwhackers" name
(individually, "Bullwhackers Black Hawk" and "Bullwhackers Central City," and
collectively, the "Bullwhackers Casinos"). The Company also owns and operates,
through a subsidiary, a third gaming facility, located in Black Hawk, Colorado,
which it opened as the Silver Hawk Saloon & Casino on June 26, 1996 (the "Silver
Hawk Casino," together with the Bullwhackers Casinos, the "Colorado Casinos").
The Company offers parking for patrons of Bullwhackers Black Hawk and the Silver
Hawk Casino at its surface parking lot (the "Surface Parking Lot") with a
capacity of approximately 375 cars located directly between the two casinos. See
"Business--The Colorado Casinos."

As a result of the financial difficulties of a riverboat gaming project
undertaken by a wholly-owned subsidiary of the Company in New Orleans, Louisiana
(the "Riverboat Project"), the Company, BWBH, BWCC and Millsite sought
protection under Chapter 11 of the United States Bankruptcy Code on November 7,
1995. The First Amended Joint Plan of Reorganization of the Company, BWBH, BWCC
and Millsite (the "Plan of Reorganization") was confirmed on April 8, 1996 and
became effective on June 7, 1996 (the "Effective Date"). As a result, among
other things, the Company has significantly reduced its consolidated debt and no
longer has any interest in the Riverboat Project. See "Legal
Proceedings--Background of Bankruptcy; Plan of Reorganization."

The Company was incorporated in August 1993 for the purpose of conducting
the operations of certain entities, which, along with certain predecessor
entities, constructed and were operating the Bullwhackers Casinos. BWBH was
incorporated in 1993 for the purpose of owning and operating the Bullwhackers
Black Hawk Casino. BWCC was incorporated in 1993 for the purpose of owning and
operating the Bullwhackers Central City Casino. Silver Hawk was incorporated in
1996 for the purpose of acquiring, owning and operating the Silver Hawk Casino.
Millsite, which was incorporated in 1993, owns the land underlying the Surface
Parking Lot. The principal executive offices of the Company and its subsidiaries
is 1700 Lincoln Street, 49th Floor, Denver, Colorado 80203, and its telephone
number is (303) 863- 2400.

RISK FACTORS

AN INVESTMENT IN THE COMMON STOCK AND NOTES INVOLVES CERTAIN RISKS. SEE
"RISK FACTORS."

THE OFFERING

The following securities may be offered and sold from time to time by the
Selling Securityholders:

5,138,888 shares of Common Stock.

$50,000,000 principal amount of Notes.

An additional $5,883,000 in principal amount of Notes are being registered
hereunder by the Company and may be issued directly by the Company to the
holders of the Notes as payment of certain accrued interest when due, in lieu of
cash, pursuant to the terms of the Notes. Such Notes, if issued, may be
subsequently resold by the Selling Securityholders pursuant to this Prospectus
or otherwise. The Notes are guaranteed by the Guarantors and are secured by,
among other things, a lien on substantially all of the real and personal
property owned or leased by the Company and the Guarantors, subject only to the
liens of the Company's working capital lender, and a collateral pledge of the
capital stock of the

Guarantors. See "Description of Capital Stock - Description of the Notes."
None of the securities are being offered to the public by the Company. See
"Selling Securityholders" and "Plan of Distribution."

<TABLE>

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE DATA AND RATIOS)

Years Ended December 31,

1995
<CAPTION>
1992(a) 1993 1994(c) 1995(c) (Pro Forma)(d)
--------- -------- ----------- ----------- --------------
STATEMENT OF OPERATIONS DATA: (unaudited)

<S> <C> <C> <C> <C> <C>
Net revenues........................... $ 17,045 $ 38,468 $ 45,474 $ 47,428 $ 47,428
Operating Expenses:
Impairment of assets and - - 10,804 11,347 11,347
predevelopment expense..............
Reorganization items................ - - - 17,910 -
Other operating expenses............ 25,349 35,310 47,631 44,807 46,120
Income (loss) from operations.......... (8,304) 3,158 (12,961) (26,636) (10,039)
Interest expense....................... 3,000 6,987 18,822 18,664 6,731
Equity loss in unconsolidated
subsidiary (GPRI)................... - - (2,323) (70,277) -
Net loss............................... $(11,241) $ (3,829) $(32,131) $(115,216) $(16,720)
======== ========= ========= ========== ========
Net loss per common share (e).......... $ N/A $ N/A $ N/A $ N/A $ (3.25)
======== ========= ========= ========== ========

Weighted average common
shares (b) (e)...................... N/A N/A N/A N/A 5,138,888
Ratio of Earnings to Fixed Charges..... (2.75) .45 (.71) (5.17) (2.48)

</TABLE>

<TABLE>

<CAPTION>
Six Months
Ended Jan. 1,1996 June 7, 1996
June 30, through through
1995 June 6, 1996 June 30, 1996
(unaudited) (unaudited) (unaudited)
STATEMENT OF OPERATIONS DATA:

<S> <C> <C> <C>
Net revenues........................... $ 23,667 $19,982 $3,245
Operating Expenses:
Impairment of assets and
predevelopment expense.............. 5,077 -- --
Reorganization items................ 500 2,290 --
Other operating expenses............ 23,743 16,886 3,064
Income loss from operations............ (5,653) 806 181
Interest expense....................... 9,976 579 403
Equity loss in unconsolidated
subsidiary (GPRI)................... (12,187) -- --
Extraordinary gain from reorganization. -- 164,358 --
Net Income (loss)...................... $(27,600) $164,407 $(211)
======== ======== ======
Ratio of Earnings to Fixed Charges..... (1.77) 1.08 .48

</TABLE>

<TABLE>

As of December 31,
As of June 30,
1993 1994(c) 1995(c) 1996
------ -------- ------- ----
(unaudited)

BALANCE SHEET DATA:
<S> <C> <C> <C> <C>
Cash and cash equivalents.............. $ 1,676 $ 7,977 $ 3,623 $ 5,369
Total assets........................... 35,181 141,093 37,680 69,770
Long-term debt (excluding current
portion)............................ 35,064 155,675 - 55,272
Liabilities subject to compromise...... - - 186,460 -
Total stockholders' equity (deficit)... (10,002) (36,824) (153,137) 3,948

<FN>
(a) Reflects operating results for the period from June 15, 1992 to
December 31, 1992 for Bullwhackers Central City and the period from
July 17, 1992 to December 31, 1992 for Bullwhackers Black Hawk.

(b) Warrants totaling 7,552,213 shares of common stock and 179,000 common
stock, warrants and options issued under the Company's pre-bankruptcy
Restricted Share Plan and Non-Employee Director Plan were not included
in the calculation of weighted average shares outstanding as their
effect would have been anti-dilutive.

(c) Grand Palais Riverboat, Inc. ("GPRI"), was consolidated with the
Company and its other wholly-owned subsidiaries for the Company's
fiscal year ended December 31, 1994, but was not consolidated with the
Company and its other wholly owned subsidiaries for the Company's
fiscal year ended December 31, 1995 because the Company no longer
controlled GPRI following the commencement of the GPRI's bankruptcy
case (the "GPRI Bankruptcy Case"). See Consolidated Financial
Statements and Notes thereto.

(d) For information on specific pro forma adjustments resulting from the
reorganization, see "Unaudited Pro Forma Condensed Consolidated
Financial Information."

(e) The weighted average number of common shares outstanding and net income
per common share for the Company prior to the Effective Date (the
"Predecessor Company") have not been presented because, due to the
Reorganization and implementation of fresh start reporting, they are
not comparable to subsequent periods.
</FN>
</TABLE>

RISK FACTORS

THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
THAT INVOLVE RISKS, UNCERTAINTIES, AND OTHER FACTORS WHICH MAY CAUSE THE
COMPANY'S ACTUAL PERFORMANCE TO BE MATERIALLY DIFFERENT FROM THE PROJECTIONS
EXPRESSED OR IMPLIED BY SUCH STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS MAY BE
FOUND IN THE MATERIAL SET FORTH UNDER "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AN RESULTS OF OPERATIONS--LIQUIDITY AND CAPITAL RESOURCES,"
"BUSINESS," AND "DESCRIPTION OF CAPITAL STOCK--DESCRIPTION OF NOTES," AS WELL AS
WITHIN THE PROSPECTUS GENERALLY. SUCH FACTORS INCLUDE, AMONG OTHERS, THE RISK
FACTORS SET FORTH BELOW AND THE MATTERS SET FORTH OR INCORPORATED IN THE
PROSPECTUS GENERALLY.

PROSPECTIVE INVESTORS OF THE SHARES AND NOTES OFFERED HEREBY SHOULD
CAREFULLY CONSIDER THE FOLLOWING FACTORS IN ADDITION TO THE OTHER INFORMATION
CONTAINED IN THIS PROSPECTUS IN EVALUATING AN INVESTMENT.

RECENT EMERGENCE FROM BANKRUPTCY

The Company emerged from bankruptcy on the Effective Date. Also, on the
Effective Date, the Company adopted fresh start reporting in accordance with
generally accepted accounting policies, resulting in adjustment of the Company's
common stockholders' equity and the carrying value of assets and liabilities.
Therefore, the Company's post-reorganization balance sheets and statements of
operations are not prepared on a consistent basis of accounting with its
pre-reorganization balance sheets and statements of operations. Accordingly, the
Company has had limited history of operations post-bankruptcy on which its
performance may be evaluated and the Company does not believe that pre-
bankruptcy performance yields a valid comparison. See "Legal
Proceedings--Background of Bankruptcy; Plan of Reorganization" and Consolidated
Financial Statements and the Notes thereto.

COMPETITION

Colorado law permits limited stakes casino gaming in three historic mining
towns, Black Hawk and Central City, adjacent towns located approximately 35
miles west of Denver, and Cripple Creek, approximately 90 miles south of Denver.
Black Hawk and Central City form the primary gaming market in Colorado, and
competition is intense. Bullwhackers Central City is located approximately one
and one-half miles from Bullwhackers Black Hawk and the Silver Hawk Casino is
located adjacent to the Surface Parking Lot, and across the Surface Parking Lot
from Bullwhackers Black Hawk. Due to their proximity, the Colorado Casinos
compete for some of the same target markets of customers in the Denver
metropolitan area. However, the Company believes that its primary competition
for the Colorado Casinos are other casinos operating in Black Hawk and Central
City, of which there were approximately 33 as of August 31, 1996, and,
secondarily, casinos operating in Cripple Creek of which there were
approximately 26 as of August 31, 1996. Recently, more experienced, nationally
recognized casino operators from other areas of the country have entered, or
announced plans to enter, the Colorado gaming market, including Harrah's,
Harvey's, ITT Sheraton, Colorado Central Station and Fitzgerald's, many of which
have substantially greater financial and marketing resources than the Company.
Because Colorado does not limit the total number of gaming licenses available
for issuance in Colorado and there are no minimum facility size requirements,
the Company expects the number of gaming facilities to continue increasing.

The Company believes that the primary competitive factors in the Black
Hawk-Central City market are location, availability and convenience of parking,
number of slot machines and gaming tables, types and pricing of amenities, name
recognition, and overall atmosphere. The Company believes it generally competes
favorably on these factors, although Bullwhackers Central City offers less
convenient parking than some of its direct competitors and the Silver Hawk
Casino, recently opened, is smaller and currently has less name recognition than
some of its direct competitors.

The Company believes that since October 1991, approximately 12 casinos in
Black Hawk and 20 casinos in Central City have ceased operations. In addition,
several operators, including the Company, have reduced staffing and others have
closed temporarily or reduced their square footage and/or hours of operations.
The Company believes that the casinos that failed did so for a variety of
reasons, including inferior design, inconvenient parking, inadequate size,
inexperienced management and undercapitalization.

Various published reports detailing additional gaming projects have been
announced for Black Hawk. The majority of these projects are along the southern
end of Black Hawk at the first major intersection off State Highway 119,
providing these projects with the initial opportunity to capture visitors to
Black Hawk and Central City from the Denver metropolitan area. Bullwhackers
Black Hawk and the Silver Hawk Casino, in contrast, are located at the northern
end of Black Hawk at the second major intersection off State Highway 119. In
addition, the Colorado Department of Transportation is analyzing plans to
potentially construct a third major intersection off State Highway 119
in between the two current intersections. This additional intersection, if
constructed, would provide the casinos south of Bullwhackers Black Hawk
and the Silver Hawk Casino with another opportunity to capture visitors
to Black Hawk from the Denver metropolitan area before they reach
Bullwhackers Black Hawk and the Silver Hawk Casino, thereby potentially
reducing traffic flow and customer visitors to Bullwhackers Black Hawk and
the Silver Hawk Casino, as well as to casinos in Central City, including
Bullwhackers Central City.

While it is difficult to assess the development stage of each of the
announced projects and the likelihood of whether any or all of the announced
projects will eventually be built and at what size, it is reasonably likely that
at least some of the new competition may be completed and open to the public by
early to mid-1998. Therefore, should several of the announced competitive
projects open, the increased competition may adversely affect the Company's
operations in both Black Hawk and Central City and, accordingly, may have a
material adverse effect on the Company's consolidated results of operations,
financial position and cash flows.

Several lobbying groups placed initiatives for additional Colorado limited
stakes gaming venues, including Denver, on the November 1992 statewide ballot.
Each of these initiatives was defeated by a wide margin. However, in November
1996 there will be an initiative on the statewide ballot to expand limited
stakes gaming to the city of Trinidad, approximately 125 miles south of Colorado
Springs, and similar initiatives, legislation or regulations could be introduced
in the future. The enactment of any initiative, legislation or regulations
legalizing gaming elsewhere in Colorado could, and if such legalized gaming was
closer to Denver would, have a material adverse effect on the Company's
consolidated results of operations, financial position and cash flows.

In addition to competing with other gaming facilities in Colorado as
described above, the Company competes, to a lesser degree, for both customers
and potential future gaming sites, with gaming facilities nationwide, including
casinos in Nevada and Atlantic City, many of which have substantially greater
financial resources and experience in the gaming business. The Company also
competes with other forms of gaming on both a local and national level,
including state-sponsored lotteries, charitable gaming and pari-mutuel wagering,
among others, and competes for entertainment dollars generally with other forms
of entertainment. The recent and continuing expansion of legalized casino gaming
to new jurisdictions throughout the United States may also affect competitive
conditions. Although the Company's focus is the Colorado gaming market, it is
considering gaming ventures in other locations that the Company believes present
favorable opportunities, and may pursue certain of such opportunities if its
resources allow it to do so. However, its ability to capitalize on such
opportunities is expected to be limited due to competition for such
opportunities from more experienced and financially stronger entities.

FLUCTUATING MARKET

Due to the rapid growth of the Colorado gaming market, changes in the
number of facilities operating and their individual layouts, the seasonality of
the business and the local attributes of each Colorado gaming market, revenue
results have varied, and likely will vary, significantly between the various
Colorado gaming markets and between properties within those markets. As the
Black Hawk market expands, both in terms of gaming device capacity and market
share, the Central City market tends to contract. The majority of new and
expansion projects are focused in Black Hawk, accordingly, the Company expects
revenue per gaming device in Central City generally and Bullwhackers Central
City in particular to decline relative to Black Hawk over the foreseeable
future.

RELIANCE ON DENVER MARKET

The Company's gaming revenues currently depend primarily upon "day-tripper"
visitor traffic at the Colorado Casinos from Denver metropolitan area residents.
A decline in the Denver economy, a decline in the Black Hawk-Central City gaming
market, or increased competition for Denver metropolitan area residents from
other gaming jurisdictions both inside and outside Colorado, could have a
material adverse effect on the Company's consolidated results of operations,
financial position and cash flows.

COLORADO GAMING REGULATIONS

GENERAL. Under Colorado law and regulations (the "Colorado Regulations"),
the ownership and operation of casino facilities in Colorado are subject to
strict and extensive regulation by the Colorado Division of Gaming supervised by
the five-member Colorado Limited Gaming Control Commission (the "Gaming
Commission").

The ownership and operation of casino gaming facilities are subject to
extensive state and local regulation. The Gaming Commission requires various
licenses, findings of suitability, registrations, permits and approvals to be
held by the Company and its subsidiaries. The Gaming Commission may, among other
things, limit, condition, suspend or revoke a license to operate for any cause
deemed reasonable. Substantial fines or forfeiture of assets for violations of
gaming laws or regulations may be levied against the Company, the Company's
subsidiaries and the persons involved. In addition, the actions of persons
associated with the Company and its management employees, over whom the Company
may have no control, could jeopardize any licenses held by the Company in
Colorado. The suspension or revocation of any of the Company's licenses or the
levy on the Company of substantial fines or forfeiture of assets would have a
material adverse effect on the Company.

To date, the Company has obtained all governmental licenses, findings of
suitability, registrations, permits and approvals necessary for the operation of
the Colorado Casinos. However, gaming licenses and related approvals are deemed
to be privileges under Colorado law, and no assurances can be given that any new
licenses, permits and approvals that may be required in the future will be given
or that existing ones will not be revoked. The current licenses for the
Bullwhackers Casinos expire on December 2, 1996 and the license for the Silver
Hawk Casino expires on June 24, 1997. Renewal is subject to, among other things,
continued satisfaction of suitability requirements. There can be no assurance
that the Company will successfully renew its licenses in a timely manner or at
all.

Under the Colorado Regulations, no person can have an "interest" in more
than three gaming retailer/operator licenses. The Company currently has three
such licenses, one each for Bullwhackers Black Hawk, Bullwhackers Central City
and the Silver Hawk Casino. Accordingly, any expansion opportunities that the
Company may have in Colorado would be limited absent the disposition of one of
the Colorado Casinos. See "Business - Colorado Gaming Regulations."

RESTRICTIONS ON HOLDERS OF COMMON STOCK. Under Colorado Regulations, the
definition of an "interest" in a gaming license excludes ownership of less than
5% of a "publicly traded" company such as the Company. Because the Company has
three such licenses, any owner of any interest in a non-publicly traded Colorado
licensee or a 5% or greater interest in a publicly traded Colorado licensee may
be precluded from owning 5% or more of the Common Stock. To enable the Company
to comply with the Colorado Regulations and secure and maintain the business and
other regulatory approvals necessary for operating a gaming-related business in
Colorado, the Company's Certificate of Incorporation provides that the Company
may not issue any voting securities except in compliance with the rules of any
gaming authority. The Company's Certificate of Incorporation also provides that
all transfers of its voting securities must be in compliance with applicable
gaming authority rules and if any gaming authority issues an order disqualifying
a person from owning shares of Common Stock, the Company may redeem the stock of
the disqualified holder unless Common Stock is transferred to a person found by
the Gaming Commission to be suitable within 60 days from the finding of
unsuitability. See "Business - Colorado Gaming Regulations" and "Description of
Capital Stock Description of Common Stock."

RESTRICTIONS ON HOLDERS OF NOTES. If a record or beneficial owner of Notes
is required by any Gaming Authority (as defined in the Indenture) to be
licensed, qualified or found suitable, such holder must apply for a license,
qualification or finding of suitability within the required time period
requested by such Gaming Authority. The applicant for a finding of suitability
must pay all costs of the investigation for such finding of suitability. If a
record or beneficial owner is required to be licensed, qualified or found
suitable and is not licensed, qualified or found suitable by such Gaming
Authority, the Company shall require such owner to dispose of the Notes. See
"Business-Colorado Gaming Regulations" and "Description of Capital
Stock-Description of the Notes-Redemption-Mandatory Redemption."

LIQUOR REGULATION

The sale of alcoholic beverages is subject to licensing, control and
regulation by certain Colorado state and local agencies (the "Liquor Agencies").
Subject to certain exceptions, all persons who directly or indirectly own 5% or
more of the Company must file applications with and are subject to investigation
by the Liquor Agencies. The Liquor Agencies also may investigate persons who,
directly or indirectly, loan money to liquor licensees. All liquor licenses are
subject to renewal, are revocable and are not transferable. The Liquor Agencies
have broad powers to limit, condition, suspend or revoke any liquor license. Any
disciplinary action could, and any failure to renew or other revocation of any
of its liquor licenses would, have a material adverse effect upon the operations
of the Company and the Colorado Casinos.

Colorado law prohibits any person or entity from having an "interest" (as
defined) in more than one type of alcoholic beverage license or more than three
gaming tavern liquor licenses. The Company currently holds a gaming tavern
license for each of the three Colorado Casinos. Accordingly, the Company's
expansion opportunities in Colorado are limited by such licensing restrictions.
Furthermore, no person that holds an interest in the Company may hold any
interest in any other Colorado alcoholic beverage licensees. See "Business
- -Non-Gaming Regulation-Liquor Regulation."

TAXATION

The Company's operations are subject to taxes imposed upon gaming operators
by the Gaming Commission and the municipalities of Black Hawk and Central City.
Taxes currently levied on the Company's operations include taxes on gross gaming
proceeds and annual gaming device fees. Such taxes and fees are subject to
revision from time to time. Effective October 1, 1996, the Gaming Commission
changed the tax rate. While certain of the tax rates were decreased in some of
the lower-revenue brackets, the top tax rate was increased from 18% to 20% on
all revenue in excess of $10 million. The new tax rates are 2% of the gross
gaming revenue up to and including $2 million (unchanged from the previous
year), 4% of the gross gaming revenue above $2 million up to and including $4
million (a decrease from the 8% tax rate for the previous year), 14% of the
gross gaming revenue above $4 million up to and including $5 million (a decrease
from the 15% tax rate for the previous year), 18% of gross gaming revenue above
$5 million up to and including $10 million (unchanged from the previous year)
and 20% of gross gaming revenue in excess of $10 million (an increase in the top
tax rate). The increase in the top tax rate is expected to have a greater effect
on the Company than the tax decrease in the lower revenue brackets. Accordingly,
the Company expects to pay between $300,000-$400,000 in additional gaming taxes
as a direct result of the change in tax rates. See "Business-Non-Gaming
Regulation-Taxation."

SEASONALITY AND INCLEMENT WEATHER

Because the Colorado Casinos are located in the Rocky Mountains, they are
subject to sudden and severe winter storms. Access to Central City and Black
Hawk, which are both located ten miles from Interstate 70, is made via a two-
lane secondary road. In bad weather, and in the winter months generally, this
access road is difficult to traverse, which reduces the number of patrons
traveling to Black Hawk and Central City, and, accordingly, negatively affects
the Company's operating results during these periods. In addition, bad weather
can result in a loss of services to the Colorado Casinos which also negatively
affects the Company's operating results. As a result, the Colorado Casinos'
business tends to be seasonal, with the highest level of activity occurring
during the summer months.

The sites of Bullwhackers Black Hawk and the Silver Hawk Casino are
located in a 100-year flood plain. To date, the Company has not experienced any
flooding resulting in damage to the casino. The Company carries $5 million in
flood insurance on Bullwhackers Black Hawk, which management currently believes
is adequate. There can be no assurance that Bullwhackers Black Hawk will not
suffer flood damage in the future or that any damage will be adequately covered
by insurance.

AVAILABILITY AND RETENTION OF KEY MANAGEMENT AND OTHER EMPLOYEES

The Company's operations and development are dependent upon the services of
its executive officers. In connection with the Reorganization, most of the
Company's senior management positions were eliminated. The Company's remaining
senior executives, Stephen J. Szapor, Jr., President and Chief Executive Officer
of the Company, Alan L. Mayer, Senior Vice President, Chief Legal Officer and
Secretary of the Company and Richard Rabin, Senior Vice President of Operations
of the Company, entered into employment agreements with the Company on the
Effective Date. The loss of the services of any of these individuals could
adversely affect the Company. See "Management."

The Company's operations and development also are dependent in part on its
ability to attract and retain qualified management personnel or obtaining the
services of third parties in connection with the development, operation and
management of the Colorado Casinos. Certain of the Company's current management,
some of whom have been engaged by the Company only recently, have limited
experience in the development or operation of casinos. In addition, competition
for qualified personnel at all employment levels in the gaming industry in
Colorado is intense. There can be no assurance that in the future the Company
will be able to attract and retain the personnel necessary for successful
operation and development.

ABSENCE OF ESTABLISHED TRADING MARKET FOR THE SHARES AND THE NOTES; POSSIBLE
VOLATILITY OF TRADING PRICES

No established public trading market exists for either the Common Stock or
the Notes. Although the Company understands that the Common Stock and the Notes
trade sporadically in the "pink sheets" in the over-the-counter market, neither
the Common Stock nor the Notes are, or will be upon effectiveness of the
Registration Statement of which this Prospectus is a part, listed or be
qualified for listing on any national securities exchange or on a Nasdaq Stock
Market. A primary reason that neither the Common Stock or Notes qualify for any
listing is that they are held by a relatively small number of holders, which the
Company estimates at 40 for the Common Stock and 15 for the Notes, which has an
adverse effect on the liquidity of the markets for the Common Stock and Notes.
There can be no assurance that the Common Stock or the Notes will ever have
enough holders or meet the other criteria to qualify for a listing on any
national securities exchange or a Nasdaq Stock Market, that an active trading
market for the Common Stock or the Notes will develop, or, if such a market
develops, as to the liquidity or sustainability of such market. Accordingly,
there can be no assurance that a holder of the Common Stock or Notes will be
able to sell such securities in the future or as to the price at which any sale
may occur. Factors such as quarterly fluctuations in the financial and operating
results of the Company, negative announcements by the Company or others,
developments affecting the Company or the gaming industry generally, and general
stock market or economic conditions not necessarily related to the Company's
operating performance, could cause the market price of such securities to
fluctuate substantially. Market prices may also be affected by the amount of
Common Stock and Notes sold, and the timing of sales, by the Selling
Securityholders.

DEBT SERVICE

Although much of the Company's debt obligations were eliminated or reduced
in connection with the Reorganization, the Company has significant interest
expense and principal repayment obligations under the Notes and its credit
facility and the Company is required to comply with certain financial covenants
under the Notes and its credit facility. The Company's ability to service its
debt, including interest and principal payments on the Notes, and comply with
such financial covenants, will depend on its future performance, which will be
affected by the Company's operating and marketing success, prevailing economic
conditions, government regulation and taxation and financial, business and other
factors, certain of which are beyond the Company's control. Accordingly, no
assurance can be given that the Company will maintain a level of operating cash
flow that will permit it to service its obligations and to satisfy such
financial covenants. If the Company is unable to generate sufficient cash flow
or is unable to refinance or extend its outstanding indebtedness, it will have
to adopt one or more alternatives, such as reducing or delaying future expansion
and capital expenditures, selling assets, restructuring debt or obtaining
additional equity capital. There is no assurance that any of these strategies
could be effected on satisfactory terms or at all. In addition, there is no
sinking fund for the retirement of the Notes. Therefore, the Company will be
required to repay the entire principal amount of the Notes when they mature on
June 7, 2003, unless the Notes are previously redeemed. There can be no
assurances that the Company will have available funds or will be able to raise
funds for the repayment of the Notes at maturity.

The terms and financial covenants contained in the Notes and the Company's
credit facility restrict the ability of the Company to incur additional
indebtedness. Those restrictions may limit the Company's ability to compete in
the gaming market by effectively preventing expansion of the Company's
facilities or other competitively advantageous capital expenditures. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources" and "Description of Capital
Stock-Description of Notes-Certain Covenants-Limitation on Indebtedness."

SECURITY FOR THE NOTES

The lien on real and personal property of the Company and the Guarantors
securing the Notes (the "Collateral") is junior to a lien on the Collateral held
by the Company's lender under its credit facility. If an Event of Default (as
defined in the Indenture) occurs, there can be no assurance that a foreclosure
on the Collateral would produce proceeds in an amount that would be sufficient
to pay the principal of, and accrued interest on, the Notes.

In addition, the trustee for the Notes (the "Trustee") may be limited in
its ability to foreclose upon the Collateral by applicable gaming laws and
regulations. In particular, in any foreclosure sale involving a Colorado Casino,
the purchaser would be required to obtain retail/operator licenses from the
Commission as well as a gaming tavern liquor license from Colorado state and
local agencies. If the trustee for the Notes was unable to, or chose not to,
sell the Colorado Casinos or their assets, the trustee would be required to
obtain such licenses. Such requirements may limit the number of potential
bidders, and may adversely affect the sales price for the Colorado Casinos or
their assets. Furthermore, the right of the Trustee to repossess and dispose of
the Collateral upon the occurrence of an Event of Default is likely to be
significantly impaired by applicable bankruptcy law if a bankruptcy proceeding
was commenced by or against the Company or any Guarantor prior to the Trustee
having repossessed and disposed of the Collateral. See "Description of Capital
Stock-Description of the Notes-Security."

MANDATORY OFFER TO PURCHASE NOTES UPON CHANGE OF CONTROL

In the event of a Change of Control (as defined in the Indenture), the
Company is obligated to offer to purchase all or a portion of each holder's
Notes in accordance with the terms of the Indenture at a price of 101% of the
principal amount of such Notes plus accrued but unpaid interest. The Company's
ability to pay cash to the holders of the Notes upon such event, and the ability
of the Guarantors to pay pursuant to the terms of the Guarantees upon the
failure of the Company to purchase the Notes upon such event, may be limited by
the Company's and Guarantors' respective financial condition at the time of such
event. See "Description of Capital Stock-Description of the Notes-Mandatory
Offers to Purchase."

ENVIRONMENTAL MATTERS

The Black Hawk and Central City gaming districts, including the Colorado
Casino sites, are located generally within the Central City/Clear Creek
Superfund site (the "Site") as designated by the Environmental Protection Agency
(the "EPA"), pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"). The Site includes numerous
specifically identified areas of mine tailings and other waste piles from former
gold mine operations that are the subject of ongoing investigation and clean-up
by the EPA and the Colorado Department of Public Health and Environment (the
"CDPHE"). CERCLA requires remediation of sites from which there has been a
release or threatened release of hazardous substances and authorizes the EPA to
take any necessary response actions at Superfund sites, including authorizing
potentially responsible parties ("PRPs") to clean up or contribute to the
clean-up of a Superfund site. PRPs are broadly defined under CERCLA, and include
past and present owners and operators of a site. CERCLA imposes strict liability
on PRPs, and courts have commonly held PRPs to be jointly and severally liable
for all response costs.

Although the Colorado Casinos are not within any of the specific areas of
the Site currently identified by the EPA for investigation or remediation, the
site on which the Surface Parking Lot was constructed was identified as
requiring remediation in connection with the construction of the Surface Parking
Lot. That remediation was completed in June 1994. In the process of completing
additional environmental remediation in connection with expanding the Surface
Parking Lot, the Company discovered that two small and confined treatment cells
within the Surface Parking Lot contain unacceptable levels of mercury and lead
within the soil, and thus are classified as hazardous. The Company immediately
reported this finding to the EPA and the CDPHE. The hazardous soil is located
above the groundwater table. At the direction and approval of the EPA and CDPHE,
the Company placed an asphalt cap over the hazardous soil to prevent
infiltration. While the parties have agreed that the hazardous soil presents
minimal impact to the environment in the short term, the Company has reached an
agreement with the EPA and CDPHE to remove the hazardous soil and dispose of the
material at a hazardous waste landfill prior to December 31, 1996. The Company
is currently analyzing the most efficient way and time period within which to
complete the removal of the hazardous soil. It is currently estimated that the
cost of this removal project will be approximately $100,000. See "Legal
Proceedings - Environmental Matters."

The Company has conducted environmental examinations of the real property
underlying the Bullwhackers Casinos. Based on these examinations, the Company is
not aware of any environmental problems affecting the Bullwhackers Casinos which
are likely to result in material costs to the Company. Although the Company has
not conducted environmental examinations of the real property underlying the
Silver Hawk Casino facility, it does not believe that there are any
environmental problems affecting the Silver Hawk Casino site which are likely to
result in material costs to the Company. No assurance can be given, however,
that the Company will not subsequently discover significant environmental
problems at any of its Colorado properties. Furthermore, the EPA or other
governmental authorities could broaden their investigations and identify
additional areas within the Site, including the Colorado Casino sites,
for remediation. If any of the Colorado Casinos were included in additional
areas of concern within the Site, the Company could be identified as a PRP and
any liability related thereto could have a material adverse effect on the
Company.

MARKET PRICE OF COMMON STOCK AND DIVIDEND POLICY

No established trading market for the Common Stock exists.

Since the Effective Date, the Company has neither declared nor paid
dividends on the Common Stock and does not anticipate paying dividends in the
foreseeable future. The Company intends to follow a policy of retaining any
earnings either to repay borrowings under the Company's credit facility, finance
the Company's growth, or for general corporate purposes. In addition, the
Company's credit facility and the Indenture restrict the Company from paying
cash dividends. Payment of dividends in the future will be determined by the
Company's Board of Directors and will depend upon, among other things, the
Company's future earnings, operations, capital requirements, contractual
restrictions in the Company's debt or other instruments, and such other factors
the Board of Directors may deem relevant.

SELECTED FINANCIAL DATA

The selected consolidated financial information presented below for each
year since the Predecessor Company commenced operations through the year ended
December 31, 1995 and for the six-month period ended June 30, 1995, the period
from January 1, 1996 through June 6, 1996, and the period from June 7, 1996 (the
Effective Date) through June 30, 1996, is derived from the Company's
Consolidated Financial Statements and Notes thereto which include BWBH, Inc.,
BWCC, Inc., Millsite 27, Inc. and Silver Hawk Casino, Inc. Separate financial
statements for BWBH, BWCC, Millsite, and Silver Hawk, as the guarantors of the
Notes, are not included herein because the Guarantors are each jointly and
severally liable with respect to the full amount of Notes and the aggregate
total assets, net earnings and net equity of the Guarantors are substantially
equivalent to the total assets, net earnings and net equity of the Company and
its subsidiaries on a consolidated basis. This data should be read in
conjunction with the Consolidated Financial Statements of the Company and the
Notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" contained in this Prospectus.

The pro forma condensed consolidated statement of operations data has been
prepared assuming that the Effective Date occurred on January 1, 1995. For a
more complete discussion of the pro forma data, see "Colorado Gaming &
Entertainment Co. Unaudited Pro Forma Condensed Consolidated Financial
Information."

<TABLE>
IN THOUSANDS, EXCEPT SHARE DATA

<CAPTION>
Years Ended December 31,
1995
1992(a) 1993 1994(c) 1995(c) (Pro Forma)(d)
--------- -------- ----------- ----------- --------------
STATEMENT OF OPERATIONS (unaudited)
DATA:
<S> <C> <C> <C> <C> <C>

Net revenues........................... $ 17,045 $ 38,468 $ 45,474 $ 47,428 $ 47,428
Operating Expenses:
Impairment of assets and - - 10,804 11,347 11,347
predevelopment expense..............
Reorganization items................ - - - 17,910 -
Other operating expenses............ 25,349 35,310 47,631 44,807 46,120
Income (loss) from operations.......... (8,304) 3,158 (12,961) (26,636) (10,039)
Interest expense....................... 3,000 6,987 18,822 18,664 6,731
Equity loss in unconsolidated
subsidiary (GPRI)................... - - (2,323) (70,277) -
Net loss............................... $(11,241) $ (3,829) $(32,331) $(115,216) $(16,720)
========= ========= ========= ========== =========
Net loss per common share(e)........... N/A N/A N/A N/A $ (3.25)
========= ========= ========= ========== =========
Weighted average common
shares (b)(e)....................... N/A N/A N/A N/A 5,138,888

</TABLE>

Six Months Jan. 1, 1996 June 7, 1996
Ended through through
June 30, 1995 June 6, 1996 June 30, 1996
(unaudited) (unaudited) (unaudited)
STATEMENT OF OPERATIONS
DATA:
<S> <C> <C> <C>
Net revenues........................... $ 23,667 $19,982 $3,245
Operating Expenses:
Impairment of assets and
predevelopment expense.............. 5,077 -- --
Reorganization items................ 500 2,290 --
Other operating expenses............ 23,743 16,886 3,064
Income loss from operations............ (5,653) 806 181
Interest expense....................... 9,976 579 403
Equity loss in unconsolidated
subsidiary (GPRI)................... 12,187 -- --
Extraordinary gain from
reorganization....................... -- 164,358 --
Net income (loss)...................... $(27,600) $164,407 $(211)
======== ======== ======

</TABLE>

<TABLE>

As of December 31,
<CAPTION>

As of June 30,
1992 1994(c) 1995(c) 1996
-------- ----------- --------- -------------
(unaudited)
BALANCE SHEET DATA:
<S> <C> <C> <C> <C>
Cash and cash equivalents ............. $ 1,676 $ 7,977 $ 3,623 $5,369
Total assets .......................... 35,181 141,093 37,680 69,770
Long-term debt (excluding current
portion)............................... 35,064 155,675 - 55,272
Liabilities subject to compromise...... - - 186,460 --
Total stockholders' equity (deficit) (10,002) (36,824) (153,137) 3,948
=======================================================================================================

(c) GPRI was consolidated with the Company and its other wholly owned
subsidiaries for the Company's fiscal year ended December 31, 1994, but
was not consolidated with the Company and its other wholly owned
subsidiaries for the Company's fiscal year ended December 31, 1995
because the Company no longer controlled GPRI following the
commencement of the GPRI Bankruptcy Case. See Consolidated Financial
Statements and Notes thereto."

(d) For information on specific pro forma adjustments resulting from the
reorganization, see "Unaudited Pro Forma Condensed Consolidated
Financial Information."

(e) The weighted average number of common shares outstanding and net income
per common share for the Predecessor Company have not been presented
because, due to the Reorganization and implementation of fresh start
reporting, they are not comparable to subsequent periods.
</FN>
</TABLE>

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The following unaudited pro forma condensed consolidated statement of
operations for the year ended December 31, 1995 of the Company is based on the
consolidated financial statements of the Company included elsewhere in this
Prospectus. The unaudited pro forma condensed consolidated statement of
operations has been prepared assuming that the Effective Date of the Plan of
Reorganization had occurred on January 1, 1995. The unaudited pro forma
condensed consolidated statement of operations of the Company does not reflect
the acquisition of the Silver Hawk Casino or the commencement of construction of
the Parking Garage.

The unaudited pro forma condensed statement of operations of the Company
and accompanying notes should be read in conjunction with the Company's
consolidated financial statements and notes thereto included in this Prospectus.
The unaudited pro forma condensed consolidated statement of operations is being
presented for information purposes only and does not purport to represent what
the Company's consolidated results of operations would actually have been if the
Effective Date of the Plan of Reorganization had occurred on January 1, 1995 or
to project the Company's results of operations at any future date.

<TABLE>
COLORADO GAMING & ENTERTAINMENT CO.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)

Year Ended
<CAPTION>
Year Ended December
December 31, Reorgan- 31,
1995 ization Fresh Start 1995
(Historical) Adjustments Adjustments (Pro Forma)

<S> <C> <C> <C> <C>
Revenues, net............................... $ 47,428 $ 47,428
------ ------

Operating Expenses:
Casino..................................... 13,087 13,087
Gaming taxes............................... 8,277 8,277
Food and beverage.......................... 3,173 3,173
Casino general & administrative............ 3,223 3,223
Corporate general & administrative......... 6,470 6,470
Marketing.................................. 5,806 5,806
Depreciation and amortization.............. 4,771 1,313(5) 6,084
Impairment assets and predevelopment 11,347 11,347
expense....................................
Reorganization items....................... 17,910 (17,910)(1) --
------- --------
Total operating expenses................. 74,064 57,467
======= ========

Operating loss.............................. (26,636) (10,039)

Interest expense............................ (18,664) 11,933 (2) (6,731)
Interest income............................. 361 (311)(3) 50
Equity in loss - unconsolidated subsidiary
(GPRI)...................................... (70,277) 70,277 (4) --
------ ---------

Loss before income taxes.................... (115,216) (16,720)
Provision for income taxes.................. -- --
----------- ---------

Net loss.................................... $ (115,216) $ (16,720)
========== =========
</TABLE>

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

The following notes set forth the explanations and assumptions used and
adjustments made in preparing the unaudited pro forma condensed consolidated
statement of operations for the year ended December 31, 1995.

The unaudited pro forma condensed consolidated statement of operations reflects
the adjustments described under "- Pro Forma Adjustments" below, which are based
on the assumptions and preliminary estimates described therein, which are
subject to change. These statements do not purport to be indicative of the
results of operations of the Company for such periods, nor are they indicative
of future results. Furthermore, these unaudited pro forma condensed consolidated
statement of operations does not reflect anticipated changes which may occur as
the result of activities before and after the Effective Date of the Plan of
Reorganization and other matters.

The unaudited pro forma condensed consolidated financial statements should be
read in conjunction with the financial statements and the notes thereto included
in this Prospectus.

PRO FORMA ADJUSTMENTS

The unaudited pro forma condensed consolidated statement of operations
reflects the following pro forma adjustments based on the assumptions described
below:

1). Elimination of one time non-recurring reorganization items.

2). Adjustment to interest expense to reflect the reorganized debt structure of
the Company.

3). This adjustment reflects the reduction of interest income recorded on
affiliate loans in the 1995 period.

4). Elimination of any charges from the disposed subsidiary (GPRI).

Fresh Start Adjustments

5). Recording of additional amortization charges on excess reorganization value,
based on a 18.5 year amortization period.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

OVERVIEW

The Company emerged from bankruptcy on the Effective Date. The Company
and its consolidated subsidiaries prior to the Effective Date are sometimes
referred to below and elsewhere in this Prospectus as the "Predecessor Company."

Prior to the Effective Date, the Company, through its Colorado Subsidiaries
(as defined below), owned and operated the Bullwhackers Casinos and the Surface
Parking Lot in Colorado, and, through Grand Palais Riverboat, Inc. ("GPRI"),
operated a riverboat gaming facility on the Mississippi River adjacent to
downtown New Orleans and owned a 50% interest in River City Joint Venture
("RCJV") which owned and leased certain shore facilities in New Orleans,
including approximately 53 acres of land. Additionally, RCJV provided
administrative services on behalf of its joint venture partners to support their
riverboat gaming operations. Both the Company's and its joint venture partner's
riverboat gaming facilities were operated under the name `River City'. The
Company's riverboat gaming facility commenced operations on March 29, 1995, and
due to substantial operating losses, stopped operations on June 6, 1995. The
Company's joint venture partner stopped riverboat gaming operations on June 9,
1995.

Prior to the closure of its riverboat gaming operations, GPRI had incurred
substantial obligations, including construction costs, equipment purchases, and
trade payables, for which it had no funds available or financial ability to pay.
On July 26, 1995, three creditors of GPRI filed a Chapter 7 involuntary
bankruptcy petition against GPRI in the United States Bankruptcy Court for the
Eastern District of Louisiana. On July 27, 1995, GPRI's involuntary bankruptcy
case was converted into a voluntary Chapter 11 case (the "GPRI Bankruptcy
Case"). On March 29, 1996, a plan of reorganization (the "GPRI Plan") was
confirmed in the GPRI Bankruptcy Case. On May 3, 1996 as part of the Company's
overall restructuring, the Company's equity interest in GPRI was sold to Casino
America, Inc. pursuant to the GRPI Plan of Reorganization. Consideration,
consisting of cash, stock and notes, totaling approximately $59 million, was
given to GPRI creditors, including the Company's senior secured creditors.
Accordingly, the Company received no consideration from the sale of GPRI.
Concurrently with this stock sale, all claims against the Company related to
GPRI were released. This transaction had no financial statement impact on the
Company in the 1996 period, as the Company's investment in GPRI was reduced to
zero in the 1995 period.

As a result of GPRI's financial difficulties and subsequent bankruptcy
filing, the outstanding 11 1/2 Senior Secured Pay-In-Kind Notes due 2000 issued
by the Company (the "Old Notes") were declared in default in June 1995. After
reaching agreement on a debt restructuring with the holders of the Old Notes,
the Company and the Colorado Subsidiaries filed a voluntary Chapter 11 case in
the United States Bankruptcy Court for the District of Delaware (the "Hemmeter
Bankruptcy Cases") on November 7, 1995. The venue of the Hemmeter Bankruptcy
Cases was changed to the United States Bankruptcy Court for the Eastern District
of Louisiana on December 27, 1995. The Plan of Reorganization of the Company and
its Colorado Subsidiaries was confirmed on April 8, 1996 and became effective on
June 7, 1996. The Company and the Colorado Subsidiaries continued their business
operations as debtors-in-possession under the supervision of the Bankruptcy
Court from the date their bankruptcy petitions were filed.

The Company's Reorganization became effective on June 7, 1996, the
Effective Date. Pursuant to the Reorganization, the following events occurred:

o $176 million of senior secured debt was canceled and $50 million in new
debt, consisting of the Notes, was issued.

o All outstanding common stock and warrants were canceled and 5
million shares of new common stock was issued on a pro rata
basis to the holders of the Old Notes and Resort Income
Investors ("RII").

o Certain unsecured liabilities totaling approximately $1.2 million were
canceled.

o The Company changed its name to Colorado Gaming & Entertainment Co.

Also on the Effective Date, the Company adopted fresh start reporting in
accordance with SOP 90-7 resulting in adjustment of the Company's common
stockholder equity and the carrying values of assets and liabilities.
Accordingly, the Company's post-Reorganization balance sheets and statements of
operations are not prepared on a consistent basis of accounting with its
pre-Reorganization balance sheets and statements of operations, a substantial
amount of pre-bankruptcy liabilities of the Company were converted to equity or
otherwise discharged and significant adjustments were made to reflect the
resolution of certain liabilities.

Because of the Hemmeter Bankruptcy Cases and the elimination of GPRI's
operations, no measure of comparability can be drawn from past results in order
to measure those that may occur in the future. Among the uncertainties which
have affected the Company's operations in the past and might adversely impact
the Company's future operations are (i) general economic conditions, especially
in the Denver, Colorado, metropolitan area, (ii) the intensely competitive
nature of the Colorado gaming industry, (iii) the entry into the Black Hawk and
Central City gaming markets of licensees with substantially greater economic
resources and gaming experience than the Company, (iv) changes in the laws
governing gaming operations, and (v) the possibility of increased taxes and
other regulatory burdens on the Company's operations.

IMPACT OF THE PLAN OF REORGANIZATION ON RESULTS OF OPERATIONS

Upon the Company's emergence from bankruptcy on the Effective Date, the
Company's aggregated outstanding debt balance was reduced from $185.2 million to
approximately $56.6 million. The reduction in debt is expected to result in a
reduction in annual interest expense of approximately $12 million based on the
Company's weighted average interest rate on outstanding debt in 1995. The
Company obtained a credit facility with an unaffiliated lender to provide
working capital financing and financing for its expansion plans. See "-
Liquidity and Capital Resources." Interest on this facility, the amount of which
will depend on the amount borrowed by the Company, will increase the Company's
post-Effective Date interest expense. The Company also incurred reorganization
charges totaling $17.9 million in 1995 which are non-recurring in nature. The
Company's corporate general and administrative expense in 1995 was $6.5 million.
In early 1995, the Company employed 27 corporate management employees who
provided operations, finance, design, development, legal and aviation services
to the Company. As part of the downsizing of the Company, the Company employed
five corporate management employees on the Effective Date. The Company has also
terminated its arrangement with an affiliate for use of a corporate aircraft and
has renegotiated its office lease to provide for more favorable terms. The
reductions resulting from these measures is expected to allow the Company to
reduce its corporate general and administrative expense by approximately $4.0
million per year. Because of the divestiture of GPRI through the GPRI Bankruptcy
Case, the Company's operations will no longer be burdened with the loss on
GPRI's New Orleans operations, which totaled $71.7 million in 1995.

The adoption of fresh start accounting will result in increased
amortization charges of approximately $1.0 million annually as a result of
recording $18.5 million of excess reorganization value.

Since its inception, the Company has generated significant net operating
loss carryforwards for tax purposes, which, in the absence of the Company's
bankruptcy, would have been available to offset any taxable income earned in the
future. As a result of the consummation of the Plan of Reorganization, the
Company underwent a substantial change in ownership and incurred significant
forgiveness of indebtedness income. For tax purposes, the forgiveness of
indebtedness income and the ownership change will significantly limit or
eliminate the Company's net operating loss carryforwards and other tax benefits.
Additionally, while fresh start accounting requires the Company to significantly
increase the book basis of its assets, the tax bases of those assets generally
remain at their historical bases. Therefore, given the potential limitation or
elimination of the Company's net operating loss carryforwards and the increased
book depreciation and amortization charges, the Company may have taxable income
in the future, and, therefore, may be required to pay income taxes, even though
it may record a loss for financial reporting purposes.

RESULTS OF OPERATIONS

For the Six Months Ended June 30, 1996 as Compared to the Six Months Ended
June 30, 1995

The Company's net revenue decreased 2%, to $23.2 million for the six months
ended June 30, 1996, from $23.7 million for the six months ended June 30, 1995.
The decrease in revenue is due to significant revenue declines at the Company's
Central City property, and unusually severe weather in the central Colorado
Rocky Mountains in January 1996. The Company's Black Hawk facility has produced
a 6% increase in revenues for the six months, despite the fact Black Hawk's
operations were negatively affected by the construction activities relating to
expansion of the parking lot which began April 1 and ended in early June. The
revenue gains in Black Hawk were offset by significant revenue declines at the
Company's Central City property due to a continued competitive market. The
Central City
market, which was relatively flat year to year, continues to struggle to compete
with Black Hawk, which continues to offer better access and parking convenience.
The Company's facility in Central City has not been able to compete effectively
with certain other competitors which offer substantially more amenities in terms
of on-site parking and hotel rooms. The Silver Hawk Casino, located in Black
Hawk adjacent to the Company's expanded parking lot, opened for business on June
26, 1996 and contributed approximately $164,000 in net revenue for the five days
in June. The initial results for June and the month of July exceeded
management's expectations, however, it is premature to estimate whether these
results will continue.

Expenses directly related to casino operations, including casino expense,
gaming taxes and food and beverage expense decreased 5% to $12.0 million for the
six months ended June 30, 1996, as compared to $12.6 million for the six months
ended June 30, 1995. The decrease in expenses is due to certain labor
efficiencies and other cost saving programs implemented in late 1995 and early
1996.

Marketing expense remained constant at $2.8 million for both the six months
ended June 30, 1996 and 1995.

Casino general and administrative expenses decreased to $1.4 million for
the six months ended June 30, 1996, as compared to $1.8 million for the six
months ended June 30, 1995. The decrease primarily relates to reductions in
staffing at the Central City property and decreased insurance costs.

Corporate expense was reduced to $1 million for the six months ended June
30, 1996, as compared to $4.2 million for the six months ended June 30, 1995.
These reductions included the elimination of most corporate positions, combining
corporate offices with the Colorado Casinos offices and terminating the use and
subsidy of a corporate aircraft, all beginning in the second quarter of 1995.

Depreciation and amortization expense decreased to $2.3 million for the six
months ended June 30, 1996 as compared to $2.4 million for the six months ended
June 30, 1995. Due to the increased book basis of the Company's assets as a
result of adopting fresh start accounting, depreciation and amortization charges
going forward will be substantially greater.

The Company incurred $388,000 in pre-opening expense for the six months
ended June 30, 1996 related to its Silver Hawk Casino which opened on June 26,
1996.

Reorganization and other impairment charges totaled $2.3 million for the
six months ended June 30, 1996, as compared to $5.6 million for the six months
ended June 30, 1995. Reorganization expenses are costs directly related to the
Company's Reorganization.

Operating Income. Income from operations increased to $908,000 for six
months ended June 30, 1996, as compared to a $5.7 million loss for the six
months ended June 30, 1995. The increase in operating income is primarily
attributable to the $5.6 million in one-time reorganization and other impairment
charges incurred in the 1995 period, and a reduction of corporate expense from
the 1995 period.

Interest expense totaled $982,000 for the six months ended June 30, 1996,
as compared to $10 million for the six months ended June 30, 1995. The Company
did not record any interest expense during the reorganization period on its debt
obligations in default. On a pro forma basis, based on the reorganized capital
structure interest for the second quarter would have been approximately $3.3
million.

For the Year Ended December 31, 1995 as Compared to the Year Ended December
31, 1994.

Although GPRI's results of operations were consolidated with the results of
operations of the Company and its other wholly owned subsidiaries for the
Company's fiscal year ended December 31, 1994 and were not consolidated for the
Company's fiscal year ended December 31, 1995, GPRI's only operating item in
1994 was the preopening expense of $2.6 million discussed below. Therefore, with
the exception of this item, the Company's 1995 results of operations which do
not include GPRI are comparable to the Company's 1994 results of operations
which do include GPRI.

The Company's net revenue increased to $47.4 million in 1995 as compared
with $45.5 million in 1994, representing a 4% increase in net revenues. The
growth is primarily attributable to increased revenues at Bullwhackers Black
Hawk resulting from the fact that Bullwhackers Black Hawk had the benefit of the
Surface Parking Lot, which opened in April 1994, for all of 1995, as opposed to
eight months during 1994, and the fact of the overall market growth
in Black Hawk of 14% in 1995. The revenue growth at Bullwhackers Black Hawk
was offset by a slight decrease in Bullwhackers Central City gross revenues.

Expenses directly related to the casinos, including casino expense, gaming
taxes and food and beverage expense decreased by 3% to an aggregate of $24.5
million for 1995 as compared to an aggregate $25.3 million for 1994. Casino
expense was 52% of net revenue at the Bullwhackers Casinos for 1995 as compared
56% of net revenue at the Bullwhackers Casinos for 1994. Casino expense consists
of all direct costs of casino operations, and includes salaries, wages and
benefits expense.

General and administrative expense decreased to $9.7 million for 1995 as
compared to $11.4 million for 1994, representing a 15% decrease. The decrease is
due to the Company's reduced corporate group during the second half of 1995.
During the second quarter of 1995, the Company began to implement significant
cost reductions at the corporate level as part of the Company's reorganization.
Most corporate positions were eliminated, administrative offices were combined
with the Colorado Casinos, and the use and subsidy of a corporate airplane was
terminated.

Marketing expense increased to $5.8 million for 1995 as compared to $3.8
million for 1994. The increase primarily relates to the increased promotional
costs due to increased business volume and the competitive nature of the market.

Depreciation and amortization expense increased to $4.7 million for 1995 as
compared to $4.3 million for 1994, representing a 9% increase. The increase
primarily reflects a full year of depreciation on the improvements at the
Surface Parking Lot in 1995.

There were no pre-opening costs for 1995 as compared to $2.6 million in
pre-opening costs for 1994. Pre- opening costs in 1994 consisted of expenditures
incurred to prepare the New Orleans riverboat gaming facility for opening.

Predevelopment expense decreased to $402,000 in 1995, as compared to $3.9
million in 1994. Predevelopment expense consists of costs incurred during the
investigation of potential new gaming venues throughout North America, including
legal, consulting and design costs, political contributions and travel expenses.
The Company substantially reduced its predevelopment activity in early 1995 due
to the Company's lack of financial resources. The Company is not currently
engaged in any predevelopment activities and has focused its expansion efforts
on the Black Hawk market in the immediate future.

Impairment of asset charges were $10.9 million for 1995 as compared to $6.9
million for 1994. In 1995, the impairment charges resulted primarily from
approximately $6.4 million of affiliate company receivables determined to be
uncollectible, $2.7 million of capitalized interest related to construction of
the Riverboat Project and $1.5 million of capitalized offering costs which were
written-off once certain initial public offering and debt registration efforts
were abandoned.

Reorganization expense in 1995 totaled approximately $17.9 million as
compared to none in 1994. Reorganization expenses are costs directly related to
the Company's Chapter 11 reorganization and consist primarily of professional
fees and the write-off of unamortized debt placement costs and debt discount.

Operating Income. The loss from operations increased to $26.6 million for
1995 as compared to $13.0 million for 1994. The New Orleans operations accounted
for none and $2.6 million of this loss in 1995 and 1994, respectively. In 1995,
reorganization, impairment and other necessary charges totaled approximately
$29.3 million. The Bullwhackers Casinos had operating income of $9.7 million for
1995 as compared to $8.3 million for 1994. This increase primarily reflects the
growth in the Colorado market and the impact of the Surface Parking Lot on the
Bullwhackers Black Hawk operations.

Interest expense totaled $18.7 million for 1995 as compared to $18.8
million for 1994. The Company ceased accruing interest on the Old Notes and on
certain of its Bullwhackers Casino equipment financings as of November 7, 1995
because of the Company's bankruptcy filing. As a result of the decrease in the
Company's debt following the Effective Date, the Company anticipates that its
interest expense will be substantially reduced in the future.

The Company has made no provision for income taxes in 1995 or since its
inception because the Company never generated taxable income. The Company has
reserved the full amount of its net deferred tax asset (primarily net operating
loss carry forwards) because future taxable income, if any, is uncertain. The
reorganization of the Company on the Effective Date may have substantial tax
consequences to the Company.

For the Year Ended December 31, 1994 as Compared to the Year Ended
December 31, 1993.

Net revenues for 1994 were $45.5 million, an increase of 18% over the $38.5
million of net revenues for 1993. The increase in revenue is due primarily to
the completion of the Surface Parking Lot in the spring of 1994 and an expanded
gaming market in Black Hawk.

Expenses directly related to the casinos, including casino expense, gaming
taxes and food and beverage expense increased to an aggregate of $25.3 million
for 1994 as compared to $19.7 million for 1993. The increase in casino expenses
is due primarily to increased staffing as a result of greater activity at
Bullwhackers Black Hawk.

General and administrative expense increased to $11.4 million for 1994 as
compared to $7.7 million for 1993. These expenses include the cost of support
services such as finance, marketing, and administrative staff. The increased
expense for 1994 is due to costs totaling $8.1 million incurred in 1994
associated with the creation of a corporate group and related staff, which were
added beginning in January 1994. The corporate group was involved with strategic
planning and administration, the development of the Company's Louisiana
operations and the pursuit and development of gaming in other venues. The
corporate group put in place in 1994 was designed to manage several operating
companies in addition to the Colorado Subsidiaries and to pursue and develop
opportunities in new venues.

Marketing expense decreased to $3.8 million for 1994 as compared to $4.0
million for 1993.

Depreciation and amortization increased to $4.3 million for 1994 as
compared to $3.9 million for 1993. The increase is related to depreciation of
the improvements at the Surface Parking Lot which was completed in April 1994.

Pre-opening expense totaled $2.6 million for 1994 as compared to none in
1993. Pre-opening costs consist of expenditures incurred to prepare for the
opening of the casinos and include labor costs, certain consulting, marketing
and other direct costs. The pre-opening expense incurred in 1994 relates to
costs associated with the Company's New Orleans riverboat gaming facility.

In 1994, the Company recorded predevelopment expense of $3.9 million as
compared to none in 1993. This amount related to costs incurred during
investigation of potential new gaming venues which was initially capitalized as
investment in development projects. These costs are expended when a project is
no longer deemed viable. As a result of various gaming initiatives which were
not adopted by voters in potential new gaming venues, unsuccessful gaming
legislation proposed in potential new venues and municipalities which selected
gaming operators other than the Company, all such costs were expended in 1994.
Beginning in 1995, costs related to the investigation of new venue development
projects were expended as incurred. Once management has determined a new venue
project has a high probability of success, commercial development costs incurred
will be capitalized.

In September 1994, the Company entered into an agreement to acquire a 25%
equity interest in Promociones e Inversiones de Guerrero S.A. de C.V.
("PRIGSA"), a Mexican gaming company operating a sports book and jai alai
Erenton. The Company contributed $5.9 million to PRIGSA during 1994. The
contributions were made in the form of loans and, upon approval by the Mexican
government, were convertible into common stock. The results of PRIGSA's
operations upon opening in the fall of 1994 were substantially below
expectations, and, as a result, PRIGSA suffered significant operating losses and
has significant liabilities which are senior to the Company's loans to PRIGSA.
As of December 31, 1994, the Company wrote-off its investment in PRIGSA for a
total charge to earnings of $5.9 million. Although Mexico is considering
legalizing casino-style gaming, even if this occurred and PRIGSA's gaming
operations may become viable, the Company believes that any recovery on its
PRIGSA investment would be speculative

In 1994, the Company established a reserve of $1 million for certain
affiliate receivables that management believed might not be collectable. The
loss is included in impairment of investments as of December 31, 1994 in the
accompanying consolidated financial statements of the Company for 1994. See Note
11 to the Company's 1994 Consolidated Financial Statements.

Interest expense increased to $18.8 million, net of $2.1 million of
interest costs capitalized for construction projects, in 1994 as compared to
$7.0 million for 1993. The increase in interest costs relates to the interest on
the Old Notes which were issued during December 1993. Interest expense of $4.8
million in 1993 related to certain loans
provided by RII which were repaid out of the proceeds of the Old Notes.

The Company had a net loss of $32.1 million for 1994 and accordingly
recorded no provision for income taxes. The loss for tax reporting purposes was
different than the net loss for financial reporting purposes due to differences
between the book and tax basis of the Company's assets. In 1994, the Company
booked a valuation allowance to offset the net deferred tax asset of
approximately $16.0 million arising from differences between the book and tax
basis of the Company's assets, liabilities and net operating loss carryforwards,
because future taxable income was uncertain.

LIQUIDITY AND CAPITAL RESOURCES

On the Effective Date of the Company's Plan of Reorganization, June 7,
1996, the Company's outstanding Old Notes totaling $174 million, and certain
other notes payable to RII totaling $2 million, were canceled and $50 million in
Notes were issued on a pro rata basis to the holders of the Old Notes and the
RII notes. The Notes are secured by sub stantially all the assets of the Company
and require semi-annual interest payments commencing on December 1, 1996. On the
first two interest payment dates, December 1, 1996 and June 1, 1997, interest on
the Notes may, at the Company's option, be paid by issuing additional notes in
lieu of cash interest payments. As a result, the Company will have the option of
deferring approximately $6 million in interest payments until the Notes are due
in 2003.

Also on the Effective Date, the Company closed on a credit facility (the
"Credit Facility") with Foothill Capital Corporation. The Credit Facility
provides for loans up to $12.5 million in the form of several sub facilities
including a construction line of $5 million, an equipment financing line of $5
million, a revolving working capital line for up to $3.5 million, and a $1
million Silver Hawk line. At no point may the aggregate borrowings exceed $12.5
million. Borrowings under the Credit Facility are subject to a 1% financing fee
and accrue interest at prime plus 2.375%. The loans have varying terms, ranging
from three to five years from the date funds are borrowed. The Credit Facility
is secured by first liens on substantially all the Company's assets and are
senior, in terms of lien rights, to the Notes. As of June 30, 1996, the Company
had borrowed approximately $4.3 million under the Credit Facility primarily to
refinance existing equipment financing. In the third quarter, the Company
borrowed an additional $1.1 million under the equipment line to pay for Silver
Hawk Casino slot machines. Later in the third quarter, the Company borrowed $1
million under the Silver Hawk facility and repaid $1.3 million under the working
capital line, thus preserving the full $3.5 million available under the working
capital line.

In April 1996, the Company purchased the Silver Hawk Casino, which was not
operating at the time, for $2.7 million, of which $900,000 was borrowed under
the DIP Facility. The $1.8 million note payable to the seller accrued interest
at 9.5% per annum, and provided for monthly principal and interest payments on a
20 year amortization schedule. The seller of the Silver Hawk Casino is an
elected official of Black Hawk. A statute in Colorado prohibits an elected
official from having an "interest" in a gaming license. To avoid any potential
regulatory interpretation that the seller would have an "interest" in the Silver
Hawk Casino gaming license, thereby detrimentally affecting the Company's
ability to obtain the gaming license, the Company retired the seller's note from
available cash on June 18, 1996.

Certain other equipment financing, with a principal balance totaling $3.9
million, was retired prior to and on the Effective Date in accordance with the
Reorganization for $3.1 million (realizing an $800,000 discount) with proceeds
from the DIP Facility and Credit Facility. This equipment refinancing , the
Silver Hawk Casino down payment, accrued interest and certain borrowing
expenses, altogether totaling approximately $4.3 million, were replaced or
borrowed on the Effective Date from the Credit Facility.

The Company opened the Silver Hawk Casino on June 26, 1996. The Silver Hawk
Casino had been closed since 1993. Prior to opening, the Company refurbished the
interior, outfitted the Silver Hawk Casino with equipment (including slot
machines) and incurred certain other pre-opening expenses. As of June 30, the
vast majority of these costs, totaling approximately $2.0 million, were unpaid.
The Company paid for these costs in July by financing $1.1 million in slot
machines from funds available under the Credit Facility and paid the remaining
costs from available cash.

The excavation of the Company's surface parking lot in Black Hawk commenced
on April 1, 1996 and concluded on June 7, 1996. Upon completion of the extensive
excavation work, which included the excavation of a substantial portion of the
mountain located on the back part of the 3.25 acre site, and the subsequent
repaving of the surface parking lot, the surface parking lot was increased from
260 parking spaces to a capacity of approximately 375 cars, an approximately 45%
increase. The Company is analyzing whether to construct the parking garage given
the fact that it has achieved 75% of the desired parking capacity for only a
fraction of the total capital cost anticipated to be spent on the parking
garage. The Company is also considering the benefit of avoiding the
business disruption that would occur during the parking garage construction
project. The Company has concluded that it will indefinitely delay the
construction of the parking garage as it continues to re-evaluate the long-term
utilization of the site pending market conditions.

During the Reorganization, the Company incurred substantial bankruptcy
related expenses including the expenses of attorney's, accountants, and
financial advisors. The Company anticipates the total unpaid billings to such
professionals are approximately $2.9 million, reflected in accounts payable in
the accompanying balance sheet as of June 30, 1996. The Company made
substantially all of these payments in the third quarter from available cash.

Subsequent to the end of the second quarter, the Company entered into an
agreement with New Horizon Kids Quest III, Inc. ("Kids Quest"), a provider of
child care to the casino industry. The agreement provides for Kids Quest to
operate a licensed day care facility adjacent to Bullwhackers Black Hawk. Kids
Quest would be solely responsible for the day-to-day operations of the day care
facility. The Company would receive a percentage of revenues from the Kids Quest
operations. The Company will construct a day care facility for use by Kids
Quest. However, construction of the facility is subject to reaching agreement
with Kids Quest on certain issues and obtaining necessary permits and financing,
and no assurances can be given that the necessary agreements will be reached or
the necessary permits or financing obtained, or if reached or obtained, on
satisfactory terms. The preliminary cost estimate for the day care facility is
approximately $1.3 million, although the actual costs could be higher.

The Company estimates that the ongoing capital expenditures necessary to
keep its casinos competitive are approximately $2.5 million per year. As part of
this expenditure program, the Company has upgraded most of its slot machines by
installing bill validators or purchasing new slot machines with bill validators.
The Company anticipates paying for its capital expenditures from cash flow from
operations or loans under the Credit Facility.

The Company believes that the Credit Facility and its operating cash flows
will provide sufficient liquidity and capital resources for the Company's
operations. However, there is no assurance the Company's estimate of its need
for liquidity and capital resources is accurate or that new business
developments or other unforeseen events will not occur which will increase those
needs. Although no additional financings are contemplated at this time, the
Company may seek additional debt or equity financing if necessary. There can be
no assurance that additional financing will be available, or if available, will
be on terms favorable to the Company. Additionally, debt or equity financing may
require consent from the holders of the Notes and the lender under the Credit
Facility.

BUSINESS

GENERAL

The Company develops, owns and operates gaming and related entertainment
facilities. The Company owns and operates, through subsidiaries, Bullwhackers
Black Hawk and Bullwhackers Central City, two of the largest casinos in terms of
number of slot machines in the historic mining towns of Black Hawk and Central
City, Colorado, respectively. In addition, the Company owns and operates,
through a subsidiary, a third gaming facility, the Silver Hawk Casino, in Black
Hawk, which opened on June 26, 1996. In addition, through a subsidiary, the
Company owns the Surface Parking Lot with a capacity of approximately 375 cars,
which is located directly between, and used by, Bullwhackers Black Hawk and the
Silver Hawk Casino.

Colorado law currently permits limited stakes gaming (with a maximum single
bet of $5.00) in three historic mining towns: Black Hawk and Central City,
adjacent towns located approximately 35 miles from Denver, and Cripple Creek,
located approximately 40 miles from Colorado Springs and 90 miles from Denver.
Gaming operations also exist on two Native American reservations in Southwest
Colorado. Colorado law only permits casinos to offer slot machines and the table
games of blackjack and poker.

As a result of the financial difficulties of a riverboat gaming project
undertaken by a wholly-owned subsidiary of the Company in New Orleans, Louisiana
(the "Riverboat Project"), the Company, BWBH, BWCC and Millsite sought
protection under Chapter 11 of the United States Bankruptcy Code on November 7,
1995. The first Amended Joint Plan of Reorganization (the "Plan of
Reorganization") of the Company, BWBH, BWCC and Millsite was confirmed on April
8, 1996 and became effective on June 7, 1996 (the "Effective Date"). As a
result, among other things, the Company has significantly reduced its
consolidated debt and no longer has any interest in the Riverboat Project. See
"Legal Proceedings-Background of Bankruptcy; Plan of Reorganization."

THE COLORADO CASINOS

BULLWHACKERS BLACK HAWK. Bullwhackers Black Hawk opened on July 17, 1992
and is currently one of the largest gaming facilities, in terms of number of
slot machines, in Black Hawk. It is located on a prime site at the town's main
intersection of Colorado State Highway 119 (the primary access road to
Interstate 70, which leads to Denver) and Gregory Street (which connects Black
Hawk to Central City). Bullwhackers Black Hawk is housed in a 36,000 square foot
facility which contains approximately 12,000 square feet of gaming space on four
levels with the main entry on the second level. The casino currently has
approximately 600 slot machines, 8 black jack tables and 7 poker tables. The
facility has one bar on each level, a 176-seat full service restaurant and
office space. Bullwhackers Black Hawk utilizes a Victorian theme in its interior
design, featuring a winding grand staircase and a glass-enclosed elevator
connecting the various levels of the facility.

The Company recently entered into an agreement with Kids Quest under which
Kids Quest will operate a licensed day care facility adjacent to Bullwhackers
Black Hawk. Kids Quest would be solely responsible for the day-to-day operations
of the day care facility. The Company would receive a percentage of revenues
from the Kids Quest operation. The Company will construct a day care facility
for use by Kids Quest. However, construction of the facility is subject to
reaching agreement with Kids Quest on certain issues and obtaining necessary
permits and financing, and no assurances can be given that the necessary
agreements will be reached or the necessary permits or financing obtained, or,
if reached or obtained, on satisfactory terms. The preliminary cost estimate for
the day care facility is approximately $1.3 million, although the actual costs
could be higher. The Company believes the day care facility, if constructed and
opened, will give it a competitive advantage with other casinos that do not have
such a facility. The Company believes that no other casinos in the Black
Hawk-Central City market currently have, or have announced plans to build, a day
care facility.

BULLWHACKERS CENTRAL CITY. Bullwhackers Central City opened on June 15,
1992 and is currently one of the largest gaming facilities, in terms of number
of slot machines, in Central City. It is located on a prime site at one of the
town's two main intersections, and is adjacent to a public parking facility and
two of Central City's other large casinos. This 31,000 square foot facility
contains approximately 8,750 square feet of gaming space on three levels with
the main entry to the facility on the second level. Bullwhackers Central City
currently has approximately 400 slot machines and 4 black jack tables. The
facility has one bar on each level, a 126-seat full service restaurant, a retail
shop and office space. Bullwhackers Central City also utilizes a Victorian theme
in its interior design.

The Company believes that proximity to parking is extremely important to
Central City casinos. However, except for the largest casino in Central City,
none of the casinos currently operating in Central City offer onsite parking for
more than 50 cars immediately adjacent to their facilities. There are several
public parking lots in Central City offering parking for a total of
approximately 550 cars, including a 200-space public lot adjacent to
Bullwhackers Central City. To alleviate the difficulties associated with a lack
of adequate parking, the Company has recently implemented several busing
programs in conjunction with other Central City casino operators, which offer
cash promotions and other incentives designed to enhance incremental patron
play, particularly during off-peak periods.

THE SILVER HAWK CASINO. The Silver Hawk Casino is an approximately 12,000
square foot four-story building constructed in 1993, and was operated as a
casino by an unaffiliated third party for less than 90 days in 1993 before it
was closed. The Company purchased the Silver Hawk Casino facility on April 12,
1996. The Company completed minor interior remodeling, installed approximately
230 slot machines and 4 table games and reopened the facility on June 26, 1996.

The purchase price for the Silver Hawk land and building was $2.7 million,
of which $900,000 was paid in cash and the balance was financed by the seller
and payable pursuant to a promissory note secured by a first deed of trust on
the facility. The initial cash portion of the purchase price was financed
through borrowings under the DIP Facility, later refinanced through the Credit
Facility. The seller is an elected official of Black Hawk. A statute in Colorado
prohibits an elected official from having an interest in a gaming license. To
avoid any potential regulatory interpretation that the seller would have an
interest in the Silver Hawk Casino gaming license, thereby detrimentally
affecting the Company's ability to obtain the gaming license, the Company paid
in full the outstanding balance owing the seller with available cash on June 18,
1996.

SURFACE PARKING LOT. The Company owns the approximately 3.25-acre Surface
Parking Lot site located between Bullwhackers Black Hawk and the Silver Hawk
Casino. The Company believes that proximity to parking is extremely important in
Black Hawk. The Company believes that onsite parking is currently inadequate for
most Black Hawk casinos. Although the town has developed an approximately
3,000-space public parking facility which serves all of the Black Hawk casinos
by shuttle service, the location of, and access to, the municipal parking
facility are generally considered to be inadequate by most casino patrons. The
Company believes that the few gaming facilities that offer substantial parking
at or close to the facility generate higher revenues per gaming device than
gaming facilities that do not offer adequate parking. The Company believes that
the Surface Parking Lot gives Bullwhackers Black Hawk and the Silver Hawk Casino
a competitive advantage over casinos in Black Hawk that offer fewer parking
spaces or less convenient parking.

Because of the importance of convenient close-in parking to maximizing
casino revenue, in April 1994 the Company completed development of the Surface
Parking Lot site into a paved and lighted surface parking facility staffed for
valet service with 260 parking spaces. Subsequently, the Company announced plans
to construct in phases an approximately 500-space structured parking garage on
the Surface Parking Lot, for which it previously received the requisite local
zoning approvals. The parking garage was expected to cost approximately $6
million. In connection with the readying the surface parking lot for
construction, the Company completed environmental remediation and excavation
work, at a cost of approximately $1.3 million.

Upon completion of the extensive excavation work, which included the
excavation of a substantial portion of the mountain located on the back part of
the 3.25 acre site, and the subsequent repaving of the Surface Parking Lot, the
number of cars which can be parked on the Surface Parking Lot at any one time
increased to approximately 375 cars, a 45% increase. Thus, the Company analyzed
whether to construct the parking garage given the fact that it had achieved 75%
of the desired parking capacity for only a fraction of the total capital cost
anticipated to be spent on the parking garage. The Company also considered the
benefit of avoiding the attendant business disruption that would occur during
the parking garage construction project. The Company has concluded that it will
indefinitely delay the construction of the parking garage as it continues to
re-evaluate the long-term utilization of the site pending market conditions.

OTHER. Although the Company intends to focus on its existing operations, it
continues to evaluate new opportunities to apply existing management expertise
to additional gaming operations both in Colorado and in other jurisdictions. The
Company's ability to acquire additional gaming facilities in Colorado without
disposing of existing facilities is limited by the fact that no entity may hold
more than three Colorado gaming licenses or more than three gaming tavern liquor
licenses or more than one type of liquor license. The Company currently holds,
through its subsidiaries, the maximum number of gaming and liquor licenses
allowed in Colorado. See "Colorado Gaming Regulations" and "Non-Gaming
Regulation."

MARKET FOR THE COLORADO CASINOS

GENERAL. Black Hawk and Central City are historic mining towns made famous
during the gold rush of 1869. Prior to the advent of casino gaming in October
1991, Black Hawk, and to a greater extent, Central City, were popular tourist
towns, especially in the summer months. The two towns offered mine tours,
antique and rock shops and live performances of opera in the Central City Opera
House. Casino gaming is currently the main draw to the towns and gaming
establishments have displaced many of the former tourist-related businesses.

Customers for casinos in Black Hawk and Central City are primarily "day
trippers" from within a 100-mile radius of Black Hawk and Central City, which
includes the Denver metropolitan area. Approximately 1.6 million people live in
the Denver metropolitan area, and approximately two million people live within a
50-mile radius, and approximately 2.8 million people live within a 100-mile
radius, of Black Hawk and Central City. Black Hawk and Central City are located
approximately 35 miles west of Denver and approximately ten miles from
Interstate 70, the main east-west artery connecting Denver with many of
Colorado's premier ski resorts.

MARKETING STRATEGY. The Company targets customers in the Denver
metropolitan area. The Company seeks to attract customers to the Colorado
Casinos by: (i) offering first class facilities with comfortable and efficient
layouts; (ii) providing ample parking which is more convenient than that
provided by many of its competitors; (iii) promoting customer awareness through
marketing of the Bullwhackers name and theme; (iv) providing excellent customer
service with a motivated staff; (v) utilizing strategic busing programs; (vi)
offering customer promotions; (vii) providing desirable food products and
refreshments; and (viii) providing incentives to higher value repeat customers.

In particular, the Company has used extensive marketing programs to build
customer awareness, including television, radio, print and direct mail. The
Company believes that Bullwhackers enjoys among the highest name recognition
among all casinos located in Colorado, a fact which the Company attributes in
part to the success of its marketing campaigns. The Company has also developed
promotional offerings centered around the Bullwhackers theme of offering a fun,
exciting gaming atmosphere, including providing gift items and a cash-back
reward system based upon level of play through membership in the "Bullwhackers
Five Star Players Club". The Company also has instituted a popular busing
program known as the "Bullride." The Bullride operates at least four times per
day from Golden, a western Denver suburb, to and from Black Hawk and Central
City, and between the two towns, and carries an average of 2,500 patrons per
week.

The Company has upgraded most of its slot machines at the Colorado Casinos
by equipping them with bill validators, either by retrofitting existing slot
machines or replacing them with new slot machines with bill validators, as part
of its capital expenditure program pursuant to which it expects to spend
approximately $1.5 million per year. Bill validators allow patrons to use paper
currency rather than tokens or coins in slot machines. This capital expenditure
program is expected to increase the competitiveness of the Colorado Casinos
within their markets by increasing the convenience and therefore the usage of
the slot machines. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources."

COMPETITION

Competition in the Black Hawk and Central City gaming market, which forms
the primary gaming market in Colorado, is intense. Bullwhackers Central City is
located approximately one and one-half miles from Bullwhackers Black Hawk and
the Silver Hawk Casino is located adjacent to the Surface Parking Lot, across
the Surface Parking Lot from Bullwhackers Black Hawk. Due to their proximity,
the Colorado Casinos compete for some of the same target markets of customers in
the Denver metropolitan area. However, the Company believes that its primary
competition for the Colorado Casinos are other casinos operating in Black Hawk
and Central City, of which there approximately 33 as of August 31, 1996, and,
secondarily, casinos operating in Cripple Creek, of which there approximately 26
as of August 31, 1996. Recently, more experienced, nationally recognized casino
operators from other areas of the country have entered, or announced plans to
enter, the Colorado gaming market, including Harrah's, Harvey's, ITT Sheraton,
Colorado Central Station, and Fitzgerald's, many of which have substantially
greater financial and marketing resources than the Company. Because Colorado
does not limit the total number of gaming licenses available for issuance in
Colorado and there are no minimum facility size requirements, the Company
expects the number of gaming facilities and gaming devices to continue
increasing.

The Company believes that the primary competitive factors in the Black
Hawk-Central City market are location, availability and convenience of parking,
number of slot machines and gaming tables, types and pricing of amenities, name
recognition, and overall atmosphere. The Company believes it generally competes
favorably on these factors, although Bullwhackers Central City offers less
convenient parking than some of its competitors and the Silver Hawk Casino,
recently opened, is smaller and currently has less name recognition than some of
its direct competitors.

According to the Colorado Division of Gaming, there were 59 gaming
facilities operating in Colorado in August 1996, with a total of 13,408 slot
machines and 253 table games. Of these, 20 facilities, 5,185 slot machines and
111 table games were located in Black Hawk; 13 facilities, 3,445 slot machines
and 66 table games were located in Central City; and 26 facilities, 4,778 slot
machines and 76 table games were located in Cripple Creek. In August 1996, the
average daily adjusted gross proceeds (determined by deducting the amount paid
out to patrons from gross proceeds, and sometimes referred to as the casino's
"win") per slot machine was $119.78 in Black Hawk, $73.40 in Central City and
$69.84 in Cripple Creek. The cumulative win for slot machines in Black Hawk as a
market was $181 million in 1995 and $119 million for the first seven months of
1996, compared with the cumulative win for slot machines in Central City as a
market of $86 million and $49 million, respectively.

Various published reports detailing additional gaming projects have been
announced for Black Hawk. The announced projects include: Colorado Central
Station, an existing casino in Black Hawk, has announced both an expansion of
its existing casino and a new 22,000 square foot casino across the street from
its existing casino with 600 slot machines, a 120-room hotel and an 800-space
parking garage; Caesar's of Las Vegas, a subsidiary of ITT Sheraton, has
announced plans to build an approximately $80 million project with 600 - 700
slot machines, and 800 parking spaces; the Black Hawk Brewery has shown drawings
of a $23 million project, with 46,000 square feet of gaming space containing
500-700 slot machines; the Gilpin Hotel has announced a joint venture with
Jacobs Entertainment from Cleveland for a new 35,000 square foot casino with 52
hotel rooms, 250 parking spaces and 750-1,000 slot machines; the Jazz Alley has
announced an expansion to roughly 650 slot machines in a highly themed casino to
be known as Virginia City. In Central City, Harvey's Wagon Wheel, currently the
largest casino in Central City, has announced plans to build a new parking
garage. The majority of the Black Hawk projects are along the southern end of
Black Hawk at the first major intersection off of State Highway 119, providing
these projects with the initial opportunity to capture visitors to Black Hawk
and Central City from the Denver metropolitan area. Bullwhackers Black Hawk and
the Silver Hawk Casino, in contrast, are located at the northern end of Black
Hawk at the second major intersection off State Highway 119. In addition, the
Colorado Department of Transportation is analyzing plans to potentially
construct a third major intersection off State Highway 119 in between the two
current intersections. This additional intersection, if constructed, would
provide the casinos south of Bullwhackers Black Hawk and the Silver Hawk Casino
with another opportunity to capture visitors to Black Hawk from the Denver
metropolitan area before they reach Bullwhackers Black Hawk and the Silver Hawk
Casino, thereby potentially reducing traffic flow and customer visitors to
Bullwhackers Black Hawk and the Silver Hawk Casino, as well as to casinos in
Central City, including Bullwhackers Central City.

While it is difficult to assess the development stage of each of the
announced projects and the likelihood of whether any or all of the announced
projects will eventually be built and at what size, it is reasonably likely that
at least some of the new competition may be completed and open to the public by
early to mid-1998. In addition, as the Town of Black Hawk expands, both in terms
of gaming device capacity and market share, the Central City market tends to
contract. Therefore, should several of the announced competitive projects open,
the increased competition may adversely affect the Company's operations in both
Black Hawk and Central City and, accordingly, may have a material adverse effect
on the Company's consolidated results of operations and financial position.

Several lobbying groups placed initiatives for additional Colorado limited
stakes gaming venues, including Denver, on the November 1992 statewide ballot.
Each of these initiatives was defeated by a wide margin, however, in November
1996 there will be an initiative on the statewide ballot to expand limited
stakes gaming to the city of Trinidad, approximately 125 miles south of Colorado
Springs, and similar initiatives, legislation or regulation could be introduced
in the future. The enactment of any initiatives, legislation, or regulations
legalizing gaming elsewhere in Colorado could, and if such legalized gaming was
closer to Denver would, have a material adverse effect on the Company's
consolidated results of operations or financial position.

In addition to competing with other gaming facilities in Colorado as
described above, the Company competes to a lesser degree, for both customers and
potential future gaming sites, with gaming facilities nationwide, including
casinos in Nevada and Atlantic City, many of which have substantially greater
financial resources and experience in the gaming business. The Company also
competes with other forms of gaming on both a local and national level,
including state-sponsored lotteries, charitable gaming and pari-mutuel wagering,
among others, and competes for entertainment dollars generally with other forms
of entertainment. The recent and continuing expansion of legalized casino gaming
to new jurisdictions throughout the United States may also affect competitive
conditions. Although the Company's focus is the Colorado gaming market, it is
considering gaming ventures in other locations that the Company believes present
favorable opportunities if its resources allow it to do so. However, its ability
to capitalize on such opportunities is expected to be limited due to competition
for such opportunities from more experienced and financially stronger entities.

COLORADO GAMING REGULATIONS

The State of Colorado created the Colorado Division of Gaming within the
Department of Revenue to license, implement, regulate and supervise the conduct
of limited stakes gaming. The Director of the Division, under the supervision of
the Gaming Commission, has been granted broad power to ensure compliance with
Colorado law and regulations adopted thereunder (collectively, the "Colorado
Regulations"). The Director of the Division may inspect, without notice,
premises where gaming is being conducted; may seize, impound or remove any
gaming device; may examine and copy all of a licensee's records; may investigate
the background and conduct of licensees and their employees; and may bring
disciplinary actions against licensees and their employees. He may also conduct
detailed background checks of persons who loan money to or invest money in a
licensee.

It is illegal to operate a gaming facility without a license issued by the
Gaming Commission. The Gaming Commission is empowered to issue five types of
gaming and gaming-related-licenses. The licenses are revocable and non-
transferrable. The failure or inability of the Company, BWBW, BWCC, Silver Hawk,
or associated persons to maintain necessary gaming licenses will have a material
adverse effect on the operations of the Company.

The Gaming Commission closely regulates the suitability of persons owning
or seeking to renew an interest in a gaming license or permit, and the
suitability of a licensee or permittee can be adversely affected by persons
associated with the licensee or permittee. Additionally, any person or entity
having any direct interest in the Company or any casino directly or indirectly
owned by the Company may be subject to administrative action, including personal
history and background investigations. The actions of persons associated with
the Company and its management employees, over whom the Company may have no
control, could jeopardize any licenses held by the Company in Colorado.

Bullwhackers Black Hawk, Bullwhackers Central City and the Silver Hawk
Casino were granted retailer/operator licenses concurrently with their
respective openings. These licenses are subject to continued satisfaction of
suitability requirements. The current licenses for the Bullwhackers Casinos
expire on December 2, 1996 and the license for the Silver Hawk expires on June
24, 1997. There can be no assurance that the Company will successfully renew its
licenses in a timely manner or at all.

All persons employed by the Company who are involved, directly or
indirectly, in gaming operations in Colorado also are required to obtain a "key"
license. Key licenses are issued to "key employees," which include any
executive, employee or agent of a licensee having the power to exercise a
significant influence over decisions concerning any part of the operations of a
licensee. At least one key license holder must be on the premises of each
Colorado Casino at all times. Messrs. Szapor, Mayer and Rabin, among others,
hold key licenses for the Company. All of the Company's directors are required
to obtain key licenses before serving as such. In addition to Mr. Szapor,
Messrs. Wimer, DiBerardino and Leonard have obtained their key licenses and the
Company's other director nominee has applied for his key license. There is no
assurance that such director nominee will meet applicable licensing criteria, or
as to when, if at all, such license will be will be issued. Accordingly, the
Company is operating with an interim board of directors consisting of Messrs.
Szapor, Wimer, DiBerardino, Leonard and Mayer until such time as the remaining
director nominee is able to obtain his key license. See "Management-Directors
and Executive Officers."

As a general rule, under the Colorado Regulations, it is a criminal
violation for any person to have a legal, beneficial, voting or equitable
interest, or right to receive profits, in more than three retail/operator gaming
licenses in Colorado. The Company currently has three such licenses, one each
for Bullwhackers Black Hawk, Bullwhackers Central City and the Silver Hawk
Casino. Accordingly, any expansion opportunities that the Company may have in
Colorado are limited absent the disposition of one of the Colorado Casinos. In
addition, this limitation may affect the ability of
certain persons to own the Company's stock. Under the Colorado Regulations, the
definition of an "interest" in a licensee excludes ownership of less than 5% of
a publicly traded company. Pursuant to the Colorado Regulations, a licensee
that elects to register its common stock under Section 12(g) of the Exchange Act
is considered to be publicly traded. The Company registered its common stock
effective on the Effective Date and, accordingly, is treated as a publicly
traded company within the meaning of the Colorado Regulations. Any owner of any
interest in a Colorado licensee that is not publicly traded or a 5% or more
interest in a publicly traded licensee may be precluded from owning more than 5%
of the Company's stock.

The Gaming Commission has ruled that a person does not have an interest in
a licensee for purposes of the multiple-license prohibition if: (i) such person
has less than a five percent (5%) interest in an institutional investor which
has an interest in a publicly traded licensee or publicly traded company
affiliated with a licensee (such as the Company); (ii) a person has a five
percent (5%) or more financial interest in an institutional investor, but the
institutional investor has less than a five percent (5%) interest in a publicly
traded licensee or publicly traded company affiliated with a licensee; (iii) an
institutional investor has less than a five percent (5%) financial interest in a
publicly traded licensee or publicly traded company affiliated with a licensee;
(iv) an institutional investor possesses securities in a fiduciary capacity for
another person, and does not exercise voting control over five (5%) or more of
the outstanding voting securities of a publicly traded licensee or of a publicly
traded company affiliated with a licensee; (v) a registered broker or dealer
retains possession of securities of a publicly traded licensee or of a publicly
traded company affiliated with a licensee for its customers in street name or
otherwise, and exercises voting rights for less than five percent (5%) of the
publicly traded licensee's voting securities or of a publicly traded company
affiliated with a licensee; (vi) a registered broker or dealer acts as a market
maker for the stock of a publicly traded licensee or of a publicly traded
company affiliated with a licensee and possesses a voting interest in less than
five percent (5%) of the stock of the publicly traded licensee or of a publicly
traded company affiliated with a licensee; (vii) an underwriter is holding
securities of a publicly traded licensee or of a publicly traded company
affiliated with a licensee as part of an underwriting for no more than 90 days
if it exercises voting rights of less than five percent (5%) of the outstanding
securities of a publicly traded licensee or of a publicly traded company
affiliated with a licensee; (viii) a stock clearinghouse holds voting securities
for third parties, if it exercises voting rights with respect to less than five
percent (5%) of the outstanding securities of a publicly traded licensee or of a
publicly traded company affiliated with a licensee; or (ix) a person owns less
than five percent (5%) of the voting securities of the publicly traded licensee
or publicly traded company affiliated with a licensee. Hence, the Company's and
its stockholders' business opportunities in Colorado are limited to such
interests that comply with the statute and Gaming Commission's rule.

Under the Colorado Regulations, any person or entity having any direct or
indirect interest in a gaming licensee or an applicant for a gaming license,
including but not limited to the Company and stockholders of the Company, may be
required to supply the Gaming Commission with substantial information, including
but not limited to, personal background and financial information, source of
funding information, a sworn statement that such person or entity is not holding
his interest for any other party, and fingerprints. Such information,
investigation and licensing as an "associated person" is automatically required
of all persons who directly or indirectly own 10% or more of a direct or
indirect legal, beneficial or voting interest in the Colorado Casinos, through
their ownership of the Company, as a publicly traded licensee. Such persons
(other than certain institutional investors discussed below) must report their
interest and apply to the Gaming Commission for a finding of suitability within
45 days after acquiring such interest. Persons directly or indirectly having an
interest of between 5% and 9.99% in a publicly held licensee must report their
interest to the Gaming Commission within ten days after acquiring their interest
and may be required to provide additional information and may be required to be
found suitable by the Gaming Commission. If certain kinds of institutional
investors provide specified information to the Gaming Commission, such
investors, at the Gaming Commission's discretion, may be permitted to own up to
14.99% of the Colorado Casinos, through their ownership of the Company, before a
finding of suitability will be required. The Gaming Commission also has the
right to request information from any person, directly or indirectly interested
in or employed by a licensee. An application for licensure or a finding of
suitability may be denied for any reason deemed reasonable by the Gaming
Commission or the Director of the Division. All licensing and investigation fees
must be paid by the person in question. The associated person investigation fee
currently is $48 per hour.

If the Gaming Commission determines that a person or entity is not suitable
to own a direct or indirect voting interest in the Company, the Company may be
sanctioned unless the person or entity disposes of its voting interest.
Sanctions may include the loss by any of the Colorado Casinos of their licenses.
In addition, the Colorado Regulations prohibit a licensee or any affiliate of a
licensee from paying dividends, interest or other remuneration to any person
found to be unsuitable, or recognizing the exercise of any voting rights by any
person found to be unsuitable. The Colorado Regulations require an operating
casino licensee to include in its corporate charter provisions which permit the
repurchase of the voting interests of any person found to be unsuitable. The
Company's Certificate of Incorporation includes the
required provisions. See "Description of Capital Stock- Description of Common
Stock."

The Gaming Commission has the power to require the Company to suspend or
dismiss officers, directors and other key employees or sever relationships with
other persons who refuse to file appropriate applications or who are found to be
unsuitable to act in such capacities, and may have such power with respect to
any entity which is required to be found suitable under the Colorado
Regulations.

A person or entity may not sell, lease, purchase, convey, acquire or pledge
an interest in an entity licensed to conduct limited stakes gaming in Colorado
without the prior approval of the Gaming Commission, except for a less than 5%
interest in a publicly traded corporation.

The Gaming Commission also has the right to request information from any
person directly or indirectly interested in, or employed by, a licensee, and to
investigate the moral character, honesty, integrity, prior activities, criminal
record, reputation, habits and associations of (i) all persons licensed pursuant
to the Colorado Limited Gaming Act, (ii) all officers, directors and
stockholders of a licensed privately held corporation, (iii) all officers,
directors and stockholders holding either a five percent (5%) or greater
interest or a controlling interests in a licensed publicly traded corporation,
(iv) all general partners and all limited partners of a licensed partnership,
(v) all persons which have a relationship similar to that of an officer,
director or stockholder of a corporation (such as members and managers of a
limited liability company), (vi) all persons supplying financing or loaning
money to any licensee (such as the holders of the Notes) connected with the
establishment or operation of limited gaming, and (vii) all persons having a
contract, lease or ongoing financial or business arrangement with any licensee,
where such contract, lease or arrangement relates to limited gaming operations,
equipment, devices or premises.

In addition, under the Colorado Regulations, every person who is a party to
a "gaming contract" with an applicant for a license, or with a licensee, upon
the request of the Gaming Commission or the Director, promptly must provide to
the Gaming Commission or Director all information which may be requested
concerning financial history, financial holdings, real and personal property
ownership, interests in other companies, criminal history, personal history and
associations, character, reputation in the community, and all other information
which might be relevant to a determination whether a person would be suitable to
be licensed by the Gaming Commission. Failure to provide all information
requested constitutes sufficient grounds for the Director or the Gaming
Commission to require a licensee or applicant to terminate its "gaming contract"
(as defined below) with any person who failed to provide the information
requested. In addition, the Director or the Gaming Commission may require
changes in "gaming contracts" before an application is approved or participation
in the contract is allowed. A "gaming contract" is defined as an agreement in
which a person does business with or on the premises of a licensed entity.
Holders of the Notes will be considered parties to a gaming contract and subject
to potential review by the Gaming Commission or the Director.

An application for licensure or suitability may be denied for any cause
deemed reasonable by the Gaming Commission or the Director, as appropriate.
Specifically, the Gaming Commission and the Director must deny a license to any
applicant who (i) fails to prove by clear and convincing evidence that the
applicant is qualified; (ii) fails to provide information and documentation
requested; (iii) fails to reveal any fact material to qualification, or supplies
information which is untrue or misleading as to a material fact pertaining to
qualification; (iv) has been, or has any director, officer, general partner,
stockholder, limited partner or other person who has a financial or equity
interest in the applicant who has been, convicted of certain crimes, including
the service of a sentence upon conviction of a felony in a correctional
facility, city or county jail, or community correctional facility or under the
state board of parole or any probation department within ten years prior to the
date of the application, gambling-related offenses, theft by deception or crimes
involving fraud or misrepresentation, is under current prosecution for such
crimes (during the pendency of which license determination may be deferred), is
a career offender or a member of associate of a career offender cartel, or is a
professional gambler; or (v) has refused to cooperate with any state or federal
body investigating organized crime, official corruption or gaming offenses.

If the Gaming Commission determines that a person or entity is unsuitable
to own interests in the Company, then the Company, and/or any of the Colorado
Casinos may be sanctioned, which may include the loss by the Company, and/or any
of the Colorado Casinos of their respective approvals and licenses.

The Gaming Commission does not require advance approval of a public
offering of securities, but rather requires a filing of notice and additional
documents with regard to such public offering prior to such public offering.
Under the regulations, the Gaming Commission may, in its discretion, require
additional information and prior approval of such public offering. The Company
may not sell any interest in any of the Colorado Casinos without the prior
approval of the Gaming Commission.

In addition to its authority to deny an application for a license or
suitability, the Colorado Commission has jurisdiction to disapprove a change in
corporate position of a licensee and may have such authority with respect to any
entity which is required to be found suitable by the Gaming Commission. The
Gaming Commission has the power to require the Company and the Colorado Casinos
to suspend or dismiss managers, officers, directors and other key employees or
sever relationships with other persons who refuse to file appropriate
applications or whom the authorities find unsuitable to act in such capacities,
and may have such power with respect to any entity which is required to be found
suitable.

The Colorado Casinos may operate only between 8:00 a.m. and 2:00 a.m., and
may permit only individuals 21 years or older to gamble in the casino. Slot
machines, black jack and poker are the only permitted games, with a maximum
single bet of $5.00. The Colorado Casinos may not provide credit to gaming
patrons. The Colorado Regulations restrict the percentage of space a casino may
use for gaming to 50% of any floor and 35% of the overall square footage of the
building in which the casino is located. Effective October 1 of each year,
Colorado establishes the gross gaming revenue tax rate for the ensuing twelve
months. Under the Colorado Constitution, the rate can be increased to as much as
40%. Colorado has both raised and lowered gaming tax rates since they were
initially set in 1991. Currently, the maximum gaming tax rate is 20%. These
regulations and taxes adversely affect the Colorado Casinos' ability to generate
revenues and operating profits. See "- Non-Gaming Regulation - Taxation."

The Company believes that it is presently in material compliance with all
applicable gaming rules and regulations.

NON-GAMING REGULATION

LIQUOR REGULATION. The sale of alcoholic beverages is subject to licensing,
control and regulation by certain Colorado state and local agencies (the "Liquor
Agencies"). Subject to certain exceptions, all persons who directly or
indirectly own 5% or more of the Company must file applications with and are
subject to investigation by the Liquor Agencies. The Liquor Agencies also may
investigate persons who, directly or indirectly, loan money to liquor licensees.
All liquor licenses are renewable, are revocable and are not transferable. The
Liquor Agencies have broad powers to limit, condition, suspend or revoke any
liquor license. Any such disciplinary action could, and any failure to renew or
other revocation of any of its liquor licenses would, have a material adverse
effect upon the operations of the Company and the Colorado Casinos.

Under Colorado law, it is a criminal violation for any person or entity to
own a direct or indirect interest in more than one type of alcoholic beverage
license or more than three gaming tavern liquor licenses. Each Colorado Casino
has a gaming tavern liquor license. Accordingly, the Company's expansion
opportunities in Colorado are limited by such licensing restriction.
Furthermore, no person that holds an interest in the Company may hold any direct
or indirect legal, equitable or voting interest in any other Colorado alcoholic
beverage licensee, and vice versa.

TAXATION. Gaming operators in Colorado are subject to state and local taxes
and fees in addition to ordinary federal and state income taxes. Black Hawk and
Central City have imposed annual license fees, currently $750 and $1,265,
respectively, for each gaming device installed in a casino. Colorado currently
levies an annual device fee of $75 for each gaming device installed in a casino.
In addition, Colorado has recently promulgated a revised annual gross gaming
revenue tax (gross gaming revenue being generally defined as the total amount
wagered less the total amount paid out in prizes) of 2% of the gross gaming
revenue up to and including $2 million, 4% of the gross gaming revenue above $2
million up to and including $4 million, 14% of gross gaming revenue above $4
million up to and including $5 million, 18% of gross gaming revenue above $5
million up to and including $10 million, and 20% of gross gaming revenue in
excess of $10 million. The increase in the top tax rate is expected to have a
greater effect on the Company than the tax decrease in the lower revenue
brackets. Accordingly, the Company expects to pay between $300,000-$400,000 in
additional gaming taxes as direct result of the change in tax rates. See "Risk
Factors - Taxation." Under the Colorado Constitution, the Commission could
increase the top rate to as much as 40%. Pursuant to a more recent tax
limitation amendment to the Colorado Constitution, however, neither the state
nor any local government may increase a tax rate without an affirmative vote of
the people; therefore, there is some question as to whether the Gaming
Commission could constitutionally increase the state tax levied on gross gaming
revenues without such a vote.

EMPLOYEES

The Company employs approximately 635 persons, including cashiers, dealers,
food and beverage service, facilities maintenance, accounting, marketing and
human resources personnel. Several of the Company's employees hold key licenses
in Colorado. See "-Colorado Gaming Regulations." No labor unions currently
represent any employees of the Company. A standard package of employee benefits
is provided to full-time employees. The Company believes that its employee
relations are satisfactory.

PROPERTIES

The Company owns, through wholly owned subsidiaries, the Colorado Casinos
and the Surface Parking Lot including, with the exception of Bullwhackers Black
Hawk, the land underlying the buildings. Under a current city ordinance which
imposes a fee on parking facilities which are not "on-site" to a casino, the
Company previously was required to pay the Town of Black Hawk $4 per day for
each space in the Surface Parking Lot. However, the Surface Parking Lot is
on-site to the Silver Hawk Casino, and the Company is no longer required to pay
such fee.

The Company leases the land underlying Bullwhackers Black Hawk pursuant to
a 23-year ground lease expiring in 2014. The terms of the ground lease require
base minimum payments for the calendar year 1996 of $150,000 per quarter. The
base minimum quarterly payments increase thereafter for each five-year period
for the balance of the lease term, up to a maximum of $195,000 per quarter.
Additional rent in the amount of 1.9% of Bullwhackers Black Hawk's adjusted
gross revenue is payable monthly in arrears throughout the term of the lease.
The lease contains a buy-out provision which allows the Company to buy the land
subject to the lease on or after November 1, 2001 at a price equal to nine times
the annual base minimum rent payments in effect when the buy-out is exercised.
See "Business-The Colorado Casinos."

In January 1996, the Company entered into an amended sublease for
approximately 19,500 square feet of office space located in Denver, Colorado
which the Company occupies as its corporate offices. The sublease expires in
October 31, 1997 and provides for rent of approximately $7,500 per month.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Set forth below is certain information with respect to each individual who
is a director of the Company or is nominated to be a director of the Company and
each individual who is an executive officer of the Company:

Name Age Position(s)

Stephen J. Szapor, Jr. 36 Chief Executive Officer,
President and Director

Alan L. Mayer 35 Senior Vice President,
Chief Legal Officer and
Secretary

Richard J. Rabin 50 Senior Vice President of
Operations

Robert Stephens 29 Vice President of Finance

Franklin S. Wimer 60 Director

Steve Leonard 42 Director

Philip J. DiBerardino 54 Director

Mark Van Hartesvelt 45 Director Nominee

Mr. Mayer is serving as an interim director until Mr. Van Hartesvelt
obtains his Colorado key gaming license.

STEPHEN J. SZAPOR, JR. has served as President and Chief Executive Officer
of the Company since August 1995 and as a director since June 7, 1996, the
Effective Date. Mr. Szapor served as Executive Vice President and Chief
Financial Officer from March 1995 until August 1995. From July 1994 until
joining the Company, he served as the Chief Operating Officer and a member of
the board of directors of Sahara Gaming Corporation, and from June 1993 until
July 1994, he was the Executive Vice President/Chief Financial Officer of Sahara
Gaming Corporation. From October 1986 until June 1993, Mr. Szapor held several
executive positions with Hollywood Casino Corporation including Assistant to the
President and Vice President--Strategic Planning. Mr. Szapor has also held
financial and accounting positions with Merrill Lynch & Co. and Arthur Andersen
LLP. He holds a key license from the Gaming Commission and is a Certified Public
Accountant. Mr. Szapor's employment agreement with the Company provides that he
shall serve as President and Chief Executive Officer and as a director during
the term of his employment. See "-Employment and Consulting Agreements."

ALAN L. MAYER has served as Senior Vice President, Secretary and Chief
Legal Officer of the Company and its predecessors since September 1992 and as an
interim director since the Effective Date. From 1987 to 1992, Mr. Mayer was
associated with Isaacson, Rosenbaum, Woods & Levy in Denver, where he
specialized in real estate, land use planning, finance, corporate and gaming
law. Mr. Mayer is a member of the American Bar Association, the Colorado Bar
Association, the California Bar Association and the International Association of
Gaming Attorneys. He is licensed to practice law in California and Colorado. He
holds a key license from the Gaming Commission and is a member of the Board of
Directors of the Casino Owners Association of Colorado. See "-Employment and
Consulting Agreements."

RICHARD RABIN has served as Senior Vice President of Operations of the
Company since March 1996 and as an interim director since the Effective Date.
Mr. Rabin served as Vice President, Finance & Administration of the Company from
August 1995 until March 1996. From 1994 until joining the Company, he served as
Chief Financial Officer of a riverboat gaming facility operated by Sahara Gaming
Corporation in Missouri and then as General Manager of a gaming facility
operated by Sahara Gaming Corporation in Nevada. From 1991 to 1994, Mr. Rabin
was Chief Financial Officer and Vice President and, beginning in 1993, also
General Manager, of the Glory Hole Saloon and Gambling Hall in Central City,
Colorado. From 1985 until 1991, Mr. Rabin served in various positions in the
gaming industry in Reno, Nevada. Mr. Rabin holds a key license from the Gaming
Commission and is a Certified Public Accountant. See "-Employment and Consulting
Agreements."

ROBERT J. STEPHENS has served as Vice President of Finance since September
1996. He served as Controller, Chief Accounting Officer and Treasurer of the
Company from August 1995 until September 1996. Previously, Mr. Stephens served
in various finance and accounting positions since joining the Company in May
1994. From 1990 to 1994 Mr. Stephens was associated with Arthur Andersen LLP.
Mr. Stephens is a Certified Public Accountant.

FRANKLIN S. WIMER has served as a director of the Company since July 16,
1996. Mr. Wimer is a founder of and has been the President of UniRock Management
Corporation, a Denver, Colorado investment banking firm, since January 1988.
Prior to forming UniRock Management Corporation, Mr. Wimer held executive
positions with a number of financial institutions.

STEVE LEONARD has served as a director of the Company since October 4,
1996. Mr. Leonard has been President of Pacifica Holding Company, a Denver-based
commercial real estate firm since 1990. Prior to establishing Pacifica Holding
Company in 1990, Mr. Leonard held various executive positions in the real estate
and real estate development industry.

PHILIP J. DIBERARDINO has served as a director of the Company since October
9, 1996. Mr. DiBerardino has been Senior Vice President of Commerce Bank in New
Jersey since September 1993. From October 1990 to September 1993, Mr.
DiBerardino was President and Chairman of Coastal Bank in New Jersey. Prior to
October 1990, he served as Deputy Commissioner of the New Jersey Department of
Banking. Prior to his service at the New Jersey Department of Banking, Mr.
DiBerardino held various executive positions in the banking industry.

MARK VAN HARTESVELT will become a director of the Company upon approval of
the Gaming Commission. Mr. Van Hartesvelt has been President of the Village at
Breckenridge Resort, a Breckenridge, Colorado resort, since 1994. From 1989 to
1994 he was Senior Vice President Sales and Marketing of Doubletree Hotels
Corporation. Prior to 1989, Mr. Van Hartesvelt served in a number of senior
executive positions in the gaming industry.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE. The following table provides information
concerning compensation paid to the Company's chief executive officer, the three
other executive officers serving as such at year-end 1995 who earned at least
$100,000 during such year, and two executive officers who would have been among
the most highly compensated had they been employed at year end, for services
rendered by such persons in all positions with the Company.

<TABLE>
<CAPTION>
Annual Compensation Long-Term
Compensation
Awards Payouts
Other Shares
Name and Principal Annual Underlying LTIP
Positions Year Salary Bonus Compensation Options/SARs Payouts
----------- ---- ------ ----- ------------ ------------ -------

<S> <C> <C> <C> <C> <C> <C>
Stephen J. Szapor, Jr. 1995 $ 211,728 $ 5,000 $ 0 0 $ 0
President and Chief 1994 N/A N/A N/A N/A N/A
Executive Officer 1993 N/A N/A N/A N/A N/A
since August 10, 1995,
Chief Financial Officer
from March, 1995 to
August 10, 1995

Alan L. Mayer
Senior Vice President, 1995 111,926 15,000 2,798 0 0
Chief Legal Officer 1994 106,384 30,000 2,144 40,000* 0
and Secretary since 1993 N/A N/A N/A N/A N/A
September 1992

Christopher B. Hemmeter 1995 351,182 100,000 0 0 0
Chief Executive Officer 1994 336,709 100,000 0 0 0
December 15, 1993 1993 0 0 0 0 0
to August 10, 1995,
Vice President
August 10, 1995 to
June 7, 1996

Mark M. Hemmeter 1995 194,223 0 0 0 0
President December 15, 1994 126,977 37,500 0 0 0
1993 to March 27, 1995, 1993 57,962 0 0 0 0
Executive Vice President .
March 27, 1995 to
August 1, 1995, Vice
President August 1, 1995
to June 7, 1996
.
Kevin G. DeSanctis 1995 522,688 0 0 0 0
Executive Vice 1994 572,110 0 0 120,000* 60,000
President, Chief 1993 N/A N/A N/A N/A N/A
Operating Officer from
April 8, 1994 to
March 27, 1995
President and Chief
Operating Officer from
March 27, 1995 to
August 10, 1995

Thomas Robinson 1995 172,706 0 2,415 144,000* 0
Executive Vice President, 1994 240,569 100,000 0 0 0
Development to July 1993 N/A N/A N/A N/A N/A
1995
</TABLE>

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

*Cancelled in connection with the Reorganization.

COMPENSATION OF DIRECTORS

Directors who are officers or employees of the Company receive no
compensation for service as members of the Board. The Company compensates
directors who are not officers or employees of the Company for their services by
paying such directors annual retainers of $20,000, paid quarterly, and by
allowing such non-employee directors to participate in the Company's
non-employee director component of the Company's Management Incentive and
Non-Employee Director Stock Plan (the "Stock Plan"). Under the Stock Plan, each
non-employee director receives an award of 2,315 restricted shares of Common
Stock on the date such a director qualifies as a director and thereafter upon
reelection, subject to the maximum number of shares of Common Stock that may be
issued to non-employee directors under the Stock Plan. See "- Management
Incentive and Non- Employee Director Stock Plan."

EMPLOYMENT AND CONSULTING AGREEMENTS

On the Effective Date, the Company entered into the following employment
and consulting agreements:

Stephen J. Szapor, Jr. The Company's employment agreement with Stephen J.
Szapor, Jr., provides that Mr. Szapor will serve as president, chief executive
officer and as a director of the Company. Pursuant to this agreement, Mr. Szapor
earns an initial annual salary of $300,000, subject to increases based on
cost-of-living adjustments and other mutually agreed factors. As additional
compensation, on the Effective Date Mr. Szapor received a bonus of $100,000 and
138,888 shares of Common Stock representing 2.5% of the capital stock of the
Company (determined on a fully diluted basis), and will be entitled to
participate in Stock Plan. In addition, he is entitled to 30% of the bonus
pools, if any, under the Company's Cash Bonus Plan (the "Cash Bonus Plan"). Mr.
Szapor's employment agreement is for an initial term of three years and renews
thereafter for successive one year terms unless terminated by either party. The
employment agreement with Mr. Szapor provides for payment to Mr. Szapor equal to
the greater of $500,000 or his base salary for the then remaining period of his
employment agreement in the event of the termination of Mr. Szapor's employment
by the Company without cause or by Mr. Szapor for good reason as defined in the
employment agreement.

Other Employment Agreements. The Company's employment agreement with Alan
L. Mayer provides that he will serve as the Company's Senior Vice President,
Chief Legal Officer and Secretary, and the Company's employment agreement with
Richard Rabin provides that he will serve as the Company's Senior Vice President
of Operations. Mr. Mayer and Mr. Rabin currently earn annual salaries of
$130,000 and $120,000, respectively, subject to increases based on
cost-of-living adjustments and other mutually agreed factors. Messrs. Mayer's
and Rabin's employment agreements are each for an initial term of three years,
and renew thereafter for successive one year terms unless terminated by each of
the respective parties. These employment agreements also provide that in the
event of termination by the Company without cause or by the respective employee
for good reason (as defined in the respective employment agreements) the
employee will receive a payment equal to his base salary then in effect for the
then remaining period of his employment agreement. Mr. Mayer and Mr. Rabin are
entitled to participate in the Stock Plan and Cash Bonus Plan.

Christopher B. Hemmeter. Pursuant to the Plan of Reorganization, the
Company entered into a consulting agreement with Christopher B. Hemmeter
pursuant to which the Company pays Mr. Hemmeter $29,166.67 per month from the
Effective Date through August 1997 in return for services rendered thereunder.
The consulting services provided to the Company by Mr. Christopher B. Hemmeter
include advice and services related to gaming regulatory issues and help in
identifying potential new business opportunities.

Mark M. Hemmeter. Pursuant to the Plan of Reorganization, the Company
entered into a consulting agreement with Mark M. Hemmeter (the "Mark M. Hemmeter
Consulting Agreement") pursuant to which the Company pays Mr. Hemmeter
$10,416.67 per month from the Effective Date through November 1996 in return for
services rendered thereunder. The consulting services provided to the Company by
Mr. Mark M. Hemmeter include advice and services related to gaming regulatory
issues and help in identifying potential new business opportunities. The Mark M.
Hemmeter Consulting Agreement will expire on November 30, 1996.

MANAGEMENT INCENTIVE AND NON-EMPLOYEE DIRECTOR STOCK PLAN

The Company has established the Stock Plan, which became effective on the
Effective Date, pursuant to which the senior management of the Company will be
eligible to earn stock grants of up to 7.0% of the Common Stock (determined on a
fully diluted basis) if certain performance benchmarks as determined by the
Board of Directors are achieved and non-employee directors will be awarded 0.50%
of the capital stock of the Company (also determined on a fully diluted basis).
The Stock Plan provides for the following participation levels of the Common
Stock:

Stephen J. Szapor, Jr. 2.50%
Alan L. Mayer 1.25%
Richard Rabin 1.25%
Robert J. Stephens 0.50%
Other Employees 1.50%
Non-employee Directors 0.50%
-----
7.50%

Shares awarded to non-employee directors are restricted and shall be
forfeited if the director is not serving as such on the date of the first annual
meeting of the Company following the date of the award. Shares awarded to
eligible employees will be restricted and subject to forfeiture if certain,
pre-determined annual performance goals are not obtained. One-third of awarded
shares will vest and become non-forfeitable for each year in which such
performance goals are achieved.

MANAGEMENT CASH BONUS PLAN

The Company has established a Cash Bonus Plan which became effective on
the Effective Date for senior management employees in which the participants
will split a bonus pool equal to 15% of the increase in earnings before
interest, taxes, depreciation and amortization for each plan period commencing
with the period beginning on the Effective Date and ending on December 31, 1996
and each six months thereafter over the same period in the immediately preceding
calendar year determined, in the case of the periods in 1995 and 1996, without
regard to the effect of the Company's Riverboat Project or the Company's
extraordinary expenses resulting from the Hemmeter or GPRI Bankruptcy Cases. Mr.
Szapor's employment agreement provides that he will receive 30% of the bonus
pools, if any. The other plan participants will split the remaining 70% of any
bonus pools.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Prior to the Effective Date, the Company entered into certain transactions
in which Christopher B. Hemmeter, who formerly served as Chief Executive Officer
and in other executive officer positions and was the controlling stockholder of
the Company, and Mark M. Hemmeter, formerly an executive officer of the Company,
had, or may be deemed to have had, direct or indirect material interests, as
described below.

Resort Income Investors ("RII") made an acquisition, development and
construction loan to the predecessor of the Company in the principal amount of
$12 million (later increased to $12.3 million). At that time, Christopher B.
Hemmeter was the president and chairman of the board of RII and the beneficial
owner of approximately 2.2% of RII's outstanding equity securities and Mark M.
Hemmeter was executive vice president, secretary and treasurer and a director of
RII and the beneficial owner of less than 1% of RII's outstanding equity
securities. The loan was secured by a third mortgage on the real property and
improvements comprising Bullwhackers Central City as well as liens on all
personal property contained therein and $6,551,200 of the principal thereof was
personally guaranteed by Christopher B. Hemmeter. In 1992, RII also made an
acquisition, development and construction loan in the principal amount of $12
million to a predecessor of the Company secured by a senior leasehold mortgage
on Bullwhackers Black Hawk. The terms and provisions of this loan were
substantially the same as the loan secured by Bullwhackers Central City except
that the loan was not personally guaranteed by Christopher B. Hemmeter. Both
loans obligated the Company to pay, under certain circumstances, contingent
interest equal to a portion of any increase in the value of the collateral
securing the loans. The $24.3 million of principal, $790,000 of accrued interest
and $700,000 of bonus interest on both of these loans were repaid in 1993 with
$25.8 million of the $131.5 million of net proceeds to the Company from the
offering of the Old Notes. Upon repayment of the loans, Christopher B. Hemmeter
was released from his guarantee.

On April 21, 1995, the Company borrowed $1 million from RII. On May 15,
1995, the Company borrowed $2 million from RII on a secured basis and used $1
million of this loan to repay the April 21, 1995 loan from RII. At that time,
Christopher B. Hemmeter beneficially owned approximately 1.7% of RII's
outstanding equity securities and Mark M. Hemmeter beneficially owned less than
1% of RII's outstanding equity securities. This loan was satisfied pursuant to
the Plan of Reorganization. Currently, both Christopher B. Hemmeter and Mark M.
Hemmeter each own less than 1% of the outstanding equity securities of RII.

The general contractor for the Bullwhackers Casinos held a construction
note in the principal amount of $6,251,200 (the "Construction Note") which was
secured by a second mortgage on the land and improvements comprising
Bullwhackers Central City. Christopher B. Hemmeter personally guaranteed the
Construction Note. The Construction Note was repaid with a portion
of the proceeds of the offering of the Old Notes and Mr. Hemmeter was released
from his guarantee.

In 1994, the Company and certain affiliates entered into an amended
consulting agreement with Mr. Daniel P. Robinowitz, a pre-Effective Date
stockholder of the Company of approximately 9.1% on a fully diluted basis,
pursuant to which Mr. Robinowitz was entitled to receive an ownership interest
in the Company and a $3 million fee in exchange for his assistance in obtaining
necessary licensing and other regulatory approvals with respect to the Company's
Louisiana operations. Pursuant to this agreement, Mr. Robinowitz's right to
receive an ownership interest in the Company was converted in January 1995 into
1,605,739 shares of common stock of the Company. The $3 million fee was paid to
Mr. Robinowitz in March 1994. In addition, Mr. Robinowitz was paid an initial
consulting fee of $2,790,000 for his services with respect to certain Louisiana
projects, of which $279,000 was allocated to the Company.

In December 1993, the Company reimbursed Christopher B. Hemmeter in the
amount of $225,000 for advances made by him in 1993 to Michigan City Casino &
Lodge, Inc., a wholly owned, non-operating subsidiary of the Company.

The Company made outstanding advances to the following:

December 31
June 30,
1994 1995 1996
(in thousands)
Canadian Pavilion Limited Partnership... $ 1,323 $1,573* $1,573
Outlaws Casino, Ltd..................... 876 1,072* 1,072
RCJV.................................... 763* 43 43
RCH Investments, NV..................... 250 259* 259
Hemmeter Partners....................... 344* 335 335
Grand Palais Casino, Inc................ 557 587* 587
Officers................................ 585* 867 867
Other................................... 62* 35 35
---------- --------- --------
$ 4,760 $ 4,771 $ 4,771
======== ======== ========

*Constitutes largest aggregate amount outstanding.

Canadian Pavilion Limited Partnership ("CPLP"), Outlaws Casino, Ltd.
("Outlaws"), RCH Investments, NV ("RCH") and Hemmeter Partners are majority
owned by Christopher B. Hemmeter and Mark M. Hemmeter. The advances to CPLP,
Outlaws, RCH, and Hemmeter Partners accrue interest at 14% per annum, with
interest payable quarterly, and are due on demand. Grand Palais Casino, Inc.
("GPCI") is a wholly owned subsidiary of Grand Palais Enterprises, Inc.
("GPEI"), of which certain stockholders were also majority stockholders of the
Company prior to the Effective Date. This advance accrues interest at 14% per
annum, and is due on demand. The Company has fully reserved the amounts of these
advances because of uncertainty as to their collectibility.

In July 1994, Kevin G. DeSanctis, then Executive Vice President and Chief
Operating Officer of the Company, received a $225,000 advance in accordance with
the terms of his employment agreement, of which none has been repaid to date. In
September 1994, Christopher B. Hemmeter, was advanced funds totaling $275,000,
accruing interest at prime plus 2%, and due on demand. In January 1995, an
additional $373,000 was advanced to Mr. Hemmeter on an interest free basis, of
which $110,000 has been repaid. The amount of Mr. Hemmeter's advances that
remained unpaid totaled $641,900.

In 1994, the Company established a reserve of $1 million for the portion of
the affiliate advances described above that the Company believed may not be
collectible. This reserve was not allocated to any particular affiliate
advances. In 1995, due to the deteriorating financial condition of Christopher
B. Hemmeter and the affiliate companies listed in the above table who received
those advances and possible defenses that they could raise, the Company provided
a reserve for the remainder of the amounts owed the Company by these individuals
and affiliates.

The affiliate advances described above are fully reserved and the Company
has ceased accruing interest thereon. The Company is assessing its strategy in
terms of pursuing any collection of these advances. The Company has agreed not
to exercise any rights of set-off that the Company may have in respect of the
payments which the Company will make to Christopher B. Hemmeter under his
consulting agreement with the Company, and the Company, as a result of the Plan
of Reorganization, does not have any obligations to the other obligors which
would give it set-off rights.

Hemmeter Partners, an affiliate of Christopher B. Hemmeter, leased an
aircraft that Mr. Hemmeter used for business and personal purposes. In exchange
for Mr. Hemmeter making the aircraft available to the Company for business
purposes, the Company agreed to pay such affiliate approximately $100,000 per
month and to pay the salary and benefits of the aircraft pilot and co-pilot,
which totaled approximately $125,000 per year. Direct payments to Hemmeter
Partners totaled $1.5 million and $420,000 for 1994 and 1995, respectively.
Payments made by the Company with respect to the aircraft represent the
Company's pro rata share of the costs and expenses associated with the aircraft
and are adjusted based on actual use of the aircraft. The Company ceased using
the aircraft and terminated this arrangement as of May 1995.

In 1992 and 1993, Grand Palais Casinos, Inc. ("GPCI"), undertook a private
offering of senior secured exchangeable notes. Certain of the Company's former
majority stockholders and warrantholders, including Christopher B. Hemmeter and
Daniel P. Robinowitz, were also stockholders of GPCI's parent company, Grand
Palais Enterprises, Inc. ("GPEI"). In September 1993, $7.5 million of the net
proceeds of GPCI's private offering were loaned to GPRI. The loan was evidenced
by a demand note payable to GPCI which accrued interest at the rate of 12% per
annum. The loan was repaid with proceeds from the sale of the Old Notes. As
additional consideration, the GPCI noteholders were issued warrants to purchase
2,980,986 shares of common stock. All warrants were extinguished pursuant to the
Plan of Reorganization.

GPCI also made additional advances to GPRI on an as needed basis. In 1993,
the advances totaled $2.2 million, accrued interest at 12% and were unsecured.
Proceeds from the Old Notes were used to repay $1.70 million of the advances.
The remaining $490,000 was repaid in the first quarter of 1994. Through December
31, 1993, GPCI also paid certain overhead costs and expenses on behalf of GPRI,
which amounts were not material.

The Company paid $1.5 million, $1.3 million and $624,000 to the law firm of
Shefsky, Froelich & Devine Ltd. for legal services rendered to the Company in
1993, 1994 and 1995, respectively. Cezar M. Froelich, a pre-Effective Date
director and stockholder of the Company of 1.4% on a fully diluted basis, is a
member of that firm. Shefsky, Froelich & Devine Ltd. provided legal services to
the Company until February 9, 1996. Any further payments to Shefsky, Froelich &
Devine Ltd. are subject to Bankruptcy Court approval.

LEGAL PROCEEDINGS

BACKGROUND OF BANKRUPTCY; PLAN OF REORGANIZATION

The Company was incorporated in August 1993 for the purpose of
conducting the operations of HP Casino Management, L.P., BH Management Company,
LLC, Central City Management Company, LLC, HP Black Hawk, LLC and HP Central
City, LLC, which, along with certain predecessor entities, constructed and were
operating the Bullwhackers Casinos.

In June 1994, through its wholly owned subsidiary, GPRI, the Company
entered into a joint venture with an unrelated entity to construct and operate
the Riverboat Project. The Company's share of development costs of the Riverboat
Project was financed in part through the private placement by the Company of
$140,000,000 of Notes (the "Old Notes"). On June 15 and December 15, 1994, and
June 15, 1995, the Company issued additional Old Notes in the respective
principal amounts of $8,117,000, $8,884,000 and $9,420,000 in payment of the
interest then due and payable on the outstanding Old Notes.

On July 26, 1995, the GPRI Bankruptcy Case was commenced in the United
States Bankruptcy Court for the Eastern District of Louisiana. The GPRI
Bankruptcy Case was converted into a voluntary Chapter 11 case on July 27, 1995.

As a result of the financial difficulties of GPRI, the Old Notes were
declared to be in default in June 1995. During the summer and early fall of
1995, the Company and investment advisors to certain of the holders of the Old
Notes negotiated a debt restructuring which contemplated the commencement of
Chapter 11 bankruptcy proceedings for the Company and the Colorado
Subsidiaries which were not then in bankruptcy. On November 7, 1995, the Company
and the Colorado Subsidiaries commenced the Hemmeter Bankruptcy Cases. On
December 27, 1995, the venue of the Hemmeter Bankruptcy Cases was transferred to
the United States Bankruptcy Court for the Eastern District of Louisiana.

The Company and the Colorado Subsidiaries continued their business
operations as debtors-in-possession under the supervision of the Bankruptcy
Court following the commencement of the Hemmeter Bankruptcy Cases. The Company
received approval from the Bankruptcy Court to pay or otherwise honor certain of
its pre-petition obligations related to the Bullwhackers Casinos, including
employee wages and benefits, utilities, and claims of certain trade vendors, and
such payments were made. In addition, the Bankruptcy Court approved a $7.9
million debtor-in-possession credit facility (the "DIP Facility").

On March 29, 1996, the GPRI Plan was confirmed in the GPRI Bankruptcy Case.
The GPRI Plan was consummated on May 3, 1996. The GPRI Plan provided that all
outstanding shares of capital stock of GPRI (which were owned by the Company)
were cancelled and new stock issued to Casino America, Inc., an unrelated party,
or its assigns, which provided consideration to GPRI's creditors. Under the GPRI
Plan, the Company received GPRI's causes of action, if any, against GPRI's joint
venture partner in the Riverboat Project and received no other distribution in
respect of its stock ownership in GPRI or any claim that it may have in the GPRI
Bankruptcy Case.

On April 8, 1996, the Plan of Reorganization in the Hemmeter Bankruptcy
cases was confirmed by order of the United States Bankruptcy Court for the
Eastern District of Louisiana, and was consummated on the Effective Date.

The following events occurred at the Effective Date pursuant to the Plan of
Reorganization:

1. The Company and its Colorado Subsidiaries were discharged from any
liability to GPRI or its creditors. The Company no longer has any interest
in GPRI or the Riverboat Project and its principal assets consist of the
stock of its subsidiaries which own the Colorado Casinos and the Surface
Parking Lot.

2. The claims of entities which provided goods and services to the
Bullwhackers Casinos were paid in full or were otherwise treated in such a
manner so that they were not impaired and all other unsecured creditors of
the Bullwhackers Casinos received notes in a principal amount equal to the
allowed amount of their claims which provide for a single payment of
principal and accrued interest on the tenth anniversary of the issuance
thereof. All other unsecured creditors of the Company received no
distribution in respect of their claims against the Company.

3. The holders of the Old Notes1 and Resort Income Investors, Inc., which held
a secured claim in the Hemmeter Bankruptcy Case (the "RII Claim"; Resort
Income Investors, Inc. is sometimes referred to as "RII") received an
aggregate of $50,000,000 in principal amount of the Notes and one hundred
percent (100%) of the issued and outstanding capital stock of the
reorganized Company, subject to being diluted to 90% by certain stock
grants to be provided to senior management employees and non-employee
directors. See "Management-Executive Compensation." As a result, the
holders of the Old Notes and RII are the principal creditors and
stockholders of the Company. The portion of the principal amount of the
Notes paid to RII is less than $1 million and a similar portion of common
stock was issued to RII.

4. Pursuant to the settlement of certain lawsuits against the Company and
certain of its executive officers, the Company issued the CAI Notes
(defined below) to Capital Associates, Inc. ("CAI"). The Company's
obligation in respect of the CAI Notes was reduced dollar for dollar by any
amounts received by CAI in respect of its claims filed in the GPRI
Bankruptcy Case.

5. Certain claims of the Company and the Colorado Subsidiaries against third
parties, including derivative claims against the pre-Effective Date
directors, officers, and employees of the Company and its Colorado
Subsidiaries, were transferred to a litigation trust (the "Litigation
Trust"). The trustees of the Litigation Trust are the post-Effective Date
directors of the Company and will determine whether or not to pursue any
such claims. Any amounts received in respect of any such claims will inure
to the benefit of the holders of the Old Notes and RII.

-------------
(1) Because the Old Notes were primarily held in the names of nominees, the
Company was unable to determine the identity of the Old Note holders
directly. The individual holders of approximately $152,775,000 of the
outstanding principal balance of the Old Notes filed proofs of claim in the
Chapter 11 bankruptcy proceedings of the Company described below. The
holders of five percent or more of the Old Notes at the time of filing of
those proofs of claim are described below in "Principal and Selling
Securityholders."

6. The amounts outstanding under the DIP Facility were paid in full and the
DIP Facility was terminated. The Company replaced the DIP Facility with the
Foothill Credit Facility. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation."

7. The Company changed its name to Colorado Gaming & Entertainment Co.

The foregoing is only a summary of some of the principal terms of the Plan
of Reorganization and is qualified in its entirety by reference to the complete
copy of the Plan of Reorganization that has been filed as an Exhibit to the
Registration Statement of which this Prospectus is a part.

OTHER

During June 1995, CAI filed an action against the Company, BWBH, BWCC,
Christopher B. Hemmeter and Mark M. Hemmeter in the District Court for the City
and County of Denver, Colorado, seeking to enforce guarantees allegedly provided
by the defendants of an equipment lease provided to GPRI. On September 14, 1995,
the court granted summary judgment in favor of CAI and against the defendants in
the amount of $4,477,950.26, plus interest. In July 1995, CAI also filed an
action against the Company, Messrs. Szapor and Mayer, BWBH, BWCC, and GPRI in
the District Court for the City and County of Denver, Colorado alleging that,
among other things, they negligently and fraudulently induced it into entering
into the equipment lease which was the subject of its June 1, 1995 lawsuit.
Messrs. Szapor and Mayer filed answers denying the allegations in the complaint
and have asserted a counterclaim against CAI for abuse of process.

On February 6, 1996, both lawsuits filed by CAI were settled, subject to
the consummation of the Plan of Reorganization. Upon the Effective Date, CAI
dismissed both lawsuits with prejudice and released all claims asserted therein.
In accordance with the settlement, on the Effective Date, the Company issued two
unsecured promissory notes to CAI (the "CAI Notes") in the respective principal
amounts of $1.6 million and $3 million and Messrs. Szapor and Mayer released
their counterclaims. Both CAI Notes accrue interest at the rate of 9% per annum.
The $1.6 million CAI Note is due in ten equal quarterly installments commencing
September 7, 1996. The $3 million CAI Note has been reduced by amounts received
by CAI in respect of its claims filed in the Chapter 11 bankruptcy cased filed
by GPRI. Accordingly, the outstanding balance on the $3 million CAI Note is in
the range of between $500,000 to $700,000, depending on the ultimate resolution
of the exact amount received by CAI from GPRI distributions to be credited
against this CAI Note. Accordingly, the Company has reflected $700,000 of the
second CAI Note as an obligation in its consolidated balance sheet, although
this amount might be reduced as discussed above.

Upon the Effective Date, a Litigation Trust was formed with the exclusive
right to enforce, in its sole discretion, any and all causes of action of the
debtors in the Chapter 11 cases. Accordingly, certain claims of the Company
against third parties were transferred to the Litigation Trust. The Trustee of
the Litigation Trust will initially be the directors of the Company who will
determine whether to pursue any such claims. Any amounts received in respect of
such claims by the Litigation Trust will benefit the holders of the Old Notes
and RII. Included among the transfer of claims to the Litigation Trust was the
derivative action filed in September 1995 against the pre-Effective Date
directors of the Predecessor Company by Daniel P. Robinowitz, a pre-Effective
Date stockholder of the predecessor company.

Claims that the Company may have against affiliates of the predecessor
company for outstanding receivables that such affiliates owe to the Company were
not transferred to the Litigation Trust. Such claims remain with the Company and
any amounts received by the Company on account of such claims will benefit the
Company. All affiliate receivables have been fully reserved and, it is unlikely
that the Company will receive any amounts in respect of such claims.

All other legal proceedings pending against the predecessor company prior
to the Effective Date were settled pursuant to the Reorganization. There are no
legal proceedings pending against the Company after the Effective Date which
could reasonably be believed to have a material adverse effect on the Company's
consolidated results of operation. See "-Background of Bankruptcy; Plan of
Reorganization."

The Plan of Reorganization provides that the Company's obligation to
indemnify Messrs. Szapor and Mayer against any claims asserted against them as a
result of their service as employees of the Company, both before and after the
commencement of the Hemmeter Bankruptcy Cases, will not be affected by the
Hemmeter Bankruptcy Cases and that the Company will assume any obligations of
GPRI to indemnify Messrs. Szapor and Mayer against claims arising as a result of
their service with GPRI. The Plan of Reorganization also provides that Messrs.
Szapor and Mayer are released from any liability in respect of causes of action
assigned to the Litigation Trust.

The Plan of Reorganization also provides that the Company's obligations to
indemnify its other officers and employees who are employed by the Company on
the date of commencement of the Hemmeter Bankruptcy Cases, other than
Christopher B. Hemmeter and Mark M. Hemmeter (together, the "Hemmeters"),
against claims against them as a result of their service with the Company after
the commencement of the Hemmeter Bankruptcy Cases will not be affected by the
Hemmeter Bankruptcy Cases and that the Company will assume any similar indemnity
obligations of GPRI.

The Plan of Reorganization also requires the Company to indemnify its
pre-Effective Date directors other than the Hemmeters (the "Independent
Directors") against any claims asserted against them as a result of their
service as directors of the Company if the final report of the Independent
Litigation Counsel indicates that there is no basis for pursuing any of the
potential claims against them reviewed by the Independent Litigation Counsel.
The Company's maximum indemnity obligation for all of the Independent Directors
is capped at $500,000 in the aggregate. Although the Company has no direct
indemnity obligations with respect to claims against the Hemmeters, if a claim
is asserted against both the Independent Directors and the Hemmeters, the
Hemmeters will be entitled to be represented by the counsel representing the
Independent Directors at the expense of the Company to the extent that the
claims are based on the Hemmeters' actions as directors of the Company.

ENVIRONMENTAL MATTERS

Although the Colorado Casinos are not within any of the specific areas of
the Site currently identified by the EPA for investigation or remediation, the
site on which the Surface Parking Lot was constructed was identified as
requiring remediation in connection with the construction of the Surface Parking
Lot. That remediation was completed in June 1994. In the process of completing
additional environmental remediation on the Surface Parking Lot, the Company
discovered that two small and confined treatment cells within the Surface
Parking Lot contain unacceptable levels of mercury and lead within the soil, and
thus are classified as hazardous. The Company immediately reported this finding
to the EPA and the CDPHE. The hazardous soil is located above the groundwater
table. At the direction and approval of the EPA and CDPHE, the Company placed an
asphalt cap over the hazardous soil to prevent infiltration. While the parties
have agreed that the hazardous soil presents minimal impact to the environment
in the short term, the Company has reached an agreement with the EPA and CDPHE
to remove the hazardous soil and dispose of the material at a hazardous waste
landfill prior to December 31, 1996. The Company is currently analyzing the most
efficient way and time period within which to complete the removal of the
hazardous soil. It is currently estimated that the cost of this removal project
will be approximately $100,000.

The Company, through independent environmental consultants, conducted both
Phase I and Phase II environmental examinations of the real property underlying
the Bullwhackers Casinos and obtained subsequent follow-up reports. Based on
these examinations, the Company is not aware of any environmental problems
affecting the Bullwhackers Casinos which are likely to result in material costs
to the Company. Although the Company has not conducted environmental evaluations
of the real property underlying the Silver Hawk Casino facility, it does not
believe that there are any environmental problems affecting the Silver Hawk
Casino site which are likely to result in material costs to the Company. No
assurance can be given, however, that the Company will not subsequently discover
significant environmental problems at any of its Colorado properties.
Furthermore, the EPA or other governmental authorities could broaden their
investigations and identify additional areas within the Site, including the
Colorado Casino sites, for remediation. If any of the Colorado Casinos were
included in additional areas of concern within the Site, the Company could be
identified as a PRP and any liability related thereto could have a material
adverse effect on the Company. Furthermore, environmental conditions at any of
the Company's Colorado properties could have, or could in the future have, a
detrimental impact on adjacent or nearby properties or persons. No assurance can
be given that no such impact on a third party will arise in the future, nor that
such an impact, if it arises, will not have a material adverse impact on the
Company.

PRINCIPAL AND SELLING SECURITYHOLDERS

This Prospectus covers resales of Common Stock and Notes received under the
Plan of Reorganization by the Selling Securityholders named below and other
Selling Securityholders pursuant to certain registration rights under the
Registration Rights Agreement (as defined below). This Prospectus may be
supplemented or amended from time to time to reflect its use for resales by
persons who are entitled to such rights but are not named below. All such
Selling Securityholders may be deemed to be underwriters of such securities
within the meaning of the Securities Act. See "Plan of Distribution."

The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of October 16, 1996, and as adjusted to reflect
the sale of the Shares offered hereby by, (i) each person known by the Company
to be the beneficial owner of more than 5% of the Company's Common Stock, (ii)
each of the Company's directors, (iii) each of the executive officers named in
the Summary Compensation Table above (See "Management -- Executive
Compensation"), (iv) all executive officers and directors as a group, and (v)
the Selling Securityholders. The information presented in this table and the
following table regarding the Selling Securityholders' holdings of the Common
Stock and the Notes is based on information furnished to the Company by the
Selling Securityholders and other sources that the Company has not verified.
Unless otherwise indicated, to the Company's knowledge, all beneficial ownership
is sole and direct. Certain of the Selling Securityholders were holders of the
Old Notes and certain of such holders participated in negotiations relating to
the Company's bankruptcy and the Reorganization. Other than relationships
arising in connection with such matters and with regard to Stephen J. Szapor,
Jr., President and Chief Executive Officer and a director of the Company, none
of the Selling Securityholders has had a material relationship with the Company
within the past three years.

<TABLE>

COMMON STOCK

<CAPTION>
NUMBER SHARES
SHARES OWNED OF OWNED
PRIOR TO SHARES AFTER
OFFERING PERCENT OFFERED OFFERING

<S> <C> <C> <C> <C>
Grace Brothers, Ltd.........................490,607 9.6 490,607 0
1560 Sherman Avenue
Suite 900
Evanston, IL 60201

Archstone Partners, L.P.1................... 22,262 * 22,262 0
Cragswood Ltd.1............................. 29,683 * 29,683 0
Glen Rock Partners, L.P.1................... 41,471 * 41,471 0
Martino-Swartz JT Venture 1................. 14,842 * 14,842 0
NF & M International 1...................... 14,842 * 14,842 0
RH Capital Assoc. #1, L.P 1................. 39,366 * 39,366 0

Keystone Small Company Growth Fund 2........494,015 9.6 494,015 0
Keystone High Income Bond Fund 2............477,839 9.3 477,839 0
Keystone America Strategic Income Fund 2....195,843 3.8 195,843 0
Keystone Fixed Income Advisers, Inc.2....... 39,698 * 39,698 0
200 Berkeley Street
Boston, MA 02116

The Mainstay Funds, on behalf of
its High Yield Corporate Bond Fund
Series3 . . . . . . . . . . . . . . . . .368,128 7.2 368,128 0
Brown & Williamson High Yield Account3 . . . 33,647 * 33,647 0
New York Life MFA Series Fund, Inc., on
behalf of its High Yield Corporate Bond
Fund Portfolio3 .. . . . . . . . . . . . . 12,468 * 12,468 0
c/o Mackey-Shields Financial Corporation
9 West 57th Street
New York, NY 10019

Millison Investment Management, Inc....... 74,531 1.5 74,531 0

Prudential Distressed Fund................ 50,000 * 50,000 0

PaineWebber Strategic Income Trust........ 102,958 2.0 102,958 0
Managed High Yield Fund, Inc.............. 105,643 2.1 105,643 0
PaineWebber High Income Trust............. 768,570 14.9 768,570 0
All-American Term Trust Inc............... 77,681 1.5 77,681 0
PaineWebber Offshore Funds, plc--......... 0
The High Income Fund.................... 27,766 * 27,766 0
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, NY 10019

Putnam Advisory Funds..................... 296,834 5.8 296,834 0
One Post Office Square
Boston, MA 01209

SC Fundamental Value Fund, L.P.......... 416,311 8.1 416,311 0
SC Fundamental Value BVI, Ltd............. 190,192 3.7 190,192 0
712 Fifth Avenue
New York, NY 10019

Resort Income Investors................... 60,170 1.2 60,170 0

Stephen J. Szapor, Jr..................... 138,888 2.7 138,888 0
Alan L. Mayer............................. 0 0 0 0
Richard Rabin............................. 0 0 0 0
Franklin S. Wimer ............... 2,315 * 0 2,315
Steve Leonard............................. 2,315 * 0 2,315
Mark Van Hartesvelt....................... 0 0 0 0
Philip J. DiBerardino..................... 2,315 * 0 2,315
All directors and officers as a group
(8 persons) 145,833 2.7 138,888 6,945
- --------------------------
<FN>
1 Bear Stearns is the nominee of such holder.

2 Keystone Investment Management Company serves as investment adviser to
Keystone Small Company Growth Fund, Keystone High Income Bond Fund,
Keystone America Strategic Income Fund, and Keystone Fixed Income Advisers,
Inc.

3 Mackay-Shields Financial Corporation serves as investment adviser to these
holders.

* Less than 1%.
</FN>
</TABLE>

The following table sets forth certain information regarding the ownership
of the Notes, as of October 16, 1996, offered pursuant to this Prospectus held
by the Selling Securityholders.

<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT OF PRINCIPAL AMOUNT OF
NOTES OWNED AMOUNT OF NOTES OWNED
PRIOR TO NOTES AFTER
OFFERING PERCENT OFFERED OFFERING

<S> <C> <C> <C> <C>
GM High Yield Fund $ 2,250,000 4.5% $ 2,250,000 0
High Yield Income Fund 1,250,000 2.5 1,250,000 0
Prudential High Yield Fund 6,000,000 12.0 6,000,000 0
Prudential Series High Yield Fund 2,500,000 5.0 2,500,000 0
Prudential Distressed Fund 297,000 * 297,000 0
Putnam Advisory Funds 20,219,000 40.4 20,219,000 0
IDS Financial Services, Inc. 14,000,000 28.0 14,000,000
Resort Income Investors 601,702 1.2 601,702 0
SunAmerica $ 2,500,000 5.0 $ 2,500,000

*Less than 1%

</TABLE>
PLAN OF DISTRIBUTION

GENERAL

An aggregate of up to 5,138,888 shares of Common Stock and $55,883,000
principal amount of Notes may be offered pursuant to this Prospectus. Of the
Notes, $50,000,000 are currently held by the Selling Securityholders and are
being registered for resale hereunder. An additional $6,000,000 in principal
amount of Notes are being registered hereunder by the Company and may be issued
directly to the holders of the Notes as payment of certain accrued interest when
due, in lieu of cash, pursuant to the terms of the Notes. Such Notes, if issued,
may be subsequently resold by the Selling Securityholders pursuant to this
Prospectus or otherwise. The Company will not receive any of the proceeds from
the sale by the Selling Securityholders of the Notes or Common Stock offered
hereby. Such securities may be sold by the Selling Securityholders in the
over-the-counter market, or otherwise, in transactions at prices prevailing at
the time of sale, at prices related to such prevailing market prices, or at such
other prices as may be negotiated among the parties. The Selling
Securityholders' Shares and Notes may be sold by one or more of the following
methods, without limitation: (a) a block trade in which a broker or dealer so
engaged will attempt to sell the securities as agent but may position and resell
a portion of the block as principal to facilitate the transaction; (b) purchases
by a broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchases; and (d) directly in
transactions between sellers and purchasers without a broker/dealer. In
effecting sales, brokers or dealers engaged by the Selling Securityholders may
arrange for other brokers or dealers to participate. The Selling
Securityholders, such brokers or dealers may receive commissions or discounts
from Selling Securityholders in amounts to be negotiated. Broker or dealers
participating in such transactions as agent may receive commissions from the
purchasers as well as from the Sellers, if also acting as agent for the
purchasers, Selling Securityholders and any participating brokers or dealers may
be deemed to be "underwriters" within the meaning of the Securities Act, in
connection with such sales. Profits, commissions, concessions, and discounts on
sales by persons who may be deemed to be underwriters within the meaning of the
Securities Act may be deemed underwriting compensation under the Securities Act.

Selling Securityholders may also offer the Shares or Notes covered by this
Prospectus under other registration statements or pursuant to exemptions from
the registration requirements of the Securities Act, including sales which meet
the requirements of Rules 144 or 148 under the Securities Act or pursuant to an
exemption contained in the Federal Bankruptcy Code. Selling Securityholders
should seek advice from their own counsel with respect to the legal requirements
for such sales.

The Company will pay all expenses of filing the Registration Statement and
preparing and reproducing this Prospectus which the Company estimates to be
$95,000. The Selling Securityholders will pay any selling expenses, including
brokerage commissions, incurred in connection with their sale of any Shares
covered by this Prospectus.

In order to comply with certain states' securities laws, if applicable, the
Notes or Common Stock will be sold in such jurisdictions only through registered
or licensed brokers or dealers. In certain states the Notes and Common Stock may
not be sold unless they have been registered or qualified for sale in such
state, or unless an exemption from registration or qualification is available.

REGISTRATION RIGHTS AGREEMENT

Pursuant to a Registration Rights Agreement, dated as of the Effective
Date, among the Company and the Initial Holders as defined therein (the
"Registration Rights Agreement"), the Company agreed to file the Registration
Statement of which this Prospectus is a part with the Commission and use its
best efforts to have it declared effective within 150 days of the Effective
Date. Under the terms of the Registration Rights Agreement, substantially all of
the expenses of the offering (other than broker or dealer discounts,
commissions, or other compensation) will be paid by the Company. Furthermore,
the Company has agreed to keep the Registration Statement continuously
effective, subject to certain blackout periods, for a period of up to three
years following the effective date of the Registration Statement. In addition,
the Company and the Selling Securityholders are obligated to indemnify each
other against certain liabilities, including liabilities arising under the
Securities Act.

This Prospectus may be supplemented or amended from time to time to reflect
its use relating to the Common Stock and Notes for resales by Selling
Securityholders not named in this Prospectus as such who are entitled to certain
registration rights under the Registration Rights Agreement.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no established market for the Common
Stock of the Company and there can be no assurance that an active trading market
will subsequently develop. Sales of substantial shares of Common Stock in the
public market could adversely affect the market price of the Common Stock
prevailing from time to time.

The Company has 5,138,888 shares of Common Stock outstanding, all of which
are being registered on the Registration Statement of which this Prospectus
forms a part. Accordingly, all such shares will be freely transferable without
restriction or registration under the Securities Act, except for any shares
purchased by an existing "affiliate" of the Company, as that term is defined by
the Securities Act (an "Affiliate"), which shares will be subject to the resale
limitations of Rule 144 adopted under the Securities Act ("Rule 144").

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted securities
for at least two years (including the holding period of any prior owner except
an affiliate of the Company) would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of: (i) one percent
of the number of shares of Common Stock then outstanding (which equals
approximately 51,139 shares); or (ii) the average weekly trading volume of the
Common Stock during the four calendar weeks preceding the filing of a Form 144
with respect to such sale. Sales under Rule 144 are also subject to certain
manner of sale provisions and notice requirements and to the availability of
current public information about the Company. Under Rule 144(k), a person who is
not deemed to have been an Affiliate at any time during the 90 days preceding a
sale, and who has beneficially owned the shares proposed to be sold for at least
three years (including the holding period of any prior owner except an
Affiliate), is entitled to sell such shares without complying with the manner of
sale, public information, volume limitation or notice provision of Rule 144.

DESCRIPTION OF CAPITAL STOCK

DESCRIPTION OF COMMON STOCK

The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock, of which 5,145,833 shares are issued and outstanding. Holders of
Common Stock are entitled to one vote for each share held in the election of
directors and on all other matters submitted to a vote of stockholders, and do
not have cumulative voting rights in the election of directors. Accordingly, the
stockholders of a majority of the shares of Common Stock entitled to vote in any
election of directors may elect all of the directors standing for election.

Stockholders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared by the Board out of funds legally
available therefor. Upon the liquidation, dissolution or winding-up of the
Company, the stockholders of Common Stock are entitled to receive ratably the
net assets of the Company available after payment of all debts and other
liabilities. Stockholders of Common Stock have no preemptive, subscription,
redemption or conversion rights. All shares of the Common Stock are fully paid
and non-assessable when issued upon receipt of the purchase price therefor. As
of October 18, 1996, the Company had approximately 40 holders of record of the
Common Stock.

COLORADO GAMING REGULATIONS

Pursuant to the Colorado Regulations, the Gaming Commission has broad
powers to require stockholders of the Company, as a gaming licensees, to provide
it with information and to determine the suitability of any stockholders of the
Company to hold voting interests in the Company. If the Gaming Commission
determines that a person or entity is not suitable to own a voting interest in
the Company, whether directly or indirectly, the Company may be sanctioned
(including by loss of any gaming licenses) unless such person or entity disposes
of its voting interests. In addition, the Colorado Regulations prohibit a
licensee from paying dividends, interest or other remuneration to any person
found to be unsuitable, or from recognizing the exercise of any voting rights by
any person found to be unsuitable. The Colorado Regulations require a casino
licensee to include in its corporate charter provisions to permit the repurchase
of the voting interests of any person who the Gaming Commission finds
unsuitable. The Company has included the required provisions in its Certificate
of Incorporation. See "- Certain Charter and Bylaws Provisions." In addition, a
person or entity may not sell, lease, purchase, convey, acquire or pledge 5% or
more of the stock of a "publicly traded" gaming licensee, such as the Company,
shares in a gaming license without the prior approval of the Gaming Commission,
except for sales or other transactions involving less than a 5% interest in a
publicly traded licensee. See "Business - Colorado Gaming Regulations."

CERTAIN CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS

To enable the Company to secure and maintain the business and other
regulatory approvals necessary for operating a gaming-related business, the
Company's Certificate of Incorporation provides that the Company may not issue
any voting securities except in compliance with the rules of any gaming
authority. The Company's Certificate of Incorporation also provides that all
transfers of voting securities of the Company must be in compliance with
applicable gaming authority rules and if any gaming authority issues an order
disqualifying a person from owning shares of Common Stock, the Company may
redeem the stock of the disqualified holder unless Common Stock is transferred
to a person found by the Gaming Commission to be suitable within 60 days from
the finding of unsuitability. See "- Colorado Gaming Regulations." The
redemption price will be equal to the lesser of the holder's investment in the
voting securities or the current market price as of the finding of
unsuitability. No holder of voting securities of the Company which has been
found to be unsuitable may vote any such voting securities and such voting
securities shall not be deemed outstanding for quorum or other purposes and the
disqualified holder shall not be entitled to any dividends or other remuneration
with respect to such voting securities. See "Business -- Colorado Gaming
Regulations."

As permitted by the provisions of the Delaware General Corporation Law (the
"DGCL"), the Company's Certificate of Incorporation eliminates in certain
circumstances the liability of directors of the Company for a breach of their
fiduciary duty as directors. These provisions do not eliminate the liability of
a director for: (i) breach of the director's duty of loyalty to the Company or
its stockholders; (ii) acts or omissions by a director not in good faith or
which involve intentional misconduct or a knowing violation of the law; (iii)
liability arising under Section 174 of the DGCL (relating to the declaration of
dividends and purchase or redemption of shares in violation of the DGCL); or
(iv) any transaction from which the director derived an improper personal
benefit. In addition, these provisions do not eliminate the liability of a
director for violations of federal securities laws, nor do they limit the rights
of the Company or its stockholders, in appropriate circumstances, to seek
equitable remedies such as injunctive or other forms of non-monetary relief.
Such remedies may not be effective in all cases.

The Company's Certificate of Incorporation and Bylaws provide that the
Company shall indemnify all directors and officers of the Company to the full
extent permitted by the DGCL. Under such provisions, any director of officer, in
his capacity as such, who is made or threatened to be made a party to any suit
or proceeding, may be indemnified if the Board determines such director of
officer acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interest of the Company. The Company's Certificate of
Incorporation, Amended and Restated Bylaws and the DGCL further provide that
such indemnification is not exclusive of any other rights to which such
individuals may be entitled under the Company's Certificate of Incorporation and
Amended and Restated Bylaws, or under any agreement, vote of stockholders or
disinterested directors or otherwise.

The Company's Certificate of Incorporation provides initially for a five
member board of directors with each director serving a one year term. Directors
may be removed with or without cause.

DESCRIPTION OF THE NOTES

GENERAL

The Notes were issued on the Effective Date to the holders of the Old Notes
and the RII Claim as fully registered Notes, without coupons, under an Indenture
dated as of the Effective Date (the "Indenture") between the Company, its
Colorado Subsidiaries and Fleet National Bank, as trustee (together with any
successor, the "Trustee"). This summary of the material terms of the Notes does
not purport to be complete and is subject to, and qualified in its entirety by,
the provisions of the Indenture. Capitalized terms used under this heading which
are not otherwise defined herein shall have the meanings ascribed thereto in the
Indenture, which is included as an exhibit to the Registration Statement of
which this Prospectus is a part.

TERMS

The Notes are senior secured obligations of the Company and will mature on
June 1, 2003. The aggregate principal amount of Notes which may be authenticated
and delivered under the Indenture is limited to $50,000,000 (plus any Secondary
Notes, as described below) except for Notes authenticated and delivered upon
registration of transfer of, or in exchange for, other Notes.

Interest on the Notes accrues at the rate of 12% per annum, computed on the
basis of a 360-day year comprised of twelve 30-day months. Interest is payable
commencing December 1, 1996 and semiannually thereafter on June 1 and December 1
of each year, to the holders of record of Notes at the close of business on May
15 and November 15 immediately preceding each such interest payment date.

The Company may, at its option if an effective registration statement under
the Securities Act covers such issuance or such issuance is exempt from
registration under the Securities Act, pay interest on the Notes through the
issuance of additional Notes (the "Secondary Notes") in an aggregate principal
amount equal to the interest that would be payable if such interest were paid in
cash (provided, however, that amounts less than $1,000 shall be payable in
cash). The terms of the Secondary Notes shall be identical to the terms of the
Notes, except that interest on the Secondary Notes is payable only in cash. All
references to "Notes" herein shall, unless the context otherwise requires, also
refer to any Secondary Notes.

Principal of, premium, if any, and interest on the Notes is payable at the
office or agency of the Company maintained for that purpose, provided that upon
the agreement of the Company and a holder (a "Holder") of a Note payments of
interest and principal of any Note may be made directly to the Holder of such
Note. The Notes are transferrable at the corporate trust office of the Trustee
located at 777 Main Street, Hartford, Connecticut. No service charge is made for
any registration of transfer or exchange of the Notes, except for any tax or
other governmental charge that may be imposed in connection therewith.

REDEMPTION

Optional Redemption. The Notes are redeemable prior to maturity, in whole
or part, at the election of the Company on or after June 1, 2000, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest to the redemption date, if redeemed during the
12-month period beginning on the June 1st that begins in the years indicated
below:

Year Redemption Price

2000 104%
2001 103%
2002 and thereafter 102%

Mandatory Redemption. Notwithstanding any other provision of the Indenture,
if any Gaming Authority requires that a Holder or beneficial owner of Notes must
be licensed, qualified or found suitable under any applicable Gaming Law, such
Holder or beneficial owner must apply for a license, qualification or a finding
of suitability within the required time period after being requested to do so by
the Gaming Authority. If such Holder or such beneficial owner is not so
licensed, qualified or found suitable within the period provided therefor by
such Gaming Authority, the Company shall have the right, at its option, (i) to
require such Holder or beneficial owner to dispose of such Holder's or
beneficial owner's Notes within 30 days of receipt of notice of the Company's
election or such earlier date as may be ordered by such Gaming Authority, or
(ii) to call for a
redemption of the Notes of such Holder or beneficial owner at a price equal to
the lesser of 100% of the principal amount thereof or the price at which such
Holder or beneficial owner acquired the Notes, plus, in either case, accrued
interest to the earlier of the date of redemption or the date of the finding of
unsuitability by such Gaming Authority (which may be less than 30 days following
the notice of redemption, if so ordered by such Gaming Authority). The Company
is not responsible for any costs or expenses that any Holder may incur in
applying for a license, qualification or finding of suitability.

Selection and Notice. In the event that less than all of the Notes are to
be redeemed at any time, selection of Notes for redemption will be made by the
Trustee on a pro rata basis, by such method as the Trustee shall deem fair and
appropriate (provided that no Notes in a principal amount of $1,000 or less
shall be redeemed in part). Unless otherwise specified herein, notice of
redemption shall be mailed by first class mail not less than 30 days nor more
than 60 days before the redemption date to each Holder to be redeemed at its
registered address. If any New Note is to be redeemed in part only, the notice
of redemption that relates to such New Note shall state the portion of the
principal amount thereof to be redeemed. On and after the redemption date,
interest will cease to accrue on Notes or portions thereof called for
redemption.

NO SINKING FUND

No sinking fund payments are required with respect to the Notes.

MANDATORY OFFERS TO PURCHASE

Offer to Purchase Upon Change of Control. The Company is obligated to make
an offer to purchase all outstanding Notes at a purchase price of 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of purchase if a Change of Control of the Company occurs. A Change of Control
includes (i) the sale or other disposition of substantially all of the Company's
assets; (ii) the liquidation or dissolution of the Company; (iii) the
acquisition by any person or group (within the meaning of Section 13(d) and
14(d) of the Exchange Act) of beneficial ownership or the right to acquire,
whether immediately or only after the passage of time, of more than 50% of all
classes of capital stock of the Company then outstanding normally entitled to
vote for the election of directors; (iv) during the twelve months following the
Issue Date of the Notes, a change in the composition of the Board of Directors
of the Company such that a majority of the directors of the Company nominated to
be such on the Issue Date cease to be directors of the Company (other than as
may be caused by the replacement of interim directors who are serving as
directors only until the individuals named to serve as directors on the Issue
Date receive Commission approval). If a Change of Control occurs, the Company
shall, within 15 days, notify the Trustee in writing of such occurrence, and the
Trustee shall, within 15 days following receipt of notice to the Trustee, notify
the Holders of such occurrence. Such notice from the Company shall include an
offer to purchase all Notes then outstanding at a purchase price equal to 101%
of the principal amount thereof plus accrued and unpaid interest, if any, to the
payment date. The purchase offer by the Company must remain open for at least 20
business days from the date of the Trustee's notice. The obligation of the
Company to purchase the Notes upon a Change of Control may not be amended or
waived without the concurrence of the Holders of not less than 66-2/3% of the
aggregate principal amount of the Notes then outstanding. See "- Amendments and
Waivers." There can be no assurance that the Company will have sufficient funds
to purchase the Notes upon a Change of Control.

Other Offers to Purchase. The Company is also obligated to make offers to
purchase Notes at a purchase price of 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of purchase in an amount equal
to the Net Cash Proceeds of certain sales or other dispositions of assets or
certain events of loss. See "- Certain Covenants - Restricted Asset Sales" and
"- Application of Net Cash Proceeds in Event of Loss."

GUARANTEE OF NOTES

The Notes and the Company's obligations under the Indenture are irrevocably
and unconditionally guaranteed by the Guarantors. The Guarantees of the
Guarantors are in addition to (and not in substitution for) any other security
for the Notes and may not be revoked by the Guarantor until all guaranteed
obligations have been indefeasibly paid and performed in full.

SECURITY

The Notes are secured by a perfected lien on certain Collateral of the
Company and the Guarantors, including all of the capital stock of the Guarantors
owned by the Company and on substantially all of the assets of the Company and
the Guarantors, whether owned on the Issue Date or thereafter acquired,
including the Colorado Casinos, the Surface Parking Lot and, if and when
constructed, the Parking Garage through appropriate Security Documents in favor
of the Trustee as Collateral Agent.

The liens securing the Notes will be subordinate only to those liens
defined in the Indenture as "Permitted Liens," which include: (i) liens securing
credit facilities providing for an aggregate principal amount of indebtedness of
up to $17,500,000 incurred pursuant to permitted credit facilities; (ii) certain
specified liens on certain assets of the Company or the Guarantors in existence
on the date of the Indenture; (iii) liens on the Silver Hawk casino securing the
deferred portion of the purchase price thereof; (iv) liens encumbering
after-acquired property of the Company or a Guarantor which were in existence
when the encumbered property was acquired and which were not created in
connection with the acquisition; (v) certain statutory liens, such as mechanics
or materialmen's liens and tax liens, to the extent that the obligation secured
is not delinquent or is being contested in good faith; and (vi) leases,
subleases, easements, rights-of-way and other minor title irregularities which
do not materially interfere with the business of the Company or any of its
subsidiaries.

Provided that no Event of Default then exists, the Company is entitled to
obtain a release of any lien securing the Notes with respect to any property of
the Company sold or otherwise disposed of in the ordinary course of business
(including the sale of gaming and other equipment as part of a program to
replace or upgrade gaming or such other equipment) up to $1,500,000 in the
aggregate in any 12-month period (an "Unrestricted Asset Sale"). The Company is
also entitled to obtain a release of any lien securing the Notes with respect to
any property sold or otherwise transferred in any other permitted asset sale
provided that the Company complies with certain reinvestment or Note repurchase
obligations. See "- Certain Covenants - Restricted Asset Sales."

The proceeds of any sale of the Collateral in whole pursuant to the
Indenture and the related Security Documents following an Event of Default may
not be sufficient to satisfy payments due on the Notes. In addition, the ability
of the Holders to realize upon the Collateral may be limited pursuant to gaming
laws as described below, in the event of a bankruptcy or pursuant to other
applicable laws, including securities laws.

Certain Gaming Law Limitations. The Trustee's ability to foreclose upon the
Collateral is limited by relevant Gaming Laws, which generally require that
persons who own or operate a casino or possess or sell gaming equipment hold a
valid gaming license. No person can hold a license in the State of Colorado
unless the person is found qualified or suitable by the relevant Gaming
Authorities. In order for the Trustee to be found qualified or suitable such
Gaming Authorities would have discretionary authority to require the Trustee and
any or all of the Holders to file applications, be investigated and be found
qualified or suitable as a casino licensee or as a landlord or landlords of a
gaming establishment. The applicant for qualification for a suitability
determination or for licensing must pay all costs of such investigation. If the
Trustee is unable or chooses not to qualify, be found suitable or be licensed to
own, operate or sell such assets, it would have to retain an entity licensed to
operate or sell such assets. In addition, in any foreclosure sale or subsequent
resale by the Trustee, licensing requirements under the relevant Gaming Laws may
limit the number of potential bidders and may delay any sale, which may have an
adverse effect on the sale price of such Collateral. In addition, under Colorado
law, Holders may be required to file personal history and financial background
information with the Gaming Authorities and to be found suitable in order for
the Trustee to foreclose on gaming equipment and the Colorado Casinos.
Therefore, the practical value of realizing on the Collateral may, without the
appropriate approvals, be limited.

Certain Bankruptcy Limitations. The right of the Trustee to repossess and
dispose of the Collateral upon the occurrence of an Event of Default is likely
to be significantly impaired by applicable bankruptcy law if a bankruptcy
proceeding were to be commenced by or against the Company or the Company
Subsidiaries prior to the Trustee having repossessed and disposed of the
Collateral. Under the United States Bankruptcy Code (the "Bankruptcy Code"), a
secured creditor such as the Trustee is prohibited from repossessing its
security from a debtor in a bankruptcy case, or from disposing of security
repossessed from such debtor, without bankruptcy court approval. Moreover, the
Bankruptcy Code permits the debtor to continue to retain and to use Collateral
owned as of the date of the bankruptcy filing (and the proceeds, products, rents
or profits of such Collateral) to the extent provided by the Security Documents
and applicable nonbankruptcy law even though the debtor is in default under the
applicable debt instruments, provided that the secured creditor is given
"adequate protection." The meaning of the term "adequate protection" may vary
according to circumstances, but it is intended in general to protect the value
of the secured creditor's interest in the Collateral and may include, if
approved by the court, cash payments or the granting of additional security for
any diminution in the value of the Collateral as a result of the stay of
repossession or disposition or any use of Collateral by the debtor during the
pendency of the bankruptcy case. In view of the lack of a precise definition of
the term "adequate protection" and the broad discretionary power of a bankruptcy
court, it is impossible to predict how long payments under the Notes could be
delayed following commencement of a bankruptcy case, whether or when the Trustee
could repossess or dispose of the Collateral or whether or to what extent
Holders would be compensated for any delay in payment or loss of value of the
Collateral through the requirement of "adequate protection."

CERTAIN COVENANTS

The following summarizes certain of the covenants with which the Company
and each Company Subsidiary must comply:

Limitation on Indebtedness. The Company shall not, and shall not permit any
Company Subsidiary to, directly or indirectly, incur any Indebtedness other
than:

(a) Indebtedness under the Notes, the Indenture and the Security Documents;

(b) Bank Indebtedness and any renewals, replacements and/or refinancings
thereof, so long as the aggregate principal amount of Bank Indebtedness at
any one time outstanding pursuant to this paragraph (b) does not exceed the
Bank Indebtedness Amount;

(c) Any Indebtedness, if (i) no Default or Event of Default shall have occurred
and be continuing at the time of, or would occur after giving effect to, on
a pro forma basis, such incurrence of such Indebtedness and (ii)
immediately after giving effect to the incurrence thereof, and the receipt
and the application of the proceeds thereof, the Consolidated Coverage
Ratio would be greater than (A) 1.75 to 1, in the case of such Indebtedness
incurred or to be incurred on or prior to December 31, 1996 and (B) 2.0 to
1, in the case of such Indebtedness incurred or to be incurred on or after
January 1, 1997; provided that any such Indebtedness shall mature at a date
not earlier than the Stated Maturity of the Notes and shall have an Average
Life to Stated Maturity equal to or greater than the remaining Average Life
to Stated Maturity of the Notes; or

(d) Any Indebtedness issued in exchange for or to repay, prepay, repurchase,
redeem, defease, retire or refinance ("refinance") any Indebtedness
permitted by clauses (a) or (c) above; provided that (i) if the principal
amount of the Indebtedness so issued shall exceed the principal amount of
the Indebtedness so exchanged or refinanced, then such excess shall be
permitted only to the extent that it is otherwise permitted to be incurred
hereunder and (ii) the Indebtedness so issued (A) has a Stated Maturity
later than the Stated Maturity of the Indebtedness so exchanged or
refinanced, (B) has an Average Life to Stated Maturity equal to or greater
than the remaining Average Life to Stated Maturity of the Indebtedness so
exchanged or refinanced, and (C) is subordinated to the Notes to at least
the same extent as the Indebtedness so exchanged or refinanced.

Limitation on Restricted Payments. The Company shall not, and shall not
permit any Company Subsidiary to, make, directly or indirectly, any Restricted
Payment, including (i) any declaration or payment of any dividend or similar
payments in respect of the capital stock of the Company or a Company Subsidiary
(other than dividends payable solely in capital stock or payments of dividends
on capital stock of a Company Subsidiary payable to the Company or to Company
Subsidiary which is wholly owned by the Company); (ii) any purchase, defeasance,
redemption or other acquisition or retirement for value of any capital stock, or
any warrants, rights or options to purchase any capital stock, of the Company or
any Company Subsidiary; (iii) any payment of principal on any Indebtedness which
is subordinated in right of payment to the Notes, or (iv) any loan, stock
purchase or other Investment in any Person that will not be a wholly owned
Company Subsidiary of the Company immediately after giving effect to such loan,
stock purchase or other Investment, if after giving effect thereto, on a pro
forma basis:

(a) a Default or Event of Default shall have occurred and is continuing or
would occur as a consequence thereof;

(b) immediately after giving effect to such Restricted Payment, the Company
could not incur at least $1.00 of Indebtedness and maintain the Consolidated
Coverage Ratio required for the incurrence of additional debt; or

(c) the aggregate of all Restricted Payments declared or made after the
Issue Date exceeds the sum of: (i) 50% of Consolidated Net Income (or in the
event such Consolidated Net Income shall be a deficit, minus 100% of such
deficit) accrued during the period (treated as one accounting period) commencing
on the first full quarter after the Issue Date, to and including the last day of
the fiscal quarter ended immediately prior to the date of each such calculation,
minus (ii) 100% of the amount of any write downs, write-offs, or negative
extraordinary charges not otherwise reflected in Consolidated Net Income during
such period, plus (iii) an amount equal to the aggregate Net Cash Proceeds
received by the Company from the issuance or sale (other than to a subsidiary)
of its Capital Stock (excluding Disqualified Stock, but including capital stock
issued upon conversion of convertible Indebtedness and from the exercise
of options, warrants or rights to purchase capital stock, other than
Disqualified Stock, of the Company) after the Issue Date;

provided, however, that the foregoing provisions will not prevent, provided that
no Default or Event of Default shall have occurred and is continuing at the time
of the restricted payment: (i) the payment of any dividend within 60 days after
the date of its declaration if, at the date of declaration, such payment would
be permitted by the foregoing provisions; (ii) the payment of dividends or the
making of distributions solely in shares of capital stock of the Company; and
(iii) Restricted Payments not otherwise permitted by clauses (i) through (iii)
above in an amount not exceeding $200,000 in any calendar year.

Limitation of Liens. The Company shall not, and shall not permit any
Company Subsidiary to, create, incur, assume or suffer to exist any lien of any
kind upon any of its property or assets (including, without limitation, any
income or profits) now owned or hereafter acquired by it, other than Permitted
Liens.

Limitation on Dividends and Other Payment Restrictions Affecting Company
Subsidiaries. The Company shall not, and shall permit any Company Subsidiary to,
directly or indirectly create or otherwise cause or suffer to exist any
consensual encumbrance or restriction on the ability of any Company Subsidiary
to pay dividends, make distributions on the capital stock of such Company
Subsidiary, pay any obligation to the Company or a Company Subsidiary, or
otherwise transfer assets or make or pay loans to the Company or any Company
Subsidiary, except: (i) restrictions imposed by the Security Documents; (ii)
certain other restrictions set forth in the Indenture; (iii) customary
non-assignment provisions restricting subletting or assignment of any lease
entered into in the ordinary course of business; (iv) restrictions imposed by
Gaming Laws or any Gaming Authority; (v) restrictions under any agreement
relating to any property, assets or business acquired by the company or its
Company Subsidiaries, which restrictions are applicable only to the assets or
business acquired; (v) any restrictions with respect to capital stock or assets
of a Company Subsidiary imposed pursuant to a stock or asset sale of such
Company Subsidiary, and (vii) replacements of restrictions imposed pursuant to
clauses (i) through (vi) above that are no more restrictive than those being
replaced.

Limitation on Sale-Leaseback Transactions. The Company shall not, and shall
not permit any Company Subsidiary to, directly or indirectly enter into,
guarantee or otherwise become liable with respect to any Sale-Leaseback
Transaction involving Collateral or any other Sale-Leaseback Transaction unless:
(i) after giving effect to any such Sale-Leaseback Transaction the Company could
incur $1.00 of additional Indebtedness and its Consolidated Coverage Ratio would
be no less than the ratio necessary to increase additional Indebtedness; (ii)
such Sale-Leaseback Transaction does not involve the creation of a lien which is
not a Permitted Lien; (iii) the consideration received by the Company and/or any
of its Company Subsidiaries for such Sale-Leaseback Transaction is at least
equal to the Fair Market Value of such property being transferred, and (iv) the
Company shall apply the Net Cash Proceeds of the sale as if such sale was a
Restricted Asset Sale. See "- Restricted Asset Sales".

Restricted Asset Sales. The Company shall not, and shall not permit any
Company Subsidiary to, directly or indirectly, make any Restricted Asset Sale,
including the issuance by a Company Subsidiary of any capital stock or other
equity interests to a Person other than the Company or a wholly owned Company
Subsidiary or any asset sale or other disposition which is not an Unrestricted
Asset Sale, unless: (i) at the time of such Restricted Asset Sale the Company or
such Company Subsidiary, as the case may be, receives consideration at least
equal to the Fair Market Value of the assets sold or otherwise disposed of; (ii)
with certain exceptions, which include the sale of Bullwhackers Central City, at
least 90% in value of the proceeds therefrom consist of U.S. dollars; (iii) no
Default or Event of Default shall have occurred and be continuing at the time of
or after giving effect to such Restricted Asset Sale; and (iv) unless otherwise
permitted by the Indenture, the Restricted Asset Sale does not involve any
Collateral.

On or before the 180th day after the date on which the Company or any
Company Subsidiary consummates a Restricted Asset Sale, the Company shall make
an offer to purchase a principal amount (expressed as a multiple of $1,000) of
Notes equal to the Net Cash Proceeds received by the Company in respect of the
Restricted Asset Sale at a purchase price equal to 101% of the principal amount
thereof plus accrued and unpaid interest thereon, if any, to the date of
purchase; provided that the Company will not be required to purchase Notes with
the Net Cash Proceeds of a Restricted Asset Sale if and to the extent that on or
before the 180th day after the date on which the Company or such Company
Subsidiary consummates the Restricted Asset Sale, the Company or such Company
Subsidiary applies all or part of the Net Cash Proceeds from the Restricted
Asset Sale to acquire other assets for use in the Company's gaming business, and
upon consummation thereof, the Trustee shall have received a perfected security
interest in the property or assets acquired by the Company or any of its Company
Subsidiaries in connection therewith. Each offer to purchase Notes after a
Restricted Asset Sale shall remain open for a period of at least twenty (20)
business days.

In the event any Restricted Asset Sale involves any Collateral, the Company
or such Company Subsidiary, as the case may be, shall cause such Net Cash
Proceeds to be deposited in a Collateral Account maintained by the Trustee. Such
funds may be released from the Collateral Account only to repurchase Notes or to
acquire assets for use in the Company's gaming business.

Application of Net Cash Proceeds in Event of Loss. In the event that the
Company or any Company Subsidiary suffers any casualty loss or government taking
to any material asset, on or before the 360th day that the Company or such
Company Subsidiary received any Net Cash Proceeds from such Event of Loss, the
Company shall make an offer to purchase from all Holders up to a maximum
principal amount (expressed as a multiple of $1,000) of Notes equal to the Net
Cash Proceeds at a purchase price equal to 101% of the principal amount thereof
plus accrued and unpaid interest thereon, if any, to the date of purchase;
provided that the Company will not be required to purchase Notes with such Net
Cash Proceeds if and to the extent that on or before the 360th day after the
date on which the Company or such Company Subsidiary receives such Net Cash
Proceeds, the Company or such Company Subsidiary applies all or part of the Net
Cash Proceeds to acquire other assets for use in the Company's gaming business
and upon consummation thereof, the Trustee shall have received a perfected
security interest (subject only to Permitted Liens) in the property or assets
acquired by the Company or any of its Company Subsidiaries in connection
therewith.

In the event any casualty loss or government taking involves any
Collateral, the Company or such Company Subsidiary, as the case may be, shall
cause such Net Cash Proceeds to be deposited in a Collateral Account maintained
by the Trustee. Such funds may be released from the Collateral Account only to
repurchase Notes or to acquire assets for use in the Company's gaming business.

Limitation on Company Subsidiary Preferred Stock. The Company shall not
issue or permit any Company Subsidiary to issue, directly or indirectly, any
preferred stock other than preferred stock issued to and held by the Company or
a wholly owned Company Subsidiary of the Company.

Ownership of Stock of Company Subsidiaries. The Company shall at all times
have, or cause a wholly owned Company Subsidiary (other than a Non-Operating
Subsidiary) of the Company to have, ownership of at least 100% of each class of
Voting Stock of, and all other equity securities in, each Company Subsidiary
other than a Company Subsidiary which becomes such as a result of a permitted
Investment.

Limitation on Transactions with Affiliates. The Company shall not, and
shall not permit any Company Subsidiary to, conduct any business or enter into
any transaction or series of transactions with any of their respective
Affiliates (defined to include entities having 15% or more voting control),
except such transactions that are on terms that are no less favorable to the
Company or such Company Subsidiary, as the case may be, than those that could
have been obtained in a comparable transaction on an arm's-length basis from an
unaffiliated third party. All transactions with Affiliates involving aggregate
payments (i) in excess of $500,000 shall not be permitted unless, prior to the
consummation thereof, the transaction shall be approved by the Board of
Directors of the Company, including a majority of the independent directors, as
evidenced by a Board Resolution, and (ii) in excess of $2 million shall not be
permitted unless, prior to consummation thereof, the Company shall, in addition
to board approval, receive a favorable opinion as to the fairness of the
transaction from any national or regional investment banking firm with
recognized experience with the gaming industry.

Change in Nature of Business. The Company shall not, and shall not permit
any of its Company Subsidiaries to, own, manage or conduct any operation other
than an operation involved in the gaming and ancillary businesses.

Maintenance of Consolidated Fixed Charge Coverage Ratio. The Company shall,
at the end of each fiscal quarter beginning with the fiscal quarter ending March
31, 1998, maintain the ratio of the difference between its Consolidated EBITDA
and its Capital Expenses to its Consolidated Fixed Charges for the four quarters
then ending at a ratio which is greater than or equal to 1.25 to 1.

Consolidation, Merger, Conveyance, Transfer or Lease. Except as part of a
permitted Restricted Asset Sale, the Company shall not consolidate with, merge
with or into, sell, assign, convey, lease or transfer all or substantially all
of its properties and assets to any Person or group of affiliated Persons unless
(i) the Company shall be surviving entity or the surviving entity shall be a
corporation organized and existing under the laws of the United States or any
State thereof or the District of Columbia; (ii) the surviving entity shall
expressly assume all of the obligations of the Company under the Notes, the
Indenture, and the Security Documents; (iii) no Default or Event of Default
shall have occurred and be continuing; (iv) the surviving entity shall,
immediately after giving effect to such transaction on a pro forma basis, have a
Consolidated Net Worth equal to or greater than the Consolidated Net Worth of
the Company immediately prior to such transaction; (v) immediately after giving
effect to such transaction on a pro forma basis, the Company or the surviving
entity could incur at least $1.00 of additional Indebtedness
and maintain a Consolidated Coverage Ratio of no less than the ratio necessary
to incur additional Indebtedness; (vi) the surviving entity shall have delivered
to the Trustee an Officer's Certificate stating that such consolidation, merger,
conveyance, transfer or lease and supplemental indenture if a supplemental
indenture is required in connection with such transaction or series of
transactions complies with this covenant and that all conditions precedent in
the Indenture relating to the transaction or series of transactions have been
satisfied, and (vii) such transaction will not result in the loss of any Gaming
License or Change in Control.

Other than the provisions of the Indenture discussed above, the Indenture
may not afford Holders any further protection in the event of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction
involving the Company that may adversely affect the holders of the Notes, if
such transaction is not a transaction defined as a Change of Control.

EVENTS OF DEFAULT AND REMEDIES

The following are Events of Default under the Indenture:

(a) the default in the payment of any interest on any Note when it becomes due
and payable and the continuance of any such default for a period of ten
(10) days; or

(b) the default in the payment of the principal of or premium, if any, on any
Note when due at maturity, upon acceleration, mandatory redemption,
optional redemption, required purchase or otherwise; or

(c) the failure by the Company to own directly or through wholly owned Company
Subsidiaries subject to certain exceptions, 100% of the Voting Stock of all
Company Subsidiaries, the failure by the Company to maintain the required
Consolidated Fixed Charges Coverage Ratio at the required level or if the
Company or any Company Subsidiary modifies any agreement with Christopher
B. Hemmeter or Mark M. Hemmeter existing as of the Issue Date or enters
into any additional agreement after the Issue Date with either Person.

(d) default in the performance, or breach of any covenant or warranty of the
Company or any Company Subsidiary in the Indenture, or by the Company or
any Guarantor under any other Noteholder Document, or by any Guarantor
under its Guarantee (other than defaults otherwise specified in this
section), and the continuance of such default or breach for a period of
thirty (30) days after written notice to the Company by the Trustee or to
the Company and the Trustee by the holders of at least 25% in aggregate
principal amount of the outstanding Notes; or

(e) failure by the Company or any Company Subsidiary to make any payment when
due or within applicable grace periods with respect to any other
Indebtedness to the extent that all such payments then due aggregate the
principal amount of $1 million or more; or

(f) a final judgment for the payment of money in excess of $1 million shall be
entered against the Company, any Guarantor or any Company Subsidiary and
remaining undischarged for a period of thirty (30) days; or

(g) any warrant of attachment in an amount of $1 million or more shall be
issued against any portion of the property or assets of the Company, any
Guarantor or any Company Subsidiary; or

(h) certain events of bankruptcy, insolvency or reorganization with respect to
the Company or any Company Subsidiary shall have occurred; or

(i) any Noteholder Document ceases to be in full force and effect or any
Noteholder Documents ceases to create in favor of the Trustee, with respect
to any portion of the Collateral, a valid and perfected Lien on the
Collateral (subject only to Permitted Liens) purported to be covered
thereby; or

(j) any Guarantee of a Guarantor is determined by a court of competent
jurisdiction to be null and void with respect to such Guarantor or any
Guarantor denies that it has any further liability under its Guarantee or
gives notice to such effect; or

(k) the cessation of substantially all gaming operations at any Gaming Facility
which has commenced operations, other than the Central City Casino, for
more than 45 days, except as a result of an Event of Loss (or 90 days in
the case of cessation as a result of renovations to or construction at or
adjacent to such Gaming Facility); or

(l) the revocation, suspension or involuntary loss of the legal right to
operate any Gaming Facility which continues for more than 45 days; or

(m) the Company ceases to own 100% of the Voting Stock of BWBH, Inc., sells the
Black Hawk Casino or all or a significant portion of BWBH, Inc.'s assets or
properties, the occurrence of a Restricted Asset Sale involving assets or
property owned or leased by BWBH, Inc. or used by BWBH, Inc. in the
operation of the Black Hawk Casino, or certain Events of Loss occur with
respect to the Black Hawk Casino or BWBH, Inc.

The Company is required to deliver to the Trustee on or before the date
which is 45 days after the end of each of the first three fiscal quarter of the
Company's fiscal year and on or before the date which is 90 days after the end
of each fiscal year of the Company, an officer's certificate stating whether or
not any Default or Event of Default has occurred. Within 45 days after the
occurrence of any Default, unless such Default shall have been cured or waived,
the Trustee must deliver notice of such Default known to the Trustee to all
Holders. Except in the case of a Default specified in clauses (a) or (b) above,
the Trustee may withhold such notice if and so long as it determines in good
faith that withholding such notice is in the interest of the Holders.

If an Event of Default (other than an Event of Default specified in clause
(h) above) occurs, the Trustee or the Holders of at least 25% in principal
amount of the outstanding Notes may, by written notice, declare the principal
of, premium, if any, and accrued interest on all the Notes to be immediately due
and payable. If an Event of Default specified in clause (h) occurs, then the
principal of and accrued interest on all the Notes shall become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder.

After a declaration of acceleration, the Holders of a majority in principal
amount of Outstanding Notes may, by notice to the Company and the Trustee,
rescind such declaration of acceleration if (a) the Company has deposited with
the Trustee a sum sufficient to pay the unpaid principal of (and premium, if
any, on) the Notes, all overdue interest on the Notes (including interest on
overdue interest), and the Trustee's reasonable expenses, (b) all existing
Events of Default have been cured or waived, other than nonpayment of principal
of and interest on the Notes due solely by such acceleration, and (c) the
rescission of acceleration would not conflict with any judgment or decree.

Notwithstanding the preceding paragraph, in the event of a declaration of
acceleration in respect of the Notes because of an Event of Default specified in
clause (e), such declaration of acceleration shall be automatically annulled if
(i) the Indebtedness that is the subject of such Event of Default has been
discharged or the holders thereof have waived the default and rescinded their
declaration of acceleration in respect of such Indebtedness, (ii) the Company
shall have given notice of such discharge to the Trustee (countersigned by the
holders of such Indebtedness) within 30 days after such declaration of
acceleration in respect of the Notes, and (iii) no other Event of Default has
occurred during such 30 day period which has not been cured or waived.

Upon the occurrence of an Event of Default which is continuing, the Trustee
may, or at the direction of the Holders of at least 25% in principal amount of
the outstanding Notes shall, initiate suit for collection of the amounts due
under the Notes and the Guarantees, exercise all rights and remedies in respect
of the Collateral pursuant to the Noteholder Documents or otherwise exercise any
rights and remedies available to it under the Indenture or otherwise.

No Holder of any of the Notes has any right to institute any proceeding
with respect to the Indenture or any remedy thereunder, unless the Holders of at
least 25% in principal amount of the outstanding Notes have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as Trustee, the Trustee has failed to institute such proceeding
within 15 days after receipt of such notice and the Trustee has not within such
15-day period received directions inconsistent with such written request by
Holders of a majority in principal amount of the outstanding Notes. Such
limitations do not apply, however, to a suit instituted by a Holder for the
enforcement of the payment of the principal of, premium, if any, or accrued
interest on, such Note on or after the respective due dates expressed in such
Note.

During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent Person would
exercise under the circumstances in the conduct of such Person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
is not under any obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the holders unless such holders
shall have offered to such Trustee reasonable security or indemnity. Subject to
certain provisions concerning the rights of the Trustee, the holders of a
majority in principal amount of the outstanding Notes have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee exercising any trust or power conferred on the Trustee.

DEFEASANCE

The Company may at any time terminate all of its obligations with respect
to the Notes and the Indenture ("Legal Defeasance"), except for certain
obligations, including those regarding any trust established for a defeasance
and obligations to register the transfer or exchange of the Notes, to replace
mutilated, destroyed, lost or stolen Notes and to maintain agencies in respect
to the Notes. The Company may also at any time terminate its obligations under
certain covenants set forth in the Indenture that constitute a Default or an
Event of Default with respect to the Notes issued under the Indenture ("Covenant
Defeasance"). In order to exercise either Legal Defeasance or Covenant
Defeasance, the Company must irrevocably deposit with the Trustee in trust, for
the benefit of the Holders, money or United States Government Obligations (or a
combination thereof) in such amounts as will be sufficient to pay the principal
of, premium, if any, and interest on the Notes to redemption or maturity,
together with all other sums payable by it under the Indenture, and comply with
certain other conditions, including the delivery of an opinion as to certain tax
matters.

SATISFACTION AND DISCHARGE

Upon the request of the Company, the Indenture will cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
Notes) as to all outstanding Notes when either: (a) all such Notes theretofore
authenticated and delivered (except lost, stolen or destroyed Notes which have
been replaced or paid and Notes for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust) have been delivered to the
Trustee for cancellation; or (b)(i) all such Notes not theretofore delivered to
the Trustee for cancellation have become due and payable or will become due and
payable at their Stated Maturity within one year or are to be called for
redemption within one year, and the Company has irrevocably deposited or caused
to be deposited, prior to the date of such discharge, with the Trustee funds
sufficient to pay and discharge the entire indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal, premium,
if any, and accrued interest to the date of such deposit; (ii) the Company has
paid all sums payable by it under the Indenture, and (iii) the Company has
delivered to the Trustee an Officer's Certificate and an opinion of counsel
stating that all conditions precedent to satisfaction and discharge have been
complied with.

AMENDMENTS AND WAIVERS

The Company may, when authorized by resolutions of its Board of Directors,
and the Trustee may, without the consent of the Holders, amend, waive or
supplement the Indenture, the Security Documents or the Notes for certain
specified purposes. The purposes for which amendments may be made without the
consent of the holders include, among other things, curing ambiguities, defects
or inconsistencies, maintaining the qualification of the Indenture under the
Trust Indenture Act, or making any change that does not adversely affect the
rights of any Holder. Other amendments and modifications of the Indenture, the
Notes or the Security Documents may be made by the Company and the Trustee with
the consent of the Holders of not less than a majority of the aggregate
principal amount of the Outstanding Notes, provided that no such modification or
amendment may, without the consent of the Holder of each Outstanding New Note
affected thereby:

(a) Alter the maturity, principal amount, interest rate or priority of the
Notes (or the right to institute suit for any payment after stated maturity),

(b) Release any Guarantor from its Guarantee or amend the provisions of the
Indenture relating to the Guarantee (other than a release resulting from a
permitted sale of all of the capital stock of a Guarantor),

(c) Except as otherwise provided in the Indenture, release any Collateral
or permit creation of any Lien senior to or equal to the Lien of any Security
Document, or

(d) Reduce the percentage in principal amount of the Outstanding Notes the
consent of whose Holders is required for any supplemental indenture, waiver,
amendment or consent to take any action under the Indenture.

No supplemental indenture shall, without the consent of the Holders of 66 2/3%
in principal amount of the Outstanding Notes, waive or amend the obligation of
the Company to repurchase the Notes upon a Change of Control. See "- Mandatory
Offers to Purchase - Offer to Purchase Upon Change of Control".

REGARDING THE TRUSTEE

Fleet National Bank, Hartford, Connecticut, will serve as Trustee under the
Indenture and will act as collateral agent and the mortgagee, as applicable,
under the Security Documents. Any replacement trustee must be qualified to act
as such under the United States Trust Indenture Act of 1940, as amended.

GUARANTEES OF 12% SENIOR SECURED PAY-IN-KIND NOTES DUE 2003

BWBH, BWCC, Millsite and Silver Hawk, have irrevocably and unconditionally
guaranteed the payment of the Notes and the Company's obligations under the
Indenture. The Guarantees of the Guarantors are in addition to (and not in
substitution for) any other security for the Notes and may not be revoked by
Guarantor until all guaranteed obligations have been indefeasibly paid and
performed in full.

The liability of each Guarantor under its Guarantee is joint and several
for the full amount of each new Note and is independent of, and not in
consideration of or contingent upon, the liability of the Company or any other
Guarantor. The obligation of each Guarantor under its Guarantee is continuing,
absolute and unconditional without regard to (i) the legality, validity or
enforceability of the Notes, the Indenture, any Security Document, any Lien or
Collateral or the Guarantee given by any other Guarantor; (ii) any defense
(other than payment), set-off or counterclaim that may be available to the
Company or any other Guarantor against any Holder; or (iii) any other
circumstance whatsoever. Each Guarantor waives (i) any and all rights of
subrogation, indemnity or reimbursement (until all guaranteed obligations have
been paid in full); (ii) the right to require the Holders to proceed against the
Company, any other Guarantor, or any Collateral for the Notes or other
guaranteed obligations; (iii) all rights under applicable law which reduce a
guarantor's obligations; (iv) the benefit of any statute of limitations; (v) any
requirement of marshalling or any other principle of election or remedies; (vi)
any right to assert any defense, set-off or counterclaim; (vii) notice of any
kind, except as expressly required by any Security Documents securing any
guaranteed obligations, and (viii) all defenses available to any Guarantor by
virtue of valuation, stay, moratorium or other law.

LEGAL MATTERS

Certain matters regarding the validity of the Notes, the Guarantee and the
Common Stock will be passed upon for the Company by LeBoeuf, Lamb, Greene &
MacRae, L.L.P., a partnership including professional corporations.

EXPERTS

The consolidated financial statements of the Company at December 31, 1994
and 1995, and for each of the three years in the period ended December 31, 1995,
appearing in this Prospectus and Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as set forth in their
reports thereon appearing elsewhere herein and in the Registration Statement,
and are included in reliance upon such reports given upon the authority of such
firm as experts in accounting and auditing.

INDEX TO FINANCIAL STATEMENTS

Page

CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Public Accountants..................................F-2
Consolidated Balance Sheets...............................................F-3
Consolidated Statements of Operations.....................................F-4
Consolidated Statements of Stockholders' Equity (Deficit).................F-5
Consolidated Statements of Cash Flows.....................................F-6
Notes to Consolidated Financial Statements................................F-8

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Hemmeter Enterprises, Inc.:

We have audited the accompanying consolidated balance sheets of Hemmeter
Enterprises, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for each of the three years in the period ended December 31,
1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hemmeter Enterprises, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described more fully in Note 1 to
the consolidated financial statements, on November 7, 1995, the Company filed a
voluntary petition under Chapter 11 of the Federal Bankruptcy Code and has since
operated its business as a debtor-in-possession under the supervision the
Bankruptcy Court. The Company's proposed plan of reorganization ("Plan" -- see
Note 1) was confirmed by the Bankruptcy Court on March 28, 1996; however, there
are certain events that must occur for the Plan to be declared effective by the
Bankruptcy Court. Because the Company's Plan is not yet effective, and the
Company would be unable to satisfy its default on its senior secured pay-in-kind
notes if the Plan does not become effective, substantial doubt exists regarding
the Company's ability to continue as a going concern. The accompanying financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern.

Denver, Colorado,
April 11, 1996

<TABLE>
HEMMETER ENTERPRISES, INC.
(DEBTOR-IN-POSSESSION)

CONSOLIDATED BALANCE SHEETS
(in thousands)

Predecessor Company Reorganized Company (a)
December 31, June 30, 1996
ASSETS 1994 1995 (unaudited)
------ ---- ----
CURRENT ASSETS:
<S> <C> <C> <C>
Cash and cash equivalents................................... $ 7,977 $ 3,623 $ 5,369
Accounts receivable, net.................................... 1,109 226 260
Inventories................................................. 85 85 94
Prepaid expenses............................................ 1,581 638 598
Due from affiliates, net.................................... 3,625 -- --
---------- ----------- ------------
Total current assets................................. 14,377 4,572 6,321
--------- ----------- ------------
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS................... 69,079 32,127 43,488
EQUITY INVESTMENT IN UNCONSOLIDATED SUBSIDIARY................... 18,010
18,010 -- --
RESTRICTED FUNDS IN ESCROW....................................... 18,648 -- 509
EXCESS REORGANIZATION VALUE (Note 1)............................. -- -- 18,676
OTHER ASSETS, net................................................ 20,979 981 776
---------- ----------- ------------
$ 141,093 $ 37,680 $ 69,770
========= =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable............................................ $ 3,118 $ 404 $ 5,671
Accrued expenses............................................ 3,727 3,953 3,532
Current portion of credit facility.......................... -- -- 1,347
Current portion of notes payable............................ 14,610 -- --
Current portion of obligations under capital leases 787
--------- ---------- ------------
Total current liabilities............................ 22,242 4,357 10,550
--------- ---------- ------------
NOTES PAYABLE, net of current portion:
Senior secured notes payable................................ 154,213 -- 50,000
Obligations under capital leases............................ 1,462 -- --
Other notes................................................. -- -- 5,272
--------- ---------- ------------
155,675 -- 55,272
--------- ---------- ------------
LIABILITIES SUBJECT TO COMPROMISE................................ -- 186,460 --
--------- ---------- ------------

----
Total liabilities.................................... 177,917 190,817 65,822
--------- ---------- ------------
COMMITMENTS AND CONTINGENCIES (NOTE 12)
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value, 2,000,000 shares
authorized, none issued................................
-- -- --
Common stock, $.01 par value, 50,000,000 shares
authorized, 9,847,787 and 11,786,235 shares issued and
outstanding at December 31, 1994 and 1995,
respectively, cancelled on June 6, 1996..................
Warrants issued.............................................

99 118 --
8,266 7,000 --
Common stock,$.01 par value, 20,000,000 shares
authorized, 5,138,888 shares issued and outstanding at
June 30, 1996............................................ -- -- 51

Additional paid-in capital.................................. 2,012 2,162 14,653
Accumulated deficit......................................... (47,201) (162,417) (10,756)
--------- ---------- -----------
Total stockholders' equity (deficit)................. (36,824) (153,137) 3,948
--------- ---------- -----------
$ 141,093 $ 37,680 $ 69,770
========= ========== ===========

<FN>
(a) Due to the Reorganization and implementation of fresh-start reporting,
financial statements for the new Reorganized Company (period starting June 7,
1996) are not comparable to those of the Predecessor Company. See Notes to the
Financial Statements for additional information.
</FN>

</TABLE>

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

<TABLE>
HEMMETER ENTERPRISES, INC.
(DEBTOR-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

Six June 7,
Month January 1, 1996
Years Ended December 31, Ended 1996 through
------------------------ June 30, through June 30,
1993 1994 1995 1995 June 6, 1996 1996
---- ---- ---- ---- --------- ---------
(unaudited) (unaudited) (unaudited)

<S> <C> <C> <C> <C> <C> <C>
Casino........................... $ 35,984 $ 42,724 $ 44,854 $ 22,383 $ 19,126 $ 3,100
Food and beverage................. 2,935 3,571 3,737 1,804 1,288 215
Other............................. 259 389 286 155 32 7
-------- --------- --------- ---------- --------- ----------
Gross revenues.................. 39,176 46,684 48,877 24,342 20,446 3,322
Less: promotional allowances........... (708) (1,210) (1,449) (675) (464) (77)
-------- --------- --------- ---------- --------- ---------
Net revenues.................. 38,468 45,474 47,428 23,667 19,982 3,245
-------- --------- --------- ---------- --------- ---------
OPERATING EXPENSES:

Casino.............................. 12,705 14,006 13,087 6,518 5,544 591
Gaming taxes and device fees ....... 7,703 8,178 8,277 4,562 3,614 760
Food and beverage 3,270 3,140 3,173 1,551 1,299 200
General and administrative:
Casino........................... 4,325 3,281 3,223 1,802 1,249 194
Corporate........................ -- 8,108 6,470 4,200 902 147
Marketing........................... 3,376 3,776 5,806 2,759 2,349 435
Depreciation and amortization....... 3,931 4,307 4,771 2,351 1,882 396
Pre-opening......................... -- 2,594 -- -- 47 341
Reorganization items (Note 1)....... -- -- 17,910 500 2,290 --
Impairment of assets (Notes 5 and 11) -- 6,875 10,945 5,077 -- --
Predevelopment costs................ -- 3,929 402 -- -- --
Other............................... -- 241 -- 73 244 --
--------- ------- --------- --------- ------- ---------
Total operating expenses........ 35,310 58,435 74,064 19,420 3,064 29,393
--------- ------- --------- --------- ------- ---------

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
INCOME (LOSS) FROM
OPERATIONS...................... 3,158 (12,961) (26,636) (5,726) 562 181
Interest expense (includes $4,755 and
$122 to affiliates in 1993 and 1995,
respectively, (contractual interest of
$3,179 was not recognized for
December 31, 1995 (Note 7))....... (6,987) (18,822) (18,664) (9,976) (579) (403)
Interest income........................ -- 1,976 361 66 11 289
Equity in loss of unconsolidated
subsidiary....................... -- (2,324) (70,277) (12,187) -- --
--------- ---------- ----------- ---------- --------- ----------
INCOME (LOSS) BEFORE INCOME
TAX.............................. (3,829) (32,131) (115,216) (27,600) 49 (211)
Provision for income taxes.......... -- -- -- --
--------- ---------- ---------- ---------- --------- ----------
gain................................ (3,829) (32,131) (115,216) (27,600) 49 (211)
Extraordinary gain from reorganization
items............................... -- -- -- -- 164,358 --
========== ========== =========== ========= ========= ==========
NET INCOME (LOSS).....................$ (3,829) $ (32,131) $ (115,216) $(27,600) $ 164,407 $ (211)
========== ========== =========== ========= ========= ==========

NET INCOME (LOSS) PER SHARE(b)........ N/A N/A N/A N/A N/A (0.04)
========== ========== ============ ========= ========= ==========
WEIGHTED AVERAGE
COMMON AND EQUIVALENT
SHARES OUTSTANDING.................10,269,641 9,969,142 11,786,23 11,786,235 11,786,235 5,138,888
========== ========= ========= ========== ========== ===========
<FN>
(a) Due to the Reorganization and implementation of fresh start reporting,
financial statements for the new Reorganized Company (period starting June 7,
1996) are not comparable to those of the Predecessor Company. See Notes to the
Financial Statements for additional information.

(b) The weighted average number of common shares outstanding and net income per
common share for the Predecessor Company have not been presented because, due to
the Reorganization and implementation of fresh start reporting, they are not
comparable to subsequent periods.
</FN>

</TABLE>

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

<TABLE>
HEMMETER ENTERPRISES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 and 1995
AND THE SIX MONTHS ENDED JUNE 30, 1996
(in thousands, except number of shares)

Common Stock
--------------------------------
Additional
Warrants Paid-in Accumulated
Shares Amount Issued Capital Deficit Totals
------------ --------- --------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, December 31, 1992................................ -- $ -- $ -- $ 1,239 $ (11,241) $ (10,002)
Capital contributions to predecessor companies............. -- -- -- 871 -- 871
Issuance of common stock pursuant to restructuring......... 10,269,641 103 -- (102) -- 1
Issuances of warrants to purchase common stock............. -- -- 8,266 -- -- 8,266
Net Loss................................................... -- -- -- -- (3,829) (3,829)
------------ -------- ----------- --------- --------- -------

BALANCES, December 31, 1993................................ 10,269,641 103 8,266 2,008 (15,070) (4,693)
Conversion of common stock to warrants..................... (421,854) (4) -- 4 -- --
Net Loss................................................... -- - -- -- (32,131) (32,131)
------------ -------- ---------- --------- --------- --------

BALANCES, December 31, 1994................................ 9,847,787 99 8,266 2,012 (47,201) (36,824)
Vesting of common stock grants to officers and directors... 88,667 1 -- 168 -- 169
Warrants of deconsolidated subsidiary...................... -- -- (1,266) -- -- (1,266)
Conversion of warrants to common stock..................... 1,849,781 18 -- (18) -- --
Net Loss................................................... -- - -- -- (115,216) (115,216)
------------ -------- ----------- --------- -------- ---------

BALANCES, December 31, 1995................................ 11,786,235 118 7,000 2,162 (162,417) (153,137)

Reorganization transaction (unaudited)..................... (6,647,347) (67) (7,000) 12,491 151,872 157,296
Net Loss June 7 through June 30, 1996 (unaudited).......... -- -- -- -- (211) (211)
------------ -------- ----------- -------- ----------- ----------
BALANCES, June 30, 1996 (unaudited)........................ 5,138,888 $ 51 $ -- $ 14,653 $ (10,756) $ 3,948
============ ======== ========= ======== =========== ==========

</TABLE>

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

<TABLE>
HEMMETER ENTERPRISES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

January 1, June 7,
Six 1996 1996
Months through through
Years Ended December 31, Ended June June 6, June 30,
30, 1995 1996 1996(a)
1993 1994 1995 ---------- ---------- ---------
---- ---- ---- (unaudited)(unaudited)(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C> <C> <C>
Net income (loss)................................ $ (3,829) $ (32,131) $(115,216) $ (27,600) $ 164,407 $ (211)
---------- ---------- ---------- ---------- --------- -------

Adjustments to reconcile net income (loss) to net cash
provided by
operating activities:
Depreciation and amortization.................... 3,931 4,307 4,771 2,351 1,882 396
Loss on retirements of property and equipment.... 92 -- 127 73 244 --
Equity in loss of unconsolidated subsidiaries.... -- 2,324 70,277 12,187
Noncash compensation............................. -- -- 169 128 -- --
Predevelopment costs............................. -- 3,929 --
Impairment of assets............................ -- 6,875 11,347 -- -- --
Noncash interest expense..................... 692 17,909 17,895 10,669 495 398
Extraordinary gain from reorganization........... -- -- -- -- (164,358) --
Change in working capital and other............. (433) (650) 1,315 3,141 822 1,611
Noncash reorganization items..................... -- -- 15,317 500 1,825 --
-------- ------- -------- --------- -------- --------
Total adjustments................................ 4,282 34,845 121,218 -- -- --
------- ------- -------- --------- -------- --------
Net cash provided by operating activities........ 453 2,714 6,002 1,449 5,317 2,194
------- ------- -------- --------- -------- --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, equipment and leasehold
improvements.................................. (9,812) (31,560) (1,508) (1,631) (3,855) (2,090)
Investment in development projects............... (571) (3,358) -- 4,208 -- --
Net restricted funds (placed in) disbursed
from escrow (71,200) 52,552 4,209 (7,642) (507) (2)
Investment in unconsolidated subsidiaries........ -- (20,334) (9,270) -- -- --
Advances to PRIGSA (Note 5)...................... -- (5,875) (289) -- -- --
(Increase) decrease in other assets.............. (7,830) (5,174) 59 -- -- --
Advances to affiliates, net...................... (365) (4,402) (1,257) (510) -- --
-------- -------- ------- -------- -------- -------
Net cash (used in) provided by investing activities (89,778) (18,151) (8,056) (5,575) (4,392) (2,092)
-------- -------- ------- -------- -------- -------

</TABLE>

January 1,
Six Months 1996 June 7, 1996
Years Ended December 31, Ended June through June through June
30, 1995 6, 1996 30, 1996(a)
1993 1994 1995 ----------- ------------ ------------
---- ---- ---- (unaudited) (unaudited) (unaudited)

<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable to affiliate......... 6,285 -- 2,000 -- -- --
Repayment of notes payable to affiliate.......... (31,851) -- -- -- -- --
Proceeds from notes payable and obligations under
capital leases................................ 135,255 13,048 -- 2,000 5,824 --
Payment of debt placement costs, net of accrued
liabilities................................... (7,667) (38) (315) -- -- --
Repayments of notes payable and obligations under
capital leases................................ (10,565) (2,540) (1,651) (1,331) (3,304) (1,801)
Capital contributions received by predecessor
companies..................................... 871 -- -- -- -- --
Issuance of warrants to purchase common stock 8,266 -- -- -- -- --
-------- -------- -------- ------- -------- --------
Net cash provided by financing activities........ 100,594 10,470 34 -- -- --
------- -------- -------- ------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................. 11,269 (4,967) (2,020) (3,457) 3,445 (1,669)
CASH AND CASH EQUIVALENTS, at beginning of
period (less $2,334 of cash in subsidiary
deconsolidated for the 1995 period).............. 1,675 12,944 5,643 5,643 3,623 7,068
-------- ------- -------- -------- ---------- ----------
CASH AND CASH EQUIVALENTS, at end of period......... $12,944 $ 7,977 $ 3,623 $ 2,186 $ 7,068 $5,369
======= ======= ========= ========= ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest, net of amounts capitalized $ 6,647 $ 965 $ 579 $ 373 $ 19 $ --
======= ======= ========= ========= ========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Issuance of notes payable and capital lease obligations
for purchases of property and equipment...... $ 408 $ 726 $ 227 $ -- $ -- $ --
======== ======= ========= ========= ========= ==========
Issuance of notes payable for accrued interest
obligations.................................. $ -- $17,001 $ 9,416 $ -- $ -- $ --
======== ======= ========= ========= ========= ==========

</TABLE>

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

HEMMETER ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1994 AND 1995 AND AS OF JUNE 30, 1996
AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996

(Information as of June 30, 1996 and for the six months
ended June 30, 1995 and 1996 is unaudited)

(1) ORGANIZATION, PLAN OF REORGANIZATION
AND GOING-CONCERN CONSIDERATIONS

ORGANIZATION

Hemmeter Enterprises, Inc. ("HEI"), and its subsidiaries (the"Company"),
develop, own and operate gaming and related entertainment facilities. HEI was
incorporated in August 1993 to acquire and serve as the parent company of
certain companies now comprising HEI's wholly owned subsidiaries pursuant to a
restructuring of certain entities under common control which was consummated on
December 17, 1993. The accompanying financial statements have been prepared to
give effect to the 1993 restructuring.

Three wholly owned subsidiaries, BWBH, Inc., BWCC, Inc., Silver Hawk
Casino, Inc., own and operate limited stakes gaming facilities in Colorado
(collectively, the "Colorado Casinos"). Millsite 27, Inc., also a wholly owned
subsidiary, owns a surface parking facility constructed in 1994 for the benefit
of BWBH, Inc.'s casino. The Colorado Casinos commenced operations in 1992.
Another wholly owned subsidiary, Grand Palais Riverboat, Inc. ("GPRI"), is a
fifty percent joint venture partner in River City Joint Venture ("RCJV") with
Crescent City Capital Development Corp. ("CCCD"), an affiliate of Capital Gaming
International, Inc., which developed and operated a riverboat gaming project in
New Orleans, Louisiana (the "Riverboat Project") (Note 6). GPRI and CCCD each
operated separate riverboat gaming operations which commenced on March 29, 1995
and April 3, 1995, respectively. RCJV operated an entertainment and docking
facility for the two riverboats, with parking, dining, entertainment facilities
and other amenities.

GPRI BANKRUPTCY

The Riverboat Project incurred construction cost overruns and had
substantial operating losses as a result of the failure of the New Orleans
gaming market to develop as anticipated and the resulting failure of the
Riverboat Project to achieve projected revenues. As a result, GPRI and CCCD
terminated riverboat gaming operations on June 6, 1995 and June 9, 1995,
respectively. On July 26, 1995, certain creditors filed an involuntary petition
under Chapter 11 of the Federal Bankruptcy Code against GPRI, CCCD and RCJV. On
July 27, 1995, GPRI converted its petition to a voluntary petition under Chapter
11 of the Federal Bankruptcy Code in the United States Bankruptcy Court for the
Eastern District of Louisiana (the "Court"). Since that time, GPRI has continued
to operate as a debtor-in-possession, although the business of GPRI has not
operated since June 6, 1995.

Following termination of operations, HEI management began assessing the
possibility that all or part of the Riverboat Project could be sold to another
gaming operator. After evaluation and negotiation of potential transactions,
HEI, certain creditors and GPRI entered into a letter of intent with Casino
America, Inc. ("Casino America Agreement"). Generally, the Casino America
Agreement provides for the purchase by Casino America, Inc. of 100% of the newly
issued shares of common stock of a Reorganized GPRI in exchange for
consideration from Casino America, Inc. valued at approximately $59 million,
including cash, stock, notes and the assumption of certain GPRI liabilities. On
January 30, 1996, GPRI filed its proposed plan of reorganization ("GPRI Plan")
pursuant to which it seeks to implement the terms of the Casino America
Agreement. The GPRI Plan was confirmed by the Court on March 29, 1996. The GPRI
Plan will be consummated on the date on which the conditions to the
effectiveness of the GPRI Plan have been satisfied or waived (Note 13). Under
the GPRI Plan, the Company will receive GPRI's causes of action, if any, against
GPRI's joint venture partner in the Riverboat Project and will receive no other
distribution in respect of its stock ownership in GPRI or any claim that it may
have in the GPRI bankruptcy case.

HEI BANKRUPTCY

In June 1995, HEI received "Notices of Default" from the trustee of its
Senior Secured Pay-In-Kind Notes (the "Old Notes") (See Note 7), alleging that
HEI was in default under various provisions of the Old Notes Indenture. The
alleged defaults included, among other matters, violations related to the
issuance of certain additional indebtedness, the termination of riverboat gaming
operations, the numerous liens filed against the Riverboat Project and the
failure to file audited financial statements on a timely basis. HEI negotiated
with a committee comprised of certain holders of the Old Notes to restructure
the Old Notes. On November 7, 1995, HEI and three of its wholly owned
subsidiaries (BWBH, Inc. BWCC, Inc. and Millsite 27, Inc.) (collectively, the
"Debtor"), filed voluntary petitions for reorganization under Chapter 11 of the
Federal Bankruptcy Code in the District of Delaware as contemplated by the
negotiations with the holders of the Old Notes. The Chapter 11 case subsequently
was transferred to the Court.

The Court allowed the Debtor to continue business operations as a
debtor-in-possession. The Debtor's primary operations now consist of the
Bullwhackers Casinos. The Debtor received approval from the Court to pay or
otherwise honor certain of its pre-petition obligations related to the
Bullwhackers Casinos, including employee wages and benefits, utilities, and
claims of certain trade vendors.

Accordingly, these amounts have been paid or are included in the
appropriate liability captions in the accompanying December 31, 1995 and June
30, 1996 consolidated balance sheet. In addition, the Court approved the
Debtor's entering into a $7.9 million debtor-in-possession financing facility
(see Note 7).

HEI PROPOSED PLAN OF REORGANIZATION

On February 12, 1996, the Debtor filed its Chapter 11 First Amended Plan of
Reorganization and Disclosure Statement (as amended, the "Plan") with the Court.
The Court granted motions filed by the Debtor approving an amended Disclosure
Statement describing the Plan and establishing procedures for notification of
creditors and stockholders and for solicitation of formal acceptances of the
Plan by creditors. The Plan was confirmed by the Court on March 28, 1996.

The Plan will be consummated on the date on which certain conditions
specified in the Plan will be satisfied or waived (the "Effective Date"). The
following events will occur at the Effective Date pursuant to the Plan:

1. The Debtor will be discharged from any liability to GPRI or its creditors.
The Company will no longer have any interest in GPRI or the Riverboat
Project and its principal assets at that time will consist of the stock of
its subsidiaries which own the Bullwhackers Casinos and The Surface Parking
Lot. If the GPRI Plan is not effective prior to the Effective Date, the
Company will continue to own the capital stock of GPRI until the GPRI Plan
becomes effective.

2. The claims of entities which provide goods and services to the Bullwhackers
Casinos will be paid in full or will otherwise be treated in such a manner
so that they are not impaired and all other unsecured creditors of the
Bullwhackers Casinos will receive notes in a principal amount equal to the
allowed amount of their claims which provide for a single payment of
principal and accrued interest on the tenth anniversary of the issuance
thereof. All other unsecured creditors Company will receive no distribution
in respect of their claims against the Company.

3. The holders of the Old Notes and the holder of the secured claim of Resort
Income Investors, Inc. ("RII") will receive $50,000,000 in principal amount
of 12% Senior Secured Pay-In-Kind Notes of the Company, due 2003 (Note 7),
and one hundred percent (100%) of the issued and outstanding capital stock
of the "Reorganized Company," subject to being diluted to 90% by certain
stock grants to be provided to senior management employees and non-employee
directors of the Reorganized Company (Note 8). As a result, the holders of
the Old Notes and the RII claim will be the principal creditors and
stockholders of the Company. The portion of the new Senior Secured
Pay-In-Kind Notes paid to the holder of the RII claim will be less than $1
million and a similar portion of common stock will be issued to the holder
of the RII claim.

4. Pursuant to the settlement of certain lawsuits against the Company and
certain of its executive officers, the Company will issue two promissory
notes to Capital Associates, Inc. ("CAI"), an equipment lessor which had
leased equipment to the Company and GPRI, in the respective principal
amounts of $1.6 million and $3 million (the "CAI Notes"). The Company's
obligation in respect of the CAI Notes will be reduced dollar for dollar by
any amounts received by CAI in respect of its claims filed in the GPRI
bankruptcy case (Note 10).

5. Certain claims of the Debtor against third parties, including derivative
claims against the pre-Effective Date directors, officers, and employees of
the Debtor, will be transferred to a litigation trust (the "Litigation
Trust"). The trustees of the Litigation Trust are the post-Effective Date
directors of the Company and will determine whether or not to pursue any
such claims. Any amounts received in respect of any such claims will
benefit the holders of the Old Notes and the RII claim (Note 12).

6. The amounts outstanding under the DIP Facility (Note 7) will be paid in
full and the DIP Facility will be terminated. The Company anticipates
replacing the DIP Facility with a new $12.5 million credit facility on the
Effective Date.

7. The Company will change its name to Colorado Gaming & Entertainment Co.

LIABILITIES SUBJECT TO COMPROMISE

Pursuant to the Chapter 11 proceedings, certain secured and unsecured
claims against the Debtor in existence prior to the filing of the petitions for
relief under the Federal Bankruptcy Code were stayed while the Debtor continued
business operations as a debtor-in- possession. The stayed claims which are
"impaired" under the Plan are reflected in the accompanying December 31, 1995
consolidated balance sheet as "liabilities subject to compromise." As of the
petition date, the Debtor also discontinued accruing interest on its
pre-petition debt obligations. Additional claims have arisen subsequent to the
petition date resulting from the rejection of executory contracts and/or leases
and from the allowance by the Court of contingent and/or disputed claims.
Creditors and other parties in interest have filed claims with the Court which
are substantially in excess of the amounts recorded in the Debtor's records.
Management believes these differences are primarily related to errors,
duplicative claims and overstatement of claims. The exact amount of these
liabilities is subject to adjustment as disputed claim amounts are resolved by
the Court, which management believes will not have a material adverse effect on
the Company's financial position, results of operations or cash flows.

Liabilities subject to compromise consist of the following (in thousands):

December 31,
1995
Senior Secured Pay-In-Kind Notes................. $174,274
Resort Income Investors notes payable............ 2,122
Equipment financing.............................. 4,169
HEI guarantee of subsidiary debt................. 4,600
HEI trade payables............................... 1,295
---------
Total................................... $186,460
========

The accompanying consolidated financial statements have been prepared on a
going-concern basis, which contemplates continuity of operations, realization of
assets and liquidation of liabilities in the ordinary course of business.
However, as a result of the Chapter 11 filing and circumstances relating to this
event, including the Debtor's highly leveraged financial structure, there is
substantial doubt about the continuity of the Company's operations and the
realization of the Company's assets and liquidation of its liabilities. While
under the protection of Chapter 11, the Debtor may, with the approval of the
Court, sell or otherwise dispose of assets and liquidate or settle liabilities
for amounts other than those reflected in the consolidated financial statements.
Further, the proposed Plan will materially change the amounts reported in the
consolidated financial statements, which do not give effect to any adjustments
to the carrying value of the assets or amounts of liabilities that might be
necessary as a consequence of the proposed Plan. The appropriateness of using
the going-concern basis is dependent upon both the Plan and the GPRI Plan
becoming effective, generation of sufficient cash from operations and financing
sources to meet obligations and achievement of satisfactory levels of future
operating profit. The accompanying financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities that might be necessary
if the Company is unable to continue as a going concern.

FRESH START REPORTING

Upon confirmation of the Plan, the Company's post-petition liabilities and
allowed claims exceeded the reorganization value of the reorganized Company.
Additionally, the Plan provides that the existing stockholders of the Company
will receive no ownership interest in the Reorganized Company. Because these two
conditions exist, the Company is subject to and as of the Effective Date of the
Plan, the Reorganized Company will adopt Fresh Start Reporting in accordance
with the American Institute of Certified Public Accountants Statement of
Position 90-7, "Financial Reporting by Entities in Reorganization under the
Bankruptcy Code" ("SOP 90-7"). Fresh start reporting will result in material
changes to the consolidated balance sheet, including revaluation of assets and
liabilities to fair market value and revaluation of equity based on the
reorganization value of the ongoing business.

The $65.2 million reorganization value was estimated based upon a
Discounted Cash Flow Analysis. Under the Discounted Cash Flow Analysis, the
value of the Company was calculated utilizing five year projected cash flows
plus an estimated terminal value at the end of year five. The terminal value was
calculated at 6 times year five cash flows. The cash flows and terminal values
were then discounted to present values by applying a discount rate of
approximately 17%. The Company's cash flow forecasts reflect numerous
assumptions, including modest increases in revenues and profitability resulting
primarily from enhanced marketing efforts, selective capital expenditures,
implementation of additional cost efficiencies and overall growth in the Black
Hawk market. The increases have been assumed to be offset somewhat by an
increased level of competition in the Black Hawk market. The forecasts do not
take into account the Company's proposed expansion plans including the
acquisition and opening of the Silver Hawk Casino or the construction of the
proposed parking structure in Black Hawk. Upon adopting fresh start reporting,
the reorganization value will be allocated to the assets and liabilities of the
Reorganized Company, including subsidiaries. Any excess of the reorganization
value over the fair market value of the net assets and liabilities will be
reported as excess reorganization value and will be amortized over a 20-year
period or less.

As a result of adopting fresh start reporting, the Reorganized Company's
consolidated financial statements will not be comparable with those prepared
before the effective date, including the historical consolidated financial
statements included herein.

(2) SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of
HEI and its wholly owned subsidiaries. Intercompany balances and transactions
have been eliminated.

As of December 31, 1994, the accounts of GPRI are consolidated with those
of HEI and its other majority owned subsidiaries. Because of the pending GPRI
Chapter 11 bankruptcy proceedings and Casino America Agreement, it has been
determined that HEI does not "control" GPRI and, therefore, GPRI no longer meets
the consolidation criteria pursuant to Statement of Financial Standards No. 94,
"Consolidation of All Majority-Owned Subsidiaries." Accordingly, effective
January 1, 1995, HEI's investment in GPRI is being accounted for under the
equity method. Under the equity method, original investments and advances are
recorded at cost and adjusted by the Company's share of undistributed losses of
the investee.

USE OF ESTIMATES

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

CASH AND CASH EQUIVALENTS

Cash and cash equivalents includes cash in banks, currency located in the
casinos' vaults, coins located in the gaming device hoppers and other cash used
in daily operations. Included in cash and cash equivalents at December 31, 1994,
1995 and June 30, 1996 is restricted cash totaling $618,000, $595,000 and
$509,000, respectively, which represents the portion of cash on hand that is
required to be maintained by the Bullwhackers Casinos based on regulations
promulgated by the Colorado Limited Gaming Control Commission (the "Colorado
Gaming Commission").

The Company considers all highly-liquid investments purchased with an
original maturity of three months or less to be cash equivalents. The carrying
amount of cash equivalents approximates fair value because of the short-term
maturity of those investments.

INVENTORIES

Inventories consist of food and beverage, retail and casino supplies.
Inventories are stated at the lower of cost (first-in, first-out basis) or
market.

PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements are stated at cost.
Depreciation and amortization are computed using the straight-line method over
the estimated useful lives of the assets. Costs of major improvements are
capitalized; costs of normal repairs and maintenance are charged to expense as
incurred.

OTHER ASSETS

Other assets consisted of the following (in thousands):

<TABLE>
<CAPTION>
December 31,
1994 1995 June 30,1996
---- ---- ------------

<S> <C> <C> <C>
Debt placement costs for
$140 million 11 1/2% Senior
Secured Pay-In-Kind Notes
(net of $1,441,000 of accumulated
amortization in 1994)............. $ 7,377 $ -- $ --
Dock Board deposit................... 7,551 -- --
Licensing Costs...................... 3,271 -- --
Other, net........................... 2,780 981 776
--------- ------ ------
$ 20,979 $ 981 $ 776
======== ====== ======

Debt placement costs incurred to obtain the Old Notes were being amortized
over the seven-year term of the Old Notes using the effective interest rate
method. In 1995, all unamortized debt placement cost were charged-off as
reorganization items in accordance with the provisions of SOP 90-7. The Dock
Board deposit represents a deposit paid by GPRI to the Board of Commissioners of
the port of New Orleans related to the Riverboat Project. Costs incurred in
relation to formation of GPRI and licensing fees for its initial farming license
have been capitalized and were being amortized over the five-year term of the
initial Louisiana gaming license beginning in March 1995. Effective January 1,
1995, as a result of the deconsolidation of GPRI, the Dock Board deposit and
license costs were included in the separate financial statements of GPRI.
Accumulated amortization of other assets as of December 31, 1994 and 1995 and
June 30, 1996 totaled $175,200, $239,400 and $271,500, respectively.

ACCRUED EXPENSES

</TABLE>
<TABLE>

Accrued expenses consisted of the following (in thousands):

<CAPTION>
December 31, June 30,
1994 1995 1996
(unaudited)
<S> <C> <C> <C>
Gaming taxes payable............ $ 541 $537 $ 542
Accrued payroll and
related expenses............. 1,310 1,048 1,023
Accrued offering costs.......... 200 -- --
Accrued gaming liabilities...... 659 437 1,187
Other accruals.................. 1,017 729 780
------ ------- ------
$3,727 $3,953 $3,532
====== ====== ======
</TABLE>

CASINO REVENUES AND PROMOTIONAL ALLOWANCES

In accordance with industry practice, the Company recognizes as casino
revenues the net win from gaming activities, which is the difference between
gaming wins and losses. The retail value of food and beverage furnished to
customers on a complimentary basis is included in gross revenues and then
deducted as promotional allowances. The estimated cost of providing such
promotional allowances is included in casino operating expenses in the
accompanying consolidated statements of operations and totaled approximately
$251,000, $429,000 and $615,000 for the years ended December 31, 1994 and 1995,
respectively, and for the six months ended June 30, 1996.

PREDEVELOPMENT EXPENSE

Historically, costs incurred during investigation of potential development
projects were capitalized and charged to expense at such time as management
concluded that a development project was no longer viable. As of December 31,
1994 all costs related to development projects were expensed as management had
determined each of the related projects were no longer viable development
opportunities. Beginning in 1995, costs related to investigation of new venue
development projects were expensed as incurred.

PRE-OPENING EXPENSES

The Company expenses pre-opening costs as incurred. Pre-opening costs
consist of expenditures incurred prior to the opening of the casinos to prepare
the casinos for business and include labor costs, certain consulting, marketing
and other direct costs. Because GPRI was consolidated in 1994, pre-opening costs
of $2.6 million incurred in 1994 in connection with GPRI's riverboat are
reflected in the accompanying 1994 consolidated statement of operations.

REORGANIZATION ITEMS

Reorganization items consist of income, expenses and other costs directly
related to the Chapter 11 reorganization of the Debtor.

Reorganization items consisted of the following (in thousands):

<TABLE>

<CAPTION>
December 31, June 30,
1995 1996
(unaudited)
<S> <C> <C>
Charge-off of debt discount and placement
costs..................................... $10,717 $ --
Guarantee of subsidiary debt................. 4,600 --
Professional fees............................ 2,593 2,290
------- ------
$17,910 $2,290
======= ======
</TABLE>

NET LOSS PER COMMON SHARE

Net loss per common share and common equivalent share are computed by
dividing net loss by the weighted average number of shares of common stock and
common stock equivalents outstanding during the year. For all periods presented
in the accompanying consolidated statements of operations, outstanding warrants,
options and restricted stock have been excluded from the calculation of weighted
average common and common equivalent shares outstanding as their impact in net
loss per share would have been antidilutive.

NEW AUTHORITATIVE PRONOUNCEMENTS

Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
will be adopted by the Company in 1996. The adoption of this Statement is not
expected to have a material impact upon the Company's results of operations or
financial position.

RECLASSIFICATIONS

Certain prior period amounts have been reclassified to conform to the
current year presentation.

INTERIM FINANCIAL STATEMENTS

The financial statements as of June 30, 1996 and for the six month periods
ended June 30, 1996 and 1995 are unaudited. In management's opinion, the
unaudited financial statements as of June 30, 1996 and for the six month periods
ended June 30, 1996 and 1995 include all adjustments necessary for a fair
presentation. Such adjustments were of a normal recurring nature with the
exception of Fresh-start accounting adjustments.

(3) RESTRICTED FUNDS IN ESCROW

In connection with the issuance of the $140 million aggregate principal
amount of Old Notes (Note 7), the Company was required to escrow a portion of
the net proceeds to be used to fund a portion of the Company's expected share of
the total cost to develop the Riverboat Project (Note 6). The Company also
escrowed additional net proceeds used for construction of a surface parking
facility (Note 12). Transactions in the escrow account were managed by an
independent trustee and disbursement agent who administered requests for
disbursements pursuant to a Disbursement Agreement, which was a condition to the
issuance of the Old Notes. Total deposits to the escrow account were $81.7
million in 1993 of which $10.5 million and $64.8 million had been disbursed as
of December 31, 1993 and 1994, respectively, including $9 million used to repay
loans from an affiliate in 1993 (Note 11) and $15 million which was released to
the Company in 1994 for general working capital upon the occurrence of certain
events as allowed by the Old Notes Indenture. Approximately $2.5 million of the
funds disbursed in 1994 were used for construction of the surface parking
facility. The remaining funds were disbursed in 1995 for development of the
Riverboat Project, including funds for construction of the riverboat, and the
acquisition of property for the entertainment and dock facility. Funds held in
this account served as collateral for the Old Notes.

(4) PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET

Property, equipment and leasehold improvements consisted of the following (in
thousands):

<TABLE>
<CAPTION>
December 31, June 30,
1994 1995 1996
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Land and improvements.............. $ 14,105 $ 14,330 $ 11,799
Building and improvements.......... 5,722 5,764 5,212
Leasehold improvements............. 7,699 7,626 18,901
Gaming equipment, furniture
and fixtures.................... 18,204 18,570 18,688
Construction-in-progress........... 33,551 - 3,880
--------- --------- ---------
79,281 46,290 58,480
Less: accumulated depreciation
and amortization................ (10,202) (14,163) (14,992)
--------- --------- ---------
$ 69,079 $ 32,127 $ 43,488
========= ========= =========
</TABLE>

For the year ended December 31, 1994, interest costs totaling $248,000 were
capitalized to land and improvements during construction of the surface parking
facility. In addition, interest costs totaling $1.3 million and $1.8 million
were capitalized on construction costs related to the riverboat in 1993 and
1994, respectively, and are included in construction-in-progress.
Construction-in-progress at December 31, 1994 consisted of construction costs
related to GPRI's riverboat. Effective January 1, 1995, these costs are now
reflected in the separate financial statements of GPRI.

Depreciation and amortization are computed using the straight-line method
over the following useful lives:

Useful Lives
Land improvements............... 15 years
Building and improvements....... 5 - 31.5 years
Leasehold improvements.......... 5 - 23 years
Gaming equipment, furniture
and fixtures................. 5 - 31.5 years

(5) NEW VENUE PROJECTS

For the years ended December 31, 1994 and 1995, the Company expensed $3.9
million and $402,000, respectively, of predevelopment expenses related to
various potential development opportunities in new gaming venues throughout
North America. The costs incurred represented design, presentation, research,
consulting, regulatory and other costs associated with pursuing development
opportunities in new gaming venues. The Company expensed these costs as
management determined that each of the potential new gaming venues were no
longer viable development projects. In early 1995, the Company ceased such
activities due to its deteriorating financial condition. In September 1994, the
Company entered into an agreement to invest $6.2 million for a 25% interest in
Promociones e Inversiones de Guerrero S.A. de C.V. ("PRIGSA"), a Mexico based
development and gaming Company with operations in Acapulco. As of December 31,
1994, the Company had contributed $5.8 million towards its investment. In 1995,
the Company contributed its remaining commitment of approximately $289,000. The
Company had an option to convert its contributions to shares of common stock in
PRIGSA upon approval by the Mexican government. Results of PRIGSA operations
upon opening in the fall of 1994 were substantially below expectations and, as a
result, PRIGSA suffered significant operating losses. Because the majority of
PRIGSA's other debt securities are in a senior position to PRIGSA's obligation
to the Company, the Company has determined that it is unlikely that the
Company's advances will be repaid or that the Company will otherwise realize its
investment in PRIGSA. Accordingly, as of December 31, 1994, the Company
charged-off the full value of its investment to impairment of assets in the
accompanying consolidated statements of operations.

(6) INVESTMENT IN AND ADVANCES TO GRAND PALAIS RIVERBOAT, INC.

As discussed in Note 1, GPRI was formed in March 1993 to design, develop,
own and operate a riverboat casino in New Orleans, Louisiana. In connection with
the issuance of the Old Notes, HEI escrowed $79.2 million of the proceeds of the
Old Notes for GPRI's share of the development costs of the proposed Riverboat
Project (Note 3). In June 1994, GPRI and CCCD formed the RCJV to develop the
proposed Riverboat Project. The original budgeted cost for the Riverboat Project
was $196.3 million, exclusive of capitalized interest. Through December 31,
1994, the Company had invested $64.2 million in GPRI relating to the
construction of the riverboat, licensing, Dock Board costs and funds invested in
RCJV for construction of the entertainment and dock facility. In addition, in
1994 the Company recorded net losses of $3.3 million from GPRI, related to
pre-opening costs of GPRI and RCJV, offset by interest income. Amounts relating
to GPRI have been consolidated with HEI and its other subsidiaries in the
accompanying December 31, 1994 consolidated financial statements.

In April 1995, the Riverboat Project budget was revised to approximately
$223 million. The increased costs primarily related to additional construction
and design fees on the RCJV entertainment and dock facility, funds which were
spent to accomplish an accelerated opening, and increased pre-opening costs,
including additional bankroll requirements, insurance costs and outside services
for staffing and operating the riverboats. GPRI intended to fund its share of
these additional costs by deferral of payments, cash flows from the project and
additional equity contributions from HEI and from CCCD. Upon commencement of
operations, revenues derived during the period of operations of the Riverboat
Project were approximately one third of projected revenues. Accordingly, during
the period of operations (March 29, 1995 to June 6, 1995), GPRI incurred
significant operating losses. As a result of the construction cost overruns and
the failure of the Riverboat Project to generate sufficient revenues to cover
operating costs, GPRI determined it could no longer continue the operation of
its riverboat casino.

As of December 31, 1995, HEI's investment in GPRI had increased to $73.5
million, primarily related to additional funds contributed in 1995 to cover
construction overruns and operating losses. For the year ended December 31,
1995, GPRI reported a net loss of $71.7 million, including a $20.2 million
write-down of GPRI assets to estimated realizable value and a $44.9 million
write-down of its interest in RCJV and assumption of certain RCJV debts to be
paid by GPRI pursuant to the GPRI Plan in connection with the sale of GPRI to
Casino America, Inc. As a result of the losses of GPRI, including its write-down
of RCJV, the Company's investment in GPRI has been reduced to zero. As discussed
in Note 1, under the GPRI Plan, HEI will receive no distribution on account of
its current stock ownership in GPRI, and HEI has also guaranteed $4.6 million of
GPRI's debt.

(7) NOTES PAYABLE

Notes payable consisted of the following (in thousands):

<TABLE>
<CAPTION>
December 31, June 30,
1994 1995(1) 1996
(unaudited)
<S> <C> <C> <C>
Secured Pay-In-Kind Notes (net of
unamortized discount of $5.9
million in 1994)............... $ 151,982 $ 174,274 $ 50,000
Credit facility with a
bank............................ 13,048 -- 4,319
Notes payable to gaming
equipment vendors............... 3,793 2,623 --
Notes payable to RII.............. -- 2,122 --
Other............................. -- 4,600 2,300
---------- ---------- ---------
168,823 183,619 56,619
Less: current portion............ (14,610) -- (1,347)
---------- ---------- ---------
$ 154,213 $ 183,619 $ 55,272
========== ========== =========
</TABLE>

(1) These amounts are included in "liabilities subject to compromise" in the
accompanying December 31, 1995 consolidated balance sheet.

DEBTOR-IN-POSSESSION FINANCING

On December 8, 1995, the Court approved certain financing and security
agreements (the "DIP Facility") between the Debtor and an unaffiliated lender
(the "DIP Lender") designed to provide the Debtor with adequate financing to
operate its businesses during the bankruptcy period. The aggregate DIP Facility
was $7.9 million in the form of revolving credit facilities to provide up to
$2.5 million for working capital purposes, $4.4 million for equipment
refinancing and $1 million to provide financing for the Debtor's possible
acquisition of strategic assets (Note 12).

Borrowings under the DIP Facility are secured by a first priority lien and
security interest in all of the Debtor's property and equipment, except for
certain "permitted liens" as defined in the DIP Facility agreements. In
addition, borrowings under the DIP Facility constitute Allowed Superpriority
Administrative Expense Claims and, therefore, have priority over substantially
all other administrative expense claims of the bankruptcy proceedings. The DIP
Facility will be repaid with proceeds from the Exit Financing (see below).

Interest on borrowings under the DIP Facility accrue interest at prime plus
2.75%. Loan fees and other expenses totaling $300,000 were paid to the DIP
Lender, which amounts are included in other assets in the accompanying
consolidated balance sheets and are being amortized over the one-year term of
the facility.

The term of the DIP Facility is one year subject to an accelerated maturity
on the effective date of confirmation of the proposed Plan. The Debtor is
subject to certain covenants which require, among other things, that the Debtor
maintain certain financial ratios, and that restrict, among other things, the
incurrence of additional debt, the disposal of assets and capital expenditures.
As of December 31, 1995, there were no outstanding borrowings under the DIP
Facility.

EXIT FINANCING

It is a condition precedent to the effectiveness of the proposed Plan that
the Debtor will have closed on a facility from the DIP Lender to provide up to a
$12.5 million revolving credit facility to the Reorganized Company to replace
the existing DIP Facility. Borrowings under the revolving credit facility will
be used for working capital purposes, refinancing of existing equipment secured
debt and for construction of a parking structure located near the Bullwhackers
Casino (see Note 12) and adjacent to the proposed Silver Hawk Casino in Black
Hawk, Colorado. Borrowings, including accrued interest at prime plus 2.375%,
would be payable monthly, subject to a maximum five-year term, and would be
secured by a first priority lien and security interest in substantially all the
assets of the Reorganized Company.

SENIOR SECURED PAY-IN-KIND NOTES

On December 21, 1993, the Company completed a private offering of 140,000
units consisting of $140 million aggregate principal amount of the Old Notes
with detachable warrants to acquire 1,750,000 shares, or 10%, of common stock of
the Company. The warrants were valued by the Company at $7 million, which amount
was offset against the Old Notes balance and was being amortized as interest
costs over the seven-year term of the Old Notes. The net proceeds from the
offering, after deducting the commissions and other offering expenses were
approximately $131 million. The net proceeds were used to repay construction
financing for the Bullwhackers Casinos and provide funds for the Riverboat
Project and for working capital purposes. The offering expenses of approximately
$9 million, were capitalized as other assets, and were being amortized over the
seven-year term of the Old Notes using the effective interest rate method. As of
December 31, 1995, all remaining unamortized discount and offering expenses
related to the Old Notes were written-off as a reorganization item in accordance
with SOP 90-7.

Interest on the Old Notes accrued at 12% per annum and was payable
semiannually on June 15 and December 15, commencing June 15, 1994. Through
December 15, 1995, at the Company's option, interest on the Old Notes was
payable either in cash or through the issuance of additional Old Notes.
Thereafter, the Company was required to pay interest on the Old Notes in cash.
On June 15 and December 15, 1994, the Company made interest payments on the Old
Notes by issuing a total of $17 million of additional Old Notes. On June 15,
1995, the Company made interest payments on the Old Notes by issuing a total of
$9.4 million of additional Old Notes. No interest payment or issuance of
additional Old Notes was made on December 15, 1995, because of the Debtor's
bankruptcy filing.

The Old Notes were redeemable by the Company, in whole or in part, at any
time beginning December 15, 1996, at certain times and redemption prices as
specified in the Old Notes Indenture. Unless previously reduced, the Company was
required to redeem, at par plus accrued interest, 20% of the then outstanding
aggregate principal amount of the Old Notes on each of December 15, 1998 and
1999, with the remainder due in December 2000. To date, no Old Notes have been
redeemed.

The Old Notes were secured by substantially all the assets of the Company,
including the common stock of its subsidiaries, GPRI's joint venture interest in
the RCJV, guarantees of certain of HEI's subsidiaries, and other personal
property. The Company was also subject to certain covenants which restricted,
among other things, the incurrence of additional debt, payment of dividends,
ownership of new subsidiaries, new business activities, proceeds from the sale
of assets and transactions with affiliates.

As discussed in Note 1, in June 1995, HEI received "Notices of Defaults"
from the trustee of the Old Notes, alleging that HEI was in default under
various provisions of the Indenture. As a result of the defaults under the
Indenture, the holders of the Old Notes are entitled to all of the remedies
contained in the Indenture, including but not limited to acceleration of
repayment of the Old Notes and foreclosing on the security pledged by the
Company to the trustee.

On November 7, 1995, the Debtor filed for Chapter 11 protection.
Accordingly, interest totaling approximately $3 million was not accrued for the
period November 7, 1995 to December 31, 1995. Additionally, for the three months
ended March 31, 1996, interest totaling $5.2 million was not recorded due to the
Chapter 11 proceedings. As of December 31, 1995, the total amount of the Old
Notes, plus accrued interest through November 7, 1995, is $174.3 million which
amount is included in "liabilities subject to compromise" in the accompanying
consolidated balance sheets.

The Debtor negotiated with a committee comprised of certain of the holders
of the Old Notes to restructure the Old Notes. Pursuant to the proposed Plan,
the holders of the Old Notes, along with RII, (see below) will receive, on a pro
rata basis, New Senior Secured Notes ("New Notes") having an aggregate principal
amount of $50 million and 5 million shares of common stock of the Reorganized
Company (Note 8). Interest will accrue at a rate of 12% per annum, and is
payable semi-annually. Through the first year, at the option of the Reorganized
Company, interest on the New Notes will be payable either in cash or through the
issuance of additional New Notes. Thereafter, the Reorganized Company will be
required to pay interest on the New Notes in cash. The New Notes will be secured
by substantially all the assets of the Reorganized Company, including the common
stock of the subsidiaries. The New Notes will be redeemable after the fourth
anniversary at redemption prices to be set forth in the New Notes Indenture
subject to final maturity in 2003. In addition, the New Notes Indenture will
include certain restrictive covenants.

OTHER BORROWINGS

On May 15, 1995, HEI entered into a $4 million working capital credit
facility with RII. HEI borrowed $2 million under this facility, which proceeds
were then invested in GPRI. Borrowings accrued interest at 12% and were due on
September 30, 1995. The Company granted a security interest to RII in certain of
the Company's assets including a subordinated interest in GPRI's riverboat. HEI
was unable to repay the $2 million and thus is in default under the RII
facility. Interest totaling $35,000 was not accrued from the petition date,
November 7, 1995 to December 31, 1995. The $2 million, plus accrued and unpaid
interest through November 7, 1995 totaling $2.1 million, is included in
"liabilities subject to compromise" in the accompanying consolidated balance
sheet as of December 31, 1995. Pursuant to the proposed Plan, RII will receive
New Notes and shares of common stock of the Reorganized Company as discussed
above.

In 1994, GPRI obtained a credit facility from a Bank in the amount of $15
million to fund a portion of the riverboat casino construction. As of December
31, 1994, GPRI had borrowed $13.0 million under this facility. Borrowings
accrued interest at prime plus 1% and matured on April 24, 1995 and accordingly,
were reflected as a current note payable in the accompanying December 31, 1994
consolidated balance sheet. Effective January 1, 1995, as a result of the
de-consolidation of GPRI, borrowings under this credit facility are no longer
recorded in the consolidated balance sheets and are recorded in the separate
financial statements of GPRI. BWBH, Inc. and BWCC, Inc. are guarantors under
this credit facility and, accordingly, the Bank has filed a claim in the
bankruptcy proceedings of the Debtor. However, the Bank's claims are expected to
be satisfied in accordance with the proposed GPRI Plan (Note 13).

During 1991 and 1992, RII made acquisition, development and construction
loans to the Company totaling $24.3 million ("RII Notes") for the Bullwhackers
Casinos. The original maturity date of the RII Notes was October 31, 1996. The
RII Notes were repaid with proceeds from the Old Notes in December 1993. Prior
to repayment, interest on the RII Notes accrued at 14.5% and was payable
quarterly. Upon prepayment, RII received bonus interest totaling $700,000 in
accordance with the terms of the RII Notes. To obtain the financing, the Company
paid RII loan fees totaling $729,000. The unamortized balance of these loan fees
upon repayment, totaling $457,800, was written off as interest expense in 1993.

In May 1992, the Company signed a note agreement with its construction
contractor for payment of outstanding construction costs related to the
Bullwhackers Casinos. The note, as modified in 1993, required monthly interest
payments at prime plus 2%, with maturity in December 1994. This note was repaid
with proceeds from the Old Notes in December 1993.

The Company financed a portion of the purchase price of the land on which
the Bullwhackers Casino in Central City, Colorado is located with a purchase
money note payable to the seller. The note required monthly payments of
principal and interest of $108,100 (at 10%) through its October 1994 maturity
date. This note was repaid with proceeds from the Old Notes in December 1993.

The Company financed the acquisition of a portion of the Bullwhackers
Casinos' gaming equipment with notes payable to an equipment vendor totaling $7
million. Such notes are secured by the gaming equipment and the proceeds from
the gaming equipment and are guaranteed by certain of the HEI's stockholders. In
April 1993, the terms of the notes payable were modified. Beginning April 1993,
the then outstanding principal balance and accrued interest were combined and
began accruing interest at a fixed rate of 9.5%. Monthly principal and interest
payments of $151,000 were required through April 1997. As of the petition date,
November 7, 1995, the Company stopped accruing interest, totaling $37,940, for
the period from November 7, 1995 to December 31, 1995, and making any repayments
on these notes. Subsequent to year end, the Company reached an agreement with
the lender to repay the $2.6 million outstanding balance on the notes for
approximately $2 million with proceeds from the DIP Facility realizing a 20%
discount for retiring the notes (Note 13).

(8) CAPITAL STRUCTURE

CAPITAL STRUCTURE AFTER CONSUMMATION OF THE PROPOSED PLAN

The proposed Plan provides for the amendment and restatement of the
Company's certificate of incorporation and bylaws. The new charter will
authorize 20 million shares of $.01 par value common stock. The holders of the
Old Notes and RII (Note 1) will receive 5 million shares of common stock,
representing 100% of the outstanding shares of common stock subject to being
diluted to 90% by certain stock grants to be issued to senior management
employees and non-employee directors of the Reorganized Company pursuant to a
proposed Management Incentive Program and under an employment agreement with the
chief executive officer of the Reorganized Company.

CAPITAL STRUCTURE PRIOR TO THE CONSUMMATION OF THE PLAN

PREFERRED STOCK

Preferred stock of the Company consists of 2 million authorized shares, of
which none has been issued.

COMMON STOCK

Common stock of the Company consists of 50 million authorized shares. All
common stock will be canceled under the Plan (Note 1). In 1993, 10,269,641 were
issued pursuant to the restructuring (Note 1). In addition, warrants to purchase
a total of 7,130,359 shares of common stock were issued in connection with the
restructuring (2,399,373 shares), the issuance of the Old Notes (1,750,000
shares) (Note 7) and the loan from an affiliate (2,980,986 shares) (Note 11).
The warrants are immediately exercisable at a price of $.01.

The warrants to acquire 2,399,373 shares of common stock of the Company
were issued to certain individuals having ownership rights in the predecessors
to the Company. These warrants were assigned a nominal value because these
individuals acquired such rights in connection with the formation of the
predecessor companies at either nominal or no cost. A consultant to the Company
in connection with the Company's Riverboat Project received 1,605,739 of such
warrants in exchange for his right to receive ownership in the predecessor
companies. In 1994, 421,854 shares of common stock were converted into warrants
to acquire 421,854 shares of common stock as a result of transfers to this
consultant from an existing shareholder. In 1995, certain warrants were
converted into 1,849,781 shares of common stock.

The Company adopted an "Omnibus Stock and Incentive Plan" (the "Stock
Plan") in December 1993. A maximum of 1,000,000 shares were reserved for
issuance under the Stock Plan. The Stock Plan was to terminate five years from
the date of its adoption, unless sooner terminated by the Board of Directors. In
1993 the Company granted a total of 130,000 restricted shares to officers of the
Company and a consultant. In 1994, 28,000 shares of Restricted Stock were
forfeited. In 1994 the Company granted 60,000 ISO's to a former officer to
purchase shares of common stock of the Company at an exercise price of $4.00 per
share. The options vest equally over three years with the first vesting date on
April 1, 1995. In 1995 the Company granted 85,000 restricted shares and 85,000
options, at an exercise price of $4.00 per share, to a current officer of the
Company. Both the options and restricted stock shares vest equally over a three
year period. All grants under the Stock Plan will be forfeited as a result of
the proposed Plan (Note 1). The Company recognized compensation expense of
$169,000 in 1995 related to the vesting of the restricted shares. No additional
compensation expense was recognized after November 7, 1995.

WARRANTS ISSUED

Warrants issued includes $7 million of value assigned to the Old Notes
warrants (Note 7) and, in 1994, $1.3 million of value assigned to the GPRI
warrants (Note 11). The Company has warrants outstanding to purchase 5,702,432
shares of common stock at a nominal exercise price. Subject to obtaining any
necessary gaming approvals, the warrants may be exercisable any time after their
issuance. Prior to the exercise of the warrants, holders of warrants are not
entitled to any of the rights of a holder of the Company's common stock,
including the right to vote or to receive dividends. All warrants will be
extinguished and canceled under the proposed Plan (Note 1).

NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

The Company has also adopted the "Non-Employee Director Stock Option Plan."
Only non-employee directors are eligible to participate in the Non-Employee
Director Stock Option Plan. A total of 100,000 shares of common stock are
authorized and reserved for issuance under the Non-Employee Director Stock
Option Plan.

A total of 20,000 options have been granted and vested to five non-employee
directors at an exercise price of $4.00 per share. All grants under the
Non-Employee Director Stock Option Plan will be extinguished and canceled under
the Plan.

(9) INCOME TAXES

The Company has no provision for income taxes in 1994 or 1995 nor for the
six months ended June 30, 1996, due to the Company's significant loss position.
Prior to December 21, 1993 or the formation of the Company, taxes were not
provided on the predecessor entities because all tax obligations of those
entities passed through to the owners of those entities.

The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109"), in December 1993. SFAS 109 requires
recognition of deferred tax assets and liabilities based on enacted tax laws for
any temporary differences between the financial reporting and tax basis of
assets, liabilities and carryforwards. Deferred taxes are then reduced, if
deemed necessary, by a valuation allowance for the amount of any tax benefits
which, based on management's opinion, are not expected to be realized. The net
deferred tax asset as of December 31, 1994 and 1995 is comprised of the
following (in thousands):

<TABLE>
<CAPTION>
December 31, June 30,
1994 1995 1996
---- ---- ----
(unaudited)
CURRENT:
<S> <C> <C> <C>
Accrued vacation and gaming
liabilities........................ $ 356 $ 184 $ 184

NON-CURRENT:
Difference in asset basis............. 3,478 3,053 (461)
Cancellation of indebtedness.......... -- -- (55,035)
Start up costs/intangibles
capitalized for tax................ 1,967 -- --
Impairment of assets.................. 3,164 5,832 2,565
Reorganization items.................. -- 4,287 --
Deferred interest for tax............. -- 404 --
Book tax difference of RCJV........... -- 8,646 8,646
Net operating loss carryforwards...... 7,899 41,148 49,410
-------- -------- --------
Net deferred tax asset................ 16,864 63,554 5,309
Valuation allowance................... (16,864) (63,554) (5,309)
-------- -------- --------
$ -- $ -- $ --
======== ======== ========
</TABLE>

The net deferred tax asset valuation allowance is equal to the full amount
of the net deferred tax asset because the realization of such asset is dependent
upon future taxable income, which is uncertain. The Company currently has net
operating loss carryforwards totaling approximately $103 million, which expire
beginning in 2008. These net operating loss carryforwards do not include the
separate company net operating loss generated by GPRI in 1995.

Generally, the Company anticipates that the reorganization will allow the
Company to produce income from operations and potentially taxable income and net
income for financial reporting purposes. Since its inception, the Company has
generated significant net operating loss carryforwards for tax purposes, which,
in the absence of the Company's bankruptcy, would have been available to offset
any taxable income earned in the future. As a result of the consummation of the
proposed Plan, the Company may undergo a substantial change in ownership and
incur significant forgiveness of indebtedness income. Additionally, a
significant portion of the tax assets includes tax losses of GPRI. If GPRI is
unable to retribute those losses to HEI, then those assets will be transferred
to Casino America in connection with the sale of GPRI stock to Casino America.
If HEI is unable to attain such assets the debt forgiveness income and the
potential ownership change may significantly limit or eliminate the Company's
net operating loss carryforwards and other tax benefits. Fresh start accounting
requires the Company to significantly increase the book basis of its assets, the
tax basis of those assets generally remain at their historical basis. Therefore,
given the potential limitation or elimination of the Company's net operating
loss carryforwards and the increased book depreciation and amortization charges,
the Company may have taxable income in the future, and, therefore, may be
required to pay income taxes, even though it may record a loss for financial
reporting purposes.

(10) LEASES

CAPITAL LEASES

On March 1, 1993, the Company entered into a Master Lease Agreement with
Capital Associates International, Inc. ("CAI") for lease financing totaling $2.2
million to provide working capital. Certain of the Company's equipment was
pledged as security for the borrowings. The Debtor, and certain of HEI's
stockholders also guaranteed repayment of the borrowings. In 1995, the Master
Lease Agreement was amended to provide $2.8 million in additional lease
financing to be used for the Riverboat Project and to be repaid by GPRI. The
financing has been treated as a capital lease in the separate financial
statements of the Company and of GPRI.

As a result of the termination of Riverboat Project operations, GPRI was
unable to make its required payments under the lease. Accordingly, CAI initiated
a lawsuit against the Company (Note 12) to recover all amounts owing under the
Master Lease, as amended ("Lawsuit #1"). The finance company initiated a second
lawsuit against the Company and certain of its officers alleging that the
finance company was misled into entering into the amendment to the Master Lease
Agreement ("Lawsuit #2"). In September 1995, a judgment was entered against the
Company in Lawsuit #1 for $4.6 million, which judgment has been appealed by the
Company. This amount is reflected as a liability subject to compromise in the
accompanying consolidated balance sheets.

In February 1996, the parties to the two lawsuits entered into a settlement
agreement which seeks to resolve the disputes. Pursuant to the settlement
agreement, both lawsuits will be dismissed and the Reorganized Company will
issue two notes payable to CAI. The first note will be in the amount of $1.6
million, payable in 10 quarterly installments of principal and interest (at 9%
per annum) and will be unsecured. The second note will be in the amount of $3
million, payable in 20 quarterly installments of principal and interest (at 9%
per annum) and will be unsecured. Payments on each note will begin 90 days after
the Effective Date of confirmation of the proposed Plan. The settlement
agreement further provides that if the finance company receives any
distributions (as defined) from its claims in the GPRI bankruptcy, or if Casino
America, Inc. agrees to assume any or all of the finance company liability, then
such amounts will serve to reduce the amounts payable under the $3 million note
first, then the $1.6 million note (Note 13). The terms of the settlement
agreement must be approved by the Court.

The Company also has capital lease obligations related to gaming devices
and certain other equipment totaling $1.6 million. The interest rate for the
various leases range from 12% to 15%. As a result of the bankruptcy proceedings,
all capital lease obligations have been reclassified as "liabilities subject to
compromise" in the accompanying consolidated balance sheets. Subsequent to year
end, an agreement was reached with such lessors to retire the remaining lease
obligation for approximately $1.2 million.

OPERATING LEASES

The Company leases real property, on which the Bullwhackers Casino in Black
Hawk, Colorado, was constructed. The lease is for a period through 2015 and
requires an annual base rent as specified below, payable quarterly.

The land lease also requires monthly payments of additional rent equal to
1.9% of gross revenues, as defined. Total base rent plus additional rent
pursuant to the lease agreement for the years ended December 31, 1993, 1994 and
1995 and the six months ended June 30, 1995 and 1996 was $986,000, $1.1 million,
$1.1 million, $577,000 and $609,000, respectively. In addition to the specified
rental payments, the Company is also responsible for any and all costs
associated with the leased property, including but not limited to taxes and
assessments, utilities, insurance, maintenance and repairs. The Company has an
option to purchase the leased land, beginning November 1, 2001, for an amount
equal to nine times the annual base minimum rent payment then in effect.

Future annual base rental payments for the land lease as of December 31,
1995 are as follows:

Year ending December 31 (in thousands): 1996.....................$600
1997......................600
1998......................600
1999......................600
2000......................600
Thereafter..................10,070
Total . . . . . . . . . . .$13,070

Beginning in September 1994, the Company entered into an approximate seven
year lease for office space. The lease agreement requires monthly payments of
approximately $23,300.

As a result of the bankruptcy proceedings, the Debtor may reject certain
leases under the provisions of the Bankruptcy Code. The Reorganized Company
anticipates ratifying the Black Hawk land lease. However, the Debtor has
renegotiated the terms of its office space. Under the revised lease terms, which
were approved by the Court, the Reorganized Company will surrender its $200,000
security deposit to the landlord and pay monthly rent of $7,500 through October
1997, at which time the lease will terminate.

(11) OTHER RELATED PARTY TRANSACTIONS

DUE FROM AFFILIATES

The Company has outstanding advances to the following affiliates (in
thousands):

December 31, June 30,
------------ 1996
1994 1995 -----
---- ---- (unaudited)
<S> <C> <C> <C>
Canadian Pavillon Limited
Partnership................. $1,323 $1,573 $1,573
Outlaws Casino, Ltd............ 876 1,072 1,072
RCJV........................... 763 43 43
RCH Investments, NV............ 250 259 259
Hemmeter Partners.............. 344 335 335
Grand Palais Casino, Inc....... 557 587 587
Officers....................... 585 867 867
Other.......................... 62 35 35
------ ------ ------
$4,760 $4,771 $4,771
====== ====== ======
</TABLE>

Canadian Pavilion Limited Partnership ("CPLP"), Outlaws Casino, Ltd.
("Outlaws"), RCH Investments, NV ("RCH") and Hemmeter Partners are majority
owned by certain of the current controlling shareholders and officers of HEI.
The advances to CPLP, Outlaws, RCH, and Hemmeter Partners accrue interest at 14%
with interest payable quarterly, and are due on demand. Grand Palais Casino,
Inc. ("GPCI") is a wholly owned subsidiary of Grand Palais Enterprises, Inc.
("GPEI"), of which certain stockholders are also current stockholders of HEI.
This advance accrues interest at 14% and is due on demand. In July 1994, Kevin
G. DeSanctis, then Executive Vice President and Chief Operations Officer
received a $225,000 advance in accordance with the terms of his employment
agreement of which none has been repaid. In September 1994, Christopher B.
Hemmeter, the President and Chief Executive Officer was advanced funds totaling
$275,000, accruing interest at prime plus 2%, and due on demand. In January
1995, an additional $373,000 was advanced to Mr. Hemmeter on an interest free
basis, of which $110,000 has been repaid. As of December 31, 1995, the
outstanding advances to Mr. Hemmeter totaled $641,000. All advances to
affiliates were made on an unsecured basis.

In 1994, the Company established a reserve of $1 million for certain
affiliate receivables that management believed may not be collectible. Because
of the continued deterioration in 1995 of the financial condition of the
affiliates and certain officers to which the Company has advanced funds, the
Company has determined that it is unlikely that it will collect any of the
advances to affiliates and, accordingly, has provided an additional reserve of
$3.9 million for the remainder of the amounts owed the Company. These amounts
are reflected as impairment of assets in the accompanying consolidated
statements of operations. The Company continues to pursue collection of the
advances to affiliates.

CONSULTING AGREEMENT

GPRI was party to a consulting agreement whereby the consultant was
entitled to receive an initial consultation fee and a supplemental $3 million
fee in exchange for the consultant's assistance in obtaining necessary licensing
and other regulatory approvals with respect to the Riverboat Project. In
addition, the consultant was paid an initial consultation fee of $2.8 million
for his services with respect to the Riverboat Project and GPCI project. Of this
amount, 10% or $280,000, was allocated to the Company based on relative
estimates of the potential value of the Riverboat Project and GPCI project. This
amount is included in other assets in the accompanying consolidated balance
sheet as of December 31, 1994. As a result of the deconsolidation of GPRI, these
amounts are now reflected in the separate financial statements of GPRI. This
consultant has initiated a lawsuit against the Company as described further in
Note 12.

TRANSACTIONS WITH GPCI

In 1992 and 1993, GPCI completed private offerings of senior secured
exchangeable notes. Certain of HEI's majority stockholders are also stockholders
and warrant holders, including Christopher B. Hemmeter and Daniel Robinowitz of
GPCI's parent company, GPEI. In September 1993, $7.5 million of the net proceeds
of GPCI's private offering were loaned to GPRI. The loan was evidenced by a
demand note payable to GPCI and accrued interest at 12%. The loan was repaid
with proceeds from the Old Notes (Note 7). As additional consideration, the GPCI
noteholders were to be issued warrants to purchase one share of GPRI's common
stock per warrant for $.01 (the "GPRI Warrants"). In connection with the
formation of the Company, the GPCI noteholders were issued warrants to purchase
2,980,986 shares of common stock of the Company. These warrants were valued at
$1.3 million, which amount was offset against the $7.5 million demand note and
amortized as interest costs. The $1.3 million of interest costs were then
capitalized as part of construction-in-progress (Note 4) in the accompanying
consolidated balance sheet as of December 31, 1994. As a result of
deconsolidation of GPRI in 1995, these amounts are now reflected in the separate
financial statements of GPRI. During 1993, GPCI had advanced other funds to
GPRI. The advances totaled $2.2 million, accrued interest at 12% and were
unsecured. Proceeds from the Old Notes were used to repay $1.7 million of the
advances in 1993. The remaining $490,000 was repaid in the first quarter of
1994. The Company advanced GPCI an additional $556,500 and $30,000 in 1994 and
1995, respectively, which is included in due to affiliates in the accompanying
consolidated balance sheets. As of December 31, 1995, all outstanding amounts
have been reserved as uncollectable due to the bankruptcy filing of Harrah's
Jazz Company, of which GPCI is a one-third equity partner.

OTHER

Hemmeter Partners, an affiliate of Christopher B. Hemmeter, leased an
aircraft that Mr. Hemmeter used for business and personal purposes. In exchange
for Mr. Hemmeter making the aircraft available to the Company for business
purposes, the Company agreed to pay Mr. Hemmeter's affiliate approximately
$100,000 per month and to pay the salary and benefits of the aircraft pilot and
co-pilot, which totaled approximately $125,000 per year. Direct payments to
Hemmeter Partners totaled $1.5 million and $420,000 for 1994 and 1995,
respectively. Payments made by the Company with respect to the aircraft
represent the Company's pro rata share of the costs and expenses associated with
the aircraft and are adjusted based on actual use of the aircraft. The Company
ceased using the aircraft and terminated this arrangement as of May 1995.

The Company paid $1.5 million, $1.3 million and $624,000 to the law firm of
Shefsky Froelich & Devine Ltd. for legal services rendered to the Company in
1993, 1994 and 1995, respectively. Cezar M. Froelich, a director, owns 1.4% of
the Company on a fully diluted basis, and is a member of that firm. Shefsky
Froelich & Devine Ltd. provided legal services to the Company until February 9,
1996. Any further payments to Shefsky Froelich & Devine Ltd., are subject to
Bankruptcy Court approval.

Christopher B. Hemmeter received no compensation for acting as Chief
Executive Officer in 1993. The value of these services provided by Mr. Hemmeter
was not material.

(12) COMMITMENTS AND CONTINGENCIES

GAMING LICENSES

The Bullwhackers Casinos are required to comply with laws and regulations
promulgated by the Colorado Gaming Commission in order to maintain continued
operations. The Bullwhackers Casinos operate under separate current annual
gaming licenses which expire in December 1996. Management anticipates that such
gaming licenses will be renewed.

GAMING TAXES AND FEES

The Bullwhackers Casinos operate as licensed gaming establishments pursuant
to the Colorado Limited Gaming Act and, accordingly, are required to make
monthly gaming tax payments to the State of Colorado which are subject to annual
revisions with a maximum rate of 40%. Such tax for the 1995 period is calculated
as a percentage of adjusted gross proceeds (casino net win).

Gross Proceeds Tax Rate
-------------- --------
First $2 million....................... 2%
Next $2 million........................ 8%
Next $1 million........................ 15%
Proceeds over $5 million............... 18%

Additionally, the city and state levy device fees ranging from $75 to
$1,265 per annum. For the years ended December 31, 1993, 1994 and 1995, and the
six months ended June 30, 1995 and 1996, the Company recorded $7.7 million, $8.2
million, $8.3 million, 4.6 million and $4.3 million, respectively, in total
gaming taxes and device fees.

BLACK HAWK PARKING FACILITY

The Company acquired a land parcel on which it constructed a 260 stall
surface parking facility. As part of the land development, the Company agreed to
conduct environmental remediation of the land parcel pursuant to an
Administrative Order on Consent with the Environmental Protection Agency ("EPA")
and the State of Colorado Department of Health. The Company expended
approximately $1.8 million for this remediation work in 1994. The cost of the
remediation was anticipated and provided for from the net proceeds of the Old
Notes and has been capitalized as part of the land acquisition as incurred
because the work was necessary to prepare the property for its intended use.
Possible additional remediation costs are estimated at approximately $1 million.
However, the Company believes, based on consultations with various governmental
agencies and correspondence with the EPA, that the likelihood of the EPA or
other regulatory agencies requiring this further remediation is remote.

The City of Black Hawk assesses each casino which provides off-site parking
to its patrons, a $4 per day per stall parking fee, which is included in casino
expense. The Company anticipates that upon commencement of operations of the
proposed Silver Hawk Casino (see below), the parking fee will terminate.

LEGAL PROCEEDINGS

In September 1995, Daniel P. Robinowitz, a pre-effective date stockholder
of the Company (Note 11), filed a stockholders derivative action against the
directors of the Company in the United States District Court for the Eastern
District of Louisiana (the "Robinowitz Derivative Action"). The complaint
alleges in general that the Company, through its board of directors, mismanaged
the affairs of the Company. Because the Company filed bankruptcy prior to any
responsive pleadings being filed, no activity has occurred in this case. The
Company appointed its chief executive officer to serve as a special litigation
committee for the board of directors of the Company and he retained independent
counsel in October 1995 to investigate the allegations raised by the complaint.

Pursuant to the proposed Plan, certain claims by the Company against third
parties, including the Robinowitz Derivative Action, are assigned to the
Litigation Trust. All legal proceedings pending against the Company or its
Colorado subsidiaries prior to the effective date of the proposed Plan will be
settled pursuant to the proposed Plan. As a result, there will be no litigation
pending against the Reorganized Company or its Colorado subsidiaries on the
effective date of the proposed Plan. The determination by the Litigation Trust
whether or not to pursue any causes of action assigned to it will have no
material impact on the Reorganized Company or the Colorado subsidiaries.

The proposed Plan provides that the Company's obligation to indemnify
certain of its officers against any claims asserted against them as a result of
their service as employees of the Company, both before and after the
commencement of the Debtor's bankruptcy cases, will not be affected by the
Debtor's bankruptcy cases and that the Company will assume any obligations of
GPRI to indemnify the two officers discussed above against claims arising as a
result of their service with GPRI. The proposed Plan also provides that the
officers will be released from any liability in respect of causes of action
assigned to the Litigation Trust.

The proposed Plan also provides that the Company's obligations to indemnify
its other officers and employees, other than Christopher B. Hemmeter and Mark M.
Hemmeter (collectively, the "Hemmeters"), against claims against them as a
result of their service with the Company after the commencement of the Debtor's
bankruptcy cases will not be affected by the Debtor's bankruptcy cases and that
the Company will assume any similar indemnity obligations of GPRI.

The proposed Plan also requires the Company to indemnify its pre-effective
date directors other than the Hemmeters (the "Independent Directors") against
any claim asserted against them as a result of their service as directors of the
Company if the final report of the Independent Litigation Counsel indicates that
there is no basis for pursuing any of the potential claims against them reviewed
by the Independent Litigation Counsel. The Company's maximum indemnity
obligation for all of the Independent Directors is capped at $500,000 in the
aggregate. Although the Company has no direct indemnity obligations with respect
to claims against the Hemmeters, if a claim is asserted against both the
Independent Directors and the Hemmeters, the Hemmeters will be entitled to be
represented by the counsel representing the Independent Directors at the expense
of the Company to the extent that the claims are based on the Hemmeters' actions
as directors of the Company.

The Company's management believes that the ultimate resolution of all legal
proceedings will not have a material adverse impact on the Company's financial
position or results of operations.

(13) EVENTS SUBSEQUENT TO THE DATE OF THE AUDITORS' REPORT (unaudited)

GPRI PLAN

On May 3, 1996, the Company closed on the sale of its stock ownership in
GPRI to Casino America, thus signifying the effectiveness of GPRI's Plan. The
aggregate consideration paid by Casino America totaled approximately $59
million. All proceeds from the sale were distributed to the creditors of GPRI,
including the holders of the Company's Old Notes, pursuant to the GPRI Plan.
Part of the consideration given by Casino America was the assumption of $2.3
million of the CAI $3 million note. Accordingly, the Company is only obligated
for the remaining $700,000. Additionally, the effectiveness of the GPRI Plan
released the Company and all of its remaining subsidiaries from any obligations
to GPRI, RCJV, and their creditors.

HEI PLAN

On June 7, 1996 (the "Effective Date"), the Company and its three
subsidiaries emerged from bankruptcy. In general, the Reorganization provided
for resolution of all claims against the Predecessor Company and amounts pending
as of November 7, 1995, the Chapter 11 filing date, as well as resolution of
certain legal disputes, in exchange for the issuance of new indebtedness and new
common stock (see Notes 5 and 6). Upon the Effective Date, the name of HEI was
changed to Colorado Gaming & Entertainment Co.

FRESH START REPORTING

In accordance with AICPA Statement of Position 90-7, "Reporting by Entities
in Reorganization Under the Bankruptcy Code" ("SOP 90-7"), the Company was
required to adopt "fresh-start" accounting, on the Effective Date. The impact of
the adoption of fresh-start reporting is reflected in the June 30, 1996
consolidated balance sheets.

The adjustments to reflect the consummation of the Reorganization
(including the gain on extinguishment of debt and other pre-petition
liabilities) and the adjustment to record assets and liabilities at their fair
values have been reflected in the unaudited consolidated financial statements to
separate post-Reorganization operations from those prior to June 7, 1996, which
have not been prepared on a comparable basis. Such adjustments resulted in an
approximate $164 million extraordinary gain as reflected in the Statement of
Operations.

SILVER HAWK ACQUISITION

On March 27, 1996, Silver Hawk Casino, Inc. ("Silver Hawk") was
incorporated in Delaware as a wholly owned subsidiary of Hemmeter Enterprises,
Inc., for purposes of acquiring and operating a limited stakes casino in Black
Hawk, Colorado. In April 1996, the Company purchased the Silver Hawk Casino,
which was not operating at the time, for $2.7 million, of which $900,000 was
borrowed under the DIP Facility. The remaining $1.8 million was financed by a
note payable to the seller, which accrued interest at 9.5% per annum, and
provided for monthly principal and interest payments on a 20 year amortization
schedule. The seller of Silver Hawk Casino is an elected official of Black
Hawk. A statute in Colorado prohibits an elected official from having an
"interest" in a gaming license. To avoid any potential regulatory
interpretation that the seller would have an "interest" in the Silver Hawk
Casino gaming license, thereby detrimentally affecting the Company's ability
to obtain the gaming license, the Company retired the seller's note from
available cash on June 18, 1996. Additionally, the Company invested an
additional $2 million to equip and prepare the Silver Hawk Casino for
opening. The Company commenced gaming operations at the Silver Hawk Casino
on June 25, 1996.

CREDIT FACILITY

On June 7, 1996, the Company entered into a $12.5 million revolving credit
facility (the "Credit Facility") with Foothill Capital Corporation. The Credit
Facility is segregated into several different facilities, including a $5 million
construction line, a $5 million equipment financing line, up to a $3.5 million
working capital line and a $1 million Silver Hawk line. No more than $12.5
million of borrowings may be outstanding at any time. Borrowings under the
Credit Facility are subject to a 1% financing fee and accrue interest at prime
plus 2.375%. The loans have varying terms ranging from three to five years from
when the funds are borrowed. As of June 30, 1996, the Company had drawn
approximately $3 million under the equipment facility and $1.3 million under the
working capital line. Borrowings are secured by a first priority lien and
security interest in substantially all of the real and personal property owned
or leased by the Company. The Credit Facility replaced a Debtor-in-Possession
facility, also provided by Foothill Capital Corporation. Subsequent to the end
of the second quarter, the Company borrowed $1.1 million under the equipment
line to pay for the Silver Hawk Casino slot machines, $1 million under the
Silver Hawk facility and repaid in full the working capital line.

OTHER NOTES

Pursuant to the Reorganization, the Company issued two unsecured promissory
notes to Capital Associates International, Inc. ("CAI") in the respective
principal amounts of $1.6 million and $3 million, both accruing interest at the
rate of 9% per annum. The $1.6 million note is due in 10 equal quarterly
installments commencing September 7, 1996. The $3 million note has been reduced
by amounts received by CAI in respect of its claims filed in the chapter 11
bankruptcy case filed by GPRI. Accordingly, the outstanding balance on the $3
million note is approximately $700,000 depending on the ultimate resolution of
the exact amount received by CAI from GPRI distributions to be credited against
the note. Accordingly the Company has reflected approximately $700,000 of the
second note as an obligation in the accompanying consolidated balance sheet.

EQUITY

Pursuant to the Reorganization, the Predecessor Company's common stock and
warrants were cancelled on the Effective Date. The Reorganization also provided
for the amendment and restatement of the Company's certificate of incorporation
and bylaws. The new charter authorized 20 million shares of $.01 par value
common stock. Upon the Effective Date, 5 million shares of common stock of the
Company were issued on a pro rata basis to the holders of Old Notes and RII. In
addition, the Company's President and Chief Executive Officer was issued 138,888
shares of common stock on the Effective Date. Also on the Effective Date,
416,667 shares were reserved to be issued to executive management pursuant to
the Management Stock Incentive Plan (the "Stock Plan"). The Stock Plan provides
for shares to be issued to certain management individuals annually for the next
three years based on the Company meeting certain performance criteria. Once
issued, the shares are fully vested. The first grant is expected to be on June
7, 1997.

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

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OF ANY UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THIS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.

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

TABLE OF CONTENTS

Page
Additional Information.............................................2
Prospectus Summary.................................................3
Risk Factors.......................................................6
Market Price of Common Stock and Dividend
Policy.......................................................12
Selected Financial Data...........................................12
Unaudited Pro Forma Condensed Consolidated
Financial Information........................................15
Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................18
Business..........................................................25
Management........................................................33
Certain Relationships and Related Transactions....................37
Legal Proceedings.................................................39
Principal and Selling Securityholders.............................43
Plan of Distribution..............................................45
Shares Eligible for Future Sale...................................46
Description of Capital Stock......................................46
Legal Matters.....................................................57
Experts...........................................................57
Index to Financial Statements....................................F-1

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

5,138,888 SHARES

COMMON STOCK

$55,883,298 PRINCIPAL AMOUNT

12% SENIOR SECURED
PAY-IN-KIND NOTES

COLORADO GAMING &
ENTERTAINMENT CO.

-----------------
PROSPECTUS
-----------------

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets for the costs and expenses payable by the
Company in connection with the sale of the Notes and Common Stock being
registered. All items are estimated except the SEC Registration Fee.

SEC Registration Fee . . . . . . . . . . . . . . $24,356
Printing . . . . . . . . . . . . . . . . . . . . 1,000
Legal Fees and Expenses. . . . . . . . . . . . . 50,000
Qualification under State
Securities Laws (including legal fees) . . . 6,000
Accounting Fees and Expenses . . . . . . . . . . 7,500
Transfer Agent Fees . . . . . . . . . . . . . . 4,000
Miscellaneous . . . . . . . . . . . . . . . . . 5,144
--------
Total . . . . . . . . $95,000

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the DGCL empowers a Delaware corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of such corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. A corporation may indemnify such person
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. A corporation may, in
advance of the final disposition of any civil, criminal, administrative or
investigative action, suit or proceeding, pay the expenses (including attorneys'
fees) incurred by any officer or director in defending such action, provided
that the director or officer undertakes to repay such amount if it shall be
ultimately determined that he is not entitled to be indemnified by the
corporation.

A Delaware corporation may indemnify officers and directors in an action by
or in the right of the corporation to procure a judgment in its favor under the
same conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him
against the expenses (including attorneys' fees) which he actually and
reasonably incurred in connection therewith. The indemnification provided is not
deemed to be exclusive of any other rights to which an officer or director may
be entitled under any corporation's by-law, agreement, vote or otherwise.

Article IX of the Company's Certificate of Incorporation provides that the
Company shall indemnify its officers, directors, agents and other persons to the
fullest extent permitted by the DGCL. Article IX of the Company's Certificate of
Incorporation provides that a director of the Company shall not be personally
liable to the Company or its stockholders for monetary damages for breaches of
fiduciary duty as a director, except for liability (i) for any breach of the
officer's or director's duty of loyalty to the Company or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for
any transaction from which the director derived any improper personal benefit.

Pursuant to the Plan of Reorganization, Messrs. Szapor and Mayer and
certain other pre-Effective Date directors and officers of the Company are
entitled to certain additional indemnification rights. See "Legal Proceedings."

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

On June 7, 1996, the Effective Date, all of the Company's then-outstanding
capital stock was cancelled and the Company issued, $50,000,000 in principal
amount of its 12% Senior Secured Pay-In-Kind Notes due 2003 and 5,000,000 shares
of Common stock pursuant to the Plan of Reorganization pursuant to an exemption
from registration under the United States Bankruptcy Code. In addition, on such
date, the Company issued 138,888 shares of Common Stock to Stephen J. Szapor,
Jr., the Company's President and Chief Executive Officer, pursuant to Mr.
Szapor's Employment Agreement, pursuant to Section 4(2) of the Securities Act.

On December 15, 1993, the Company sold $140,000,000 in principal amount of
its Old Notes in a private placement pursuant to Regulation D under the
Securities Act. The Company believes that all of the purchasers of such notes
were "accredited investors" within the meaning of Regulation D and that the
Notes were not offered to prospective purchasers who were not accredited
investors. Salomon Brothers Inc served as placement agent for the sale of the
Old Notes. Each note purchaser also received 12 warrants to purchase 1.041667
shares of common stock of the Company (subject to certain anti-dilution
provisions) for each $1,000 of principal amount of Old Notes purchased. The
aggregate offering price of the Old Notes and the warrants was $140,000,000, of
which $4,900,000 was paid to Salomon Brothers Inc as a placement fee.

On June 15 and December 15, 1994, and June 15, 1995, the Company issued
additional Old Notes pursuant to Section 4(2) of the Securities Act in the
respective principal amounts of $8,117,000, $8,884,000 and $9,420,000 to the
then holders of the Old Notes in payment of the interest then due and payable on
the outstanding Old Notes.

On December 17, 1993, the Company issued 10,269,641 shares of its common
stock and 5,380,359 warrants to purchase shares of common stock for an exercise
price of $.01 per share to the owners of certain predecessors of the Company and
its Colorado Subsidiaries in exchange for the assets of these predecessors. A
total of 1,427,927 of the warrants have been exercised since December 17, 1993
for an aggregate consideration to the Company of $14,279.27. These shares were
issued pursuant to Section 4(2) of the Securities Act.

Pursuant to the Company's Omnibus Stock and Incentive Plan, the Company
granted employees the right to receive 130,000 shares of its common stock
provided that the restrictions to which such grants were subject were satisfied.
A total of 33,667 of these shares were issued to employees in 1995. Each of the
five non-employee directors of the Company were each awarded 1,000 shares of
common stock of the Company in December 1993. The shares issued to employees and
directors were issued pursuant to Section 4(2) of the Securities Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

See Index to Exhibits

(b) Financial Statement Schedules

Not Applicable

ITEM 17. UNDERTAKINGS

The undersigned registrants hereby undertake:

(1) To file, during any period in which offers or sales are being made, a post
effective amendment to this registration statement;

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information as set forth in the
registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.

(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial
bona fide offering thereof.

(3) To remove from registration by means of a post effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrants pursuant to the foregoing provisions, the registrants have been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, enforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrants of expenses incurred
or paid by a director, officer or controlling person of the registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Denver, and
the State of Colorado on October 22, 1996.

COLORADO GAMING & ENTERTAINMENT CO.

By: /s/ Stephen J. Szapor, Jr.
Stephen J. Szapor, Jr.
President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.

Signature Title Date

/s/ Stephen J. Szapor, Jr. October 22, 1996
- --------------------------------- President and Chief
Stephen J. Szapor, Jr. Executive Officer
(Principal Executive
Officer)

/s/ Robert Stephens October 22, 1996
- --------------------------------- Vice President of Finance
Robert Stephens (Principal Financial and
Accounting Officer)

/s/ Philip J. DiBerardino Director October 22, 1996
- ---------------------------------
Philip J. DiBerardino

/s/ Steve Leonard Director October 22, 1996
Steve Leonard

/s/ Franklin S. Wimer Director October 22, 1996
- ---------------------------------
Franklin S. Wimer

/s/ Alan L. Mayer Director October 22, 1996
- ---------------------------------
Alan L. Mayer

INDEX TO EXHIBITS

Exhibit No. Description

2.1 Disclosure Statement for First Amended Joint Plan of Reorganization of
the Company, BWBH, Inc., BWCC, Inc. and Millsite 27, Inc.*

2.2 First Amended Joint Plan of Reorganization of the Company, BWBH, Inc.,
BWCC, Inc. and Millsite 27, Inc. (included in exhibit 2.1.).*

3.1 Amended and Restated Articles of Incorporation of the Company.*

3.2 Amended and Restated By laws of the Company.*

4.1 Indenture between the Company and Fleet National Bank, as Trustee.*

4.2 Specimen Certificate of Common Stock.*

4.3 Form of Note.*

4.4 Registration Rights Agreement.*

5.1 Opinion of LeBoeuf, Lamb, Greene & MacRae regarding validity of
securities (including consent).

10.1 Loan and Security Agreement, dated as of November 1, 1995 by and
between BWBH, Inc., BWCC, Inc. and Millsite 27, Inc. and Foothill
Capital Corporation.*

10.2 Amendment Number One to Loan and Security Agreement, dated as of
December 4, 1995.*

10.3 Amendment Number Two to Loan and Security Agreement, dated as of
January 24, 1996.*

10.4 Letter Agreement, dated as of December 18, 1995, from BWBH, Inc.,
BWCC, Inc. and Millsite 27, Inc. to Foothill Credit Corporation.*

10.5 Security Agreement, dated as of November 1, 1995, between the Company
and Foothill Credit Corporation.*

10.6 Trademark Security Agreement, dated as of November 1, 1995, between
the Company and Foothill Credit Corporation.*

10.7 Continuing Guaranty, dated as of November 1, 1995 by the Company and
Foothill Credit Corporation.*

10.8 Amended and Restated Loan and Security Agreement, dated as of June 4,
1996 between Foothill Capital Corporation, BWBH, Inc., BWCC, Inc.,
Millsite 27, Inc. and Silver Hawk Casino, Inc.*

10.9 Lease Agreement, dated October 25, 1991 by and among Jerry L. Brown
and Harold Gene Reagin and HP Black Hawk, L.P.*

10.10 Option to Purchase dated October 28, 1991 by and among Jerry L. Brown
and Harold Gene Reagin and HP Black Hawk, L.P.*

10.11 Sublease Agreement by and between Marsh & McLennan, Incorporated and
the Company.*

10.12 Amendment to Sublease Agreement, dated as of January 18, 1996 by and
between Marsh & McLennan, Incorporated and the Company.*

10.13 Guaranty, dated as of January 18, 1996, by BWBH, Inc., BWCC, Inc. and
Millsite 27, Inc.*

10.14 Agreement for Sale of Real Estate, dated October 20, 1995, by and
between Millsite 20 Limited Liability Company, Iron City Limited
Liability Company and the Company.*

10.15 First Amendment to Agreement for Sale of Real Estate, dated December
21, 1995 by and between Millsite 20 Limited Liability Company, Iron
City Limited Liability Company and the Company.*

10.16 Letter dated February 28, 1996 from the United States Environmental
Protection Agency.*

10.17 Subdivision Agreement dated February 28, 1996 by and among the City
of Black Hawk, the Black Hawk/Central City Sanitation District,
Millsite 27, Inc. and Millsite 20 Limited Liability Company.*

10.18 State of Colorado, Department of Revenue, Limited Gaming License
issued to Bullwhackers Black Hawk Casino.*

10.19 State of Colorado, Department of Revenue, Alcoholic Beverage License
issued to BWBH, Inc.*

10.20 City of Black Hawk, Retail Liquor License with Extended Hours issued
to BWBH, Inc.*

10.21 State of Colorado, Department of Revenue, Limited Gaming License
issued to Bullwhackers Central City Casino.*

10.22 State of Colorado, Department of Revenue, Alcoholic Beverage License
issued to BWCC, Inc.*

10.23 City of Central City, Retail Liquor License issued to BWCC, Inc.*

10.24 City of Central City, Extended Hours License issued to BWCC, Inc.*

10.25 Colorado Gaming & Entertainment Co. Management Stock Incentive Plan.*

10.26 Colorado Gaming & Entertainment Co. Cash Bonus Plan.*

10.27 Form of Consulting Agreement between the Company and Christopher B.
Hemmeter.*

10.28 Form of Consulting Agreement between the Company and Mark M.
Hemmeter.*

10.29 Employment Agreement between the Company and Stephen J. Szapor, Jr.*

10.30 Employment Agreement between the Company and Alan L. Mayer.*

10.31 Employment Agreement between the Company and Richard Rabin.*

21.1 List of Subsidiaries.*

23.1 Consent of Arthur Andersen LLP.

23.2 Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P. (included in Exhibit
5.1).

24.1 Power of Attorney granted by individuals signing the Registration
Statement, included on signature page of Registration Statement.**

99.1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended of Fleet National Bank, as Trustee under the Indenture.*

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

* Incorporated by reference to the same exhibit number in the Company's
Registration Statement on Form 10 (File No. 0 - 28068).

** Previously filed.

EXHIBIT 5.1
LEBOEUF, LAMB, GREENE & MACRAE
L.L.P.
633 17th Street, Suite 2800
Denver, Colorado 80203
(303) 291-2600

October 22, 1996

Colorado Gaming & Entertainment Co.
1700 Lincoln Street, 49th Floor
Denver, CO 80203

Re: Form S-1 Registration Statement (Reg. No. 333-12999)
Relating to the Resale of up to 5,138,888 Shares of common
stock, $.01 par value per share (the Common Stock) and up to
$55,883,000 Principal Amount of 12% Senior Secured Pay-In-Kind
Notes Due 2003 (the "Notes") of Colorado Gaming &
Entertainment Co.

Gentlemen:

As your counsel, it is our opinion that the Common Stock and the Notes
being registered in the above-referenced Registration Statement on Form S-1
(the "Registration Statement") have been legally issued and are fully paid and
non-assessable, except in the case of certain of the Notes that have not yet
been issued, which will be legally issued, fully paid and non-assessable when
issued in accordance with the terms of such Notes and the governing indenture
against payment of any applicable consideration. As your counsel, we hereby
consent to the use of our opinion as an exhibit to the Registration Statement
and to all references to our firm included in or made a part of the Registration
Statement and any amendments thereto.

Very truly yours,

/s/ LeBoeuf, Lamb, Greene & MacRae, L.L.P.

CONSENT OF ARTHUR ANDERSEN LLP

As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm), included in or made a part of this
registration statement.

ARTHUR ANDERSEN LLP

/s/ Arthur Andersen LLP

October 22, 1996