FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
Commission file number 0-22450
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
For quarter ended Commission File Number
COUNTRY WORLD CASINOS, INC.
(Name of Small Business Issuer in its charter)
Nevada 13-3140389
(State of jurisdiction of incorporation) (IRS Employer I.D. Number)
200 Monument Road, Suite 10, Bala Cynwyd, Pennsylvania 19004
(Address of principal executive offices)
Registrant's telephone number (610) 617-9990
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 ___
Indicate the number of shares outstanding of each of the issuer's
class of common stock. The Registrant had 54,331,687 shares of its
common stock outstanding as of March 31, 1999.
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX
Part I: FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet as of March 31, 1999 (Unaudited). . . . . . 1
Statements of Operations for the nine months ended
March 31, 1999 and 1998 and for the period from
November 9, 1982 (Date of Inception) through March
31, 1999 (Unaudited). . . . . . . . . . . . . . . . . . 3
Statements of Stockholders' Equity (Unaudited). . . . . . 4
Consolidated Statement of Cash Flow (Unaudited) . . . . . 9
Item 2. Management's Discussion and Analysis or Plan of Operation. 9
Part II: OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . 12
Item 3. Defaults upon Senior Securities. . . . . . . . . . . . . 12
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 12
Signature Page . . . . . . . . . . . . . . . . . . . . . . . . . . 13
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET AS OF DECEMBER 31, 1998 (UNAUDITED)
ASSETS:
CURRENT ASSETS:
Cash $ 0
Prepaid Interest 61,290
Prepaid Expense 15,000
Due From Parent 13,233
TOTAL CURRENT ASSETS 89,523
PROPERTY AND EQUIPMENT:
Land 6,750,475
Casino Under Development 11,092,504
TOTAL PROPERTY AND EQUIPMENT 17,842,979
OTHER ASSETS
Deposits 35,630
TOTAL ASSETS $ 17,968,132
1
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET AS OF MARCH 31, 1999 (UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts Payable $ 3,621,848
Payroll and Property Taxes Payable 160,799
Accrued Expenses 21,600
Notes Payable 3,433,961
Accrued Interest 573,901
Other Current Liabilities 35,979
TOTAL CURRENT LIABILITIES 7,848,088
LONG-TERM LIABILITIES:
TOTAL LONG-TERM LIABILITIES 5,000,000
STOCKHOLDERS' EQUITY:
Convertible Preferred Stock. Series A. $.001
Par Value 2,250,000 Shares Authorized, 2,250,000
Shares Issued and Outstanding (Liquidation
Preference $7,492,500) 2,250
Common Stock, $.001 Par Value, 75,000,000 Shares
Authorized, 54,331,687 Issued and Outstanding 54,331
Convertible Preferred Stock, Class B, $.25 Par Value,
5,000,000 Shares Authorized, 1,100,000 Shares Issued
and Outstanding 275,000
Additional Paid-in Capital 11,176,474
Deficit Accumulated During the Development Stage (6,388,011)
TOTAL STOCKHOLDERS' EQUITY 5,120,044
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 17,968,132
See Notes to Financial Statements
2
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE PERIOD FROM
NOVEMBER 9, 1982
(DATE OF INCEPTION)
NINE MONTHS ENDED THROUGH
MARCH 31, MARCH 31,
1999 1998 1999
COSTS AND EXPENSES:
Research and Development Costs $ $ $ 122,000
Professional Fees - Due to Bankruptcy 23,083 514,756
Management Fee - Related Party 416,321
General and Administrative Expenses 684,176 818,605 5,003,478
Depreciation 15,533 4,743 65,952
TOTALS 699,709 846,431 6,122,507
OTHER INCOME (EXPENSE):
Interest Income 14,678 109,490
Interest Expense (109,778) (92,267) (113,988)
Interest Expense - Related Party (199,019)
Rental Income 45,126
Loss on Non-Marketable Securities (85,000)
Write off Loan Receivable (90,000)
Forfeited Deposit (100,000)
Other Income 735
TOTALS (109,778) (77,589) (432,656)
(Loss) from Continuing Operations
Before Discontinued Operations and
Extraordinary Item (809,487) (924,020) (6,555,163)
DISCONTINUED OPERATIONS:
Gain on Disposal of Subsidiaries 389,286
(Loss) from Discontinued Operations (389,286)
Total Discontinued Operations
(LOSS) BEFORE EXTRAORDINARY ITEM (809,487) (924,020) (6,555,163)
EXTRAORDINARY ITEM:
Extraordinary Gain on Forgiveness
of Debt 167,152
NET (LOSS) $(809,487) $(924,020) $(6,388,011)
PER SHARE DATA:
Net (Loss) Per Common Share $ (0.02) $(0.07)
WEIGHTED AVERAGE NUMBER OF SHARES 54,331,687 13,488,243
See Notes to Financial Statements
3
<PAGE>
<TABLE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
Deficit
Accumulated Total
Preferred Stock Common Stock Additional During the Stock-
Series A Series B Subscribed Paid-In Development holders'
Shares Amount Shares Amount Shares Amount Shares Amount Capital Stage Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
,
November 9, 1982 (Date
of Inception) -- $ -- -- $ -- -- $ -- -- $ -- $ -- $ -- $ --
Issuance of Shares for
Cash ($.51 Per Share) -- -- -- -- 2,971 15 -- -- 1,510 -- 1,525
Issuance of Common
Stock to the Public
($12.50 Per Share) -- -- -- -- 1,474 8 -- -- 644,992 -- 645,000
Deferred Offering Costs -- -- -- -- -- -- -- -- (115,690) -- (115,690)
Cancellation of Common
Stock -- -- -- -- (800) (4) -- -- 4 -- --
Issuance of Shares for
Services ($.18 Per
Share) -- -- -- -- 85,714 429 -- -- 14,571 -- 15,000
Issuance of Common Stock
at a Discount ($.02 Per
Share) -- -- -- -- 1,339,212 6,696 -- -- 13,304 -- 20,000
Capital Contribution -- -- -- -- -- -- -- -- 2,850 -- 2,850
Net Loss for the Period
From November 9, 1982
(Date of Inception)
Through June 30, 1992 -- -- -- -- -- -- -- -- -- (221,169) (221,169)
Balance - June 30, 1992 -- -- -- -- 1,428,571 7,144 -- -- 561,541 (221,169) 347,516
Issuance of Common Stock
at a Discount for
Services ($.02 Per
Share, May 1993 -- -- -- -- 714,287 3,571 -- -- 8,929 -- 12,500
Net Loss for Year Ended
June 30, 1993 -- -- -- -- -- -- -- -- -- (373,401) (373,401)
Balance - June 30,
1993 - Forward -- $ -- -- $ -- 2,142,858 $10,715 -- $ -- $570,470 $(594,570) $(13,385)
See Notes to Financial Statements
</TABLE>
4
<PAGE>
<TABLE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
Deficit
Accumulated Total
Preferred Stock Common Stock Additional During the Stock-
Series A Series B Subscribed Paid-In Development holders'
Shares Amount Shares Amount Shares Amount Shares Amount Capital Stage Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - June 30,
1993 - Forward -- $ -- -- $ -- 2,142,858 $10,715 -- $ -- $570,470 $(594,570) $(13,385)
Change in Par Value
from $.005 to $.001 -- -- -- -- -- (8,572) -- -- 8,572 -- --
Issuance of Shares for
Cash September 1993
($1.00 Per Share) -- -- -- -- 600,000 600 -- -- 599,400 -- 600,000
Issuance of Shares for
Cash September 1993
($1.00 per Share -- -- -- -- 1,500,000 1,500 -- -- 1,498,500 -- 1,500,000
Issuance of Convertible
Preferred Stock for
Acquisition of Land
Valued at $1.00 Per
Share Issued July
1993 2,250,000 2,250 -- -- -- -- -- -- 2,247,750 -- 2,250,000
Issuance of Stock to
Related Party for
Cash and Services
Pursuit to Exercise
of Options ($1.00
Per Share) -- -- -- -- 250,000 250 -- -- 249,750 -- 250,000
Purchase and Cancellation
of Treasury Stock ($1.00
Per Share -- -- -- -- (125,000) (125) -- -- (124,875) -- (125,000)
Issuance of Stock for
Cash (140,000 Shares
and 60,662 Shares
Issued December 1993
and January 1994,
Respectively) at
$2.50 Per Share -- -- -- -- 200,000 200 -- -- 499,800 -- 500,000
Balance of Common Stock
for Acquisition of
Land Valued at $1.00
Per Share Issued June
1994 -- -- -- -- 250,000 250 -- -- 249,750 -- 250,000
Issuance of Common Stock
for Cash and Services
Pursuant to Exercise of
Options (75,000 Shares
and 20,000 Shares Issued
April and June 1994
Respectively at $2.50
Per Share) -- -- -- -- 95,000 95 -- -- 237,405 -- 237,500
Issuance of Common Stock
for Services Rendered
Valued at $2.50 Per
Share Issued April 1994 -- -- -- -- 200,000 200 -- -- 499,800 -- 500,000
Subscription of Common
Stock Pursuant to
Private Placement
Offering ($3.00 Per
Share) -- -- -- -- -- -- 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 - Forward 2,250,000 $2,250 -- $ -- 5,113,520 $5,113 262,667 $263 $7,324,059 $(2,085,355) $5,246,330
See Notes to Financial Statements
</TABLE>
5
<PAGE>
<TABLE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
Deficit
Accumulated Total
Preferred Stock Common Stock Additional During the Stock-
Series A Series B Subscribed Paid-In Development holders'
Shares Amount Shares Amount Shares Amount Shares Amount Capital Stage Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - June 30,
1994 - Forward 2,250,000 $2,250 -- $ -- 5,113,520 $5,113 262,667 $263 $7,324,059 $(2,085,355) $5,246,330
Issuance of Common
Stock Pursuant to
Private Placement
Offering ($2.67
Per Share) -- -- -- -- 460,000 460 -- -- 1,229,040 -- 1,229,500
Issuance of Stock
for Outstanding
Note Issued April
20, 1995 ($.20 Per
Share) -- -- -- -- 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 Year
Ended June 30, 1995 -- -- -- -- -- -- -- -- -- (757,659) (757,659)
Balance - June 30,
1995 2,250,000 $2,250 -- --10,836,187 10,836 -- -- 9,562,550 (2,843,014) 6,732,622
Net Loss for Year
Ended June 30,
1996 -- -- -- -- -- -- -- -- -- (416,440) (416,440)
Balance - June 30,
1996 2,250,000 $2,250 -- --10,836,187 10,836 -- -- 9,562,550 (3,259,454) 6,316,182
Issuance of Preferred
Stock - Class B in
Exchange for Related
Party Debt ($.25 Per
Share) April 1997 -- -- 4,000,000 1,000,000 -- -- -- -- -- -- 1,000,000
Common Stock Issued in
Exchange for Debt ($.25
Per Share) April 1997 -- -- -- -- 1,250,000 1,250 -- -- 248,750 -- 250,000
Warrants Issued for
1,000,000 Shares of
Common Stock in
Connection with
Norlar, Inc. Debt
Financing ($.06 Per
Warrant -- -- -- -- -- -- -- -- 60,000 -- 60,000
Net Loss for Year
Ended June 30, 1997 -- -- -- -- -- -- -- -- -- (1,080,391) (1,080,391)
Balance - June 30,
1997 2,250,000 2,250 4,000,000 1,000,000 12,086,187 12,086 -- -- 9,871,300 (4,339,845) 6,545,791
Issuance of Common
Stock for Services
Rendered Valued at
$.20 per Share, July
1997 -- -- -- -- 1,000,000 1,000 -- -- 199,999 -- 200,000
Issuance of Common Stock
in Exchange for Debt
and Services to be
Rendered ($.1875 Per
Share) September 1997 -- -- -- -- 395,500 396 -- -- 73,761 -- 74,157
Issuance of Common Stock
for Services Rendered
and Debt Exchange
($0.86 Per Share)
March 1998 -- -- -- -- 85,000 850 -- -- 72,413 -- 72,263
</TABLE>
6
<PAGE>
<TABLE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
Deficit
Accumulated Total
Preferred Stock Common Stock Additional During the Stock-
Series A Series B Subscribed Paid-In Development holders'
Shares Amount Shares Amount Shares Amount Shares Amount Capital Stage Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Convert Preferred to
Common Stock April
1998 -- --(4,000,000)(1,000,000)40,000,000 40,000 -- -- 960,000 -- --
Issuance of Stock for
Services April 1998 -- -- 100,000 25,000 -- -- -- -- -- -- 25,000
Net Loss for the Year
Ended June 30, 1998 -- -- -- -- -- -- -- -- -- (1,238,679) (1,238,679)
Balance - June 30,
1998 2,250,000 $2,250 100,000 $25,000 54,331,687 $54,332 -- $ -- $11,176,474 $(5,578,524) $5,679,530
Common Stock issued
in Exchange for Debt
($.25 per Share)
October 1998 -- --1,000,000 250,000 -- -- -- -- -- -- 250,000
Net Loss for the Nine
Months Ended
March 31, 1998 -- -- -- -- -- -- -- -- -- (809,487) (809,487)
Balance - December
31, 1998 2,250,000 2,250 1,100,000 275,000 54,331,687 54,332 -- -- 11,176,474 (6,388,011) $5,120,044
See Notes to Financial Statements
</TABLE>
7
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE PERIOD FROM
NOVEMBER 9,1982
(DATE OF INCEPTION)
NINE MONTHS ENDED THROUGH
MARCH 31, MARCH 31,
1999 1998 1999
OPERATING ACTIVITIES:
Continuing Operations:
(Loss) Before Extraordinary Item $(809,487) $(924,020) $(6,555,163)
Adjustments to Reconcile Net Loss)
to Net Cash (Used for)Operating
Activities:
Depreciation 15,533 4,743 65,952
Amortization of Discount 45,000 60,000
Common Stock Issued for Interest 14,451
Common Stock Issued for Services 862,500
Loss on Marketable Securities (85,000)
Write Off of Loan Receivable (90,000)
Extraordinary Item 167,152
Accrued Interest - Related Party 52,514
Allocation of Management Fees - Related Party 408,000
Changes in Assets and Liabilities:
(Increase) Decrease in:
Due From Officers (93,000)
Prepaid Interest 11,850 (748,780)
Due From Parent (8,706) (13,233)
Increase (Decrease) in:
Accounts Payable 310,752 2,965,563 3,621,848
Payroll and Property Taxes Payable 6,347 44,191 160,799
Accrued Interest 284,319 74,122 573,901
Accrued Expenses (4,579) (21,778) 21,600
Discontinued Operations:
Net (Loss) (389,286)
Adjustment to Reconcile Net (Loss) to Net Cash
(Used for) Operating Activities:
Gain on Disposal of Assets 389,286
Total Adjustments 612,372 3,173,292 4,978,694
NET CASH USED FOR OPERATING ACTIVITIES -
FORWARD $197,115 $2,249,272 $(1,576,469)
See Notes to Financial Statements
8
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
CERTAIN STATEMENTS INCLUDED HEREIN OR INCORPORATED BY REFERENCE
CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (THE "REFORM ACT").
THE COMPANY DESIRES TO TAKE ADVANTAGE OF CERTAIN "SAFE HARBOR"
PROVISIONS OF THE REFORM ACT AND IS INCLUDING THIS SPECIAL NOTE TO
ENABLE THE COMPANY TO DO SO. FORWARD-LOOKING STATEMENTS INCLUDED OR
INCORPORATED BY REFERENCE IN THIS PART INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS WHICH WOULD CAUSE THE COMPANY'S ACTUAL
RESULTS, PERFORMANCE (FINANCIAL OR OPERATING) OR ACHIEVEMENTS TO DIFFER
MATERIALLY FROM THE FUTURE RESULTS, PERFORMANCE (FINANCIAL OR
OPERATING) OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD LOOKING
STATEMENTS.
Since the Company's purchase of the Black Hawk 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. In July 1997, the Company signed a financing agreement with
U2 Consulting, LLC., an affiliate of Pacific Genesis, Inc. and Western
Equities, Inc., to raise $79.5 million through the issuance of
corporate bonds. The parties had 180 days to provide for the
financing, were unable to complete same and said agreement with U2
Consulting was terminated in December 1997.
In January 1998, the Company again began the process of acquiring
financing. After much discussion and many contacts with a wide range of
financing groups, the Company entered into three separate agreements to
provide the necessary financing, of which two such agreements
terminated in the first quarter of 1999. The one remaining agreement
calls for the issuance of up to seventy million dollars ($70 million)
of first mortgage debt securities which the company hopes to bring to
market later this year. This agreement, is strictly confidential until
completed. Although the Company is confident in the ability to raise
the necessary capital, there can be no assurance that any funds will be
provided immediately or in the future.
Once financed, 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.
In order to begin the process of timely completing its goals, in July
1997 the Company contracted with Colorado Gaming Development Company,
Inc., Semple Brown Roberts, P.C. and PCL Construction Services, Inc.,
all of Denver, Colorado to design and construct the planned casino and
hotel complex.
The Company signed a management agreement with Signature Hospitality
Resources, Inc. of Denver, Colorado to manage its Radisson Black Hawk
Hotel, a separate agreement to use the national flag of Radisson on the
hotel and a contract with Luciani & Associates, LLC of Atlantic City,
New Jersey, to manage the casino operations. These two parties
assisted the architect in design of their respective operations. As of
March 31, 1999, those two agreements have expired. Once financing has
been secured, the Company will attempt to negotiate new agreements with
others yet be determined.
The Company is engaged in the design, development and construction of a
Hotel and Casino (the "Hotel Casino") in Black Hawk, Colorado. The
revised plan for the Hotel Casino will be a nine level complex,
featuring three stories of hotel rooms above a two-story, 55,000 square
foot casino, and a four story parking garage. Other amenities will
include one or more full service restaurants, a buffet, entertainment
9
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
lounge and retail shops. When completed as planned, the Hotel Casino
will be largest hotel and casino complex in Colorado. Construction and
opening of the Hotel Casino is dependent upon the Company's ability to
successfully raise the required capital discussed above.
The casino level of the project, at approximately 55,000 square feet,
will be the largest in Colorado and will be capable of accommodating
1,000 slot machines and 32 gaming tables. The Company expects that
slot machines will be the greatest source of its gaming revenues. Slot
machines are less labor intensive and require less square footage than
table games, and also generate higher profit margins.
An alternative plan, the Company has been reviewing, calls for
constructing the casino without hotel rooms which would be added in a
second phase at a later date.
The Country World Casino's atmosphere will feature a country western
music theme similar to the rock and roll music theme successfully
employed by the Hard Rock Cafe. The Casino decor is planned to include
memorabilia from the great country singers, both past and present. The
country western theme has not been established in the Black
Hawk/Central City, Colorado gaming market, and therefore will give the
Country World Casino its own unique identity. Management believes that
as casinos have become more numerous, the gaming industry has begun to
recognize that popular themes and amenities such as quality dining and
hotel accommodations play an important role in attracting customers to
casinos. The theme is intended to appeal to the Hotel Casino's target
customer base, which consists primarily of residents of the Denver
metropolitan area as well as other Colorado communities located within
driving distance of Black Hawk.
The Hotel will provide overnight accommodations with 200 +/- rooms and
suites, making it one of the first destination resort of its kind in
Black Hawk. Complimenting both the casino and hotel will be a three
story underground parking facility for approximately 1,000 cars
featuring both valet and self parking options, and the only covered
on-site bus turnaround currently available in Black Hawk for the
convenience of day trip customers.
LIQUIDITY & CAPITAL RESOURCES
The Company's ability to obtain the financing and to proceed with its
plans for a gaming facility had been affected by the Company's disputes
with New Allied, which had culminated in litigation and foreclosure
proceedings on the Property in 1995, and the Company's filing of a
bankruptcy petition under Chapter 11. The Bankruptcy Case was
dismissed in March 1997 and Summary Judgement was granted in favor of
the Company with regard to all other litigation issues in October 1998.
In March 1996, the Company borrowed $5 million from Kennedy Funding,
Inc. The Company issued a Promissory Note effective May 20, 1996
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.
In May 1997, the Company issued a promissory note and second deed of
trust on the property to Norlar, Inc. for a maximum of $600,000 (First
Norlar Note), or so much thereof as may have been advanced by maker,
for payments due on the Kennedy loan and for general corporate
purposes. As of March 1999, the
10
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
Company owed $600,000 on the First Norlar Note. In October 1997, the
Company issued a second promissory note (Second Norlar Note) and a
fourth deed of trust on the property to Norlar, Inc., again for a
maximum of $600,000. As of March 1999, the Company owed $600,000 on
the Second Norlar Note. In April 1998, the Company issued a third
promissory note (Third Norlar Note) and fifth deed of trust on the
property to Norlar, Inc. again for a maximum of $600,000. As of March
1999, the Company owed $600,000 on the Third Norlar Note. In August
1998, the Company issued a fourth promissory note (Fourth Norlar Note)
and sixth deed of trust on the property to Norlar, Inc. again for
$600,000. As of March 1999, the Company owed $600,000 on the Fourth
Norlar note. In January 1999, the Company issued a Fifth Promissory
Note (Fifth Norlar Note) and seventh deed of trust on the property to
Norlar, Inc. again for $600,000. As of March 1999, the Company owed
$332,489 on the Fifth Norlar Note. In addition, for each $100,000
Norlar, Inc. has loaned to the Company, it has authorized the issuance
of 500,000 warrants to purchase shares of common stock at $0.20 per
share. Norlar, Inc. is a closely-held corporation beneficially owned
by Larry Berman and his wife. Mr. Berman is Chairman and Chief
Executive Officer of the Company. The loans bear interest at 12% per
annum and is to be repaid upon the earlier of the sale of the property,
refinance of the property or the financing of the project.
In July 1998, the Company settled an ongoing dispute with New Allied
Development Corporation with regard to a piece of property outside the
gaming district in Black Hawk, Colorado. Title to such property was
returned to New Allied, therefore reducing the Company's debt by
$750,000, plus applicable interest and taxes due.
In October 1998, the Company converted $250,000 of debt to the
Company's officers into Series B preferred stock.
RESULTS OF OPERATIONS
The Company has had no revenues from operations. The Company continues
to incur losses of approximately $125,000 per month to service the
Kennedy Funding Note and other ongoing obligations such as rent and
utilities for the Company's corporate office. The ability of the
Company to achieve revenues in the future will be dependent upon
realization of its plans to develop a gaming and hotel complex on the
property.
11
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company was the plaintiff and a counterclaim defendant in a lawsuit
pending in Denver, Colorado District Court, Case No. 95CV2310. This
lawsuit was commenced by the Company on May 26, 1995. The lawsuit
between the Company and New Allied and TKCC was stayed upon the filing
of the Company's bankruptcy petition in October 1995. That stay was
lifted when the bankruptcy case was dismissed in March 1997, and the
Company moved forward with these proceedings. The Company filed for
Summary Judgment in this matter and hearings were held September and
October 1998. Such summary judgment was granted in favor of the
Company in October 1998. In addition, the Company filed an appeal of
the Bankruptcy Court's ruling. New Allied cross appealed. Such
appeals were denied by the United States District Court in August 1998
and the appeals matters are continuing as the Company has appealed this
matter to a higher court unopposed. Such appeal is set for oral
argument in May 1999.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
12
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
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.
By: /s/ William H. Patrowicz
William H. Patrowicz, Secretary & Treasurer
Date: May 11, 1999
13
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 89,523
<PP&E> 17,842,979
<DEPRECIATION> 15,533
<TOTAL-ASSETS> 17,968,132
<CURRENT-LIABILITIES> 7,848,088
<BONDS> 0
0
3,350,000
<COMMON> 54,331,687
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 17,968,132
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 699,709
<OTHER-EXPENSES> 109,778
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 109,778
<INCOME-PRETAX> (809,487)
<INCOME-TAX> 0
<INCOME-CONTINUING> (809,487)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (809,487)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
