U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark 1) X Quarterly Report Under Section 13 or 15(d) of The Securities
--- Exchange Act of 1934
For the quarterly period ended March 31, 1997
---------------
Transition Report Under Section 13 or 15(d) of The Securities
Exchange Act of 1934 (No Fee Required) for the Transition Period
from ________ to ________
Commission file number 0-22450
COUNTRY WORLD CASINOS, INC.
--------------------------------------------
(Name of Small Business Issuer in its Charter)
Nevada 13-3140389
------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
13576 West Utah Avenue
Lakewood, CO 80228
--------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 912-5776
4155 E. Jewell Avenue, Suite 1000, Denver, Colorado 80222
---------------------------------------------------------
(Former name, former address and formal fiscal year,
if changed since last report)
Check whether the registrant (1) has filed all reports required to be
filed by Sections 13 or 15(d) of the Securities Exchange Act during the past 12
months (or for such shorter period as 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
APPLICABLE ONLY TO CORPORATE ISSUERS.
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date.
The Registrant had 10,836,187 shares of its common stock outstanding as of
May 14, 1997.
Transitorial Small Business Disclosure Format (Check one): Yes _____ No X
<PAGE>
COUNTRY WORLD CASINOS, INC.
Index
Page
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Plan of Operation
3
Part II - OTHER INFORMATION
Item 1. Legal Proceedings 6
Item 3. Defaults upon Senior Securities
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES 7
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Financial Statements are attached commencing on page F-1.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
OPERATION.
Country World Casinos, Inc., the Registrant (the "Company" or "Country
World") was incorporated on November 9, 1982 under the name, Innovative Medical
Technology, Inc. The Company was organized to engage in the medical industry.
The Company effected a public offering in 1983. The Company was essentially
inactive until 1990 when it undertook the manufacturing of monolithic composite
panels for use in the construction of semi-truck trailers, shipping containers
and industrial buildings. The Company discontinued this business in September
1992.
In 1993, the Company changed the focus of its planned business operations
to the construction of a casino in Black Hawk, Colorado. In August, 1993, the
Company completed the acquisition from New Allied Development Corporation and
its subsidiary, Tommyknocker Casino Corp. (collectively "NADC") of certain real
property located in Black Hawk, Colorado known as Mill Sites 12 and 13, and the
Smith Lode Mining Claim, U.S. Survey No. 502 (the "Property").
Since the Company's purchase of the Property in August 1993, the Company's
activities have focused on obtaining the necessary financing and making
preparations for construction of the casino on the Property. The Company has
been able to obtain sufficient financing to make significant preparation for
construction of the casino, but sufficient financing has not been obtained to
commence construction of this project. The Company's efforts have included the
completion of an extensive excavation project consisting of the removal of
approximately 60,000 cubic yards of rock and dirt, preparation of working
drawings for the foundation of the project, design of the interior casino and
retail areas of the project, work with the Colorado Department of Transportation
for the redesign of Highway 119, the main access road to the Property, and work
with the Black Hawk-Central City Sanitation District for a sewer tap and with
the City of Black Hawk's Water District to provide a water tap to the Property.
Although these efforts have not been completed, the Company believes that, if
financing were obtainable, it should be in a position to construct a gaming
facility on the Property.
In the fiscal year ended June 30, 1995, the Company borrowed $1,000,000
from Holly Holdings, Inc., formerly known as Holly Products, Inc. ("Holly"). On
April 20, 1995, the Company issued 5,000,000 shares of its common stock to Holly
in exchange for the cancellation of the $1,000,000 indebtedness, plus interest.
The Company also agreed to grant Holly the right to purchase up to an additional
20,000,000 shares of common stock at $.20 per share (a total of $4,000,000) if
such funding was provided within a reasonable time and progress continued to be
made concerning financing for the casino project. The Company and Holly agreed
that Holly would provide $250,000 to the Company by no later than June 30, 1995,
for which the Company would issue 1,250,000 shares of its common stock. Holly
did not provide the $250,000 to the Company by June 30, 1995; however,
subsequent to the advancement of the $1,000,000 referred to above, Holly has
provided financing of approximately $865,000 to the Company through March 31,
1997. In addition, as noted below, Holly has agreed to provide additional
financing to the Company.
The Company is in need of substantial, additional financing in order to
complete construction and to commence operation of the casino. There can be no
assurance that the Company will be able to obtain the necessary financing. In
addition, the Company's ability to operate the casino will be dependent upon
substantial other conditions, including the obtaining of licenses and compliance
with governmental regulations, grading and construction of the casino, obtaining
the necessary permits and approvals from the City of Black Hawk and other
regulatory bodies, procuring gaming equipment on satisfactory terms, and
accomplishing these objectives in a timely manner. The Company does not expect
to accomplish these objectives in the current fiscal year.
3
<PAGE>
During the fiscal year ended June 30, 1995, the Company's disagreements
with New Allied intensified. As a result of NADC's unwillingness to cooperate
with the Company, NADC's failure to secure a release of the $475,000 first deed
of trust on the Property, NADC's misrepresentations to the Company and
subsequent legal problems involving NADC, the Company instituted litigation
against NADC.
In 1995 NADC commenced foreclosure proceedings involving the Property. Due
to the pendency of these proceedings, on October 12, 1995, the Company filed a
Voluntary Petition Under Chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court, District of Colorado (Case No. 95 20563 RJB). As a result, all
creditors of the Company were stayed from commencing or continuing any action or
enforcing any judgment or lien against the Company or property of the Company,
except as otherwise authorized pursuant to Title 11 U.S.C. 362(b). Upon the
Company's motion, the Bankruptcy Court dismissed the Company's Chapter 11 case
in March 1997.
In March 1996 the Bankruptcy Court granted the Company's motion to approve
$5 million in financing, which financing was obtained on May 31, 1996. The $5
million financing was obtained from a group of lenders led by Kennedy Funding,
Inc. and Anglo-American Financial as agent ("Kennedy"). The lending group
included Norlar, Inc. Norlar, Inc. is a closely-held corporation beneficially
owned by Larry Berman and his wife. Mr. Berman is a director of the Company, and
an officer, director and principal shareholder of Holly. Norlar, Inc.'s
participation or percentage of the $5 million financing is 47% or $2,350,000.
The other participants are unrelated to the Company or Holly.
In connection with this financing, the Company made a Promissory Note
effective May 20, 1996 payable to Kennedy in the principal amount of $5 million
with interest payable at the rate of 15% per annum until May 19, 1997 (the
"First Year Interest Obligation") and at a rate of 24% per annum thereafter.
Payments of principal and interest are payable as follows: (a) the First Year
Interest Obligation was prepaid at closing; (b) commencing on May 19, 1997 and
for each month thereafter, the Company is to make interest only payments, in
advance, in the amount of 2% of the then existing principal balance due under
the Note; and (c) the entire outstanding principal balance, together with all
accrued and unpaid interest, if not previously paid, shall be finally due and
payable on May 19, 1999. The holder of the Note may accelerate the due date for
the entire balance of principal, interest and other sums due upon maturity in
the event of default under the Note. The default rate of interest is 24% during
the first loan year and 36% thereafter. The Note is secured by a first deed of
trust on the Property, and any buildings, fixtures and any materials which are
now or may hereafter be located on the Property. The Note has been guaranteed by
Holly. In addition, Holly and the Company have entered into an environmental
indemnity agreement with Kennedy pursuant to which they will defend and hold
harmless the co-lenders from any environmental claims.
Norlar has agreed with the other participants in the $5 million loan to
subordinate Norlar's interest to the other participants for the benefit of the
Company. Norlar has agreed that all of Norlar's monthly payments which would be
due on its 47% interest in the $5 million loan be deferred until the Property is
refinanced, sold, foreclosed upon or otherwise liquidated. Accordingly, the
Company will be required, commencing May 19, 1997, to make monthly interest-only
payments on the remaining 53% of the $5 million loan owed to the non- Norlar
participants. Therefore, the Company's requirements will be $53,000 per month.
Holly has agreed to provide $1 million on a phased-in basis, with an
initial payment of $750,000 made in February 1997. Holly has agreed to pay the
remaining $250,000 to the Company on or before November 19, 1997. The Company
has agreed with Holly to reduce this agreement for the cash infusion to written
documents. The Company used the net proceeds of the $5 million Kennedy financing
and the advances from Holly to pay unsecured creditors of the Company and to pay
the amounts deemed by the Bankruptcy Court to be owed to NADC in connection with
NADC's deed of trust on the Property. The Deed of Trust in favor of NADC has
been extinguished. Both the Company and NADC have filed appeals of this ruling,
which appeals are pending.
The Company will continue to seek construction financing and permanent
"take-out" financing, or a joint-venture partner in order to develop the
Property by the construction of a gaming facility. If the Company
4
<PAGE>
should fail in its efforts to obtain such financing, the Company may seek to
market the Property for sale in order to liquidate the Property.
The Company has made several unsuccessful efforts to obtain financing,
construction financing, "take-out" financing, or joint venture agreements in an
attempt to develop the Property. The Company is currently engaged in discussions
with a development firm regarding development of Property, but no assurance can
be given that arrangements will be made with this firm, or if arrangements are
made, that they will be on terms favorable to the Company. There can no
assurance that the Company will be successful in its efforts to obtain financing
for development of the Property, or in the development or any actual operation
of the Property.
The Company has incurred substantial net losses, and had a working capital
deficiency of approximately $1,785,000 at March 31, 1997. Insofar as the Company
has not completed its casino facility, it has received no revenues from
operations from these planned business activities. The Company's financial
statements have been presented on the basis that it is a going concern, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. The Company's ability to continue in existence is
dependent upon its ability to obtain additional long-term financing and achieve
profitable operations. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset or liability
amounts which might be necessary should the Company be unable to continue in
existence.
During the nine months ended March 31, 1997, the Company had interest
income of $26,079, interest expense of $3,931, general and administrative
expenses of $410,530 and depreciation expense of $4,672. The Company's loss was
$392,319, or $.06 per share. The Company remains in the development stage and
had incurred a loss from inception through March 31, 1997 of $3,653,007. The
ability of the Company to achieve revenues in the future will be dependent upon
realization of its plans to develop a gaming facility on the Property.
5
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
I. The Company is the plaintiff and a counterclaim defendant in a lawsuit
pending in Denver, Colorado District Court, Case No. 95CV2310, entitled Country
World Casinos, Inc., a Nevada corporation, Plaintiff, v. Tommyknocker Casino
Corp., a Colorado corporation and New Allied Development Corporation, a Colorado
corporation, Defendants, v. Country World Casinos, Inc., a Nevada Corporation,
Holly Products, Inc., a New Jersey corporation, Ronald G. Nathan, Sal Lauria,
Roger D. Leclerc, William H. Patrowicz and David Singer, Counterclaim
Defendants. This action was stayed due to the filing of the Company's Petition
in Bankruptcy in the United States Bankruptcy Court for the District of Colorado
on October 12, 1995, Case No. 95-20563RJB which case was dismissed upon motion
of the Company in March 1997. The District Court litigation and the bankruptcy
petition arise as a result of disputes with New Allied Development Corporation
and its subsidiary, Tommyknocker Casino Corp. (collectively "NADC"). A claims
hearing was held in September 1996 to determine the amount of NADC's allowed
secured debt in the proceeds of the Company's financing of the Property. Prior
to the hearing, the Company had paid to NADC the undisputed portion of its
secured debt against the Property in the amount of $998,391. In November 1996,
the Bankruptcy Court issued its Memorandum Opinion and Order determining the
method and amount of NADC's secured claim. The amount of $1,308,726, as
authorized by the Bankruptcy Court, has been paid by the Company to NADC, for a
total of $2,307,117. In November 1996, the Bankruptcy Court ordered that NADC
was paid in full. The payment was without prejudice to the right of the Company
to seek a reconsideration and without prejudice to appeal the Order.
In December 1996, the Company filed a Motion for Reconsideration of the
Order of the Bankruptcy Court, as well as a notice of appeal. The Bankruptcy
Court denied the Motion for Reconsideration. In December 1996 NADC filed a
cross-appeal of the Order of the Bankruptcy Court. This appeal has been made to
the United States District Court for the District of Colorado and has been
assigned case number 96-AP- 2823.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
The Company has not made payments on a $725,000 note due to NADC secured by
a deed of trust on land near the Property. The Company is engaged in
negotiations with NADC regarding this matter and other matters involving them.
No assurance can be given that an agreement will be concluded, or if concluded,
that the terms will be favorable to the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(b) In March 1997 the Company filed a Report on Form 8-K under Item 3
reporting the dissal of the Company's Chapter 11 case and the appeal of an
earlier ruling by the Bankruptcy Court related to the dispute with NADC.
6
<PAGE>
COUNTRY WORLD CASINOS, INC.
Notes to Financial Statements
The accompanying financial statements of Country World Casinos, Inc. (the
"Company") have been prepared in accordance with the instructions to quarterly
reports on Form 10-QSB. In the opinion of Management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations and changes in financial position at
March 31, 1997, and for all periods presented have been made. Certain
information and footnote data necessary for fair presentation of financial
position and results of operations in conformity with generally accepted
accounting principles have been condensed or omitted. it is therefore suggested
that these financial statements be read in conjunction with the summary of
significant accounting policies and notes to financial statements included in
the Company's Annual Report on Form 10-KSB. The results of operations for the
period ended March 31, 1997 are not necessarily indicative of operating results
for the full year.
F-1
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
COUNTRY WORLD CASINOS, INC.
(A Development Stage Company)
Balance Sheet
-------------
Assets
Current assets:
Cash $ 20,946
Property and Equipment (Notes 3 and 4)
Land 7,475,475
Casino under development 5,084,167
Furniture and equipment 48,068
------------
12,607,710
Less accumulated depreciation (18,807)
------------
12,588,903
Other assets
Prepaid interest (Note 4) 125,000
Deposits 440
------------
Total assets $ 12,735,289
============
F-2
<PAGE>
<TABLE>
<CAPTION>
COUNTRY WORLD CASINOS, INC.
(A Development Stage Company)
Balance Sheet
Liabilities and Stockholders' Equity
Current liabilities:
<S> <C>
Current maturities of long-term debt (Notes 3 and 4) $ 727,763
Accounts payable 12,160
Advances - stockholders 865,232
Accrued interest 123,250
Other accrued expenses 77,843
------------
Total current liabilities 1,806,248
Long term liabilities
Notes Payable (Notes 4 and 7) 5,006,412
------------
Total liabilities 6,812,660
Commitments and contingency (Notes 3 and 6)
Stockholders' equity (Notes 2 and 3)
Preferred stock, $.001 par value, 25,000,000 shares authorized
Convertible Preferred, 2,250,000 shares issued and outstanding
(Liquidation preference $7,492,500) 2,250
Common stock, $.001 par value, 50,000,000 shares authorized,
10,836,187 issued and outstanding 10,836
Additional paid-in capital 9,562,550
Deficit accumulated during the development stage (3,653,007)
------------
Total stockholders' equity 5,922,629
------------
Total liabilities and stockholders' equity $ 12,735,289
============
See notes to financial statements
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COUNTRY WORLD CASINOS, INC.
(A Development Stage Company)
Statement of Operations
For the Period
From November 9, 1982
(Date of Inception)
For Nine Months Ended Through
March 31, 1997 March 31, 1997
-------------- -----------------
Costs and expenses
<S> <C> <C>
Research and development costs $ -- $ 122,000
Bad debt expense -- 175,000
General and administrative expenses 410,530 3,387,767
Depreciation expense 4,672 18,807
----------- -----------
Total $ 415,202 $ 3,703,574
Other income (expense)
Other income 735
46,462
Interest expense (3,931)
(5,895)
Interest income 26,079 92,848
Gain on forgiveness of debt -- 17,152
Forfeited deposit (Note 3) -- (100,000)
----------- -----------
Total 22,883 $ 50,567
-----------
Loss from continuing operations (392,319) (3,653,007)
Discontinued operations
Gain on disposal of subsidiaries -- 389,286
(Loss) from discontinued operations -- (389,286)
----------- -----------
Net (loss) income $ (392,319) $(3,653,007)
Net (loss) income per share $ (.06) $ (.55)
=========== ===========
Weighted average number of shares
6,694,097 6,694,097
=========== ===========
See notes to financial statements
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COUNTRY WORLD CASINOS, INC.
(A Development Stage Company)
Statements of Cash Flows
For the Period From
November 9, 1982
(Date of Inception)
For Nine Months Ended Through
March 31, 1997 March 31, 1997
--------------- --------------
Cash flows from operating activities:
Continuing operations
<S> <C> <C>
Net (loss) $ (392,319) $(3,653,007)
Adjustments to reconcile net (loss) to net cash from
operating activities -
Depreciation 4,672 41,554
Common stock issued for interest -- 14,451
Common stock issued for services -- 837,500
Decrease in noncurrent assets -- 237,000
Decrease in accounts payable (638,193) 12,160
Increase in accrued expenses (461,062) 201,093
Increase in prepaid expenses 562,500 (125,000)
Discontinued operations
Net (loss) -- (389,286)
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities -
Gain on disposal of assets -- 389,286
Changes in assets and liabilities -- --
----------- -----------
Total cash (used in) provided by operating activities (924,402) (2,434,249)
Cash flows from investing activities:
Purchase of land and casino development costs (346,966) (5,884,642)
Purchase of furniture, vehicle and equipment -- (70,815)
Investment in non-marketable securities -- (85,000)
Loans receivable -- (90,000)
Investment in patent -- (62,000)
Deposits and other -- (440)
Cash into escrow 1,817,213 --
----------- -----------
Total cash used in investing activities: 1,470,247 (6,192,897)
Cash flows from financing activities:
Proceeds advances stockholders 580,164 865,232
Proceeds from long-term debt -- 6,010,690
Repayments on long-term borrowings (1,111,353) (3,451,515)
Proceeds from stock issuance -- 5,220,835
Capital contribution -- 2,850
----------- -----------
Total cash provided by (used in) financing activities: (531,189) 8,648,092
Net (decrease) increase in cash 14,655 20,946
Cash - beginning of period 6,291 --
----------- -----------
Cash - end of period $ 20,946 $ 20,946
=========== ===========
F-5
</TABLE>
<PAGE>
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
During the year ended June 30, 1995, the Company converted a note payable
($1,000,000) plus accrued interest ($14,451) totaling $1,014,451 owed to a
shareholder, into 5,000,000 common shares. (Note 1)
During the year ended June 30, 1994 the Company issued common stock of $250,000
and Convertible Preferred stock of $2,250,000 and incurred $4,175,000 of debt to
acquired land with a cost of $6,675,000 (Note 3).
See notes to financial statements
F-6
<PAGE>
<TABLE>
<CAPTION>
COUNTRY WORLD CASINOS, INC.
(A Development Stage Company)
Statement of Stockholders' Equity
From November 9, 1982 (Date of Inception) Through March 31, 1997
Common Stock
-------------------------------------- Deficit
Preferred Stock Subscribed Additional During the
----------------- --------------- Paid-In Development Accumulated
Shares Amount Shares Amount Shares Amount Capital Stage Total
------ ------ ------ ------- ------ ------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
November 9, 1982
(date of inception) - $ -- -- $ -- - $ -- $ -- $ -- $ --
Issuance of shares
for cash - -- 104,000 520 - -- 1,005 -- 1,525
Issuance of common
stock to the public - -- 51,600 258 - -- 644,742 -- 645,000
Deferred offering
costs - -- -- -- - -- (115,690) -- (115,690)
Cancellation of
common stock - -- (28,000) (140) - -- 140 -- --
Issuance of shares
for services - -- 3,000,000 15,000 - -- -- -- 15,000
Issuance of common
stock at a discount - -- 46,872,400 234,362 - -- (214,362) -- 20,000
Capital contribution - -- -- -- - -- 2,850 -- 2,850
Net loss for the
period from November 9,
1982 (date of
inception) through
June 30, 1992 - -- -- -- - -- -- (221,169) (221,169)
------ ----- ----------- ------- ----- ------ -------- -------- --------
Balance - June 30, 1992 - -- 50,000,000 250,000 - -- 318,685 (221,169) 347,516
Issuance of common stock
at a discount
for services - -- 25,000,000 125,000 - -- (112,500) -- 12,500
Net loss for year
ended June 30, 1993 - -- -- -- - -- -- (373,401) (373,401)
------ ----- ----------- ------- ----- ------ -------- -------- --------
Balance - June 30, 1993 - -- 75,000,000 375,000 - -- 206,185 (594,570) (13,385)
Reverse stock split
1:35 - -- (72,857,142) (364,285) - -- 364,285 -- --
Change in par value
from $.005 to
$.001 - -- -- (8,572) - -- 8,572 -- --
Issuance of stock
for cash - -- 600,000 600 - -- 599,400 -- 600,000
Issuance of stock
for cash - -- 1,500,000 1,500 - -- 1,498,500 -- 1,500,000
Continued on next page.
See Notes to financial statements.
F-7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COUNTRY WORLD CASINOS, INC.
(A Development Stage Company)
Statement of Stockholders' Equity
From November 9, 1982 (Date of Inception) Through March 31, 1997
Continued from previous page.
Common Stock
-------------------------------------- Deficit
Preferred Stock Subscribed Additional During the
----------------- --------------- Paid-In Development Accumulated
Shares Amount Shares Amount Shares Amount Capital Stage Total
------ ------ ------ ------- ------ ------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of Convertible
Preferred Stock for
acquisition of land
valued at $1.00 per
share (Note 5) 2,250,000 2,250 -- -- -- -- 2,247,750 -- 2,250,000
Issuance of stock for
cash and services
pursuant to exercise
of options (Note 5) -- -- 250,000 250 -- -- 249,750 -- 250,000
Purchase and cancellation
of treasury stock
(Note 5) -- -- (125,000) (125) -- -- (124,875) -- (125,000)
Issuance of stock
for cash (Note 5) -- -- 200,662 200 -- -- 499,800 -- 500,000
Issuance of common
stock for acquisition
of land valued at
$1.00 per share
(Note 5) -- -- 250,0009 250 -- -- 249,750 -- 250,000
Issuance of common
stock for cash and
services pursuant
to exercise of
options (Note 5) -- -- 95,000 95 -- -- 237,405 -- 237,500
Issuance of common
stock for services
rendered valued at
$2.50 per share
(Note 5) -- -- 200,000 200 -- -- 499,800 -- 500,000
Subscription of
common stock pursuant
to private placement
offering (Note 5) -- -- -- -- 262,667 263 787,737 -- 788,000
Net loss for year
ended June 30, 1994 -- -- -- -- -- -- -- (1,490,785) (1,490,785)
---------- ------ ----------- -------- -------- ------ ----------- ----------- -----------
Balance - June 30, 1994 2,250,000 $2,250 5,113,520 $ 5,113 262,667 $ 263 $ 7,324,059 $(2,085,355) $5,246,330
Subscription of common
stock pursuant
to private placement
offering (Note 5) -- -- 460,000 460 -- -- 1,229,040 -- 1,229,040
Issuance of stock
for outstanding note -- -- 5,000,000 5,000 -- -- 1,009,451 -- 1,014,451
Convert subscribed
stock to common
and record fees -- -- 262,667 263 (262,667) (263) -- -- --
Net loss for twelve
months ended
June 30, 1995 -- -- -- -- -- -- -- (757,659) (757,659)
-------- ------ ----------- -------- -------- ------ ----------- -----------
Balance - June 30, 1995 2,250,000 $2,250 10,836,187 $ 10,836 0 $ 0 $ 9,562,550 $(2,843,014) $6,732,622
See notes to financial statements.
</TABLE>
F-8
<PAGE>
<TABLE>
<CAPTION>
COUNTRY WORLD CASINOS, INC.
(A Development Stage Company)
Statement of Stockholders' Equity
From November 9, 1982 (Date of Inception) Through March 31, 1997
Continued from previous page.
Common Stock
-------------------------------------- Deficit
Preferred Stock Subscribed Additional During the
----------------- --------------- Paid-In Development Accumulated
Shares Amount Shares Amount Shares Amount Capital Stage Total
------ ------ ------ ------- ------ ------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net loss for twelve months
ended June 30, 1996 - - - - - - - (417,673) (417,673)
Balance - June 30, 1996 2,250,000 $2,250 10,836,187 $10,836 0 $ 0 $9,562,550 $(3,260,687) $6,314,949
--------- ------ ---------- ------- ----- ------ ---------- ------------ ----------
Net Loss for nine months
ended March 31, 1997 - - - - - - - (392,319) (392,319)
--------- ---------
Balance March 31, 1997 2,250,000 $2,250 10,836,187 $10,836 0 $ 0 $9,562,550 $(3,653,007) $5,922,629
========= ====== ========== ======= ===== ====== ========== ============ ==========
See notes to financial statements
F-9
</TABLE>
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 1 - Summary of Significant Accounting Policies and Business Activity
- -------------------------------------------------------------------------
Organization and Business
- -------------------------
Country World Casinos, Inc. (formerly Monolite Industries) (the "Company"), a
Nevada corporation, was incorporated on November 9, 1982, and is in the
development stage. The original planned operation of the Company was for the
purpose of development, licensing and production of products on a subcontracting
basis, and the sale of products and devices in or related to the medical and/or
biotechnical fields. In May of 1990, the Company acquired another company
through the issuance of 40,000,000 shares of its common stock. This acquisition
was accounted for using the pooling of interests method. The newly merged entity
formed a subsidiary on November 29, 1990, called Trail-Lite, Inc. The planned
operation through the new subsidiary was for the purpose of manufacturing
monolithic composite panels. In September 1992, the Company disposed of its
subsidiary, Trail-Lite, Inc.
In fiscal year 1994, the Company changed its focus of business operations and in
two separate transactions, acquired approximately 79,000 and 375,000 square feet
of vacant land located in the city of Black Hawk, Gilpin County, Colorado. As of
December 31, 1996, the Company has not realized any revenue from its planned
operations and, accordingly, is considered to be in the development stage.
The Company is a majority-owned subsidiary of Holly Holdings, Inc.
Concentration of Credit Risk
- ----------------------------
The Company maintains cash balances in bank deposit accounts, which, at times,
exceed federally insured limits. The Company has not experienced any losses in
such accounts.
Hotel and Casino Under Development
- ----------------------------------
The Company has purchased land and has begun construction of a hotel and casino.
The land and development costs are recorded at cost and no depreciation will be
taken until such time as the Company places the casino into operation.
Furniture and Equipment
- -----------------------
Furniture and equipment is stated at cost and will be depreciated on a
straight-line basis over their estimated useful lives.
F-10
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 1 - Summary of Significant Accounting Policies and Business Activity
(cont.)
- --------------------------------------------------------------------------------
Loss Per Share
- --------------
Loss per share of common stock was computed based on the weighted average number
of common shares outstanding during the period. Common stock equivalents are not
included as their effect would be antidilutive.
Statement of Cash Flows
- -----------------------
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents for purposes of
statement of cash flows.
Note 2 - Continued Operations and Realization of Assets
- -------------------------------------------------------
The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company incurred net losses
of approximately $3,653,000 for the period from November 9, 1982 (date of
inception) through March 31, 1997. The Company filed for bankruptcy under
Chapter 11 on October 12, 1995. Upon motion by the Company, the Bankruptcy Court
dismissed the bankruptcy case on March 11, 1997. The Company is currently
looking for the required funding to complete the construction of the casino and
hotel described in (Note 3). These factors, among others, indicate the Company's
ability to continue in existence is dependent upon its ability to obtain
additional long-term debt and/or equity financing and achieve profitable
operations. The financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset or liability amounts
which might be necessary should the Company be unable to continue in existence.
Note 3 - Casino Under Development
- ---------------------------------
On August 6, 1993, the Company closed on an acquisition of approximately 79,000
square feet of vacant land located within the city of Black Hawk, Gilpin County,
Colorado. The Company paid $550,000 cash, delivered a promissory note in the
amount of $3,450,000, and delivered 2,250,000 shares of its Convertible
Preferred stock which is convertible to common stock on a 1 for 1 basis. The
Company is obligated to file a registration statement to cover the distribution
of the Convertible Preferred stock to the shareholders of the selling entity,
which is a publicly-held corporation based in Denver, Colorado.
On June 28, 1994, the Company closed on an acquisition to an additional 375,000
square feet of vacant land located in close proximity to the original land
purchased. The Company paid $200,000 cash, delivered a promissory note in the
amount of $725,000, and delivered 250,000 shares of its common stock.
F-11
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 3 - Casino Under Development (continued)
- ---------------------------------------------
The Company intends to construct a casino on the land and intends to construct a
hotel subsequent to the completion of the casino. On July 11, 1994, the Company
entered into a contract to construct the casino. The Company has capitalized the
following costs related to the casino construction through December 31, 1996:
Interest on long-term debt $2,052,156
Architectural fees and fees for construction
and design services 3,032,011
---------
$5,084,167
==========
Note 4 - Long-Term Debt
- -----------------------
$725,000 note payable - stockholder, interest at
8%, payable in monthly installments over ten (10)
years starting 15 months after the June 28, 1994
closing. The note is collaterized by a first deed
of trust on real property with a net book value
ofapproximately $1,175,000 725,000
$5,000,000 note payable - interest at 15% until
May 19, 1997 and at 24% thereafter. Interest for
the first year was paid in advance at closing. The
principal is due May 19, 1999. The note is
collaterized by a first deed of trust on real
property with a net book value of $6,250,000. The
financing was obtained from a group of lenders
which included Norlar, Inc, a related party. The
Norlar, Inc. portion of the financing amounted to
$2,350,000. 5,000,000
F-12
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A Development Stage Company)
Notes to Financial Statements
$10,445 note payable - interest at 15% payable in
equal monthly installments over four (4) years.
The note is collaterized by a copy machine 9,175
---------
5,734,175
Less current portion 727,763
---------
5,006,412
=========
The first payment on the $725,000 note due September 28, 1995 was not made, and
accordingly, the entire amount is considered current.
Note 5 - Income Taxes
- ---------------------
Effective July 1, 1993, the Company adopted SFAS No. 109, "Accounting for Income
Taxes," which requires recognition of deferred tax liabilities and assets for
the expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax liabilities
and assets are determined based on the difference between the financial
statement and tax basis of assets and liabilities using expected tax rates in
effect for the year in which the differences are expected to reverse. The
measurement of deferred tax assets is reduced, if necessary, by the amount of
any tax benefits that, based on available evidence, are not expected to be
realized.
The Company has not generated taxable income since its inception, and therefore,
no provision for income taxes has been made.
At June 30, 1996, the Company had net operating loss carry forwards for income
tax purposes of approximately $3,261,000 which expire through 2012. The net
operating losses are limited due to a more than 50% change in ownership. The
Company has approximately $1,110,000 deferred tax asset as a result of the net
operating losses which has been fully impaired due to uncertainty as to its
utilization
F-13
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 6 - Related Party
- ----------------------
The Company agreed with a majority stockholder that the majority stockholder
will receive the right to purchase up to 20,000,000 shares of common stock at
$.20 per share if specified funding is provided.
Note 7 - Note Default
- ---------------------
In July 1995, the note holder on the $3,450,000 note payable (Note 4) declared
the note in default and began foreclosure proceedings on the real property
collateralizing the note. In addition, the payments due on the $725,000 note
have not been made and accordingly the note is considered in default. The
Company filed a lawsuit against New Allied Development Corporation and its
wholly owned subsidiary, Tommyknocker Casino Corp. ("NADC"). In 1993, NADC sold
to the Company the land in Black Hawk, Colorado upon which the Company plans to
construct a gaming facility. The Company believes that NADC committed wrongful
acts in connection with the land purchase. In addition to cash, NADC received
preferred stock and a promissory note (the "Note") from the Company. The Note is
secured by a second deed of trust on the Black Hawk property. It was provided in
the Note that when certain payments had been made by the Company to NADC, NADC
would obtain the release of the first deed of trust which secures a pre-existing
indebtedness of NADC in the original principal amount of $475,000. The first
deed of trust had not been released. NADC declared the Company in default on the
Note. In the lawsuit, the Company requested a declaration that the Company is
not obligated to make any additional payments to NADC under the Note until NADC
has secured the release of the first deed of trust. The Company also seeks other
relief against NADC.
In March 1996 the Bankruptcy Court approved $5 million in financing, which
financing was obtained on May 31, 1996.
The Company received net proceeds of approximately $2,850,500 after payment of
loan commitment fees, loan servicing fees and points to Kennedy Funding, Inc. of
approximately $812,000, the First Year Interest Obligation of $750,000 and
$610,000 for release of the prior first deed of trust on the Property. The
holder of that deed of trust was the holder of a note which had not been paid by
NADC.
F-14
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 7 - Note Default (continued)
- ---------------------------------
Pursuant to the Order of the Bankruptcy Court, the Company received a credit for
the amount paid to the holder of the note from NADC as a direct offset against
the Note made by the Company to NADC. The note from the Company to NADC was
secured by a second deed of trust against the Property. The net proceeds
received by the Company from the loan closing were paid into an interest bearing
account pending further order of the Bankruptcy Court. The Company and NADC had
a dispute as to the payoff balance on the note due to NADC by the Company. In
November 1996, the Company received final rulings from the court regarding the
NADC dispute. The Company, in November 1996, tendered an amount of approximately
$1,309,000 to NADC and the second deed of trust was extinguished. Both the
Company and NADC have filed appeals, which appeals are pending.
F-15
<PAGE>
SIGNATURES
In accordance with the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
COUNTRY WORLD CASINOS, INC.
Dated: May 15, 1997 By: /S/ ROGER D. LECLERC
---------------------------------
Roger D. Leclerc, President
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Financial Statements as of March 31, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 20,946
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,946
<PP&E> 12,607,710
<DEPRECIATION> 18,807
<TOTAL-ASSETS> 12,735,289
<CURRENT-LIABILITIES> 1,806,248
<BONDS> 0
0
2,250
<COMMON> 10,836
<OTHER-SE> 5,909,543
<TOTAL-LIABILITY-AND-EQUITY> 12,735,289
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 415,202
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,931
<INCOME-PRETAX> (392,319)
<INCOME-TAX> 0
<INCOME-CONTINUING> (392,319)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (392,319)
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
