SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.

For the fiscal year ended December 31, 1997

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

For the transition period from ___________ to ____________.

Commission file number 0-28068

COLORADO GAMING & ENTERTAINMENT CO.
(Exact Name of Registrant as Specified in Its Charter)

DELAWARE 84-1242693
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S.Employer Identification No.)

12596 WEST BAYAUD AVE., SUITE 450, LAKEWOOD, COLORADO 80228
(Address of Principal Executive Offices) (Zip Code)

(303) 716-5600
(Registrant's Telephone Number, Including Area Code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
(None)

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock (Par Value $0.01 Per Share)
Title of Class

Indicate by check P whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days Yes X No
--- ---

Indicate by check Pif there are no delinquent filers to disclose herein
pursuant to Item 405 of Regulation S-K, and there will not be any delinquent
filers to disclose, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check X mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
--- ---

Number of shares of common stock outstanding at March 25, 1998: 5,236,091

DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Proxy Statement relating to the 1998 Annual Meeting of
Stockholders are incorporated by reference into Part III of this Report.

PART I

ITEM 1. BUSINESS

GENERAL

Colorado Gaming & Entertainment Co. ("CG&E" or the "Company"), formally
known as Hemmeter Enterprises, Inc. (referred to as the "Predecessor Company"
for the period prior to June 7, 1996), develops, owns and operates gaming and
related entertainment facilities. The Company owns and operates, through
wholly-owned subsidiaries, BWBH, Inc. ("BWBH" or "Bullwhackers Black Hawk")
and BWCC, Inc. ("BWCC" or "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 wholly-owned subsidiary, Silver Hawk
Casino, Inc., a third gaming facility, in Black Hawk (the "Silver Hawk
Casino") (Bullwhackers Black Hawk, Bullwhackers Central City and the Silver
Hawk Casino are referred to collectively as the "Colorado Casinos"). In
addition, through a wholly-owned subsidiary, Millsite 27 Inc. ("MS27"), the
Company owns a parking lot with a capacity of approximately 500 cars, which
is located directly between, and is used by, Bullwhackers Black Hawk and the
Silver Hawk Casino. References in this Annual Report on Form 10-K to CG&E or
the Company include its subsidiaries unless the context otherwise requires.

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 45 miles from Colorado Springs and 110 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.

Effective August 22, 1997, the Company entered into an Agreement and
Plan of Merger, as amended as of October 21, 1997 (the "Merger Agreement"),
with Ladbroke Racing Corporation, a Delaware corporation ("LRC"), and CG&E
Acquisition Corp., a Delaware corporation ("Acquisition Sub"), pursuant to
which the Acquisition Sub will be merged with and into the Company (the
"Merger"). Prior to the Merger and pursuant to the terms of the Merger
Agreement, LRC will assign all of its rights and obligations under the Merger
Agreement, including its interest in the Acquisition Sub, to Ladbroke Gaming
Corporation, a Delaware corporation ("Ladbroke"), a wholly-owned subsidiary
of Ladbroke Group plc, the ultimate parent of LRC. As a result of the
assignment and the Merger, the Company will become a wholly-owned subsidiary
of Ladbroke. Pursuant to the Merger Agreement, holders of the Company's
common stock, $0.01 par value (the "Common Stock"), will be entitled to
receive $6.25 in cash for each share of Common Stock held by them immediately
prior to the Merger. On December 12, 1997, stockholders of the Company
approved and adopted the Merger Agreement. The Merger remains subject to
approval by the Colorado Limited Gaming Control Commission (the "Gaming
Commission"). Although there can be no assurances, closing of the Merger is
anticipated to occur sometime in the third quarter of 1998. However,
pursuant to the terms of the Merger Agreement, if the Merger has not been
consummated on or before September, 30 1998, which date may be extended by
the mutual written consent of LRC and the Company, either party has the right
to terminate the Merger Agreement and abandon the Merger.

REORGANIZATION

As a result of the financial difficulties of a riverboat gaming project
undertaken in 1995 by Grand Palais Riverboat, Inc. ("GPRI"), a wholly-owned
subsidiary of the Predecessor Company, the Predecessor Company, BWBH, BWCC
and MS27 sought protection under Chapter 11 of the United States Bankruptcy
Code on November 7, 1995 (the " Reorganization"). The First Amended Joint
Plan of Reorganization of the Predecessor Company, BWBH, BWCC and MS27 was
confirmed on April 8, 1996 and became effective on June 7, 1996 (the
"Effective Date"). As a result, among other things, the Company
significantly reduced its consolidated debt, issued new shares of common
stock and sold GPRI.

COLORADO CASINOS AND RELATED AMENITIES

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 a 36,000 square foot facility which
contains approximately 12,000 square feet of gaming space on four levels. The
casino currently has approximately 600 slot machines and fifteen table games.
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.

In June 1997, the Company completed construction of a day care facility
adjacent to Bullwhackers Black Hawk, operated by New Horizons Kids Quest III,
Inc.("Kids Quest"), at a cost of approximately $1.4 million. Kids Quest is
solely responsible for the day-to-day operations of the 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 at one of the town's
two main intersections, and is across from a parking facility. This 31,000
square foot facility contains approximately 8,750 square feet of gaming space
on two levels. Bullwhackers Central City currently has approximately 320 slot
machines, following a reduction of approximately 80 slot machines in the
fourth quarter of 1997, and four table games at the facility. The facility
has two bars, a 126-seat full service restaurant and office space.
Bullwhackers Central City also utilizes a Victorian theme in its interior
design.

The Company believes that proximity to convenient parking is extremely
important to the Central City casinos and the Colorado market in general.
However, except for the largest casino in Central City which recently
constructed an on-site parking garage, none of the casinos currently
operating in Central City offer on-site parking for more than approximately
50 cars immediately. There are several public parking lots in Central City
offering parking for a total of approximately 550 cars, including a 200-space
lot across from Bullwhackers Central City. As a result of the lack of
adequate convenient parking, many of the operators in Central City, including
the Company, increasingly rely on costly busing programs, which offer cash
back promotions and other incentives designed to enhance incremental patron
visitation and play, particularly during off-peak periods.

SILVER HAWK CASINO. The Silver Hawk Casino is an approximately 12,000
square foot four-story building constructed in 1993, that 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 on April 12, 1996.
The Company completed minor interior remodeling and reopened the facility on
June 26, 1996. Currently, the Silver hawk Casino has approximately 230 slot
machines and 3 table games. The facility has two bars, a full service
restaurant and office space.

PARKING LOT. The Company owns an approximately 3.25-acre parking lot
located between Bullwhackers Black Hawk and the Silver Hawk Casino. The
Company believes that proximity to convenient parking is extremely important
in Black Hawk. 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 its parking lot gives Bullwhackers Black Hawk
and the Silver Hawk Casino a competitive advantage over other casinos in
Black Hawk that offer fewer parking spaces or less convenient parking.

On May 23, 1997 the Company completed the process of expanding its
parking lot to accommodate a total of approximately 500 cars. The total
cost of the project was approximately $1.6 million. The Company also
constructed a new valet facility, which cost approximately $250,000, to
increase customer convenience and to enhance access to the Kids Quest child
care facility.

GROWTH STRATEGY

BRONCO BILLY'S ACQUISITION. On February 13, 1998, the Company purchased
the assets comprising the casino known as Bronco Billy's in Black Hawk from
Pioneer Associates Limited Liability Company for approximately $5.5 million.
In connection with the purchase, the Company entered into an amendment to the
Company's senior bank credit facility (the "Credit Facility") converting the
expired construction sub-facility into a new line to borrow up to $5 million
(the "Bronco Billy's Acquisition Line") to purchase and perform tenant
improvements on the former Bronco Billy's casino. The Company anticipates it
will incur an additional $2.0 million to equip and renovate the former Bronco
Billy's casino for reopening, which will be funded out of cash flow from

operations or borrowings under the Credit Facility. Bronco Billy's is
located next to Bullwhackers Black Hawk. The Company intends to remove the
common wall separating the casinos in order for the former Bronco Billy's
casino to become a part of Bullwhackers Black Hawk. Subject to the approval
of the Gaming Commission and applicable state and local liquor agencies (the
"Liquor Agencies"), the combined casino will be operated as a single casino,
under one gaming license and one liquor license. The Company plans to open
the new facility in May 1998, which will add approximately 250 slot machines
and an additional restaurant facility to Bullwhackers Black Hawk, increasing
the existing slot capacity in Bullwhackers Black Hawk by over 40%. The
Company intends to identify the expanded area of Bullwhackers Black Hawk as
"The Bullpen Sports Casino" with an enhanced sports bar theme.

CANADA. In April 1997, The Company responded to a Request for Proposal
("RFP") issued by the government of Ontario, Canada, to develop and operate
multiple charity gaming clubs in the Province of Ontario. The clubs will
offer 150 video lottery terminals ("VLT") and 40 table games with a maximum
single bet of $100. In responding to the RFP, the Company and its partners
formed Diamond Gaming of Ontario Inc. ("Diamond Gaming"). Diamond Gaming's
shareholders are a newly formed subsidiary of the Company, which owns 45% of
Diamond Gaming, a subsidiary of Ogden Corporation (45% owner) and Diamond
Gaming Services Inc. (10% owner). On September 30, 1997, the Ontario Gaming
Control Commission announced that Diamond Gaming was the successful bidder to
develop and operate charitable gaming clubs in the cities of Kingston and
Belleville, Ontario. The development and opening of the Kingston and
Belleville facilities remain contingent upon a number of items, including
entering into an operating agreement with the Ontario Gaming Control
Commission, reaching an agreement with property owners and local
municipalities on specific sites, and obtaining zoning and other local
approvals, none of which can be assured. The proposed terms of the operating
agreement will be an eight-year term with one eight-year renewal option.
Diamond Gaming will receive operator's compensation equivalent to 10% of the
VLT revenue and 5% of the table revenue and all other revenue. Additionally,
Diamond Gaming will receive 10% of operating profits, as defined, excluding
profits from VLT operations. The Company currently estimates that the two
clubs in Kingston and Belleville will require an initial investment of
approximately $5.0 million in the aggregate. The Company's share of such
investment is approximately 47% of that amount, which it intends to fund from
cash flow from operations or borrowings under the revolving portion of the
Credit Facility. Pursuant to a Supplemental Indenture dated January 23,
1998, the Company has received the necessary consent of the holders of its
12% Senior Secured Pay-In-Kind Notes to allow it to make the required
investment. The Company will account for its 45% interest in Diamond Gaming
under the equity method of accounting. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources."

CONSULTING AGREEMENT. In 1996, the Company entered into a agreement with
a company in business of providing gaming consulting and management services
to Native American Indian tribes. The consulting agreement provided that the
companies will use their joint resources to pursue obtaining contractual
arrangements with various Native American tribes to provide consulting
services for new and existing Native American gaming projects. For the
twelve months ended December 31, 1997 and 1996, the Company expended $123,000
and $120,000, respectively, of fees and contributions, which has been
expensed in the accompanying consolidated statements of operations. On
November 25, 1997, the consulting agreement was terminated with respect to a
particular Native American gaming project for which the Company made the
above-referenced contributions, which termination relieves the Company from
any rights or obligations with respect to such project. The termination
provides that the Company shall be reimbursed a total of $185,000 of such
fees and contributions, contingent upon the opening of the tribal casino for
such project. The consulting agreement is still in effect with regard to
pursuing other Native American gaming projects.

OTHER. Although the Company intends to focus on its existing
operations, it continues to review and evaluate potential opportunities to
apply existing management expertise to additional gaming operations in
Colorado and in other jurisdictions such as those described above. 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. Additionally, the Company's lending
agreements significantly limit the amount of capital which may be expended
for certain new projects. See " -Colorado Gaming Regulations" and " -
Non-Gaming Regulation."

COLORADO GAMING MARKET

GENERAL. Black Hawk and Central City are historic mining towns made
famous during the gold rush of 1859. 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. 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 the Denver metropolitan area. Approximately 2.1 million
people live in the Denver metropolitan area, approximately 2.4 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.

According to the Colorado Division of Gaming, there were 52 gaming
facilities operating in Colorado at the end of 1997, with a total of 12,977
slot machines and 224 table games. Of these, 19 facilities, 5,337 slot
machines and 106 table games were located in Black Hawk; 12 facilities, 3,196
slot machines and 58 table games were located in Central City; and 21
facilities, 4,444 slot machines and 60 table games were located in Cripple
Creek. Generally, Central City facilities have not been able to compete
effectively with facilities in Black Hawk, primarily because Black Hawk
casinos offer substantially more on-site parking and more convenient location
and access, which is a significant competitive advantage in the Colorado
market. For the year ended 1997, 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 $113.81
in Black Hawk, $68.12 in Central City and $63.38 in Cripple Creek. The
cumulative gaming win in Black Hawk as a market was $220 million in 1997 and
$204 million in 1996. While the Black Hawk market continues to grow, the
growth rate has slowed substantially from that of several years ago. The
cumulative gaming win in the Central City market was $82 million and $83
million in 1997 and 1996, respectively. Although these figures reveal only a
slight decrease in the cumulative gaming win in Central City, the recent
results of the Central City market reflect the strong growth of a the largest
competitor located off Main Street in Central City, due, among other
matters, to the addition of a new parking garage, while the results of the
Main Street operators, including Bullwhackers Central City, have seen
revenues steadily decline over the past few years.

MARKETING STRATEGY. The Company targets primarily 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) providing the newest
models of slot machine games; (iv) promoting customer awareness through
marketing of the Bullwhackers name and theme; (v) providing excellent
customer service with a motivated staff; (vi) utilizing strategic busing
programs; (vii) offering customer promotions; (viii) providing desirable food
products and refreshments; and (ix) providing incentives to higher-value
repeat customers.

In particular, the Company has used extensive marketing programs to
build customer awareness, including radio, print and direct mail. The
Company believes that Bullwhackers enjoys among the highest name recognition
of 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 slot club
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 fourteen times per day from Golden, a western
Denver suburb, to and from Black Hawk and Central City.

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 across the
Company's parking lot from Bullwhackers Black Hawk. However, the Company
believes that its primary competition for the Colorado Casinos are other
casinos operating in Black Hawk and Central City. More experienced,
nationally recognized casino operators from other

areas of the country have entered, or have recently announced plans to enter,
the Colorado gaming market, including Harvey's, Casino America, Riviera
Holdings, Inc., Hyatt, Anchor Gaming 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 to increase in Black Hawk.

Various published reports detailing additional gaming projects have been
announced for the town of 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 from the Denver metropolitan area. In
contrast, Bullwhackers Black Hawk and the Silver Hawk Casino 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 has
begun construction on a third major intersection off State Highway 119
between the two current intersections. This additional intersection will,
when completed, 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, thereby potentially reducing traffic flow
and customer visits to Bullwhackers Black Hawk and the Silver Hawk Casino
and, to a greater extent, the overall Central City market.

Currently, there are two major projects under construction in Black
Hawk. The first is a joint venture between Black Hawk Gaming & Development
Co., the 50% owner and operator of the Gilpin Hotel Casino, and Jacobs
Entertainment, for a new 35,000 square foot casino, with 55 hotel rooms, 250
parking spaces and approximately 800 slot machines. It is currently
anticipated that this project will open sometime in the second quarter of
1998. The second project is the Isle of Capri Black Hawk, which is owned by
subsidiaries of Casino America, Inc. and Nevada Gold & Casinos, Inc. The
Isle of Capri project is expected to include a 55,000 square foot casino with
1,100 slot machines, 25 table games and 1,000 on-site parking spaces. It is
expected to open in late 1998 or early 1999. The new gaming capacity being
developed may dilute existing operators' win per unit and revenue, including
the Company's. Accordingly, such increase in capacity may have a material
adverse effect on the Company's results of operations. The new projects have
all been announced/commenced in Black Hawk, due to its more convenient
location as compared to Central City. As the town of Black Hawk continues to
expand, the Central City market contracts. The Company believes that these
new projects under construction will have severe negative impact on the town
of Central City as compared to Black Hawk.

In addition, a number of other casino projects have been announced and
are in various planning stages, including a venture by Riviera Holdings,
Inc. to construct what would be the largest facility in Black Hawk.
Additionally, Bullseye Gaming has announced plans for the Black Hawk Brewery,
which will offer 500 slot machines and 10 table games when open. Various
other projects have been announced, proposed, discussed or rumored for the
Black Hawk market, including large projects known as "Country World" and the
"St. Moritz - Hyatt". While it is difficult to assess the likelihood and the
timing of these proposed projects being completed, it is reasonably likely
that at least some of the proposed competitive projects may be completed and
open to the public by sometime during 1999 or 2000. In addition, as the town
of Black Hawk has expanded, both in terms of gaming device capacity and
market size, the Central City market has contracted. Therefore, should
several of the announced competitive projects open, the increased competition
may adversely affect the Company's operations in both Black Hawk and, to a
greater extent, in Central City, which may be forced to close with the new
competition, and, accordingly, may have a material adverse effect on the
Company's consolidated results of operations and financial position.

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 and the Central City market overall offers less convenient parking and
access than most of its competitors. The Silver Hawk Casino is smaller, has
a less advantageous location 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 23 casinos in Central City have ceased operations. In
addition, several operators, including the Company, have reduced staffing and
have closed temporarily or reduced their square footage and/or hours of
operations. The Company believes that the casinos that failed in Central
City did so primarily due to Central City's Main Street disadvantages
location as

compared to Black Hawk. In Black Hawk, the Company believes the properties
that have failed have done so for a variety of reasons, including inferior
design, inconvenient parking, inadequate size, inexperienced management and
undercapitalization.

Several lobbying groups placed initiatives for additional Colorado
limited stakes gaming venues, including Denver, on the November 1996
statewide ballots. Although each of these initiatives were defeated by a wide
margin, similar initiatives, legislation or regulations could be introduced
in the future. The enactment of any initiatives, legislation, or regulations
legalizing gaming elsewhere in Colorado could, and if gaming closer to Denver
was legalized, would, have a material adverse effect on the Company's
consolidated results of operations and financial position.

During the 1996-1997 legislative session, the Colorado Legislature
passed a bill that would have authorized the installation of a minimum of 500
video lottery terminals ("VLT's") at six horse and dog tracks located
throughout Colorado. VLT's are games of chance, similar to slot machines.
The Governor of Colorado vetoed such bill. A similar bill is pending in the
current Legislative Session. If the bill passes and the Governor of Colorado
does not veto such bill, or if any such veto is overridden, the bill would
become law and would add a significant amount of gaming device capacity in
the Denver metropolitan area. Any such additional capacity may have a
material adverse impact on the Company's results of operations.

In addition to competing with other gaming facilities in Colorado, the
Company competes to a lesser degree, both for customers and in 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, bingo parlor operations, charitable gaming and
pari-mutuel wagering, among others, and competes for entertainment dollars
generally with other forms of entertainment.

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

The State of Colorado created the Colorado Division of Gaming ( the
"Division") 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 Merger must be approved by the Gaming Commission. In connection
with such approval, the Division is currently investigating the operations,
officers and directors of Ladbroke and its affiliates, including an extensive
investigation of Ladbroke Group plc and its directors. Although there can be
no assurances, the Company anticipates that approval of the Merger will occur
sometime in the third quarter of 1998. However, pursuant to the terms of the
Merger Agreement, if the Merger has not been consummated on or before
September, 30 1998, which date may be extended by the mutual written consent
of LRC and the Company, either party has the right to terminate the Merger
Agreement and abandon the Merger. Any failure or refusal of Ladbroke or such
related persons or entities to provide any information requested by the
Division, or any delays in providing such information, may detrimentally
impact the ability of Ladbroke to obtain, or materially delay the obtaining
of, the necessary approval of the Gaming Commission. There can be no
assurance that the Gaming Commission will approve the Merger.

The Director of the Division (i) may inspect, without notice, premises
where gaming is being conducted; (ii) may seize, impound or remove any gaming
device; (iii) may examine and copy all of a licensee's records; (iv) may
investigate the background and conduct of licensees and their employees; and
(v) 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-transferable.
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 Bullwhackers Black Hawk
and Central City expire on December 2, 1998 and the license for the Silver
Hawk Casino expires on June 24, 1998 and currently is in the process of being
renewed. In addition, prior to conducting gaming activities upon the former
Bronco Billy's as part of Bullwhackers Black Hawk's gaming license, as
discussed above, Bullwhackers Black Hawk must obtain approval for such
transaction by the Gaming Commission. There can be no assurance that the
Company will successfully renew its licenses in a timely manner or at all.
The failure or inability of the Company, BWBH, BWCC, Silver Hawk Casino, 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, and the
suitability of a licensee can be adversely affected by persons associated
with the licensee. 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.

All persons employed by the Company who are involved, directly or
indirectly, in gaming operations in Colorado also are required to obtain a
support gaming license prior to commencing employment. In addition, "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. All licenses are revocable, non-transferable and valid only for the
particular location initially authorized, except that support and key
employee licenses move with the approved individual and are not location
specific. Messrs. Szapor, Mayer, Rabin, Stephens, all officers of the
Company, and the Company's four independent directors, among others, all hold
key licenses in Colorado.

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 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 considered a publicly
traded company within the meaning of the Colorado Regulations. Any owner of
any interest in a Colorado licensee where such licensee is not publicly
traded, or of a 5% or more interest in a publicly traded licensee, is
precluded from owning more than 5% of the Company's stock.

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
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. Institutional investors 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;
provided, however, that such institutional investors must

provide a certification within 45 days of acquiring such ownership of various
matters relative to their ownership, including that such ownership was
acquired for investment purposes only. The Gaming Commission maintains the
right to request information from any person, directly or indirectly
interested, regardless of their level of ownership, in or employed by a
licensee. An application for license or a finding of suitability may be
denied for any reason deemed reasonable by the Gaming Commission or the
Director of the Division (the "Director"). 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.

A person or entity may not sell, lease, purchase, convey, acquire or
pledge any 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 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 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" 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.

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, blackjack 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, the Gaming Commission 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.

NATIONAL GAMBLING IMPACT AND POLICY COMMISSION. Federal legislation was
recently enacted that established a National Gambling Impact and Policy
Commission to study the economic impact of gambling on the United States, the
individual states and Native American tribes. Additional federal regulation
may occur due to the initiation hearings by the Commission. Any new federal
legislation could have a material adverse effect on the Company.

NON-GAMING REGULATION

LIQUOR REGULATION. The sale of alcoholic beverages is subject to
licensing, control and regulation by the Liquor Agencies. The current liquor
licenses for Bullwhackers Black Hawk and Bullwhackers Central City, which
were recently renewed, expire in January and February of 1999, respectively.
The Silver Hawk liquor license expires in June 1998 and is in the process of
being renewed. Currently, the Company is seeking approval from the Liquor
Agencies to expand the premises for Bullwhackers Black Hawk liquor license to
include the former Bronco Billy's casino recently acquired by the Company.
In addition, the Company's liquor licenses will be deemed to have been
transferred as a result of the Merger. This deemed transfer must be approved
by the Liquor Agencies. There can be no assurance that such approvals of the
Liquor Agencies will be obtained.

All liquor licenses are renewable, are revocable and are not
transferable. The Liquor Agencies have full 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.

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 imposes an annual device fee of $75 for each gaming device
installed in a casino. The Colorado 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.
These rates are subject to annual revision with a maximum rate of 40%. The
latest annual revision, which became effective October 1, 1996, is calculated
as a percentage of adjusted gross proceeds (casino net win). The gaming tax
rates for the previous three gaming years are set forth in the following
table:

Annual Tax Rate Annual Tax Rate
Annual Gross Proceeds from 10/94 to 9/96 from 10/96 to 6/98
--------------------- ------------------ ------------------

First $2 million . . . . . . . 2% 2%
Next $2 million. . . . . . . . 8% 4%
Next $1 million. . . . . . . . 15% 14%
Next $5 million. . . . . . . . 18% 18%
Proceeds over $10 million. . . 18% 20%

In 1997, the Gaming Commission changed the gaming tax year from October
1 through September 30 to July 1 through June 30. Accordingly, the new tax
rate for the gaming tax year 1998-99 will be set by the Gaming Commission in
June, effective as of July 1. While it is difficult to speculate on how the
Gaming Commission may adjust the tax rates, if at all, any material increase
in the tax rates could have a material adverse effect on the Company's
consolidated results of operations and financial position.

EMPLOYEES

The Company employs approximately 575 persons, including cashiers,
dealers, food and beverage servers, facilities maintenance, accounting,
marketing and human resources personnel. No labor unions currently represent
any employees of the Company. A package of employee benefits is provided to
full-time employees. The Company believes that its employee relations are
satisfactory.

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, this
access road may be 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. As a result,
the Colorado Casinos' business tends to be seasonal, with the highest level
of activity occurring during the summer months.

The site of Bullwhackers Black Hawk is located in a 100-year flood
plain. To date, the Company has not experienced any flooding resulting in
damage to the casino. The Company believes it carries adequate flood
insurance on Bullwhackers Black Hawk. 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.

PRIVATE SECURITIES LITIGATION REFORM ACT

Certain statements set forth above and elsewhere in this Annual Report
on Form 10-K which are not historical facts are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995,
such as statements relating to future competition, financing and refinancing
sources and availability, plans for future development or expansion
activities and capital expenditures. Such statements can be identified by
the use of forward-looking terminology such as "might," "may," "will,"
"would," "could," "except," "anticipate," "estimate," "likely," "believe, "or
"continue" or the negative thereof or other variations thereon or comparable
terminology. Such forward looking statements involve a number of risks and
uncertainties that may significantly affect the Company's liquidity and
results of operations in the future and, accordingly, actual results may
differ materially from those expressed in any forward-looking statements.
Such risks and uncertainties include, but are not limited to, those related
to leverage and debt service and financing and refinancing efforts,
competition, inclement weather, general economic conditions in the Denver
metropolitan area, changes in gaming laws, regulations or tax rates and risks
related to development and construction activities. See "Management 's
Discussion and Analysis of Financial Conditions and Results of
Operations-Statement on Forward-Looking Information."

ITEM 2. PROPERTIES

The Company owns, through wholly-owned subsidiaries, the Colorado
Casinos and the parking lot including, with the exception of Bullwhackers
Black Hawk, free title to the real property underlying the buildings. The
Company leases the real property underlying Bullwhackers Black Hawk pursuant
to a 23-year land lease expiring in 2014. The terms of the ground lease
require base minimum payments for the calendar year 1996 through 1999 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. In February 1998, the Company
entered into an amendment to this lease, commencing upon the opening of the
Company's Black Hawk expansion, requiring the Company to pay 80% of the above
additional rent (1.9% of adjusted gross revenues) on the joint premises of
Bullwhackers Black Hawk and the former Bronco Billy's Casino 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.

base rent and additional rent equal to 40% of Net Win (as defined therein) of
the gaming operations conducted on the premises through September 2022, with
an option to extend the lease term to July 2024. The terms of the second
lease requires a $22,500 monthly lease payment through July 2024. This lease
contains a purchase option for $1.2 million expiring in March 2001. The
terms of the third lease requires a monthly rent between $12,500 to $16,500
per month, based on a range of Average Daily Proceeds from all gaming devices
on the premises, which monthly rent escalates throughout the term of the
lease, through July 2024.

In March 1997, the Company relocated its corporate offices from Denver
to Lakewood, Colorado pursuant to a new $10,000 a month lease, which expires
April 2002.

ITEM 3. LEGAL PROCEEDINGS

GENERAL. The Company is or may become a defendant in pending or
threatened legal proceedings in the ordinary course of business. The
Company's management believes that the ultimate resolution of all such
currently pending legal proceedings will not have a material adverse impact
on the Company's financial position or results of operations.

LADY LUCK. In October 1996, BWCC, Inc. signed a non-binding memorandum
of understanding ("MOU") with Gold Coin, Inc., a wholly-owned subsidiary of
Lady Luck Gaming Corporation, to explore the possibility of physically
combining Bullwhackers Central City with the adjacent casino operated as Lady
Luck Gold Coin Gambling Hall & Saloon and owned by Gold Coin, Inc. The
prospective transaction was subject to a number of contingencies, including
the execution and delivery of definitive agreements setting forth the final
agreed upon terms and conditions of the transaction. While the parties
continued to negotiate over unresolved issues contained in the drafts of the
definitive agreements, market conditions and other events affecting the
Central City market continued to change and decline significantly. Despite
continued efforts to satisfactorily resolve the open issues in light of the
foregoing, no final, definitive agreements were executed and delivered, and
the prospective transaction was never consummated.

In March 1998, Lady Luck Central City, Inc., formerly known as Gold
Coin, Inc., filed a complaint in the District Court for the County of
Jefferson, State of Colorado, Case No. 98 CV 672, captioned as LADY LUCK
CENTRAL CITY, INC. V. BWCC, INC., D/B/A BULLWHACKERS CENTRAL CITY, COLORADO
GAMING & ENTERTAINMENT, CO., AND LADBROKE GROUP PLC. The complaint alleges
causes of action against BWCC, Inc. based upon the foregoing events for
breach of contract, breach of fiduciary duty, and breach of duty of good
faith. The complaint also alleges causes of action against the Company and
Ladbroke Group PLC for tortious interference with contract and tortious
interference with prospective business opportunity. The Company and BWCC,
Inc. believe the complaint is without merit and intend to vigorously defend
themselves. As required by the Colorado Regulations, the Company has
notified the Division of this matter.

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 parking lot was constructed was identified as requiring
remediation in connection with the construction of the parking lot. That
remediation was completed in June 1994. When the Company expanded the
parking lot in June 1996, additional environmental remediation of hazardous
soil was required. Such additional remediation was completed, at the
direction and approval of the EPA and CDPHE, prior to December

31, 1996.

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, including a Phase I on the former Bronco Billy's site. Based on
these examinations, the Company is not aware of any environmental problems
affecting the Colorado Casinos which would likely 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.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS

The following matters were approved by the Company's stockholders at the
Company's Special Meeting of Stockholders held December 12, 1997:

1. Approval and adoption of the Merger Agreement by and among LRC, the
Acquisition Sub and the Company:

3,301,738 Shares Voted For 2,174 Shares Voted Against 0 Shares Abstained

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

Set forth below is certain information with respect to each individual who
is an executive officer of the Company:

Name Age Position(s)
- ---- --- -----------

Stephen J. Szapor, Jr. 38 Chief Executive Officer,
President and Director

Alan L. Mayer 36 Senior Vice President,
Chief Legal Officer and Secretary

Richard S. Rabin 51 Senior Vice President of Operations

Robert J. Stephens 30 Vice President of Finance and Treasurer

Jack Breslin 43 Vice President of Marketing

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.
On April 29, 1997, the Compensation Committee of the Board of Directors
extended Mr. Szapor's employment contract to June 7, 2000.

ALAN L. MAYER has served as Senior Vice President, Secretary and Chief
Legal Officer of the Company and its predecessors since September 1992 and
served as an interim director from the Effective Date through January 1997.
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 President of the Board of Directors of the Casino
Owners Association of Colorado.

RICHARD S. RABIN has served as Senior Vice President of Operations of
the Company since March 1996 and served as an interim director from the
Effective Date through October 1996. 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.

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 holds a key license from the Gaming
Commission and is a Certified Public Accountant.

JACK BRESLIN has served as Vice President of Marketing since February
1997. Mr. Breslin served as President and Partner of CCI Advertising, Inc.
in New Jersey, which produced campaigns for Horseshoe Casinos and Sands Hotel
and Casino in Atlantic City, the Santa Fe Casino in Las Vegas, and Gold
River in Laughlin, Nevada and several other casinos and riverboats throughout
the country from 1991 to February 1997. Prior to that, Mr. Breslin served as
in-house Creative Director for Trump's Castle Casino Resort in New Jersey.

PART II.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDERS
MATTER

(a) MARKET INFORMATION. The Company's Common Stock has traded on the OTC
Bulletin Board system, under the symbol "CGME" since October 1996. From June
1996 to October 1996, the Common Stock traded in the "pink sheets" in the
over-the-counter market. No established public trading market for the
Company's Common Stock exists. There are only, limited sporadic and
infrequent trades of the Common Stock; consequently there are no reliable
quotations of trading prices. Based upon information supplied to Nasdaq
Trading and Market Services by the reporting brokers and information supplied
to the Company by certain market makers, Nasdaq Trading and Market Services
and such brokers reported the following range of high and low sales price for
each quarter since the Common Stock became registered under the Securities
Exchange Act of 1934 on the Effective Date:

Quarter Ended High Low
------------- ---- ---

June 30, 1996 3.50 2.50
September 30, 1996 4.25 3.50

December 31, 1996 5.00 4.00

Quarter Ended High Low
------------- ---- ---
March 31, 1997 $5.25 $4.50
June 30, 1997 4.25 4.25
September 30, 1997 5.30 2.50
December 31, 1997 5.75 5.125

The most recent trade of the Company's Common Stock was $5.75 per share
on March 10, 1998.

(b) HOLDERS. The approximate number of record holders of the Company's
Common Stock as of March 25, 1998 was approximately 13.

(c) DIVIDENDS. 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
governing its 12% Senior Secured Pay-In-Kind Notes due 2003 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.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data set forth below is derived from
the Company's Consolidated Financial Statements. Due to the Reorganization,
comparisons of periods prior to and after June 6, 1997 may be of limited use
in determining operating or other financial trends in the Company's business.
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 Form 10-K.

IN THOUSANDS, EXCEPT SHARE DATA

Years Ended December 31,
-------------------------------------
1993 1994(b) 1995(b)
------- -------- ---------

STATEMENT OF OPERATIONS DATA:
Net revenues . . . . . . . . . . . . . . $38,468 $ 45,474 $ 47,428
Operating Expenses:
Impairment of assets and
predevelopment expense . . . . . . . . - 10,804 11,347
Reorganization items . . . . . . . . . - - 17,910
Other operating expenses . . . . . . . 35,310 47,631 44,807
Income (loss) from operations. . . . . . 3,158 (12,961) (26,636)
Interest expense . . . . . . . . . . . . 6,987 18,822 18,664
Equity loss in unconsolidated
subsidiary . . . . . . . . . . . . . . - (2,324) (70,277)
------- -------- ---------
Net loss . . . . . . . . . . . . . . . . $(3,829) $(32,331) $(115,216)
------- -------- ---------
------- -------- ---------
Net loss per common share(a) . . . . . . N/A N/A N/A
------- -------- ---------
------- -------- ---------
Weighted average common
shares(a) . . . . . . . . . . . . . . N/A N/A N/A

Jan. 1,1996 June 7, 1996
through through Year Ended
June 6, 1996 December 31,1996 December 31, 1997
------------ ---------------- -----------------

STATEMENT OF OPERATIONS DATA:
Net revenues . . . . . . . . . . . . . . $19,982 $30,680 $ 52,132
Operating Expenses:
Reorganization items . . . . . . . . . 2,290 308 75
Other operating expenses . . . . . . . 17,130 26,402 44,421
Income from operations . . . . . . . . . 562 3,970 7,636
Interest expense . . . . . . . . . . . . 579 3,867 6,780
Extraordinary gain from
reorganization . . . . . . . . . . . . 164,358 -- --
------------ ---------------- -----------------
Net income . . . . . . . . . . . . . . . $164,407 $ 192 $ 212
------------ ---------------- -----------------
------------ ---------------- -----------------
Basic net income per common share(a) . . N/A $ 0.04 $ 0.04
------------ ---------------- -----------------
------------ ---------------- -----------------
Weighted average common
shares(a) . . . . . . . . . . . . . . N/A 5,138,888 5,194,280
------------ ---------------- -----------------
------------ ---------------- -----------------

As of December 31,
-----------------------------------------------------------
1993 1994(b) 1995(b) 1996 1997
-------- -------- --------- ------- -------

BALANCE SHEET DATA:
Cash and cash equivalents . . . . . . . . $ 12,944 $ 7,977 $ 3,623 $ 5,758 $ 4,228
Total assets . . . . . . . . . . . . . . 143,622 141,093 37,680 67,048 64,679
Long-term debt (excluding current
portion) . . . . . . . . . . . . . . . . 139,595 155,675 - 55,391 53,553
Liabilities subject to compromise . . . . - - 186,460 -- --
Total stockholders' equity (deficit). . . (4,693) (36,824) (153,137) 4,869 5,248
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------

(a) The weighted average number of common shares outstanding and net income per
common share for the Predecessor Company (periods prior to June 6, 1996)
have not been presented because, due to the Reorganization and
implementation of fresh-start reporting, they are irrelevant.

(b) 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 (as determined by generally accepted accounting
principles) following the commencement of the GPRI Bankruptcy Case. On May
3, 1996, GPRI was sold to Casino America, Inc. as part of the
Reorganization. See Consolidated Financial Statements and Notes thereto.

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

STATEMENT ON FORWARD-LOOKING INFORMATION

Certain information included in this Annual Report on Form 10-K contain
forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, enacted pursuant to the Private
Securities Litigation Reform Act of 1995. Such Section 21E provides certain
"safe harbor" protections for forward-looking statements in order to
encourage companies to provide prospective information about their
businesses. Forward-looking statements include statements concerning plans,
objectives, goals, strategies, future events or performance, competition,
growth opportunities, source and uses of capital, future development or
expansion activities, underlying assumptions and other statements which are
other than statements of historical facts. Such statements may be identified
by the use of forward-looking terminology such as "might," "may," "would,"
"could," "expect," "anticipate," "estimate," "likely," "believe," or
"continue" or the negative thereof or other variations thereon or comparable
terminology. Such forward-looking statements involve a number of risks,
uncertainties and other factors that may significantly affect the Company's
liquidity and results of operations in the future and, accordingly, actual
results may differ materially from those expressed in any forward-looking
statements.

The forward-looking statements set forth in this Report on Form 10-K are
based upon various assumptions, many of which are based, in turn, upon
further assumptions, including, without limitation, management's examination
of historical operating trends, data contained in the Company's records and
other data available from third parties. Although the Company believes that
such assumptions were reasonable when made, because such assumptions are
inherently subject to significant uncertainties and contingencies which are
difficult or impossible to predict and are beyond the Company's control,
there can be no assurance, and no representation or warranty is made, that
management's expectations, beliefs or projections will result, be achieved or
accomplished. In addition to the other factors and matters discussed
elsewhere herein, factors that, in the view of the Company, could cause
actual results to differ materially from those discussed in the
forward-looking statements include: (i) leverage and debt service, (ii)
financing and refinancing efforts, (iii) significant changes in competitive
factors affecting the Company, (iv) inclement weather, (v) changes in general
economic conditions in the Denver metropolitan area, (vi) changes in state
and local gaming laws, regulations or tax rates, (vii) risks related to
development and construction activities, (viii) changes in management or
control of the Company, (ix) significant changes from expectations in actual
capital expenditures and operating expenses and (x) occurrences affecting the
Company's ability to obtain funds from operations, to finance needed capital
expenditures and other investments.

OVERVIEW

Colorado Gaming & Entertainment Co. ("CG&E") and its subsidiaries
(collectively referred to as the "Company"), formerly known as Hemmeter
Enterprises, Inc. (referred to as the "Predecessor Company" or "HEI" for
periods prior to June 7, 1996), was incorporated in August 1993 to develop,
own and operate gaming and related entertainment facilities. Three
wholly-owned subsidiaries, BWBH, Inc., BWCC, Inc., and the Silver Hawk
Casino, Inc., own and operate limited stakes gaming facilities in Colorado
(collectively, the "Colorado Casinos"). The Company purchased the Silver Hawk
Casino in April 1996 for $2.7 million and commenced operations on June 26,
1996. Millsite 27, Inc., also a wholly-owned subsidiary, owns a parking lot,
for use by BWBH, Inc. and Silver Hawk Casino, Inc. A wholly-owned subsidiary
of the Predecessor Company, Grand Palais Riverboat, Inc. ("GPRI"), developed
and operated a riverboat gaming project in New Orleans, Louisiana (the
"Riverboat Project"). GPRI's riverboat gaming operations commenced on March
29, 1995 and ceased on June 6, 1995. Due to the failure of the Riverboat
Project, GPRI filed 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"). Subsequently, HEI and its subsidiaries
(BWBH, BWCC and Millsite 27), which collateralized the Predecessor Company's
senior secured debt filed for protection under Chapter 11 of the Federal
Bankruptcy Code in the Court (the "Reorganization"). Through the
reorganization process, the Predecessor Company sold GPRI to Casino America,
Inc., the proceeds of which went to partially satisfy GPRI creditors and HEI
senior secured creditors. Additionally, in the Reorganization, the Company
recapitalized by reducing its senior secured debt to $50 million and issuing
all new shares of common stock. All of these events and transactions were
completed on June 7, 1996 (the "Effective Date") and the Company

and its three subsidiaries emerged from bankruptcy.

On the Effective Date, the Company adopted fresh-start accounting in
accordance with AICPA Statement of Position SOP 90-7 resulting in adjustment
of the Company's stockholders' 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
was converted to equity or otherwise discharged and significant adjustments
were made to reflect the resolution of certain liabilities.

RESULTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997 AS COMPARED TO THE YEAR ENDED DECEMBER
31, 1996.

The Company's net revenue increased 3%, to $52.1 million in 1997, from
$50.7 million in 1996. The increase in revenue is primarily attributable to
a full year of operations of the Silver Hawk Casino in 1997, which did not
commence operations until June 26, 1996, and generated an incremental $2.4
million in net revenue in 1997. Bullwhackers Black Hawk produced a 1%
increase in revenues in 1997. However, Bullwhackers Black Hawk's operating
results were negatively affected in 1997 by severe weather in the fourth
quarter and an abnormally low hold percentage on the Company's slot
machinesduring November and December 1997. In addition, construction
activities related to the Company's parking expansion and Kids Quest during
the first five months of 1997 negatively effected revenues during that
period. Additionally, the revenue growth at the Silver Hawk Casino and
Bullwhackers Black Hawk was partially offset by a 13% revenue decrease at
Bullwhackers Central City due to the overall decline of the Main Street
casinos in the Central City market. The Central City market, which was down
approximately 2% for the year, continues to struggle to compete with Black
Hawk, which offers better access, parking convenience and superior
properties. Additionally Bullwhackers Central City has not been able to
compete effectively with Central City's largest casino, which offers
substantially more amenities such as on-site parking and hotel rooms,
including the opening of a major parking expansion in June 1997.
Bullwhackers Central City revenue declines accelerated in the second half of
1997, subsequent to the opening of a competitor's expanded parking facilities.

Expenses directly related to casino operations, including casino labor
expense, gaming taxes and food and beverage expense, increased 5% to $26.6
million in 1997, as compared to $25.3 million in 1996. The increase is due
to a full year of operations of the Silver Hawk Casino in 1997 and an
increase in the gaming taxes on revenues over $10 million from 18% to 20%.

Marketing expense increased 8% to $6.9 million in 1997, as compared to
$6.4 million in 1996. This increase is primarily due to certain cash-back
promotions and busing programs in an effort to sustain business levels at
Bullwhackers Central City. Additionally, a full year of marketing and
promotions expenses for the Silver Hawk Casino accounted for an incremental
$200,000 of marketing expense in 1997.

Casino general and administrative expenses increased 2% to $2.9 million
in 1997, as compared to $2.8 million in 1996. The slight increase primarily
relates to a full year of additional administrative expenses for the Silver
Hawk Casino.

Corporate expense increased 7% to $3.0 million in 1997, as compared to
$2.8 million in 1996. The increase primarily relates to $750,000 of legal,
financial advisory and other fees incurred relating to the Merger. Absent
these one-time transaction costs, corporate expense would have decreased 218%
from the prior period.

Depreciation and amortization decreased 15% to $5.0 million in 1997 as
compared to $5.9 million in 1996. The decreased depreciation and
amortization charges are a direct result of a substantial amount of equipment
at Bullwhackers Black Hawk and Bullwhackers Central City becoming fully
depreciated in 1997, which accounted for $1.4 million of lower depreciation
charges in 1997. This decrease is somewhat offset by increased depreciation
and amortization charges of $500,000 due to the increased basis of the
Company's assets, from the adoption of "fresh-start" accounting on June 7,
1996 and depreciation and amortization charges related to a full year of
operations of the Silver Hawk Casino.

The Company incurred no pre-opening expense in 1997 as compared to
$362,000 in pre-opening expense in 1996 related to the opening of the Silver
Hawk Casino.

Reorganization and other impairment charges totaled $75,000 in 1997, as
compared to $2.6 million in 1996. Reorganization expenses are costs directly
related to the Reorganization and consisted primarily of professional fees in
the 1997 and 1996 periods.

Interest expense increased 55% to $6.8 million in 1997, as compared to
$4.4 million in 1996. The increase in interest expense is primarily due to
the Company not recording any interest expense during the Reorganization
period (January 1 through June 6, 1996) on its debt obligations in default.

FOR THE YEAR ENDED DECEMBER 31, 1996 AS COMPARED TO THE YEAR ENDED DECEMBER
31, 1995.

The Company's net revenue increased 7%, to $50.7 million in 1996 from
$47.4 million in 1995. The increase in revenue is primarily attributable to
the addition of the Silver Hawk Casino. 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 $3.9 million in net
revenue from that date through year end. In addition, continued overall
growth in the Black Hawk market and completion of the Company's expanded
parking lot, which opened on June 7, 1996, contributed to the increase in the
Company's net revenue. Bullwhackers Black Hawk produced a 6% increase in
revenues in 1996, despite the fact that Bullwhackers Black Hawk's operations
were negatively affected by the construction activities relating to expansion
of the parking lot which began April 1 and ended June 7. The revenue gains
in Black Hawk were offset by significant revenue declines at Bullwhackers
Central City due to competition in an overall declining Central City market.
The Central City market, which was down approximately 6% for the year,
continues to struggle to compete with Black Hawk, which offers better access
and parking convenience. Bullwhackers Central City has not been able to
compete effectively with the largest operator in Central City, which offers
substantially more amenities such as on-site parking and hotel rooms.

Expenses directly related to casino operations, including casino labor
expense, gaming taxes and food and beverage expense increased 3% to $25.3
million in 1996, as compared to $24.5 million in 1995. The increase is due
to the addition of the Silver Hawk Casino operations and the increased
business levels at Bullwhackers Black Hawk. However, as a percentage of net
revenue, casino expenses decreased to 50% in 1996 from 52% in 1995. The
decrease is due to certain labor efficiencies and other cost saving programs
implemented in late 1995 and early 1996, particularly at Bullwhackers Central
City in an effort to sustain profitability in light of the revenue decreases.
The decrease is also due to the benefit of approximately $110,000 the
Company received from the revised gaming tax structure in the fourth quarter
of 1996.

Marketing expense increased 10% to $6.4 million in 1996, as compared to
$5.8 million in 1995. This increase is due to marketing efforts related to
the introduction of the Silver Hawk Casino to the market and the
implementation of additional customer busing programs and certain other
promotions in an effort to sustain business levels at Bullwhackers Central
City.

Casino general and administrative expenses decreased 13% to $2.8 million
in 1996, as compared to $3.2 million in 1995. The decrease primarily relates
to reductions in staffing at Bullwhackers Central City and decreased
insurance costs.

Corporate expense decreased 59% to $2.8 million in 1996, as compared to
$6.9 million in 1995. These reductions included the elimination of most
corporate positions and terminating the use and subsidy of a corporate
aircraft, all beginning in the second quarter of 1995. Offsetting a portion
of these corporate reductions for 1996 includes a charge for approximately
$720,000 relating to incentive compensation expense for senior management
based upon implementation of the Company's new Cash Bonus Plan and the Stock
Incentive Plan subsequent to the Reorganization. Of the $720,000 incurred,
approximately $270,000 was a result of a noncash charge related to stock
compensation.

Depreciation and amortization increased 23% to $5.9 million in 1996 as
compared to $4.8 million in 1995. The increased depreciation charges are
due to the increased book basis of the Company's assets from the adoption of
"fresh-start" reporting upon emerging from bankruptcy, primarily the excess
reorganization value recorded at Bullwhackers Black Hawk. The Company was
required to adjust the carrying value of its assets to fair value when
adopting fresh-start accounting. Also to a lesser extent, depreciation
charges increased due to the addition of the

Silver Hawk Casino.

The Company incurred $362,000 in pre-opening expense in 1996 related to
the opening of the Silver Hawk Casino.

Reorganization and other impairment charges totaled $2.6 million in
1996, as compared to $28.9 million in 1995. Reorganization expenses are
costs directly related to the Predecessor Company's Reorganization and
consisted primarily of professional fees in the 1996 period. Impairments are
write-offs, primarily due to the write-off of affiliate receivables and
capitalized financing costs in the 1995 period.

Interest expense decreased 76% to $4.4 million in 1996, as compared to
$18.7 million in 1995. The decrease in interest expense is primarily due to
the reduction of debt pursuant to the Reorganization. Additionally, the
Company did not record any interest expense during the Reorganization period
November 1995 through June 6, 1996 on its debt obligations in default. On a
pro forma basis, based on the reorganized capital structure, interest for
1996 would have been approximately $7 million.

LIQUIDITY AND CAPITAL RESOURCES

On June 7, 1996, the Company entered into a $12.5 million revolving
senior bank 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 and up to a $3.5 million working capital line. No more than
$12.5 million of borrowings may be outstanding at any time. Borrowings under
the construction line of the Credit Facility were required to be made as of
September 30, 1997. Accordingly, the construction portion of the Credit
Facility expired unutilized on September 30, 1997. The Credit Facility was
amended in February 1998 to convert the construction line into a $5 million
acquisition line (the "Bronco Billy's Acquisition Line") to purchase and
perform tenant improvements on the former Bronco Billy's casino. Borrowings
under the Credit Facility accrue interest at prime plus 2.375% (10.875% as of
December 31, 1997). The facilities have varying terms ranging from three to
five years from when the funds are borrowed, but the entire facility matures
on June 2001, with two one-year extension options. As of December 31, 1997,
the Company had an outstanding balance of approximately $108,000 under the
equipment financing line.

The Company's outstanding 12% Senior Secured Pay-In-Kind Notes (the
"Notes") have an outstanding principal amount of $52.9 million as of December
31, 1997. Interest on the Notes accrues at a rate of 12% per annum and is
payable semi-annually in June and December. The Notes mature in June 2003.

The Company completed two major capital projects in the 1997 period to
enhance its Black Hawk properties. First, the Company completed an expansion
of its parking lot and valet facility to increase the parking capacity by
approximately 120 cars, bringing the total capacity to approximately 500
cars. Secondly, the Company completed construction of a day care facility
adjacent to Bullwhackers Black Hawk for use by New Horizons Kids Quest III,
Inc.("Kids Quest"). Kids Quest is solely responsible for the day-to-day
operations of the day care facility. These construction projects aggregated
approximately $3.25 million of capital expenditures, all of which was funded
with cash flow from operations. In total, the Company spent $4.6 million on
capital expenditures in 1997, with the remaining expenditures primarily
related to the purchase of new gaming equipment.

In April 1997, The Company responded to a Request for Proposal ("RFP")
issued by the government of Ontario, Canada, to develop and operate multiple
charity gaming clubs in the Province of Ontario. The clubs will offer 150
video lottery terminals ("VLT") and 40 table games with a maximum single bet
of $100. In responding to the RFP, the Company and its partners formed
Diamond Gaming of Ontario Inc. ("Diamond Gaming"). Diamond Gaming's
shareholders are a newly formed subsidiary of the Company, which owns 45% of
Diamond Gaming, a subsidiary of Ogden Corporation (45% owner) and Diamond
Gaming Services Inc. (10% owner). On September 30, 1997, the Ontario Gaming
Control Commission announced that Diamond Gaming was the successful bidder to
develop and operate charitable gaming clubs in the cities of Kingston and
Belleville, Ontario. The development and opening of the Kingston and
Belleville facilities remain contingent upon a number of items, including
entering into an operating agreement with the Ontario Gaming Control
Commission, reaching an agreement with property owners and local
municipalities on specific sites, and obtaining zoning and other local
approvals, none of which can be assured.

The proposed terms of the operating agreement will be an eight-year term with
one eight-year renewal option. Diamond Gaming will receive operator's
compensation equivalent to 10% of the VLT revenue and 5% of the table revenue
and all other revenue. Additionally, Diamond Gaming will receive 10% of
operating profits, as defined, excluding profits from VLT operations. The
Company currently estimates that the two clubs in Kingston and Belleville
will require an initial investment of approximately $5.0 million in the
aggregate. The Company's share of such investment is approximately 47% of
that amount, which it intends to fund from cash flow from operations or
borrowings under the revolving portion of the Credit Facility. Pursuant to a
Supplemental Indenture dated January 23, 1998, the Company has received the
necessary consent of the holders of the Notes to allow it to make the
required investment. The Company will account for its 45% interest in
Diamond Gaming under the equity method of accounting.

On February 13, 1998, the Company purchased the assets comprising the
casino known as Bronco Billy's in Black Hawk from Pioneer Associates Limited
Liability Company for approximately $5.5 million. The Company financed the
purchase by borrowing $5.5 million under the Credit Facility. The Company
borrowed $5.0 million under the Bronco Billy's Acquisition Line and borrowed
the remaining $500,000 of the purchase price under the equipment line of the
Credit Facility. The Bronco Billy's Acquisition Line amortizes over 60
months, commencing on June 1, 1998 and is payable in full on June 6, 2001.
Additionally, the Company anticipates to incurring an additional $2.0 million
to equip and renovate the former Bronco Billy's casino for reopening, which
will be funded out of cash flow from operations or additional borrowings
under the Credit Facility.

Bronco Billy's is located next to Bullwhackers Black Hawk. The Company
intends to remove the common wall separating the casinos in order for the
former Bronco Billy's casino to become a part of Bullwhackers Black Hawk.
Subject to the approval of the Gaming Commission and the Liquor Agencies, the
combined casino will be operated as a single casino, under one gaming license
and one liquor license. The Company plans to open the new facility in May
1998, which will add approximately 250 slot machines (over 40% in additional
capacity) to Bullwhackers Black Hawk and an additional restaurant facility.
While the Company intends to operate the newly acquired Bronco Billy's
facility as part of Bullwhackers Black Hawk, the Company will theme the newly
acquired facility with an enhanced sports bar theme. Such theming will be
distinctively different from Bullwhackers Black Hawk's victorian theme, and
any theme currently offered in the Black Hawk and Central City markets.

The Company is currently in the process of evaluating its information
technology infrastructure for Year 2000 compliance. The Company does not
expect that the cost to modify its information technology infrastructure to
Year 2000 compliance will be material to its financial condition or results
of operations. The Company does not anticipate any material disruption in its
operations as a result of any failure by the Company to be in compliance.
The Company does not currently have any information concerning the Year 2000
compliance status of its suppliers. In the event that any of the Company's
significant suppliers do not successfully and timely achieve Year 2000
compliance, the Company's business or operations could be adversely affected.

NEGATIVE WORKING CAPITAL

As of December 31, 1997, the Company's current liabilities exceeded its
current assets, resulting in negative working capital. Since the Company
emerged from bankruptcy on June 7, 1996, the Company has used cash generated
from operations to pay down debt under the Credit Facility ahead of schedule
and to pay construction costs for its parking lot expansion and Kids Quest
construction from cash flows. Management believes this strategy maximizes
the return on its excess cash. Additionally, should the Company have
additional working capital needs, it is able to borrow up to $3.5 million
under the revolving portion of the Credit Facility.

The Company believes that the Credit Facility and its operating cash
flows will provide sufficient liquidity and capital resources to fund the
Company's current operations. However, there can be 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 financing
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 Company's senior bank lender under

the Credit Facility and from Ladbroke and related entities pursuant to the
Merger Agreement.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

ITEM 8. FINANCIAL STATEMENTS

The Consolidated Financial Statements and Notes required by Item 8 are
attached at the end of this Annual Report on Form 10-K and are included
herein by this reference. An index to these Consolidated Financial
Statements and Notes is also included in Item 14(a) of this Report on Form
10-K.

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

Not Applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information relating to the directors of the Company, including
directors who are executive officers of the Company, is set forth under the
caption "Election of Directors" in, and is incorporated herein by reference
to the Company's proxy statement for its 1998 Annual Meeting of Stockholders.
Information relating to the executive officers of the Company is set forth
under the caption "Executive Officers of the Registrant" in Part I, Item 4A
of this report and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated herein by
reference to the Company's proxy statement for its 1998 Annual Meeting of
Stockholders under the caption " Executive Compensation".

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is incorporated herein by
reference to the Company's proxy statement for its 1998 Annual Meeting of
Stockholders under the caption "Security Ownership of Certain Beneficial
Owners and Management".

ITEM 13. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS

The information required by this item is incorporated herein by
reference to the Company's proxy statement for its 1998 Annual Meeting of
Stockholders under the caption "Executive Compensation".

PART IV

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

(a) (1) and (a)(2) Financial Statements and Financial Statement Schedules

INDEX TO FINANCIAL STATEMENTS

Page
----

CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . 24
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . . . 25
Consolidated Statements of Operations. . . . . . . . . . . . . . . . . . . . 26
Consolidated Statements of Stockholders' Equity. . . . . . . . . . . . . . . 27
Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . . . . . . 28
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . 30

All other schedules are omitted because the required information is not
present in amounts sufficient to require submission of the schedule or
because the information required is included in the Consolidated Financial
Statements and Notes thereto.

(a)(3) Exhibits

See Index to Exhibits on page 43 which is incorporated herein
by reference.

(b) Reports on Form 8-K

1. On December 17, 1997, the Company filed a Current Report on
Form 8-K. The date of report (date of the earliest event
reported) was December 11, 1997. The Company reported under
Item 5 that it reached agreement to purchase the assets
comprising the casino known as Bronco Billy's in Black Hawk
from Pioneer Associates Limited Liability Company.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Colorado Gaming & Entertainment Co.

We have audited the accompanying consolidated balance sheets of Colorado
Gaming & Entertainment Co. (formerly Hemmeter Enterprises, Inc.) and
subsidiaries (the "Company") as of December 31, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year ended December 31, 1997, the period from June 7, 1996
through December 31, 1996, the period from January 1, 1996 through June 6,
1996 and the year 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 consolidated financial position of Colorado Gaming
& Entertainment Co. and subsidiaries as of December 31, 1997 and 1996, and
the results of their operations and their cash flows for the year ended
December 31, 1997, the period from June 7, 1996 through December 31, 1996,
the period from January 1, 1996 through June 6, 1996 and the year ended
December 31, 1995, in conformity with generally accepted accounting
principles.

Denver, Colorado
March 13, 1998. Arthur Andersen LLP

COLORADO GAMING & ENTERTAINMENT CO.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

December 31, 1997 December 31, 1996
----------------- -----------------

ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................................ $ 4,228 $ 5,758
Accounts receivable, net ......................................... 467 217
Inventories ...................................................... 114 106
Prepaid expenses ................................................. 619 406
----------------- -----------------
Total current assets ......................................... 5,428 6,487
----------------- -----------------
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net ................ 41,798 41,322

EXCESS REORGANIZATION VALUE, net (Note 2) .......................... 16,491 18,256

OTHER ASSETS, net of accumulated amortization of $501 and $370,
respectively ..................................................... 962 983
----------------- -----------------
$64,679 $67,048
----------------- -----------------
----------------- -----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ................................................. $ 1,118 $ 804
Accrued expenses (Note 2) ........................................ 3,951 4,025
Current portion of credit facility ............................... 108 1,308
Current portion of other notes payable and capital leases ........ 701 651
----------------- -----------------
Total current liabilities .................................... 5,878 6,788
----------------- -----------------
NOTES PAYABLE, net of current portion:
Senior secured notes payable ..................................... 52,883 52,883
Credit facility .................................................. -- 1,136
Other notes payable and capital leases ........................... 670 1,372
----------------- -----------------
53,553 55,391
----------------- -----------------
Total liabilities ............................................ 59,431 62,179
----------------- -----------------
COMMITMENTS AND CONTINGENCIES (NOTE 10)

STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 20,000,000 shares authorized,
5,236,091 and 5,138,888 shares issued and outstanding at
December 31, 1997 and 1996, respectively ....................... 52 51
Additional paid-in capital ....................................... 4,792 4,626
Retained earnings ................................................ 404 192
----------------- -----------------
Total stockholders' equity ................................... 5,248 4,869
----------------- -----------------
$64,679 $67,048
----------------- -----------------
----------------- -----------------

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

COLORADO GAMING & ENTERTAINMENT CO.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

January 1,
Year Ended June 7, 1996 1996 Year Ended
December 31, through December through June December 31,
1997 (a) 31, 1996(a) 6, 1996 1995
------------ ---------------- ------------ ------------

REVENUES:
Casino ......................................... $50,049 $29,398 $ 19,126 $ 44,854
Food and beverage .............................. 3,270 1,998 1,288 3,737
Other .......................................... 274 117 32 286
------------ ---------------- ------------ ------------
Gross revenues ................................. 53,593 31,513 20,446 48,877
Less: promotional allowances ................. (1,461) (833) (464) (1,449)
------------ ---------------- ------------ ------------
Net revenues ................................... 52,132 30,680 19,982 47,428
------------ ---------------- ------------ ------------
OPERATING EXPENSES
Casino ......................................... 14,060 7,884 5,788 13,087
Gaming taxes and device fees ................... 9,146 4,564 3,614 8,277
Food and beverage .............................. 3,409 2,111 1,299 3,173
General and administrative:
Casino ....................................... 2,869 1,557 1,249 3,223
Corporate .................................... 3,021 1,926 902 6,872
Marketing ...................................... 6,891 4,001 2,349 5,806
Depreciation and amortization .................. 5,025 4,044 1,882 4,771
Pre-opening .................................... -- 315 47 --
Reorganization items (Note 1) .................. 75 308 2,290 17,910
Impairment of assets .......................... -- -- -- 10,945
------------ ---------------- ------------ ------------
Total operating expenses ....................... 44,496 26,710 19,420 74,064
------------ ---------------- ------------ ------------
INCOME (LOSS) FROM
OPERATIONS ....................................... 7,636 3,970 562 (26,636)
Interest expense ............................... (6,780) (3,867) (579) (18,664)
Interest income ................................ 98 89 66 361
Equity loss of unconsolidated subsidiary ....... -- -- -- (70,277)
------------ ---------------- ------------ ------------
INCOME (LOSS) BEFORE INCOME
TAX PROVISION .................................. 954 192 49 (115,216)
Provision for income taxes ..................... (742) -- -- --
------------ ---------------- ------------ ------------
Net income (loss) before extraordinary
gain ......................................... 212 192 49 (115,216)
Extraordinary gain from reorganization
items ........................................ -- -- 164,358 --
------------ ---------------- ------------ ------------
NET INCOME (LOSS) ................................ $ 212 $ 192 $164,407 $(115,216)
------------ ---------------- ------------ ------------
------------ ---------------- ------------ ------------
BASIC NET INCOME PER SHARE(b) .................... $ 0.04 $ 0.04 N/A N/A
------------ ---------------- ------------ ------------
------------ ---------------- ------------ ------------
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING ............................. 5,194,280 5,138,888 N/A N/A
------------ ---------------- ------------ ------------
------------ ---------------- ------------ ------------

(a) Due to the Reorganization and implementation of fresh-start reporting,
financial statements for the 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.

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

COLORADO GAMING & ENTERTAINMENT CO.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except number of shares)

Common Stock
------------------
Additional Retained
Warrants Paid-in Earnings
Shares Amount Issued Capital (Deficit) Totals
---------- ------ -------- ---------- --------- ---------

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 excluded in
1995 period ........................................... -- -- (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)
Cancellation of Predecessor Company common stock and
warrants and elimination of deficit ................... (11,786,235) (118) (7,000) 1,951 162,417 157,250
---------- ------ -------- ---------- --------- ---------
BALANCES, June 6, 1996 .................................. -- -- -- 4,113 -- 4,113

Issuance of new common stock ............................ 5,000,000 50 -- -- -- 50
Restricted stock grants to officers and directors ...... 138,888 1 -- 513 -- 514
Net income June 7 through December 31, 1996 ............. -- -- -- -- 192 192
---------- ------ -------- ---------- --------- ---------
BALANCES, December 31, 1996 ............................. 5,138,888 51 -- 4,626 192 4,869
---------- ------ -------- ---------- --------- ---------
Restricted stock grants to officers and directors ...... 97,203 1 -- 166 -- 167
Net Income .............................................. -- -- -- -- 212 212
---------- ------ -------- ---------- --------- ---------
BALANCES, December 31, 1997 ............................. 5,236,091 $ 52 $ -- $4,792 $ 404 $ 5,248
---------- ------ -------- ---------- --------- ---------
---------- ------ -------- ---------- --------- ---------

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

COLORADO GAMING & ENTERTAINMENT CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

January 1,
Year Ended June 7, 1996 1996 Year Ended
December 31, through December through June December 31,
1997 31, 1996(a) 6, 1996 1995
------------ ---------------- ------------ ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ........................................ $ 212 $ 192 $ 164,407 $(115,216)

Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization ............................ 5,025 4,044 1,882 4,771
Loss on retirements of property and equipment ............ 82 150 244 127
Equity in loss of unconsolidated subsidiaries ............ -- -- -- 70,277
Noncash compensation ..................................... 167 514 -- 169
Deferred income taxes .................................... 742 -- -- --
Impairment of assets ..................................... -- -- -- 11,347
Noncash interest expense ................................. 101 3,443 495 17,895
Extraordinary gain from reorganization ................... -- -- (164,358) --
Change in working capital and other ...................... (334) (3,111) 822 1,374
Noncash reorganization items ............................. -- -- 1,825 15,317
------------ ---------------- ------------ ------------
Net cash provided by operating activities ................ 5,995 5,232 5,317 6,061
------------ ---------------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, equipment and
leasehold improvements ................................. (4,608) (3,224) (3,885) (1,508)
Net restricted funds (placed in) disbursed from escrow ... 162 244 (507) 4,209
Investment in unconsolidated subsidiaries ................ (92) -- -- (9,270)
Advances to PRIGSA ....................................... -- -- -- (289)
Advances to affiliates, net .............................. -- -- -- (1,257)
------------ ---------------- ------------ ------------
Net cash used in investing activities .................... (4,538) (2,980) (4,392) (8,115)
------------ ---------------- ------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable to affiliate ................. -- -- -- 2,000
Proceeds from debt financing ............................. 1,000 2,392 5,824 --
Payment of debt placement costs, net of
accrued liabilities .................................... -- (445) -- (315)
Repayments of debt financing ............................. (3,987) (5,509) (3,304) (1,651)
------------ ---------------- ------------ ------------
Net cash provided by (used in) financing activities ...... (2,987) (3,562) 2,520 34
------------ ---------------- ------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ..................................... (1,530) (1,310) 3,445 (2,020)
CASH AND CASH EQUIVALENTS, at beginning of period ...... 5,758 7,068 3,623 5,643
------------ ---------------- ------------ ------------
CASH AND CASH EQUIVALENTS, at end of period ............ $ 4,228 $ 5,758 $ 7,068 $ 3,623
------------ ---------------- ------------ ------------
------------ ---------------- ------------ ------------

(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.

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

COLORADO GAMING & ENTERTAINMENT CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

January 1,
Years Ended June 7, 1996 1996 Years Ended
December 31, through December through June December 31,
1997 31, 1996(a) 6, 1996 1995
------------ ---------------- ------------ ------------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest, net of amounts capitalized ............. $6,721 $ 1,020 $19 $ 579
------------ ---------------- ------------ ------------
------------ ---------------- ------------ ------------
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Issuance of senior secured notes payable and other
notes payable pursuant to the Reorganization ................. $ -- $52,300 $-- $ --
------------ ---------------- ------------ ------------
------------ ---------------- ------------ ------------
Issuance of notes payable and capital lease obligations for
purchases of property and equipment ........................... $ -- $ -- $-- $ 227
------------ ---------------- ------------ ------------
------------ ---------------- ------------ ------------
Issuance of notes payable for accrued interest
obligations .................................................. $ -- $ 2,883 $-- $9,416
------------ ---------------- ------------ ------------
------------ ---------------- ------------ ------------

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

COLORADO GAMING & ENTERTAINMENT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997

(1) ORGANIZATION

ORGANIZATION

Colorado Gaming & Entertainment Co. ("CG&E") and its subsidiaries
(collectively referred to as the "Company"), formerly known as Hemmeter
Enterprises, Inc. (referred to as the "Predecessor Company" or "HEI" for
periods prior to June 7, 1996), was incorporated in August 1993 to develop,
own and operate gaming and related entertainment facilities. Three
wholly-owned subsidiaries, BWBH, Inc., BWCC, Inc., and Silver Hawk Casino,
Inc., own and operate limited stakes gaming facilities in Colorado
(collectively, the "Colorado Casinos"). The Company purchased the Silver Hawk
Casino in April 1996 for $2.7 million and commenced operations on June 26,
1996. Millsite 27, Inc., also a wholly-owned subsidiary, owns a parking lot,
with a capacity of approximately 500 cars, which is directly between , and is
used by BWBH, Inc. and Silver Hawk Casino, Inc. A wholly-owned subsidiary of
the Predecessor Company, Grand Palais Riverboat, Inc. ("GPRI"), developed and
operated a riverboat gaming project in New Orleans, Louisiana (the "Riverboat
Project"). GPRI's riverboat gaming operations commenced on March 29, 1995 and
ceased on June 6, 1995. Due to the failure of the Riverboat Project, GPRI
filed 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"). Subsequently, HEI and its subsidiaries which collateralized
the Predecessor Company's senior secured debt ( BWBH, BWCC and Millsite 27)
filed for protection under Chapter 11 of the Federal Bankruptcy Code in the
Court (the "Reorganization"). Through the reorganization process, the
Predecessor Company sold GPRI to Casino America, Inc., the proceeds of which
went to satisfy GPRI creditors and HEI senior secured creditors.
Additionally, in the reorganization, the Company recapitalized by reducing
its senior secured debt to $50 million and issuing its new shares to the
Predecessor Company's senior secured creditors. All of these events and
transactions were completed on June 7, 1996 (the "Effective Date") and the
Company and its three subsidiaries emerged from bankruptcy.

FRESH START REPORTING

In accordance with AICPA Statement of Position 90-7, "Financial
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 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 December 31, 1997
consolidated financial statements. Accordingly, a vertical black line is
shown in the consolidated financial statements to separate
post-Reorganization operations from those prior to June 7, 1996. As a result
of adopting fresh-start reporting, the Reorganized Company's consolidated
financial statements are not 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 of the Reorganized
Company (period beginning June 7, 1996) and the Predecessor Company (periods
prior to June 7, 1996) include the accounts of CG&E and its wholly owned
subsidiaries. Intercompany balances and transactions have been eliminated.
Investments in 50% or less owned entities are accounted for using the equity
method.

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, 1997 and 1996 is restricted cash totaling $525,000 and $511,000,
respectively, which represents the portion of cash that is required to be
maintained by the Colorado Casinos based on regulations promulgated by the
Colorado Limited Gaming Control Commission (the "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 due to the
short-term maturity of those investments.

CAPITALIZED INTEREST

Interest cost associated with major construction projects is
capitalized. When no debt is incurred specifically for a project, interest is
capitalized on amounts expended on the project using the weighted-average
cost of the Company's outstanding borrowings. Interest capitalized during
the year ended December 31, 1997 was $62,000.

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, while costs of normal repairs and maintenance are charged to
expense as incurred.

EXCESS REORGANIZATION VALUE

Excess reorganization value is amortized on a straight-line basis over
18.5 years. Accumulated amortization of excess reorganization value was $1.6
million and $577,000 at December 31, 1997 and 1996, respectively. The
Company continually evaluates current events and circumstances in order to
determine whether the recorded value has been impaired.

ACCRUED EXPENSES

Accrued expenses consisted of the following (in thousands):

December 31,
1997 1996
------ -------

Gaming taxes payable ................ $ 456 $ 521
Accrued payroll and
related expenses ................. 1,065 991
Accrued interest .................... 601 542
Accrued incentive compensation ...... -- 454
Accrued gaming liabilities .......... 672 624
Other accruals ...................... 1,192 893
------ -------
$3,986 $4,025
------ -------
------ -------

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
amounts wagered by customers, less awards or winnings paid out to customers.
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 $501,000,
$508,000 and $605,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.

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. The $362,000 reflected in the 1996 periods
relate to pre-opening costs for the Silver Hawk Casino which opened on June
26, 1996.

REORGANIZATION ITEMS

Reorganization items consist of expenses and other costs directly
related to the reorganization of the Company. Reorganization items included
in the consolidated statements of operations consisted of the following (in
thousands):

Year Ended June 7,1996 January 1, 1996 Year Ended
December 31, through through December 31,
1997 December 31, 1996 June 6,1996 1995
------------ ----------------- --------------- ------------

Charge-off of debt discount and
placement costs ............................... $-- $ -- $ -- $10,717
Loss charged for guarantee of subsidiary debt ... -- -- -- 4,600
Professional fees ............................... 75 308 2,290 2,593
------------ ----------------- --------------- ------------
$75 $308 $2,290 $17,910
------------ ----------------- --------------- ------------
------------ ----------------- --------------- ------------

INCOME TAXES

The Company accounts for taxes pursuant to Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes". SFAS No.
109 requires the measurement of deferred tax assets for deductible temporary
differences and operating loss carryforwards and of deferred tax liabilities
for taxable differences. Measurement of current and deferred tax liabilities
and assets is based on provisions of enacted tax law; the effects of future
changes in tax laws or rates are not anticipated. Deferred tax assets
primarily result from net operating loss carryforwards and impairment of
assets recognized in different periods for financial reporting and tax
purposes.

EARNINGS PER COMMON SHARE

The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128") effective December 15, 1997. This
pronouncement requires the presentation of the earnings per share ("EPS")
based on the weighted average number of common shares outstanding (referred
to as basic earnings per share) and earnings per share giving effect to all
dilutive potential common shares that were outstanding during the reporting
period (referred to as diluted earnings per share or earnings per share
assuming dilution). In addition, this pronouncement requires restatement of
earnings per share for all prior periods presented. As a result of the
Reorganization and the implementation of fresh-start accounting, the periods
prior to June 6, 1996 are not comparable to subsequent periods and
accordingly are not presented.

The following data show the amounts used in computing earnings per share
and the effect on income and the weighted average number of shares of
dilutive potential common stock (in thousands).

Year Ended June 7,1996 January 1,1996 Year Ended
December 31, through through December 31,
1997 December 31, 1996 June 7, 1996 1995
------------ ----------------- --------------- ------------

Income available to common shareholders $ 212 $ 192 -- --
------------ -----------------
------------ -----------------
Weighted average number of common
shares used in basic EPS 5,194,280 5,138,888 N/A N/A
Effect of dilutive securities ( see Note 6):
Management stock incentive plan 118,350 97,203 N/A N/A
------------ ----------------- --------------- ------------
5,312,630 5,236,091 N/A N/A
------------ ----------------- --------------- ------------
------------ ----------------- --------------- ------------

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). This
statement requires companies to classify items of other comprehensive income
by their nature in a financial statement and display the accumulated balance
of other comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of a statement of financial
position. SFAS 130 is effective for financial statements issued for fiscal
years beginning after December 15, 1997. Adoption of this standard will not
have a material impact on the Company's financial statements.

YEAR 2000

The Company does not currently have any information concerning the Year 2000
compliance status of its suppliers. In the event that any of the Company's
significant suppliers do not successfully and timely achieve Year 2000
compliance, the Company's business or operations could be adversely affected.

RECLASSIFICATIONS

Certain prior period amounts have been reclassified to conform to the
current year presentation. These reclassifications had no effect on the
Company's net income.

(3) PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

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

December 31,
1997 1996
--------- ---------

Land and improvements ........ $ 13,997 $ 12,288
Building and improvements .... 7,010 5,359
Leasehold improvements ....... 20,778 20,935
Gaming equipment, furniture
and fixtures ............... 20,509 19,975
Construction-in-progress ..... 102 335
--------- ---------
62,396 58,892
Less: accumulated
depreciation ................ (20,598) (17,570)
--------- ---------
$ 41,798 $ 41,322
--------- ---------
--------- ---------

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

(4) NEW VENUE PROJECTS

For the years ended December 31, 1997, 1996 and 1995, the Company
expensed $140,000, $120,000 and $402,000, respectively, for predevelopment
costs related to various potential development opportunities in new gaming
venues throughout North America. The costs incurred represent design,
presentation, research, consulting, regulatory and other costs associated
with pursuing development opportunities in new gaming venues. Of the
$140,000 incurred in 1997, only $50,000 was a "restricted investment" as
defined by the Indenture for the Notes.

owner). On September 30, 1997, the Ontario Gaming Control Commission
announced that Diamond Gaming was the successful bidder to develop and
operate charitable gaming clubs in the cities of Kingston and Belleville,
Ontario. The development and opening of the Kingston and Belleville
facilities remain contingent upon a number of items, including entering into
an operating agreement with the Ontario Gaming Control Commission, reaching
an agreement with property owners and local municipalities on specific sites,
and obtaining zoning and other local approvals, none of which can be assured.
The proposed terms of the operating agreement will be an eight-year term
with one eight-year renewal option. Diamond Gaming will receive operator's
compensation equivalent to 10% of the VLT revenue and 5% of the table revenue
and all other revenue. Additionally, Diamond Gaming will receive 10% of
operating profits, as defined, excluding profits from VLT operations. The
Company currently estimates that the two clubs in Kingston and Belleville
will require an initial investment of approximately $5.0 million in the
aggregate. The Company's share of such investment is approximately 47% of
that amount, which it intends to fund from cash flow from operations or
borrowings under the revolving portion of the Credit Facility. Pursuant to a
Supplemental Indenture dated January 23, 1998, the Company has received the
necessary consent of the holders of its Notes to allow it to make the
required investment. The Company will account for its 45% interest in
Diamond Gaming under the equity method of accounting. (5)

NOTES PAYABLE

Notes payable consisted of the following (in thousands):

December 31,
1997 1996
------- -------

Senior Secured Pay-In-Kind Notes ..... $52,883 $52,883
Credit facility ...................... 108 2,444
Other ................................ 1,371 2,023
------- -------
54,362 57,350
Less: current portion 809 1,959
------- -------
$53,553 $55,391
------- -------
------- -------

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 and up to a $3.5 million working capital line. No more than $12.5
million of borrowings may be outstanding at any time. Borrowings under the
construction portion of the Credit Facility were required to be made as of
September 30, 1997. Accordingly, the construction portion of the Credit
Facility expired unutilized on September 30, 1997. Borrowings under the
Credit Facility accrue interest at prime plus 2.375% (10.875% as of December
31, 1997). The facilities have varying terms ranging from three to five
years from when the funds are borrowed, but the entire facility matures on
June 7, 2001, with two one-year extension options. As of December 31, 1997,
the Company had an outstanding balance of approximately $108,000. 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
carrying amount of the Credit Facility is a reasonable estimate of fair
value, as terms of the line reflect current rates

SENIOR SECURED PAY-IN-KIND NOTES

Pursuant to the Reorganization on June 6, 1996, senior creditors
received a new issue of Senior Secured Pay-In-Kind Notes ( the "Notes")
having an aggregate principal amount of $50 million, due 2003. Interest on
the Notes accrues at a rate of 12% per annum, and is payable semi-annually.
Through the first year the Notes were outstanding, at the option of the
Company, interest on the Notes was payable either in cash or through the
issuance of additional Notes. Thereafter, the Company is required to pay
interest on the Notes in cash. On December 1, 1996, the Company made an
interest payment on the Notes by issuing $2.9 million of additional Notes.
All future interest

payments are due in cash. The Notes are secured by substantially all the
assets of the Company. In addition, the Notes Indenture includes certain
restrictive covenants. As of December 31, 1997, the fair values of the Notes
is approximately $57.1 million, which are based on quoted market prices
(108%). 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 in the years indicated below:

YEAR REDEMPTION PRICE
---- ----------------

2000 104%
2001 103%
2002 102%
2003 100%

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 which commenced September 7, 1996. The second
note in the amount of $3 million is payable in 20 quarterly installments of
principal and interest (at 9% per annum). The $3 million note was reduced by
$2.3 million in funds received by CAI in respect of its claims filed in the
GPRI Bankruptcy. Accordingly, the outstanding balance on the $3 million note
is approximately $670,000 as of December 31, 1997. The outstanding balance
on the $1.6 million note is approximately $700,000 as of December 31, 1997.
The Company considers the estimated fair value of such notes to be the same
as its carrying value since the obligations were entered into as of the
Effective Date, and no significant interest rate fluctuations have occurred
since that date.

Aggregate annual maturities of long-term debt, are as follows:

1998 $ 809
1999 --
2000 306
2001 364
2002 --
Thereafter 52,883
-------
Total $54,362
-------
-------

Subsequent to year end, the Company borrowed $5.5 million under the
Credit Facility to finance the acquisition of Bronco Billy's. Additional
repayments with respect to these borrowings are $1.0 million, $1,1 million,
$1.1 million and $2.3 million, payable in 1998, 1999, 2000 and 2001,
respectively.

(6) STOCKHOLDER'S EQUITY

Pursuant to the Reorganization, the Predecessor Company's preferred
stock, common stock and warrants were canceled on the Effective Date. The
Reorganization 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 CG&E were issued on a pro rata basis to the
Predecessor Company's senior secured creditors. 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 three years following the
Effective Date based on the Company meeting certain performance criteria.
Once granted, the shares are fully vested. On June 7, 1997, the Company
granted 97,203 shares to management due to the performance criteria being
achieved. As of December 31, 1997, there are 319,464 shares available for
grant under the Stock Plan.

(7) INCOME TAXES

The Company recorded no income tax expense in the 1995 and 1996 periods
due to the Company's significant loss position, and the effect of the
Reorganization on the Company's tax position. For the year ended December
31, 1997 the Company recorded a $342,000 deferred tax provision. A
reconciliation of income tax expense to the statutory federal tax rate of 34%
is as follows:

Statutory Rate ........ 34.0%

Effects of:
State Taxes ........... 3.3%
Goodwill .............. 40.5%
-----
Effective Tax Rate .... 77.8%
-----

The components of the deferred tax asset as of December 31, 1997 and
1996 are as follows.

1997 1996
------- -------

CURRENT:
Accrued vacation, gaming liabilities
and incentive compensation $ 261 $ 458
NON-CURRENT:
Difference in asset basis 456 458
Recognition of legal settlement 503 740
Impairment of assets 1,208 3,860
Net operating loss carryforwards 4,689 2,343
------- -------
Gross deferred tax asset 7,117 7,859
Valuation allowance (7,117) (7,859)
------- -------
$ -- $ --
------- -------
------- -------

The net deferred tax asset valuation allowance is equal to the full
amount of the gross deferred tax asset because the realization of such asset
is dependent upon future taxable income, which is uncertain. The Company
currently has NOL's totaling approximately $12.5 million, which expire
beginning in 2008. Pursuant to the Reorganization, the old shares of common
stock were canceled and newly authorized common stock was issued to the
Company's senior secured creditors, effecting an ownership change as defined
in section 382 of the Internal Revenue Code. The effect of this ownership
change limits the utilization of NOL's generated prior to the Effective Date
to approximately $520,000 annually. Utilization of NOL's generated
subsequently to the Effective Date, totaling approximately $6.3 million, is
unlimited.

(8) LEASES

OPERATING LEASES

The Company leases real property, on which Bullwhackers Black Hawk was
constructed. The lease is for a period through 2014 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 three years ended December 31, 1997 was $1.1 million each
year. 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, or $5.9 million on that date.

Future annual base rental payments for the land lease as of December 31,
1997 are as follows:

Year ending December 31 (in thousands):

1998 ........................... $ 600
1999 ........................... 600
2000 ........................... 660
2001 ........................... 660
2002 ........................... 660
Thereafter ..................... 8,690
---------
Total .......................... $ 11,870
---------
---------

In March 1997, the Company relocated its corporate offices to Lakewood,
Colorado pursuant to a new $10,000 a month lease, which expires April 2002.

On February 11, 1998, the Company entered into three ground lease
agreements for the real property underlying the facility of the former Bronco
Billy's casino. The terms of the first lease requires a monthly $35,000 base
rent payment and additional rent equal to 40% of Net Win (as defined) of the
gaming operations conducted on the premises through September 2022, with an
option to extend the lease term to July 2024. The terms of the second lease
requires a $22,500 monthly lease payment through July 2024. This lease
contains a purchase option for $1.2 million expiring in March 2001. The
terms of the third lease requires a monthly rent between $12,500 to $16,500
per month, based on a range of Average Daily Proceeds (as defined) from all
gaming devices conducted on the premises, which monthly rent escalates
throughout the term of the lease, through July 2024.

(9) RELATED PARTY TRANSACTIONS

DUE FROM AFFILIATES

In 1997, the Company paid $250,000 to Unirock Management Company, a
merchant banking firm controlled by the Chairman of the Board of Directors
for the Company. Unirock Management Company provided financial advisory
services to the Company related to the Merger. The Company believes that
this transaction is on terms at least as favorable as would have been
obtained from non-related parties.

In 1994 and 1995, the Predecessor Company made approximately $4.8
million of advances to former officers and various affiliates which were
majority owned by the controlling stockholders and certain officers of the
Predecessor Company. No amounts were ever repaid under these advances. Due
to the deterioration of the financial condition of the affiliates and
certain officers to which the Predecessor Company had advanced funds, the
Predecessor Company determined it was unlikely that it would collect any of
the advances to affiliates and, accordingly, provided a reserve for the
entire $4.8 million amounts owed the Company as of December 31, 1995. These
write-offs are reflected as impairment of assets in the accompanying
consolidated statements of operations.

(10) COMMITMENTS AND CONTINGENCIES

GAMING LICENSES

The Colorado Casinos are required to comply with laws and regulations
promulgated by the Colorado Gaming Commission in order to maintain continued
operations. Bullwhackers Black Hawk and Bullwhackers Central City operate
under separate current annual gaming licenses which expire in December 1998,
whereas the Silver Hawk Casino license expires in June 1998. Management
anticipates that such gaming licenses will be renewed.

GAMING TAXES AND FEES

The Colorado 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%. The latest annual revision,
which became effective October 1, 1996, is calculated as a percentage of
adjusted gross proceeds (casino net win). The gaming tax rates for the
previous three gaming years are set forth in the following table:

Annual Tax Rate from Annual Tax Rate
Annual Gross Proceeds 10/94 to 9/96 from 10/96 to 6/98
--------------------- -------------------- ------------------

First $2 million ............... 2% 2%
Next $2 million ................ 8% 4%
Next $1 million ................ 15% 14%
Next $5 million ................ 18% 18%
Proceeds over $10 million ...... 18% 20%

Additionally, the city and state levy device fees ranging from $75 to
$1,265 per device per annum. For the years ended December 31, 1997, 1996 and
1995 the Company recorded $9.1 million, $8.2 million and $8.3 million,
respectively, in total gaming taxes and device fees. In 1997, the Gaming
Commission changed the gaming tax year from October 1 through September 30 to
July 1 through June 30. Accordingly, the new tax rate for the gaming tax
year 1998-99 will be set by the Gaming Commission in June, effective as of
July 1, 1998. While it is difficult to speculate on how the Gaming
Commission may adjust the tax rates, if at all, any material increase in the
tax rates could have a material adverse effect on the Company's consolidated
results of operations and financial position.

EMPLOYMENT AGREEMENTS

In 1996, the Company entered into employment agreements with certain
executives of the Company. These employment agreements are each for initial
term of three years, and renew thereafter for successive one year terms
unless terminated by each of the respective parties. On April 29, 1997, the
Compensation Committee of the Board of Directors extended Mr. Szapor's
employment contract to June 7, 2000.

OTHER COMMITMENTS

Merger, the Company will become a wholly-owned subsidiary of Ladbroke.
Pursuant to the Merger Agreement, holders of the Company's common stock,
$0.01 par value (the "Common Stock"), will be entitled to receive $6.25 in
cash for each share of Common Stock held by them immediately prior to the
Merger. On December 12, 1997, stockholders of the Company approved and
adopted the Merger Agreement. The Merger remains subject to approval by the
Colorado Limited Gaming Control Commission (the "Gaming Commission").
Although there can be no assurances, closing of the Merger is anticipated to
occur sometime in the third quarter of 1998. However, pursuant to the terms
of the Merger Agreement, if the Merger has not been consummated on or before
September, 30 1998, which date may be extended by the mutual written consent
of LRC and the Company, either party has the right to terminate the Merger
Agreement and abandon the Merger.

LEGAL PROCEEDINGS

In October 1996, BWCC, Inc. signed a non-binding memorandum of
understanding ("MOU") with Gold Coin, Inc., a wholly-owned subsidiary of Lady
Luck Gaming Corporation, to explore the possibility of physically combining
Bullwhackers Central City with the adjacent casino operated as Lady Luck Gold
Coin Gambling Hall & Saloon and owned by Gold Coin, Inc. The prospective
transaction was subject to a number of contingencies, including the execution
and delivery of definitive agreements setting forth the final agreed upon
terms and conditions of the transaction. While the parties continued to
negotiate over unresolved issues contained in the drafts of the definitive
agreements, market conditions and other events affecting the Central City
market continued to change and decline significantly. Despite continued
efforts to satisfactorily resolve the open issues in light of the foregoing,
no final, definitive agreements were executed and delivered, and the
prospective transaction was never consummated.

The Company is or may become a defendant in a number of pending or
threatened legal proceedings in the ordinary course of business. The
Company's management believes that the ultimate resolution of currently
pending legal proceedings will not have a material adverse impact on the
Company's financial position or results of operations.

(11) SUBSEQUENT EVENTS (UNAUDITED)

On February 13, 1998, the Company purchased the assets comprising the
casino known as Bronco Billy's in Black Hawk from Pioneer Associates Limited
Liability Company for approximately $5.5 million. In connection with the
purchase, the Company entered into an amendment to the Credit Facility
converting the expired $5 million construction line into a new line up to $5
million (the "Bronco Billy's Acquisition Line") to purchase and perform
tenant improvements on the former Bronco Billy's casino. The Company
borrowed $5.0 million of the purchase price under the Bronco Billy's
Acquisition Line and borrowed the remaining $500,000 of the purchase price
under the equipment portion of the Credit Facility. The Bronco Billy's
Acquisition Line amortizes over 60 months, commencing on June 1, 1998 and is
payable in full on June 6, 2001. Additionally, the Company anticipates to
incur an additional $2.0 million to equip and renovate the former Bronco
Billy's casino for reopening, which will be funded out of cash flow from
operations or additional borrowing from the Credit Facility.

Bronco Billy's is located next to Bullwhackers Black Hawk. The Company
intends to remove the common wall separating the casinos in order for the former
Bronco Billy's to become a part of Bullwhackers Black Hawk.

Subject to the approval of the Gaming Commission and the Liquor Agencies, the
combined casino will be operated as a single casino, under one gaming license
and one liquor license. The Company plans to reopen the new facility in May
1998, which will add approximately 250 slot machines and an additional
restaurant facility to Bullwhackers Black Hawk. The Company intends the
expansion of Bullwhackers Black Hawk to be known as The Bullpen Sports Casino
with an enhanced sports-bar theme.

(12) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following is a summary of unaudited quarterly information excluding
any reorganization or other impairment changes related to the Reorganization
and disposition of assets.

1997 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
---- ----------- ----------- ----------- -----------

Net Revenues $ 12,973 $ 13,392 $ 14,090 $ 11,677
Operating Income 1,368 1,849 2,424 1,995
Net Income (Loss) (346) 74 366 118

1996 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
---- ----------- ----------- ----------- -----------

Net Revenues $ 11,023 $ 12,204 $ 14,625 $ 12,810
Operating Income 424 319 1,926 1,863
Net Income 328 163,868 232 171

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

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 1934, this report
has been signed below by the following persons on behalf of the registrant
and in the capacities and on the date indicated.

Signature Title Date
--------- ----- ----

/s/ Stephen J. Szapor, Jr. President and Chief March 25, 1998
- --------------------------- Executive Officer, Director
Stephen J. Szapor, Jr. (Principal Executive
Officer)

/s/ Robert J. Stephens Vice President of Finance March 25, 1998
- --------------------------- (Principal Financial and
Robert J. Stephens Accounting Officer)

/s/ Franklin S. Wimer Director, Chairman of March 25, 1998
- --------------------------- the Board
Franklin S. Wimer

/s/ Philip J. DiBerardino Director March 25, 1998
- ---------------------------
Philip J. DiBerardino

/s/ Steve Leonard Director March 25, 1998
- ---------------------------
Steve Leonard

/s/ Mark van Hartesvelt Director March 25, 1998
- ---------------------------
Mark van Hartesvelt

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.).*

2.3 Agreement and Plan of Merger dated as of August 22, 1997 by and
among the Company, Ladbroke Racing Corporation ("Ladbroke") and
CG&E Acquisition Corp. (incorporated by reference to Exhibit 2.1
to the Company's Current Report on Form 8-K filed August 27,
1997).

2.4 Stock Option Agreement dated as of August 22, 1997 by and between
the Company and Ladbroke (incorporated by reference to Exhibit
2.2 to the Company's Current Report on Form 8-K filed August 27,
1997).

2.5 First Amendment to Agreement and Plan of Merger dated as of
October 21, 1997, among the Company, Ladbroke and CG&E
Acquisition Corp.

2.6 Asset Purchase Agreement, dated December 10, 1997, by and between
CG&E and Pioneer Associates Limited Liability Company
("Pioneer").

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.*

4.5 First Supplemental Indenture date as of January 23, 1998 by and
between the Company and State Street Bank and Trust Company, as
successor in interest to Fleet National Bank, as Trustee.

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. Management 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.*+

10.32 Employment Agreement between the Company and Robert Stephens .+

10.33 Employment Agreement between the Company and Jack Breslin.+

10.34 Second Amendment to Loan and Security Agreement by and among the
BWBH, Inc., BWCC, Inc. and Silver Hawk Casino, Inc., and Foothill
Capital Corporation dated February 9, 1998.

10.35 Amendment to Lease Agreement, dated February 27, 1998 by and
among Jerry L. Brown and Harold Gene Reagin and HP Black Hawk,
L.P.

10.36 Lease Acknowledgment, Assumption and Modification Agreement,
dated February 11, 1998 by and among Pioneer, BWBH, Inc. and
Edward E. Smith and Shirley J. Smith.

10.37 Lease Acknowledgment, Assumption and Modification Agreement,
dated February 11, 1998 by and among Pioneer, BWBH, Inc. and KDL,
Inc. ("KDL").

10.38 Lease Acknowledgment, Assumption and Modification Agreement,
dated February 11, 1998 by and among Pioneer, BWBH, Inc., KDL and
Elizabeth Branecki.

10.39 First Amendment to Employment Agreement between the Company and
Stephen J. Szapor, Jr.+

21.1 List of Subsidiaries.*

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

27.1 Financial Data Schedule.

* Incorporated by reference to the same exhibit number in the Company's
Registration Statement on Form 10, with the exception of exhibit 25.1 was
previously referenced as 99.1 (File No. 0 - 28068).

+ Indicates management contract or compensatory plan, contract or
arrangement.